Transcripts For CNBC Closing Bell 20140725

The 17,000 mark, we should add. Pressure across the other indexes as well. The s p 500 up almost 10 points to 1,978 aramafteramaicing new this week. And remember, amazon is about 13 of the nasdaq 100. Lets get more on what was wrong with visa and its responsibility for a lot of the dows decline today. Heres Mary Thompson with that story. Mary . Hey, there, bill. Visa is off the lows of the session, but the Payments Processing giants stock is the biggest loser among the dow 30, this after the company lowered its revenue forecast for the full year. The strong dollar and decline in crossborder payments revenue, payments made in one country and used in another, behind the lowered outlook. The crossborder business impacted by unrest in the ukraine and rising political tensions with russia. Heres cfo Byron Pollitt on yesterdays Conference Call. We see no signs yet of any acceleration in economic recovery and crossborder volume growth remains soft in the midsingle digits. Visa earned betterthanexpected 2. 17 a share in the quarter on revenue in line with expectations, but fullyear revenue, including the impact of Foreign Exchange is seen growing 7 to 8 , down from a previous forecast of an increase of 8 to 9 growth. Visa says its bullish long term, but any improvement in its shortterm outlook will hinge on improvements in the Global Economy and in the Global Payments business. Back to you. Yeah, thats one of those allpervasive kind of companies that has its pulse on many, many parts of the Global Economy. Mary, thank you. So, lets talk about it. Visa doesnt see signs of economic acceleration. What does it mean for the overall Global Economy . Were going to talk about it among other things in our closy Bell Exchange with Diane Garnick from clear alternatives, todd verchet, rich peterson from s p capital iq, david kelly from Jpmorgan Funds and Jack Bouroudjian from index financial partners. David kelly, youre our global strategist here. What do you make of the visa report itself and the implications for the Global Economy . Im not too worried. What were seeing across the globe, and you can see this in the flash pmi numbers earlier on this week, is modest positive growth. Better numbers out of china, a bit better out of europe. Nothings booming and there isnt a lot of inflation. And if you think about visa, they will do best in a booming economy with pending inflation and really strong real growth. But when youre interested in earnings in general, you want a moderate improvement of the Global Economy and thats actually what were getting right now. Of all the companies i expected to cite low volatility as pressure on their earnings, visa wasnt one of them. I dont understand what low volatility in the currency space had to do with their underperformance in the quarter and how telling that is about global strength or not. I think its a little bit towards the geopolitical side, too. I mean, obviously, theyre trying to guide down, lower expectations going on in the year, hedging their bets on the geopolitical risk. But again, its one company, one comment. Were really not too concerned. We do believe the global economies are improving, especially in the United States, and wed stay invested here. Rich peterson, it has sort of been an exception to the rule. Earnings have been pretty good for the most part. Amazon and visa notwithstanding. Thats true, bill. Let me augment that by saying the spokesman from visa mentioned theres no acceleration or growth, but really, as david kelly had mentioned, there is a continuation of growth. The fact is, you know, were going to see gdp above 3 in the Second Quarter above 3 and probably in the Third Quarter. You look at earnings when alcoa reported back on april 8th, youre looking at 6. 6 . Secondquarter numbers. Now were at over 8. 3 . Were seeing gains in health care, were seeing gains in materials, were seeing a turnaround in financials where initially financials were expecting to see a decline in Revenue Growth i mean, Earnings Growth. Now were seeing a positive showing for financials, which may help mastercard and American Express when they report next week. So, all in all, earnings are pretty good. In fact, we could very well see doubledigit Earnings Growth for the First Time Since the Third Quarter of 2011. Rich, what about for the nay sayers out there and actually to the broader point about the number of shares shrinking, is that boosting Earnings Growth, or are we talking earnings generally, forget the share count . Well, you look at the Financial Engineering or at a combination, and for some persons, accommodation is resuscitation, and for others, its levitation, but the fact is, companies are doing what they have to do to get, to meet the numbers, and whether its buybacks, whether its m auctiom a, corporate aversions, everythings on the tanel to meet those numbers. I was going to ask if that m a cycle is reason for investors to have exposure to equities. Weve seen big moves on that space. Absolutely. Its kind of a joke if you think about what the bears are saying. First quarter, beginning of the quarter, they said you know, companies have too much cash on hand, they shouldnt have that much wash. Now we see these Companies Purchasing smaller companies, growthoriented companies, and theyre putting the money to work and, you know, the bears are saying, hey, wait a minute, you know, the valuation is too high. I feel like the bears should have their heads in the sand right now. Think about all the great things that are happening. I mean, you know, we have earnings that are coming in, low inflation look at the highprofile credit funds which have been fired by Pension Funds across the country for underperforming repeatedly. We talked about calpers yesterday on this program getting upset with some of the hedge funds who have been bearish and wrong repeatedly on this. Theres no sand in Jack Bouroudjians hair, thats for sure. Very true, but think about what the fed has told us. The fed has for all intents and purposes told us they are not going to raise rates until next summer, potentially even the end of next year. I mean, we have a full year of an easy environment. I think visa and mastercard, what people are struggling with is they have these very high balances, and consumers are a little hesitant. Once they get through that hesitancy and they believe that rates are going to stay low for a while, expect credit card balances to head on back up and people to start buying again. Jack, riddle me this. We have the ceo of ryder coming on in a little while. We had the ceo of Norfolk Southern the other day. I mean, the transportation stocks have just been on fire. Theyve been setting alltime highs this year, but it comes at a time when other critical parts of our economy are still struggling housing, of course, the jobs markets still not what it should be right now. I mean, how do you assess the economy and where we stand right now . Well, there are two different things. First of all, transportation is a direct ancillary effect of this big Energy Revolution taking place in my backyard in the midwest here. We see more infrastructure. And remember, there are three or four jobs created for every one little oil drilling job created. So, its really taken on a life of its own. And were seeing the railroads be the big beneficiaries of that. Now, you know, when you look at the greater economy, of course, we see this disconnect between wall street and main street. Weve been talking about it time and time again. But until we can get and ive been saying it time and time again until we can get progrowth policies coming out of d. C. , were going to get the same old story from the fed, trying to keep us propped up as well as they can, and i think they deserve kudos for it. David kelly, you know, it might have been an impressive week for earnings, but certainly has been a troubling one on the international scene. This morning, germanys key index showing some pressure, perhaps from events that are happening in russia and across eastern europe. What do investors need to know going into this weekend and the weeks ahead as theyre concerned about this . I think they should still focus on the economic numbers rather than these conflicts. Because both in the ukraine situation and also in the israeli situation with the gaza strip, i mean, its horrible. The pictures are horrible, and of course, they sort of tug at your emotions. But in the end, its stalemates in both cases. I dont think the statusos really going to change in ukraine. I dont think the status quos going to change in israel. And neither of them are terribly important for the Global Economy. So, i think theyre more of a distraction to investors than really something to angt on. The thing to recognize is the economys growing moderately. Weve still got low Interest Rate policies in place. I think well see by the way, its a distraction, mcdonalds, more than a distraction for mcdonalds, which is now seeing russia say to them, sorry, were finding you in violation of various food safety or calorie reporting requirements. N the mcdonalds shares today are taking a hit on it, but there is a there there. But for investors, if you look at the broad swath of u. S. And global companies, they are taking advantage of a growing Global Economy here. I think the real thing to watch is, at what point do Interest Rates begin to move up in reflection that were running out of capacity, certainly here in the United States and eventually in other places around the world. Dont forget about china, too. Chinas just come back online. They started posting some real serious numbers, and thats put housing down 10 over there. Imagine if housing was just flat. Theyd be well over 10 with some of those numbers. So, lets keep an eye on them. That could be a story that nobodys talking about that could have big consequences down the road. All right. Thank you all. Weve got to go at this point. Thank you for your insights into this market. Pretty important market, as a matter of fact. Have a good weekend. See you later. Thanks, guys. Before we go to the break, we have to acknowledge the passing of a true wall street legend. Allen greenberg. Everybody knew him as ace greenberg, the longtime chairman and ceo of bear stearns. He has passed away now at the age of 86. He was one of a kind. Hes a character. You probably didnt meet him. I didnt, but what ive been doing if you take a look, you can find this online. He wrote legendary memos to bear stearns, and its great to go back. Theres a book of them, and he has this philosopher he created and he has all these great sayings about never be tempted by the perfume of your own odor or Something Like that that will all confuse, but its great reading. He was the classic risktaker. He spent his whole career he was 65 years on wall street, the whole time at bear stearns. He started in 1949 as a clerk, worked his way up through the years. He was a trader extraordinaire. He loved the trading environment. And even when he was chairman and ceo, he loved walking the trading floor. He was a great bridge player, too, talking about risk. He often played with Warren Buffett and malcolm forbes, to name a few people. By the way, jamie dimon bear stearns, as we know, was sold to Jpmorgan Chase in twalt twaigt. Jamie dimon eulogized him saying its hard to manage Financial Services industry without ace. It was better having ace a part of it. And while there will never be another ace greenberg, the example he set will live on through all of us, those who had the opportunity to know him. From the memos he wrote, he said he was a legendary pinch penny when it came to costs in the company. Watch costs at all time. Quickly, the time to stop stupidity and be tough on costs is when times are good. Any schlameal and most schlomosles try to cut costs when times are bad. The first is the guy who spills his soup at the big wedding. The other is the guy he spills it on. That was ace greenberg. By the w56ay, on a summer friday, another one had to do with his reminder to partners, that if they werent off, they were expected to be working on summer fridays and he had never taken one off. Ace greenberg dead at the age of 86. Well be comeback after this. Greenline do for you . Ouy 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. 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. 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Mattress discounters down day on wall street, pulling back from that alltime high the s p hit the other day, down 10 points there. A good portion of that, two stocks, visa and amazon after their earnings reports disappointed last night. The dows down 140 poins. A lot of that is visa. Then the nasdaq along for the ride, down 25 points at this hour. Morgan brennan touching on some of the big movers for us. What can you tell us . Thanks, kelly. Lets kick it off with the biggest gainer in the s p 500. Thats verisign, the internet Domain Company gaining more than 12 , almost 13 on the day after beating earnings expectations. Verisign reporting nearly a 5 increase in sales compared to last year. Meanwhile, a big debut on the nasdaq for El Pollo Loco today. The restaurant chains stock soaring more than 50 in its first day of trade. Shares of loco opened at 19. That was 4 above its ipo price. Pandora plummeting today after reporting earnings. The Internet Radio companys stock losing around 12 of its value after forecasting a thirdquarter profit thats sharply below analysts expectations. Pandora also reporting a dip in user numbers. Kelly, back to you. Morgan, thank you. Now, transportation and supply Chain Company ryder systems reporting strong earnings this week. Take a look at the shares, currently trading at pretty much an alltime high. As we mentioned, a lot of transportation stocks are right now at alltime highs. More on what it indicates about the state of the economy. We are pleased to welcome ryders ceo, william sanchez, who by the way, will be ringing the closing bell later at the new york stock exchange. Youre rebranding. Youre coming out with a new advertising campaign, first one in a while. Why now . Whats the change . Well, weve been in the Transportation Industry for 80 years, but were a bit of a wellkept secret in that a lot of people know that we rent trucks but dont realize all the searches we offer. Were in the outsourcing business, so companies outsource their fleets and their supply chains to us. Nice thing about that, its a very large market. Its over 8 million commercial vehicles in north america and only about 10 of them are o outsourced. So, its a big opportunity for us to really convert more of the doityourselfers to outsourcing that type of opportunity to us. Is it true the one reason why the transport sectors been doing better this year is because of this energy boom across the country . I think thats part of it, but clearly, we saw, and were a little bit of a bellwether, i think, for the economy. In our truck rental business, we saw that pick up at the beginning of last year. That continues to move strongly. Thats usually an indicator theres product moving in the economy. What kind of product . Theres the energy sector, but i would really say across the board, anything from housing to even food distribution. You just really see it across the board. See, thats what im talking about. There seems to be this disconnect. You know, we talk so often, of course, about housing for obvious reasons, other sectors that seem to be lagging to some degree, or theyre growing more slowly, but yet, you guys in the transportation field, who are so economically sensitive, are doing so well. Where is the disconnect there . I think capacity in transportation has been tight for the last couple years. Companies have been hesitant to invest in new trucks and leasing new trucks. Okay. So, the minute things start to pick up a little bit, we saw a rental business, companies had to come to us and rent trucks. But since the middle of last year, our Truck Leasing business is also doing well, which tells you theres a bit more confidence in the economy from our customers and theyre willing to sign up to longerterm leases for their trucks. The last missing piece of the recovery, if you will, is wages. And a lot of people have been looking at the increases that were seeing in what Truck Drivers are getting paid in some parts of the country as maybe some sign of this pressure moving in the right direction. Are you facing a shortage of Truck Drivers out there . Are you increasing wages . Yes, there is a shortage of Truck Drivers. Thats actually a great opportunity for ryder, because we hire we have 6,000 commercial Truck Drivers that are employees of ryder, so we have a very extensive driver recruiting network that we use to bring drivers into ryder. And companies that are having trouble recruiting drivers will outsource that to us. There is clearly a shortage of drivers today. There has been some Wage Inflation over the last couple of years. And i expect that to continue because theres been a lot of new regulations around Truck Drivers, that its making it harder for folks to get into that business. So, is it more about the regulation, then, as opposed to a sign that the economy is improving at large . I think its a little bit of both. I think you do have the regulation thats tightening the population of drivers. While the economy is picking up. Its not i wouldnt say its a snapback. Its just been a gradual movement in the right direction. Looking at the balcony where youre going to be ringing the bell here, your new slogan is ever better. What does that mean . Because our business is about making other businesses ever better. So, weve got a slew of services that we offer to companies. We work behind the scenes at many Great Companies today. Logistics is it, right . Logistics and fleets, truck fleets. And by providing those services, we help them be better and do a better job of serving their customers. Last quick question, whats your effective tax rate . Ah. Our effective tax rate is 36 37 . So, its higher than we often cite the Corporate Tax rate as 35 . Because that includes all of the taxes that we pay, even outside of the u. S. But yes, were 35 36 . So, what do you think when you see headlines about other companies doing tax inversions to lower their rate from say low 20s into the teens . Dont you want to do that . No, i think were really, the core of our business is north america, so were likely to stay here. But clearly, we want to see an environment, a tax environment here in the u. S. That would encourage companies to stay here as opposed to making them want to do things like an inversion. So, certainly, we would look for the government to help make some of those changes that would make it more attractive for companies to stay here. Sounds so easy. Yes, it does. Sounds easy to us. Clearly not in washington. No, nothing is. Robert sanchez, ceo of ryder systems joining us today. Take a break. Well come back. Weve got about 40 minutes left in the trading session here with the dow down 137 points, off the lows. We were down 168 at the low today. Nasdaq off 25. One of the reasons, amazon. Question is if investors are running out of patience with jeff bezos now. Theres frustration about red ink at amazon building today and the stock is showing it. Well speak with amazon pros about how much time jeff bezos has to expand profit margins. Then later, should we feel good or bad about these earnings weve seen so far this reporting season . Weve got the pros to help us sort it out coming up on closing bell. Dont just visit san francisco. water dripping and pipes clanging visit tripadvisor san francisco. soothing sound of a shower with millions of reviews, tripadvisor makes any destination better. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleepiqtm technology. 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And then theres amazon getting slammed on the heels of that worsethanexpected loss and warning you last night here on closing bell. Of course, all of that first reported right here with kelly at post 9. Josh liptons been following the carnage today, though, for us. Josh . Well, bill, amazon has been called the everything store, but it costs a lot of money to be everything to everybody. Amazon saying secondquarter sales jumped over 20 to 19 billion, but expenses surged even more. It says the company kept spending a ton of money on faster delivery, video content and new devices. All that spending, of course, pressured profits. The Company Posted a widerthanexpected loss, and more importantly, forecasts more losses for the quarter ahead. Amazons strategy here nothing new. Ceo jeff bezos has always said he invests for the long term. He measures his companys success by market share, customers and Revenue Growth. If that comes at the expense of nearterm profitability, then so be it. But now some investors are clearly losing patience. The stock getting hammered today. Its now down nearly 20 this year. Analysts say one difference is process cycles focused on centers, but now theyre investing in tablets and even smartphones, and the company doesnt seem to be in any great rush, though, to cut back on its spending. On a Conference Call with analysts, amazons cfo reiterated his companys mantra, putting customers first, he said, is the only reliable way to create lasting value for shareholders. But amazon shareholders dont seem to be buying that argument, at least today. Kelly, back to you. Thats for sure, josh. Are investors who have been betting on bezos having second thoughts . Kevin scott is joining us along with ben harr to weigh in on this. Kevin, i like the line this morning, karen says every quarter, investors seem to be surprised that jeff bezos is jeff bezos. Exactly right. Theres no knocking at jeff bezos. The guys a visionary. The question is, at some point, is amazon trying to be too many things to too many people with too little focus . Any other ceo would not have this long of a leash. This much revenue and this little bit of profit are losing money. This just wouldnt stand with any other ceo, and i think investors are getting tired of this with jeff bezos. Heres what i dont understand, ben. We fault so many corporations for all the share buybacks theyre doing these days, the socalled Financial Engineering, where theyre not plowing the money back into the company for the future, and now we find ourselves faulting jeff bezos for doing precisely that, and we always have. Why is that . Its because the street and lots investors have shortterm memories. People forget. Like, last quarter, for example, amazon beat street expectations by 300 million. And over the long term, amazon has been a great buy, but you have to go in you go in knowing that amazon is a longterm buy. He doesnt think in terms of quarters, he thinks in terms of decades and years. And five years from now, hell be proven right by his strategies, but it takes time to implement. Ben, part of the concern today seems to be that this investment is going in too many Different Directions and that some of these are jeff bezos pet projects. I wonder, though to your point, if this is about ultimately investing heavily today so they can do sameday shipping within a year or two, is that what you mean in terms of this investment now to pay off . Well, theres a couple core things. One of them is definitely that, making it so that sameday shipping is possible so that they are the ultimate distributor of everything. But its also theyre trying to sell their software through the hardware that theyre building. And so, you think about the first version of kindle was not all that great, but future versions have expanded all of their kindle, their Amazon Prime Services and made them a bigger company. And that has worked out pretty well. It just takes years to do, not weeks or months. Kevin, you think at some point jeff bezos is going to have to please shareholders. Why . Yeah, absolutely. They lost 126 million this last quarter. Its more than double, or almost double what people expected them to lose. I think its time for investors to hit the panic button. Look, amazon has a long list of goals. The question is, how high is profitability on that list . At some point, investors want to see a return on their investment, and i think the leash is get but im thinking about his control of the company itself. You dont think he has the kind of control that say a Mark Zuckerberg has over facebook or Sergei Lennon and larry page have over google at this point, do you . Precisely, and because of that, he doesnt have as much control, and therefore, he is going to have to answer to investors. Those investors could put in a new board that could fire him. He needs to show something and show something quickly, because investors are going to get tired of this. They need to see the return. He doesnt have the control he needs. Hes going to have to do something quickly. Ben . I disagree. Bezos has complete control over his company operations, and i think lots of investors know, if you remove bezos, who is the heart and soul of that company and the founder and visionary of it, the stock will only do worse for a long period of time. You see it time and time again when a founder gets ousted. And so, you have to go in knowing that this is a longterm investment. And bezos has done right by his earliest investors. Theyre not going to be forcing him out any time soon. He can turn on the profits when he wants to. Its not because the business is bad, its because hes been reinvesting so much of that wealth. There will be a point where he doesnt do that, and there is huge amounts of profit. He can do that at any time, though. The fundamental business is strong. Kevin, could you really see the gathering in the boardroom at amazon and somebody raising their hand to vote in favor of firing jeff bezos . You know, i dont think in the early days of apple people thought they would fire steve jobs, but it happened he was shoved out by the ceo at that time. Yeah. And so, i think what youre going to have to see is, you know, bens right. I think he could turn on the profit. The question is, when is he going to do that . And i think hes going to have to do it sooner rather than later. Theyre just trying to get into too many things and theres too little focus and theres not enough profit, and eventually, investors are going to get tired of it. All right. Good to see you both. Thank you. Thats a favorite water cooler discussion, what to do about amazon, right . Absolutely. All the talk today. Heading toward the close, 30 minutes left in the trading session, the dow nudging a little lower here, down 143 points with the s p down 11. Up next, good, bad or ugly . A couple of wall street pros shed light on what to make of this earnings season. And later, cheeseburgers caught in the crosshairs of geopolitics. We mentioned this one off the top. As relations between washington and moscow remain tense, russias consumer watchdog wants to ban certain mcdonalds products like the cheeseburger and the fillet of fish. This is for real and could be retaliation. Well have a report from moscow. A new volkswagen h turbo. So why are we so obsessed with turbo . Because theres nothing more exhilarating than a powerful ride. And you can get that in places you might not expect. Like the passat. And also in the funtodrive jetta. In fact, volkswagen has sold more turbos than any other brand over the last ten years. That is a lot of turbo. Vo hurry in and you can get a 1,000 turbocharged reward card when you lease a new 2014 passat s for 219 a month. Market down 143 points. Just getting word off the ap wire, reporting that the Israeli Defense ministers telling troops there that israel might significantly widen the gaza ground operation. Hasnt hit the market yet, if its going to. But were down 143 on that, the nasdaqs down 27 and the s p down 11 points. So far this earnings season, 229 s p 500 companies have reported. 155 of them have beaten expectations. But how has the quality of the earnings really been so far this time around . Yeah, with us now for their thoughts, david dariuson and our bob pisani. Welcome to you both. We just heard from rich peterson. Were about to have one of the best Earnings Seasons since 2011. Could be up 10 . You know, 10 or 11 , double digits. The next quarter is supposed to be 8. 1 . That be the Third Quarter. And the Fourth Quarter, as of now, 11 . What i find amazing is, the imf is lowering its forecast for Global Growth and u. S. Growth and chinese growth. At the same time, you had the chinese purchasing managers index, that flash thing came through at 52. Europe came through at 54. All of the ism surveys. Yeah, but the survey on the rocks for a little bit, down for a third month. Thats true, but there does seem to be the the new jobless claims came in way below 300,000. So, there seems to be an underlying the thing is, people are not spending in a great way and those jobs are jobs, but theyre parttime jobs and theyre not great paying jobs. Were getting off topic, though. He can do what he wants. The quality of earnings the quality of earnings are a genuine issue. Its true, were going to be up probably 9 , i dont think 10 , but 9 is pretty darn good. Its the best since the middle of 2011, so thats good news. The bad news is, still 4 Revenue Growth. Still, its 3 to 4 . Last year we were at 1 to 2 37 do you think we could do better by now . Sounds like were doing much better then, going from 1 to 2 to 3 to 3 4 . Its definitely better, but people want to see the Revenue Growth and Earnings Growth closer to each other. We should see 6 , 7 Revenue Growth, dont you think . And youve talked week to week the corporate buybacks how it reduces the share count and helps earnings per share. It does. Now, look, i think the argument is still cost cutting Still Matters at this point. They say, oh, you cant keep doing it. Well, weve been doing it for four years now, and eventually its going to stop. Well, maybe its going to stop, but the minute revenues start going up, these companies are going to go through the roof because all that profits going to go right to the bottom line. Theyre lean, clean, efficient machines at corporate america. But thats a big if. It could be a time coming, thats the concern. If it happens right. Because theyre so darn lean right now, thats going to go to the bottom line. Unless theres a huge hiring what about caterpillar, who basically said theyve dealt with the flatline for two years. Doug obrien said i feel great about how its running but we have to acknowledge the environment. I think caterpillars a great play on china, too. And im amazed that brazil, canada, australia, all of those china this month is up 5. 5 . Brazil is up 18 for the year. Canada, australia, both up 10 , 11 . They are chinarelated. They are caterpillartight commodityrelated, too, by the way. They are commodityrelated. So, i think those are good indicators. But we do, as i said to bill last week, kelly, you want to listen to the ceo commentary and the cfo commentary. Thats why i was really unhappy with visa today, really unhappy, because he made it clear theyre not happy with the spending theyre seeing from the customers. Lets just go back to the topic originally. 15year average for earnings is 8 for the s p. We are going to see 9 . So, were above average rights now for the 15year. Do you think the retailers, though, will be able to keep this earnings season going strong . Oh, awful. Theyre the ones who come in on the back ends, so we may be on a strong trajectory right now. Thats why im not a 10 or 11 . Youre always the optimist. I think capital iqs saying 10 is likely this time around. Exactly the reason she said there, i would doubt that, seriously. But lets stay at 9 . The average for Revenue Growth is 6 . So, my point is, if we can get close to 6 , there were at the average, but were not there yet. Thats why i do im not entirely happy with the quality of earnings. When have we ever in the history of the world sat here and said, boy, are we glad what a great earnings season. Yeah, earnings are just terrific right now, arent they . Theres always something to complain about. Bill, the criticism about cnbc is, in the late 90s, that they were too optimistic. Remember all that stuff, you know, that you couldnt do any wrong. We put a mirror up to the world and look what we found. Greenspan reduced rates, the market would keep going higher. In those days, i think thats led to some learning, and thats why there is this more balanced but how much has the negativity, which you see across all sorts of Media Outlets kept the public out of the stock market and as a results missed out on one of the best stock rallies of all time . They have thought this, and thats why i believe in my heart of hearts the market can continue to rise, because people have not come into the party in a big way. When you see everybody coming into the party, then its time to go out on the porch, out on the deck and leave. By the way, the criticism of david darst in the late 1990 was he was too optimistic, but hes still there and hes still giving us that look on things. Back to you, bob pisani. Im just an observer. Everybody keep your eye on the jobs report next friday. Next week. Next friday, august 1st. A fed meeting next week as well. You had caseshiller on tuesday, you have the Chicago Purchasing Managers index on wednesday. And on friday, i think youll want to watch this jobs number. The number i see is 230,000 and at 6. 0 . God forbid that thing comes with a 5 first number, the 5 handle. Yep, yep. That would also, i think, give a lift to the market. A 5 . A 5 handle . Its possible, right . Last month it was 6. 048 . That was the unrounded rate last month, so were less than half a point away. Boy, are you cynical today. Im just trying to keep things moving along here and keep us on topic. Bob pisani has never been too dispeptic nor too saturn nine. What . Dispeptic and saturn nine . I dont have any of those diseases, and im taking medication for the other ones. You should see us on twitser fear trying to pronounce the yiddish at ace greenbergs eulogy. 20 minutes left in the trading session. We should add as well that Goldman Sachs is out there today talking about making some tweaks to where it sees return and value in the months ahead. Still sees equities as one of its strongest overweight positions for the 12month horizon, but for 39month horizon, pulling in their horns a little bit, interestingly going underweight on Corporate Credit and weve seen some outflows there and high yield lately, some of those parts of the markets, perhaps as well on the concerns from janet yellen that weve heard voiced. Exactly. So, watching all of that gearing up for the events of next week. Up next, wall street clicking over chicken today. Our seema modys going to wrap up El Pollo Locos redhot first day of trade. Then, another actionpacked week of earnings ahead. We will run through the major numbers that are expected to move the market next week. Stay tuned for that. At every ford dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Frotheres no reasonn average 17 we cant manufacture in shuthe United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. E financial noise financial noise financial noise financial noise welcome back. With the dow off 138 points, we begin here with dominic chu and a quick market flash. Dom . Heres whats happening, kelly, bill. Just following up on your report about the latest global opportunity asset locator from Goldman Sachs, you mentioned that they had downgraded to neutral over the next three months equities. Just to provide a little more color on what theyre saying. They are downgrading to neutral over three months the equities because of the selloff in bonds could lead to a temporary selloff in equities. This makes the nearterm riskreward scenario less attractive. Despite the fact that they still believe equities are overweight 12 months and beyond. So, this is a very nearterm call. Also, on the Corporate Credit side of things, they are downgrading to underweight, both over the 3 and 12month period Corporate Credit. So, corporate bonds, on that front. Also, underweight, staying underweight government bonds as well. They expect yields to rise due to sustained high u. S. Growth and accelerating inflation and a decline of deflation concerns. So, it seems like theyre a little more optimistic, but they do think that if theres a chance of increased rates in the shorter term, that could have an effect on the equity market. So, thats why theyre staying neutral more on the shortterm side, but they still like them longterm, guys. Back over to you. It could be that, dom. It could be some of the International Tensions reported this hour. The dow is a little weaker than where we began, but not substantially, off 138 points with the tenyear well below 2 . Ever eaten at El Pollo Loco . No. That was spanish. When you go to california, youve got to have El Pollo Loco. Shares of the casual restaurants first day of trade has been a big one, hasnt it, seema mody . It has, bill. Its been a tough day for the markets, but investors going crazy for El Pollo Loco, the fast casual restaurant chain best known for its mexicanstyle firegrilled chicken. If youre not from the west coast, as you mentioned, bill, you may not have heard of El Pollo Loco. It has 400 locations in five u. S. States, but mostly in california. It generated 80 of its revenue from the Los Angeles Area last year. The Company Believes it could one day expand to 2,300 locations nationwide, benefiting from a growing hispanic population in the u. S. As well as increased demand for healthier fastfood options. I did speak to the ceo, steve sather, this morning at the nasdaq floor about competition with chipotle, and he said theres more than enough room for two big players in the mexican, fastpaced, casual space and that its a growing market. And a quick word on financials. While sales are growing, its been El Pollo Loco has been unprofitable for the past three years, but that doesnt seem to be concerning investors today. The stock up better than 50 , on fire on its first day. Back to you guys. Add it to the ranks of ipos that arent profitable. But chipotle, El Pollo Loco apples and oranges, totally different. Right. Which do you prefer . El pollo loco, i have to say. El pollo loco. Try it. It may be easier. Most people still cant say chipotle. Say chipotle. We cant pronounce yiddish words, either. Exactly. Down 130 points right now on the industrial average with 12 minutes left in the trading session here, and the s p also pulling back to the tune of 10 points. Russia today playing a big role in the selloff. Were going to get into whats happened over there and why suddenly the market seems to care, when we come right back. Theres a gap out there. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if frustration and paperwork decrease. The gap begins to close. So lets simplify things. Lets close the gap between people and care. In todays market, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of Fidelity Investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. 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[ male announcer ] tweet an expert and schedule a callback from any device. Introducing the xfinity my account app. We have a news alert on israel and our eamon javers joins us now with the details. Eamon . Hi, kelly. The Associated Press is reporting that israels defense minister is telling israeli troops that the country may need to significantly widen its ground incursion into gaza. Now, this comes after secretary of state john kerry announced in cairo that hes been unable to broker a temporary peace deal between the two sides. So, it looks like at this point, we may see a widening of the war in gaza, rather than the peace deal that many had hoped for, kelly. All right, eamon, thanks. Ill take it here. And were not seeing any market response. You might imagine that the prices of equities would go down or that maybe bond prices would go higher, maybe gold would move higher. Its been up 17 anyway, but were not seeing any response to this Late Development out of israel, so well keep an eye on that here. Joining me now as we head toward the close is mike mcqueen from hightower. Weve got earnings, we have geopolitics, we have the fed. We do. Youre keeping an eye on the fed. They meet next week. What do you think theyre going to do . Next week is packed with things, including caseshiller, first look at gdp for the quarter and then nonfarm payrolls, so weve got a lot on our plate, but the feds going to dominate. The feds going to dominate geopolitics. You think theyre behind the curve, though. I do. Look, the jobs market is stronger, well be sure to see on friday. Right. The jobs market has been stronger, and thats going to be the basis for everything Going Forward consumer confidence, Consumer Spending, et cetera. One of the great guessing games on the street right now is when they will begin raising Interest Rates. Yeah. When do you think that is . Well, we manage money. We think its earlier than people think. We think its earlier in 2015 than people think. It could be q1, First Quarter of 2015. That would probably cause an upset market, probably not going to end the bull market, though. Janet yellen has said its datadependent. Shes always said that. Absolutely. And the data are Getting Better. They are. You cant deny it. Exactly. But do they have to worry, though about what it would do to the market . You dont think it would kill this bull market to start raising rates . No, no. Smart people like David Rosenberg say the first fed rise does not end the bull market. It takes some time. So, there may be an adjustment. We havent seen any serious action to the downside, maybe a little correction, but at the end of the day, i think the bull markets intact. All right. Stay there. Well come back with mike. Well add a trader to the floor as we head toward the close with the closing countdown. A lot more in this coming up in the next hour as well. Are auto loans the new subprime disaster waiting to happen . Thats been all the talk this week. We have a contrarian view of that trending story, just ahead. You are watching cnbc, first in business worldwide. If energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Moderate to severe is tough, but ive managed. I got to be pretty good at managing my symptoms, except that managing my symptoms was all i was doing. When i finally told my doctor, he said my crohns was not under control. He said humira is for adults like me who have tried other medications but still experience the symptoms of moderate to severe crohns disease. And that in clinical studies, the majority of patients on humira saw significant symptom relief. And many achieved remission. Humira can lower your ability to fight infections, including tuberculosis. 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Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. The next week negative, then positive. Now this week we are negative for the dow. The s p, slightly different story. It was in record territory a few days this week but now down 9 points today, and for the week get this looks like the s ps going to finish down 0. 01 , so almost unchanged. Two big earnings, facebook reporting blowout numbers, and it showed. And for the week, its up almost 10 , 9. 75 for facebook. On the other side, amazon disappointing last night with a much widerthanexpected loss, even despite higher sales. That stock today down 10 , and that accounts for the loss this week as well. Joining mike mcqueen and me is peter costa as well. What do you make of this week . You know, weve had tremendous geopolitics news. Right. Weve had a lot of earnings news. The feds been in there and the markets kind of moving sideways. Its meandering. And i think theres a couple reasons for that. Any time i mean, this earnings season, its obvious that if you miss, you dont really get killed, other than amazon. Other than amazon or visa. Or visa. Those are the only two that stand out. Yep. And if you blow out your numbers all right, facebook did okay, but theres been a lot of very good earnings and the stocks havent really reacted. I mean, youd expect them to react a lot better, and they havent. So, i think that where we are right now is in a very, very dull period. I think theres, you know, a lot of what were seeing are lowered expectations, theyre beating lower expectations. So, people are just muddling through that and trying to figure out what it means long term. Are you buying some of the dips here . We are. We think this mild malaise, this summer malaise offers opportunities, but i think you could have more to come, so were not throwing money in right now. Next couple of weeks i think we could. What are you buying . The leadership right now, transportations very hot, energys very hot, technologys doing very well. Yeah. Theres still a lot of value utilities, right . Theres still value in technology. I think youre talking about the two stocks pulling south but youve got to be broadbased. If you spread your money across the technologies sector, youll probably be better off 612 months from now. Ill go with that, but short term, i am still a little bearish. Goldman saying watch out for Interest Rates. If they start to rise, and we have that jobs report next friday. Right. If rates start going up, theyre going to be more skittish about stocks in this country right now. They would go to neutral on their opinion of stocks. Right. Thats late this afternoon i have to tell you, i think Interest Rates will start to rise, and its counterintuitive to think that, but i do think youre going to see that Interest Rates start rising earlier than december, which is not going to bode well short term for the market. Guys are in accordance on that one. Good to see you both. Thank you. Have a great weekend. Going out with a decline of 127, so a down week for the dow and for the s p. But stick around. A lot more to come and a look at what could be a problem for the economy, the subprime auto loans on the second hour of the closing bell with kelly evans. Have a good weekend thank you, bill. Welcome to the closing bell, everybody. Im kelly evans and heres how were finishing up the day, and what a week its been on wall street. Red arrows across the board here, going out with the dow off about 120 points, 0. 75 . The nasdaq off 0. 5 or this points. The s p 500 down by similar magnitude, losing 9 to close at 1,978. After recording a high earlier this week, giving up some of the gains. Lets get to todays panel. Joining me, cnbcs robert frank, zach par bell from investnet. I always do that. Im sorry. I dont know whats wrong with me. Also with us for more on todays Market Action is fast money trader brian kenny. And well be joined shortly from the floor. Zachary, i will start with you, then. Which is the signal this week . Is it the s ps new high or the declines were seeing going into the weekend here . I feel like that old new show, you know, this was the week that was . I mean, every week we have this kind of narrative of is this going to finally tell us the perfect trajectory for the future . And every week were left with the fact that markets have been trending up, yeah, sort of, what was it, a completely flat week or moderately down this week, with a lot of action in the middle. I mean, i dont see anything that changes what weve been saying for the past month. We have a decent economy, earnings are better than expected, but only because expectations were so low, so easy to beat a low bar. Some really good parts, some really bad parts. I wished i could come out with a great sound bite and say were off to the races or everything is terrible, but i dont think thats the reality. Well, we appreciate that. I wonder if that means a Good Environment for stock picking, if you pick the right ones. It is encouraging, and thats what i got today. There was so much focus on the earnings, on visa, starbucks, amazon yesterday. So, that was a good sign were not so fedcentric. On the other hand, it really feels like the big investors right now are kind of disengaged. I was in the hamptons yesterday. I was reporting. This is my job. Thats what we all say. And a big investors said, look, this is the first summer hes had in years where hes taking every weekend in july out there. Like basically, the feds given him the summer off. And essentially, theres just a feeling that not much is going to go terribly wrong or terribly right. Right now the feds got your back. And i think the big investors with a lot of money in this market are sitting back waiting to see what happens until september. Brian kelly, though, let me go back to the headline that hit from the Associated Press, israels defense minister telling troops the country might significantly widen its gaza ground operation. Yeah. I mean, those headlines have been good for a 1 decline in stocks, but ultimately, stocks have shaken it off. To what the other guys were talking about, its like a vanilla pudding market. Its okay, its fine. Youre right, the fed is still there, theres still that implied fed put, but i would agree with goldman. Everybody whos been saying that rising Interest Rates are going to be good, means the economys Getting Better and the stock markets going to take off, i think theyre wrong about that. You get rising Interest Rates in this environment, the stock market will sell off. Kenny bacarri joins us now from the floor. Do you agree . I think in this environment, the market sells off, although if rates start to go up because it really starts to get stronger, thats a different situation, but its not the situation were in right now at all. What does might be make with outflows of the last several weeks . Several areas have been singled out as being overvalued, including highend debt, some of the small caps, particularly in u. S. Equities. Is this a fedspurred move, zachary . And if so, is it like past moves in the Municipal Bond market and other spaces, a buying opportunity . These are really de minimis outflows based on the relative outflow to the markets. Were talking about singledigit billions in trilliondollar markets globally. So, yes, people arent flooding into these asset classes, but to say investors are fleeing high yield one of the reasons why goldman thinks equities are going to underperform is because it thinks kri is going to underperform. Why, and if people are pulling money out of this space, does it continue . Underperform relative to what, particularly, right . I mean, they may not do as well as we thought a month ago, but i still think, look, equities are the only thing that offer any kind of dynamic return in this economy, and rising rates means the tenyear going from 2. 4 to 3 or 3. 2 . Were still talking about an unbelievably different Interest Rate environment that any of us grew up in in an investing world full stop, and i dont think were going to be in that for years, absent some tectonic crisis that by its nature is unpredictable. What is clear, though, is that this rate hike is going to come faster than people expected. Whats at the heart of this goldman call is theyre saying that the first rate hike is now, they think, going to be the Third Quarter of 2015, instead of the First Quarter of 2016. Thats not a big deal, but at the core of that analysis, goldman is saying we expect a big spike in bond yields, and thats due to inflation, thats due to a stronger economy, and that may not be all a good thing if the economys not quite there at that point. Hang on. B. K. , i know youre trying to get in here. I just wanted to go back to the highyield bonds. To me, that is the next area that could cause a crisis, and the reason why, zach brought it up, there are trillions of dollars of junk bonds. Junk bonds have almost doubled, even tripled since the crisis, yet, dealer Balance Sheets have been cut in half. So, when people start running for the exits, there is going to be no liquidity there. So, it may start off very small, but it could snowball quickly. I happen to be short hyg as a way to play that. Which has been a good trade for the last week or two. Kenny . Listen, go back to the goldman call. They went from a Fourth Quarter 2015 to the third, when everybodys really in the Second Quarter of 2015 i dont think is really such a big call. If were talking may or june, thats one thing. If we talk january of 2015, thats another thing. I think a goldman call saying rates are going up in october is not a call. This raises what david darst was talking about last hour. It might have been bob pisani, where they said were going to get the jobs report next friday. How long until it has a 5 handle . Yes, were at 6. 1, yes, weve fallen swiftly, but the unrounded rate is already 6. 048, i think, something in that range. Were not far off from that. But last month, the jobs created were parttime. Theyre not fulltime, wellpaying jobs, and thats why i think a lot of people get lost, because its frustrating. The number looks great if you look at the number, but yet, if you look at the qualities of that number, its frustrating. You look at the parttime workers. When asked why theyre in these parttime jobs, its not because they couldnt find fulltime work, its because they wanted parttime jobs. The question backs what does that mean for the reports . The fed is looking at the granularity of these jobs numbers. Theyre not looking at the headline Unemployment Rate that we talk about. Its all about wage growth. And thats still, you know, theres a segment of the economy that is seeing wage growth and Income Growth. You know, the Trucker Company was on earlier. Ryder, which just rang the closing bell here. Obviously, hightech land is seeing that, and i think thats all for the good. But on aggregate, youre not seeing it at mcdonalds or walmart. Brian, to your point, while people are concerned about high yield, if you look at jobless claims and the correlation with how the junkier parts of the market usually perform, the low level of jobless claims suggests that high yield spreads, believe it or not, should and could go much tighter. Yeah, they could be lower. On your point, brian, i mean, i think your risk is more of if there is a financial disconnect and people are looking for liquidity high yield is at risk. Thats a different kind of risk than default risk of the underlying assets. Right, exactly. Im not saying that there is going to be. Were a long way from default risk. That will be, if we get a recession, then well have that. But where high yield is and the spread over treasuries are at record lows. So to me, yeah, i guess it could go a little bit lower, but as soon as the economy starts to get better and you have that correlation between jobs and high yield, when yields go up and people start running for the exit, im just saying, it could be worse. It doesnt mean that its economically sound. It just means that theres no liquidity there and that could create a crisis. Are you surprised, anyone here surprised that crude oil hasnt risen more on the back of these International Tensions that were seeing . I think that has everything to do with what weve talked about a lot, which is the massive rampup in north American Oil Production really in the last two to three years, which means that even as you have several Million Barrels a day being taken off from iraq, from nigeria, which we dont talk about, from venezuela, which is also in its own kind of chronic crisis, youve got this supplement from north america and natural gas and it provides a buffer to that global oil supply. So, in other words, there could be a significant premium already built in over 100 a barrel. And just to circle back to whats happening overseas, which does seem to be getting more important as we go into the weekend, both with the germany weakness in the economy there, the news out of gaza just now. And if you look down at the visa numbers, what the real problem there was the troebl transactions and they site europe and ukraine as being a big part of the weakness. We like to isolate russia, say its a tiny economy it wont matter, but when you look at it in the context of Company Capital flows and a company like visa, we may be underestimating the situation. Final word . I think thats what were seeing today. I think the market is recognizing that. Technically, weve been bouncing around at the top and kind of finding no momentum to really take us higher, and so therefore, i think the path of least resistance at the moment might be a little pullback. Echoing what the goldman note is all about. Stick around for fast money at 5 00 p. M. Theyll test out amazons brand new fire phone on set. Find out if it lives up to the hype. Brian, were going to look forward to that. Thank you very much. After the bell, earnings action, i should say, picks up steam again next week. Twitter, intelligence la, gopros first report as a public company. Ill round up all the names to watch next. And multiple warnings about the economy adding fuel to todays selling pressure. Are those worries warranted . Were going to talk about that, straight ahead. Plus, russian president Vladimir Putin fighting back against u. S. Sanctions bp taking aim at mcdonalds. The details of this unbelievable story and some other new, troubling developments later on the closing bell. Keep it right here. Youre watching cnbc, first in business worldwide. D dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. 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Moving into tuesday, before the bell we have two pharma giants, merck and pfizer as well as u. P. S. Going to be interesting to see how they report in light of the fact that that bad weather is out of the way. After the bell, a dow component, American Express, also biotech giant amgen. And probably of most interest, twitter. Investors are going to be looking to see how user growth is faring for that company and how the company is monetizing that. Moving on to wednesday, before the bell weve got sprint. In the afternoon weve got yelp. Weve also got two consumer staples, kraft foods and whole foods. Thats been down, whole foods down about 30 so far this year. On thursday weve got oil majors in the morning, weve got mastercard in the afternoon, tesla. All eyes are going to be on tesla, but especially looking at gopro. Investors will be looking at that, because this is the cameramakers first time reporting earnings. Come friday, in the morning weve got another oil major, chevron, p g and clorox, and investors have the afternoon off. No earnings after the bell in the afternoon on friday. Kelly, back to you. I think theyll need it, morgan. Thank you. Thats quite a lineup. So, what are these earnings telling us about the state of the u. S. Economy and future for markets . Scott brown and Christopher Lowe are here. Welcome to you both. Scott, what are the most important names to watch next week amid the slew that you just heard there . Well, certainly were going to be looking at earnings, but theres a lot of Economic Data that are going to be coming out next week, and that really could change the outlook for the second half of the year. I think the general theme weve been seeing from a lot of the Monthly Economic figures is that you had a pretty good rebound in the Second Quarter from the bad weather in the First Quarter, but there appear to be a bit of a loss in momentum in june. That is, heading into the second half of the year, growth appeared to be slowing down somewhat. Obviously, that may be a concern. Were still seeing very weak growth in real wages. Right. That could be a limiting factor for Consumer Spending. Chris, would you agree theres been a loss of momentum in june . Oh, yeah. Look, there was a decent bounce in the monthly numbers in april and may, but looking at gdp consensus going into next week is that were probably going to see something just under 3 . Bear in mind, thats pretty much how much gdp dropped in the First Quarter. So, even if we get a consensus number, were looking at no growth in the first half. I actually think its going to be a little weaker than that, in fact. And thats the backdrop. And i just want to bring the panel in here. That reminds me of when whole foods reported last quarter. They were down 25 on that number. I dont think theyve recovered. So i guess the weak backdrop allows for gaps like that to happen. Although thats more because that stock had been i mean, we dont want to talk about the stock, but that he had been doing so well so long, it stopped being more of a growth story and more of a supermarket story. I wonder from the two gentlemen how you kind of add up this job creation. Lots of these Companies Reporting for first time in many quarters some real Revenue Growth. I mean, not like incredible Revenue Growth, but the rub on earnings had been companies are doing earnings but revenue had been flat. Now revenues going up, certainly above gdp trend. Which of these is real, or are they all real and theyre just speaking to different parts of this thing we call the economy . Scott . Well, certainly when you look at the nonfarm payroll numbers, the secondquarter figures were pretty strong month to month, but bear in mind, these things are based on statistical samples, and its not unusual to get a string of strong numbers, a string of softer numbers, below trend. So, you want to take it with a little bit of a grain of salt. Were going to be looking for confirmation in july. A lot of seasonal adjustment issues at the end of the school year. You normally get a pop in unemployment claims. That pop this year, before adjustment, has been a lot more moderate than usual. So, there are a lot of cross currents. But i think one of the issues that were seeing Going Forward is that, you know, job destruction is still very low. New hiring appears to be picking up somewhat. It still has more room for improvement. But again, i think theres a lot of uncertainty as you go to the second half of the year. Yeah. Chris, just curious, as we kind of dig down into this and look a little bit at what kind of momentum we have into the back half of the year, do you expect that we get to Something Like a 3 trend here for the u. S. Generally, or is it going to be another case of disappointment for whatever reason . Well, you know, i guess the good news is look back at the last four years. And First Quarter was disappointing in three out of four of those years. So, the second half generally has been better than the first half. I do think youre going to see job growth slow down. We went back, looked at 50 years of data. When job growth is strong and gdp is weak, its usually because companies overhired. I think this time it may also be because theres a lot of parttime hiring. And you know, maybe 200,000 isnt the same as it was in prior years. As for earnings, they have been decent on a gaap basis, but boy, you look at the National Income and product earnings, where they take into account things like yeah, thats the point. Thats been really weak. And thats the change in tax law at the beginning of the year. It doesnt affect gaap, but it does affect cash flow. Last real quick, robert . I was beyowondering, do you a clear pattern with the consumer . We had restaurants like chipotle, you know, knocking the cover off the ball, then starbucks was a little weak, which seemed like a similar consumer. What kind of consumer patterns, what are consumers spending money on right now . I dont think theres any such thing as the consumer. I think theres a wide range. And if you look across the income scale, you know, median and below, these people are running as fast as they can just to stay where they are. The high end, obviously, is doing really, really well, if you look at real estate, restaurants, Consumer Spending and so on. But for the typical worker, you know, youre not really seeing much firepower for Consumer Spending. You do get aggregate Income Growth and aggregate spending gains because you are adding jobs. But again, the pace is going to be maybe somewhat muted. Its a great point. Well leave it there for now. Scott brown and christopher low, have a good weekend. Thanks. Russia taking some of the shine off the golden arches, the country trying to ban some mcdonalds burgers as tensions with the u. S. Heat up over the conflict in ukraine. Is the white house doing enough to stop this escalation . Meet the press moderator David Gregory joins us next. And americans throughout the nation have been protesting against sheltering immigrant children in their states, but the mayor of syracuse, new york, offering up her city as a temporary home for thousands of these children. Shell tell us how her constituents are reacting to that, later on the closing bell. Shthis billboard down . People find out state farm does car loans as well as they do insurance, our bank is through. Good point. Grab an edge. Look theres two guys on the state farm borrow Better Banking sign. Nope for real theres two dudes on the state farm borrow Better Banking sign. [ reporter ] breaking news from the state farm borrow Better Banking sign. Were seeing two men that have climbed the borrow Better Banking sign gentlemen please get down from the state farm borrow Better Banking sign. Phil get the hose. Okay hes getting the hose. Alright, lets go. [ male announcer ] talk to a state farm agent about car loans that can save you hundreds. Thats borrowing better. Mcdonalds appears to be the victim of increasing tensions between the u. S. And russia over ukraine, this on the heels of conflicting reports of Russian Military action. And nbcs jim maceda in moscow with the story. Reporter well, the war of words between russia and the u. S. Saw more today, fired by foreign minister sergey lavrov, taking aim at state Department Spokeswoman marie harf. Her claims that russia is about to supply heavy antiaircraft weapons to the rebels and that Russian Forces had fired our tillery at ukrainian troops from inside russia. Now, he called these unsubstantiated fabrications streaming from kiev, he said, who is not shy to make up its own stories. But the pentagon said that heavycaliber, multilaunch rocket systems could be transferred to the rebels as early as today. And there may also be a burger war to report soon. A Russian Consumer Protection Agency has, in fact, filed a lawsuit against mcdonalds in russia, believe it or not, claiming its nutritional information on its packaging of its cheeseburgers and its chicken burgers is false, and therefore, illegal. But mcdonalds told us earlier today it knows nothing about the claims and that everything at mcdonalds has been approved by russian authorities. So, it looks like the golden arches, an american icon, are now in the kremlins crosshairs. Back to you. Our thanks to jim maceda. Those reports of artillery fire from inside of russia into ukraine also coming as moscow reportedly planning to boost military supply shipments to russian separatists in ukraine, all this after two ukrainian fighter jets were downed earlier this week. A few days after, that malaysian civilian airliner was shot down in the region. Nbcs meet the press moderator David Gregory is following the story down in washington and joins me now. David, a difficult week here for International Tensions. How concerned should Everyday Americans be about this . And kevin brady, by the way, from texas was on our Network Earlier today. We asked him about the eu moving forward with sanctions against russia, and he sort of shook his head and said the eu and u. S. Cant get on the same page here. Well, thats a real difficulty. And from the point of the view of the obama administration, thats their focus, trying get europe to get in lockstep with the u. S. Government to try to isolate putin as much as possible. The view within National Security circles in the government is that putin feels a sense that he has miscalculated, that this has spun out of his control. Hes a better tactician than strategist and he has a strategic problem now. But at the same time, they recognize he is not easily intimidated, so the strategy is really ratcheting up the pressure. Hes got some split, evidently, within his inner circle of people saying the economic costs of doing what weve done, as russia has done, and ukraine are quite high, but this is an important moment for europe to step up, particularly in light of the Malaysia Airlines downing, to really ratchet up that pressure before some of that pressure diminishes against putin. And david, were reminded of the Russian Central Bank raising Interest Rates, the extent to which billionaires in russia may be unhappy with their own wealth losses that theyre facing. How much further can russia, and will russia, in your opinion, push this . What is it that theyre pushing . What should people expect in terms of next steps here . Well, look, this got crimea. There was no penalty. Thats almost off the table as a discussion. Youve got what is still going on in eastern ukraine, which may be a situation that now putin cannot completely control. You have a new leader in ukraine who might actually be willing to provide some autonomy in the eastern part of the country. So, i think putin is probably in a position where he is more apt to negotiate some kind of solution that would diffuse this than he might have been before, and he comes out, ironically, in a stronger position because of this crisis atmosphere post the Malaysia Airlines downing. Youve seen from the administration a calculated effort not to single him out, not to go mano a mano with putin, but to try to increase pressure in a lot of different ways to bring him to the table. But this, you know, theres you look at the economist magazine, other commentary about the idea of european appeasement of putin and not forgetting the lessons of world war ii. There is a real fear factor here about allowing putin to think that he has so won this round that his expansionist policies can continue. Im interested to hear you say you think this has enhanced his position, the downing of that malaysian airliner. Ive heard many saying precisely the opposite, that its the one thing that turns sentiment against him, particularly in europe, where economically speaking, they might otherwise be more hesitant. And by the way, that newsweek cover shows him as being isolated from most of the people around him. No, no, thats not what im saying. What im saying is if he now steps forward because hes in a more difficult position because of the airliner to negotiate and to diffuse tensions in ukraine. The fact that this far along, hes finally willing to deal on ukraine, there have been enough facts that have changed on the ground that there may be more autonomy for eastern ukraine, more protection of the separatists than there might have been before. That may put him in a situation where he gets more out of the final solution phase of this than he might have gotten before. But i think theres no question, dont misunderstand me, that what has spiraled this out of control for him is the downing of this airliner that is putting him in a much more precarious position, and it has increased the need for him to try to get some control over the end game. David, thank you. Appreciate your time this afternoon, as people continue to sift through everything thats happened this week. Be sure to tune in to meet the press this sunday. David gregory will be following all of the foreign developments over the weekend. Your local listings will have the showtime there. Theres a new subprime loan boom that has a lot of people worried. Its not in housing. This time its in autos. Up next, find out just how worried you should be about a potential subprime bust that could threaten the economy again. Plus, its the final milliondollar matchup of the day for homes, and you will decide the winner. Stick around to find out which one of these will take the crown. The world has gotten you far, but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if it becomes simpler. If frustration and paperwork decrease. If grandparents get to live at home instead of in a home. The gap begins to close. So lets simplify things. Lets close the gap between people and care. White chocolate loversividual. Dont like dark chocolate. Lets close the gap between people and care. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow the consumer to customize their chocolate. We needed a scalable Cloud Solution allowing them to select what they are looking for. Now there is endless opportunity to indulge. Customization is made with the ibm cloud. The ibm cloud is the cloud for business. Welcome back. We all know how subprime mortgages led to the financial crisis in 2008. Now some people are raising the red flag on subprime again, this time when it comes to auto loans. Its currently on the rise. Joining us now, phil lebeau, who says this may sound bad, but this subprime moment will not be a crisis. And also with us, john burlow from the competitive enterprise institute. He has real concerns here. Phil, kudos for going on the record with this, buddy. Listen, i hear this all the time from people. People will stop me and say, you know what, i heard more people are getting subprime loans. Its outrageous, its ridiculous, and its no different than the subprime mortgage crisis. Its completely different. Completely different. And its nowhere on the same scale at all. And frankly, when i hear a number of these stats that are thrown out there, i always come back to this, do you know how many repossessions there were . I had to look at the stat, 0. 68 of all auto loans ended with a repossession last quarter. And home prices have never fallen. No, im kidding. Thats not to say there wont be repossessions. There will always be repossessions, its just not on the same scale. Right. John, whats your primary concern here, and what about phils point that as things currently stand, there is no problem . Kelly, thanks for having me on, and i certainly hope phil is right, but i recall that it was only a small change in valuation. And when the foreclosure rate was less than 3 in the Third Quarter of 2008 that we saw the financial crisis hit and everything really implode in the economy. So, small changes can have big impact systemically. My concern is that were following some of the same destructive policies as far as the feds easy money, in boosting demand for risky products that will give investors a better yield, and also things like the Community Reinvestment act, the Consumer Financial protection bureau, instead of guarding these loans, is actually encouraging this by trying wipe out statistical disparities among groups which and weve seen that before as well. Im just eager to get thoughts from the panel here. What do you make of it, zach . First of all, the whole notion that subprime loan is an inherently negative, or somehow, you know, sleazy product, this is a fact that you all know this, we all know this, the subprime loan is just for someone or some institution whose creditworthiness for whatever reason is judged to be a higher risk profile, and thats a perfectly legitimate thing to price that differently from other loans. It doesnt mean everyones going to default just because they are borrowing at a higher rate. And the other thing is, i dont understand, without derivatives piled upon either the housing subprime loans or these, i dont see but they are issue heres the issue the products that have the subprime auto loans packaged in them. Right. We have not learned the lesson. We have 135 billion of these being sliced up, sold to or by blackrock, all of these other institutions. We dont know where the risk is, just like during the subprime mortgage crisis, and even though that 145 is a small number, we dont know whos holding that paper. And by the wall, all of the institutions that bought it or relying on used car dealers for the creditworthiness of their buyers. Thats ridiculous but wait a minute, heres where the frustration is. If the people that are buying these subprime loans, they need to know whats in it. They need to know. They need to have faith in blackrock, whos selling it to them, because its almost like buyer beware. The same way they did in the housing crisis. Then theyll stand up and say, we didnt know and tried to turn it around. Thats bologna. If youre buying it, youd better know what youre buying. Good point. I wanted to raise a piece from the notice. In another echo of the mortgage boom, they write the investigation has found dozens of loans, including Incorrect Information about income unemployment. People who had lost their jobs, were in bankruptcy or living on Social Security or qualifying for loans, they could never afford. Phil kelly, how many is that . How many the mortgages has to do [ everyone talking at once ] and piling them back to these issuers or saying to the jpms of the world, you guys screwed this up because youve put people into these loans they should never have been in the first place. We cant let borrowers off the hook. In the New York Times story i read, the same one youre referring to, borrowers, i mean, actually told the New York Times they misstated, they said they were working when they hadnt. Everyone, when theres fraud, Everyone Needs to be punished. That goes around to the subprime mortgage crisis phil . We need to punish everyone for fraud. Go ahead, phil. Do i think there are people out there writing bad auto loans . Absolutely. Theyre not all choir boys out there. There certainly are people who are getting loans who have false information on there who shouldnt be getting an auto loan for a 25,000 vehicle. At the same point, whats the percentage of those that are these bad loans that are out there . Its so small that i look at this and i say, youre equating what happened with subprime mortgages with a very, very small part of the auto market. Were saying this is like subprime mortgages in 2006. In other words, when the defaults happen, if we can assume they will at some point, and maybe they wont, but if they do, phil, you know people are going to come back just like in mortgages and start pointing the finger. His point is entirely the crucial one. I dont know how much robert is being repackaged and sold as composite jumbo securities of which these are that people dont know. I would like to know more about that because ive seen figures, its a quarter, subprimes about a quarter of the auto issuance. And those are aaa. Are they being rated aaa . How much is out there . Then, whats the leverage and derivative exposure on top of them . Correct. Because until you get to that point, i find it very hard to fully assess what the risk spectrum is. And how systemic it will be. Great point. We have to leave it there. Were out of time. But this is a great discussion. Please come back and well continue it in the weeks ahead. Thank you both. Thank you. Phil, jon, appreciate it. We asked dolly lenz to reveal the two finalists in this edition of Million Dollar homes. Get your phones or tablet ready. Go to cnbc. Com vote. And the debate over the flow of illegal immigrant children has moved to upstate new york. The mayor of syracuse extending a welcoming hand and offering them to stay in her city. Shell join us next with how thats going over with her constituents. Well be right back. What would happen. If energy could come from anything . Or if power could go anywhere . Or if light could seek out the dark . What would happen if that happens . Anything. Snayt welcome back. Cnbcs popular Million Dollar home competition is back. Six homes battling it out for the best bang four your buck. These are reclaimed homes, each built for another original purpose, including a church or a warehouse. Heres how it works. Two milliondollar properties facing off and were letting you pick the winner, the winner. This is a live vote. Vote as many times as you want. Go to cnbc. Com vote. Well crown the winner during this segment, so get going now, so far, the mill mansion has won rounds one, two, three and four. But will you keep its winning streak alive or will the new contender take the crown . Take a look. This former flower mill sits on 3 3 4 acres. Its listed on the National Historic register and has been functioning as bed and breakfast. Inside this 6,000squarefoot home, many pieces of the original machinery remain alongside modern appliances, like these authentic gain funnels, now lights inside this enormous commercialgrade kitchen. This property has three bedrooms, one full bathroom and two half baths with wideopen floor plans across four levels. And this detached guest cottage used to be the hog house. In the early 19th century, this waterfall powered the mill. Today it adds to the peacefulness of this farm country property. This Historic Stone mill for 1 million. Whats old is new again. This former Carriage House built in 1842 is now an upscale urban residence. Sitting on 2 10 acres, this charmer has a tocar garage, private courtyard and a terrace. Inside the original brick walls, theres over 3,000 square feet of brandnew living space. Modern kitchen has ample storage, marble countertops and topnotch appliances. This unique home offers two spacious bedrooms 357bd 1 2 baths. Its your choice which one of the bedrooms you want to use as the master, as both have big, gorgeous windows and a suite. Enjoy this private terrace to relax or host an intimate dinner party. City action is within walking distance. The price for this piece of history in all its modernday amenities, 985,000. There you have it, two homes battling it out. You have a couple seconds more to keep voting at cnbc. Com vote. With more on the properties, lets bring in real estate super broker dolly lenz and our panel. Dolly, youve been usurped by the public. Are they going to make the right choice . What is the right choice . The public is always right. The client is always right. So, they make the right choice, but its an interesting choice to me. Not one i would have thought. But earlier, we were talking about the milhouse, which i was oohing and ahhing over. You werent thrilled by the property. Its location for me, first and foremost, the location. And the vacations a little funky. In the winter, are we going to find the house . Its upstate new york, right . Mmhmm. The location on the second house is key. In the second pictures, you could see tall skyscrapers. You could tell space is precious where this house is where is the house . Its providence, rhode island, you know. So, its a really nice location in providence. Providence is actually a very, very interesting city, small but very interesting. Property taxes 8,000 a year, on the house. On a 1 million property . Which is pretty high. How does it compare with the milhouse . 3,000. Is it really . Thats lower than i would expect. But the milhouse is way upstate. The other is closer to the city, much more amenities, much more exactly. Moving, shaking kind of area. You like the Carriage House. Carriage house. And she did a great job presenting. Could you pick and move the milhouse somewhere else . Yeah. To the hamptons that would look great there. The milhouse had one bathroom. Exactly. Six bedrooms and one barge. The Carriage House on four floors i mean, really. 3 1 2 for only two bedrooms, thats a good ratio. Somebody cant be an older man because you know they wont find the bathroom our voting is now closed. What . Despite everything that is wrong. Morgan is voting all day. No, no. Morgans at her computer maybe they are voting for morgan, 55 . That goes without saying, they probably are. 47 is the Carriage House. But we love mary, too, just to be clear. But dolly thinks this is the wrong choice. Yeah, i do. We should just make that clear. I think its the wrong choice, but you know what, as i said, the customers always right, the clients always right, so its the right choice. And voting is cheap. Have a great weekend. More closing bell when we come back. Dont just visit new york visit tripadvisor new york with millions of reviews, tripadvisor makes any destination better. Welcome back. That will do well in commerce as long as thou does not believe thyen odor is perfume. This among the many words of wisdom from wall street legend alan ace greenberg, passing away at the age of 86, the man who remade bear stearns in his image while ceo there. On the line is alan schwartz, would w who was the last ceo of bear stearns. Good to have you here. What do you think today, in reflecting both on the career of ace greenberg and your own experience at bear stearns . Well, its a very, very sad day for a lot of people. Ace had an enormous impact on many peoples lives, had a tremendous impact on my career and my life. Ive often said that i learned more watching ace than i learned from anything else in the business. And there will never be another one like him. Alan, can you talk a little bit about what he did to take bear stearns from a Securities Firm to one of the most flaunted names on wall street . And did with bear sterns . Turning it into one of the most vaunted names on wall street . Well, that covers a long period of time. Over 50 years. But i will say, step one, ace was the most consistent person i ever met. You can embrace change in the business as long as you stuck to your core values. Nobody did that more than ace. One of his core values was never taking too much risk. So, the irony of that is not lost on any of us. And he fingered jimmy cain for being responsible for that. And the bear sterns name was retired in 2010. And we know that ace greenberg was dealing with cancer. When did you last see him . I had lunch with ace and another colleague of ours probably about a month ago. Im so, so glad we had that lunch. I didnt know it would be the last time i saw him. He clearly was having the effects of the treatment. He had beaten the cancer, but the rest of it got to him. Thats so sad. What do you think he would want to be known, remembered for . I think the things he would want to be most remembered for were his philanthropic activiti activities. He was a trailblazer, and saw to it that everybody at bear sterns that was fortunate gave back to their community. We appreciate your thoughts on this friday afternoon, when so many are thinking of him and bear sterns. Alan schwartz was the last ceo of bear sterns. Well be back after a short break. By taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Your studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. The thought of your baby girl driving around all by herself was. You just werent ready. But she did pass. cause shes your baby girl. And now youre proud. A bundle of nerves proud. But proud. Get a discount when you add a newlylicensed teen to your Liberty Mutual insurance policy. 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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. Welcome back. President obama, meeting with Central American leaders today. Telling them that children and families without proper claims will be sent back to their home countries. Mayor minor, thank you for being with us. We talked with chuck schumer. He asked why you were pushing to make space for the families. And what has the response been . Were very proud of our proud immigrant history. We saw this humanitarian crisis, and when the federal government was looking at us for a potential site, we opened our arms to help bring these children to a place of compassion and safety. What is the offer on the table . What we have said to them, the site that the federal government is looking at has passed the initial assessment. Now, its being moved to the headquarters of hhs, and were willing to expedite this, to work to try to make this process go as smooth as possible, and have the children here as soon as possible. Robert, what do you think . Mayor, do you worry that youre putting syracuse into the middle of this debate . Encouraging the problem by giving these people a home . Just the opposite, we have a proud history of welcoming immigrants. And a strong history of being compassiona compassionate. We have a place to offer these Children Safety and compassion. We know thats who we are, and can be part of a solution while these things are being worked out. And what exact status will be children exist in in syracuse, in terms of education and Everything Else . They will be put into a temporary shelter. Because of the number of children coming over the border, there is a need for more. The average stay is 35 days. During the process, they seek out a family member, trying to place them with them while they go through the immigration process. And go through hearings to determine what their status is. And the other concern is coming from people in both Community Meetings youve held about this, theyre worried about violence and crime. And your city has not expanded its police force in recent years. Are you concerned about this taxing the resources of syracuse . Well, the federal government pays for these services 100 . This is a facility they pay for. Food, shelter, everything like that. This is an issue where we can provide the services we can provide. Hiring new police officers, and that means something deeply to us, and we live our values. Kenny . I have to say, i for one applaud you. It is a humanitarian crisis, and youre right that this is what this country stands for. Were talking about children, not convicts. Therefore, i applaud her. Thank you, mayor, and my thanks to the panel. Well hand it over to fast money with melissa lee and the gang. Have a great weekend. It is fast money friday. Im melissa lee. Stocks getting stunned today. First, visa earnings getting stunned. And the Broader Market saw a lot of red, it was a move at amazon that took center stage. No longer getting a free pass from wall street. The environment right now is, everybody is looking