Transcripts For CNBC Squawk On The Street 20120702

what now? goldman sachs says brace for down side. the ism and ecb meeting. the barclays scandal claims its first victim as the bank's chairman resigns. could that actually mean your interest rates go up. busy week endfor m & a. and "new york times" says facebook is considering leaving the nasdaq, but wait, then it says it isn't. the bulls ruled the first half with the dow rising almost 5.5%, s&p up more than 8%, but goldman sticksing p theend price targets which would am to about an 8% drop. full-year earns as well, guys, the dow is 114 years old, when it's up for the first half, 71% of the time it adds to the gains in the second half, and 88% of the time it at least hangs on to some gains, so historically, numberology would say it's the wind is at your back. last week it was nike and ford. this morning it's a ubs downgrade possibly. so all of these things are building as we enter the second half of the year. you wonder how much wind will be at our back, and we face the fiscal cliff debate this summer. >> we're going to move into a real torrid election season and a lot more conferring about that so-called fiscal cliff. let's call it earlier next year, really. you know, a note shortage of things for the market to focus on, but at the end of the day we've had a pretty good first half, a nice june erasing a lot of those losses we saw in may as a result of europe, and of course europe the reason friday to a certain extent. nothing out of there this morning that would change the tone completely, but we're talking france, gdp growth not as strong, and using strong at all to describe any -- >> ecb, of course, meets this week action a lot of speculation, and a big part of the conversation last week was, okay, if they cut, generally not a positive in any currency, but in this case maybe traders would see it as, look, second half, the risks are more to lower inflation and growth. maybe that would just be the gas the euro does need. >> that is counter to what historically the interest rains probably would mean that currencies would go down, but in this case a cut would clear the way, and currency traders are setting up for that, and for the euro to find some lift to the upper part of the range. so you've seen the euro play that range tightly here, and here we have a pullback. >> june was -- a lot of questions about china. china, of course, second largest economy in the world and europe having a lot to do with that as well, but that china pmi coming in 50.2 from 50.4 in may. ahead of what they've been looking for, they being people who following these things. let's call it they were looking for 50, the economists who follow china very closely, but it does point to this continued concern about slowing growth there. how much is it? how much can we believe the numbers? a lot of people choose to look at electricity consumption as a better barometer of what's going on. you get different pmi numbers from the regions, but we're back to also worries about chinese growth i want and this note from goldman sachs today, a guy whose track record has been pretty good for the year so far, basically saying yearend s&p 1250. they specifically cite fort and nikes as signs that international and the u.s. is going to weigh on earnings. we don't think it's going to, so at least from a short term technical perspective, goldman doesn't have -- >> but two thirds is still about consumer spending. one would anticipate if crude did stay down, it would have to be a positive. even though wednesday is a holiday, jobs number will be key. if you put a jobs number out there -- does anybody hear the tree falling in the forest? i think there's consense about -- >> there's a thought, too, that people would come back for friday. so it should be an interesting week whether or not there is more activity with the jobs report out. meantime we have to hit barclays, the chairman resigning from his post saying the buck stops with him in face of the libor price-fixes scandal. barclays's ceo is also hearing calls to stip down, though he will be in the hot seat on wednesday, though he'll face a grilling in front of a group of lawmakers in britain. i'm sure the calls will be reunited. barclays shares are trading higher today after a hue downdraft from the stock last week. >> and largest implications on the regulatory front. the anticipate i think is it will give more of a club, if you will, to the regulators in that battle that goes on between many of the uk banks, european banks and uk and london regulators. >> in terms of the uk, talk about pressure on the officials to bring some faith back into the benchmark that is libor, but not a policy of discussions in the uk, big story in the journal about whether or not they need to change the methodology, and whether or not to a degree it would no longer be susceptible to any kind of fixing. >> if cramer was here, it will say too big to be rigged. it would never occur to anything that it could be rigged. >> it seems hard toening ma. >> thoughs survey size is not that large. so a lot of money riding on very few people's opinions. >> you've seen some penalties, of course barclays has paid a large one, but lord knows there's plenty of lawyers who will look for an opportunity to sue them, saying whatever class they want to represent. you can imagine there are plenty of classes that could claim they're disadvantaged by this. that i think is in part why we have seen barclays shares decline. you see a big decline, the unknown about what's out there in terms of litigation risk, not to mention, of course, whether or not mr. diamond as ceo will keep his job. >> any banker whose names sounds like a diamond is having a bad moth. kelly, good morning, what's the picture from london? >> carl, good morning. the picture over here is that the tone from the public is generally one of being kept cal of the bankers. this doesn't help. the headlines seem to write themselves. we have the first victim. marcus agius after the bank played a record fine to regulators in the uk and the u.s., for falsely reporting their costs. barclays shares were down sharply after that news. as melissa indicated they're down something like -- today, though, doing a bit better. they're up about 3%. as you can see there's sort of that same tone across the banking sector. this probably has more to do with the positive news out of the eu summit than of course with anything specific to libor, but it does give you a sense this alone isn't necessarily moving the market. what's important here to keep an eye on is whether and what other banks are brought into this violation going forward. there's some indication that barclays is in focus because it d the most documentation, but at least a accident other firms appear to be -- libor short for the london interbank offering rate, but it's really a global benchmark. the london aspect of the story has more to do with the association than overseas. it's a self-reported rate which bakley prices everything from u.s. mortgages to credit card rates to, you know, the $360 trillion, as you guys were just saying, barclays itself had alerted regulators to kerms about how the rates was determined. there were qush the question is how do you do anything about libor without making those borrowing costs for people who have mortgages or credit cards jump? that's going to be a problem for regulators potentially as they move forward. as for barclays, a lot turn to ceo bob diamond. he will be testifies before the treasury select committee here on wednesday. the finance minister meanwhile, is expected to allow an inquire into practices. other banks may see they don't necessarily skier vive a round of bad headlines. just trust ig to deal with the fallout from this rate, so plenty, plenty, plenty more to watch this is not the last we've heard. >> you have the olympics and another reason to watch. kelly evan. bristol-myers buying amylin. more than double the price back in march when the takeover rumors began to surface. li linde is buys lincares, which is a provider of home-based respiratory therapy services, and dell is confirming that it's buying -- three deals. not too shabby. >> not huge deals, not bet the company deals, but the kind of dealing we can expect to see in this environment. they are of a size where a ceo can feel like, okay, i'm making a bet here, i may be paying a pretty high multiple, but it's not going to cost me my job in it goes bad. in many of these cases we're talking auctions already. well done in therms of the independence committee of the board, ending up with 28, 27.50 had been the last bit. don't expect in the challenges there or anything like that. as you look at that stock. bmy started at $22 a share. they end up at 31. by the way, the multiple being paid here is quite a significant one. amylin shares, even with everybody knows there was an auction going on, still gets a nice bump. they are paying quite a multiple to sales at this point. it is going to be dilutive for a while. they were getting a big payment from astrazeneca, so effectively in many ways they're paying about 3.5 billion to what hams to 50% of amylin, if you want to follow the math with me, but againsh ebitda and sales, it's a big one for the group. it's not a dominant drug in terms of the diabetes drug they have, especially so often even though the market is growing, it has to do with the administration of these drugs, and finally on linde/lincare, mom and pops are going away, reimbursement is going down, they are paying quite a significant multiple there. far above what we have seen, though it is considered the best of the group there. putting oxygen in a bottle for people who need it. >> icon was in there sometime back. it's another one in this area he loves. not going to sit down with carl and have a deep discussion on biotechnologies. he won't talk to you buy joe chironen would, but he does have the ability, hey, people want to live. they want to stay alive. it's a pretty good thesis. that has worked out confide wet, mr. mister icahn had a great 2011, and some real winners so far this well. >> shares of u.p.s. moving down, from a hold to a buy, the firm saying the stock is valued at a premium to the peers and accelerating uncertainty in europe. interesting the citation of europe since u.p.s. just recently completed a deal which got itself deeper into europe, and we questioned its timing. do they see something we don't see? it turns out perhaps they did not. >> 50% of international package volume. part of their thesis is not just the problems out of the europe, but if companies are more cash-constrained in the second half, buybacks or at least a decelerating rate of buybacks. we'll see if that happens. meantime, wow, walmart celebrating its 50th anniversary today. if you had been invested in this stock for even the last to years, you would be celebrating too, a gain of more than 400%. how to play the big-box retailer after the break. as we kick off the third quarter, a big week of data. a lot more "squawk on the street" from post 9 in just two minutes. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. scroll... tap... pinch... and zoom... in your car. introducing the all-new cadillac xts with cue. ♪ don't worry. we haven't forgotten, you still like things to push. [ engine revs ] the all-new cadillac xts has arrived, and it's bringing the future forward. for more on what to expect in the markets, let's bring in jim paulson with wells capital management. he says this market is cheap and will likely push the s&p to new recover highs. jim, always good to see you. you actually think what happened out of the eu summit was different this time around, wasn't just more promising like the past few times? >> well, i think melissa, i've seen a change there in the tone since last fall when draghi came in and, the eu balance sheet has been expanding every since. they forced some greek bond haircuts. now you have merkel maybe accepting more eu bonds. i think what's good there in europe is for the first couple years, the focus was on austerity and reducing budgets. now it's turning decidedly more towards stimulus and promoting growth. i think ultimately that is the solution, you have to promote growth and have something to tax. the fact that we have changed that is going to make europe do better here in the next few years. i think investors would like to hear more about your 1500 calls, which is so optimistic. what does that ride look like, given there's skepticism suching in about second quarter earnings, there's the debt debate this summer, the elections, a number of events we had to work through in the markets in order to get through to the end of the year firms i think a lot of those things you raise are things that have already happened. so the economy has certainly slowed down in the united states, so earnings this quarter may be more different. china is certainly in a slowdown, that is happening. what i'm more interested in is what's going to happen. i look at the things that lead this, and i'm seeing some very positive forces. >> i'm sorry to interrupt, but in terms of things that have already happened, grapted second quarter is in the books, but at the same time this news of a deeper than expected slowdown in places like europe or china, it's catching investors be surprise because the stocks are selling off, so even though theoretically it's happened in the course of time, investors have not digested it. >> i'm not so sure of that. total return to date is about 10% off the s&p with different, but the attitudes, i agree, are very bad, but look what we're push pulling gas prices we have money ground at 10%. from 4% down to a little over 17%, adding to real growth. we're doing things i think that will help the second half in the understanding and china and other emerging countries are doing the same thing. they're easing more aggressively. i think by the third quarter we'll see information about a checkup again or on bottoming. if you take the attitude of investors today selling this market, and then you give me some show of the u.s. leaving its soft patch and/or some show of the emerging world, i think that's a dynamite combination, and i think there's decent odds of that happening here in the next six months. >> jim, good to speak with you. >> thank. coming up next, art cashin, words of wisdom on this first day of the third quarter. . we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? 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>> i'm hearing on training and water holes that people are taking month and tuesday off to give them five days in a row, and the rest of taking thursday and friday. >> so we have potential skeleton crews, big stuff going on, the final details on europe, and then we're going to shift to xwroimt. you'll get initial claims, and head been up, and then you're going to get nonfarm payrolls which i think are 35% or better to be 70,000 or under, maybe 40,000 at that. art, we'll leave it there. thanks for coming by. opening bell just moments ago. get ready for what is surety tore an exciting day the first day of the quarter. ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection. if you made a list of countries from around the world... ...with the best math scores. ...the united states would be on that list. in 25th place. let's raise academic standards across the nation. let's get back to the head of the class. let's solve this. like in a special ops mission? 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it had been a subject of chatter before when the stock was high are. we're seeing the shares recoup just a touch. >> i love it when you talk french. >> i love that accent. >> just so moving. [ laughter ] meanwhile, facebook busy week last week, a lot of the price targets averaging in around the price where it actually went public. now "new york times" saying the company is consideration switching exchanges. obviously would be a huge blow to the nasdaq, though the journal tends to walk that back a bit. but after a weekend, guys where we saw some market makers potential come boo play. that was inverted in part -- >> this was an erroneous trade on friday. pirnl the ticker symbols were confused, about you the exchange points out and we get these e-mails from people on the floor, but they point out very vigorously it's because of the human component that this error was actually averted so in case you're out there, monster bench mnst, monster worldwide, big difference there. >> in the case of facebook, i continue to hear that perhaps sheryl sandburg or the ceo may have some focus that mark zuckerberg is not focused on it at all. he 'thinking primarily if not solely about the strategition vision and was never along the way as interested about what happened to the stock as so many others seem to have been. >> as somebody said on zuckerberg wears the hoodie, sandburg wears the pants. for its second quarter, that will be the next major potential catalyst out there. in terms of other stocks, due pond got in telling tiff commentary this morning, down by 1.7%. 2012 and 2013, cuts to a hold rating to better reflect weak eu demand. so this weak theme coming back into play. this time with a chemical company, again dupont down. >> they don't want to seem to get caught unaware. cutting the stock to a hold from a buy rating, and here we are, nike trading slightly higher. >> let's check in with mary tomorrow son. >> a weak open to the first day of the third quarter. up 16, the s&p 500 down fractionally, and the nasdaq down two. today's focus is a lot of data as well as deals. of course, we are waiting for the june reading on manufacturing and also the may construction spunning numbers, both coming at 10 eastern and on the heels of weaker manufacturing data. as i mentioned, you guys have been mentioning throughout the morning, there are a lot of deals to talk about today. given global m & a was down 14%. let's see how they're trading today in the week of those announcement. bristol-myers equips paying for amylin. lincare up on the news it's being acquired by linde, and ingram buys brightpoint. another one we're watching is everbank. it's buys a portfolio from ge capital buys a unit that makes commercial real estate loans to small and mid sized businesses. everbank is moving higher, because it's sxegded to add to the earnings in the very near future. dell making it official saying its buying quest software for 2.4 billion or $28 a share. it says that will expand its i.t. portfolio, basically end to end i.t. services is what it's looking to do. micron technology buys a bankrupt japanese chipmaker. those stocks were higher overseas in europe this morning. let's see how they're trading, then back to melissa, where we've seen a bit of a turnaround in the dow. the s&p and nasdaq higher, too. thank you, mary thompson. rick santelli is at the ceo group. good morning, rick. >> bonds, dollar, don't forget corn. let's start with intradays. closing ranges have been quite in a range over the last week and a half despite the feeling of volatility. if you look at a one-month chart of spanish yields, that sounds high to us, but as you can see in that chart over one point it was 7. commodity prices going down? let me think? a commodity currency? as a matter of fact, the aussie dollar is experiencing quite a rally since the beginning of june. as you can see on that chart. all right. over the weekend, in my town everybody loss power, i'll have wood chips for the next two years, but the spotty rains in the midwest didn't alter the fact that overnight corn is up well over 20 cents. it's been a rocketship pollenation percent, a critical period for the corn crop, a lot of stress, corn is up well over 30%. since about the middle of june. carl, back to you. >> rick, thank you very much. twoept go to sharon epperson. good morning. >> good morning, carl. it almost feels quiet this morning at that tremendous rally we saw on friday. we've given back some of those gains, and we are looking at prices that, when you look at the big picture are still down more than 20% over the past three months. we did see hedge funds changing their opportunities, before we saw the big price move. and we're also, of course, now into the first full day of the oil embargo against iran by the eu. those sanctions are fully in place. they have contacted the opecs governor, who, asking for an emergency meeting, saying they're concerned about falling prices. wee see what happens there. we're also continuing to watch what happens in the metals market. we have seen a slight pullback, and as george gerald from rbc points out there are some scandinavian countries that are hesitant to join the bailout, but the big data points will be the ism data as well as the non-farm payroll numbers on friday. david, back to you. >> thank you, sharon. these are always fun fights. well, between a capable or a distributor of programming and the content maker itself, in this case amc and dish in one of those big disputes. in fact, the man, of course, who kroels and runs dish networks, through but there you see it, we don't often get a stock that's that levered into or reflective of one of these disputes. typically we're talking about networks that are a bigger part of the country. there you see dish, both of which are up right now. if they don't settle this thing, it could cost amc significantly. dish doesn't mind engaging in these kinds of showdowns, if you will. at&t apparently didn't want to. it reached a deal after complaining about very high prices that amc wanted for its programming. my family says it's the most amazing thing on television, with the exception of "squawk on the street," of course. >> we'll see how it plays out. right now not having an impact on the detriment of either. as for m & a, you heard mary mention the second quarter of the year characterized by not much at all. borrows levels were at all-time lows. ear bristol-myers shares are up this morning. a deal like that you might anticipate -- by the way, there's am ling shares. the market knew about this, yet still a premium paid above friday's price. that just shows you how high they were willing to go for this company. but we'll see if there is potentially a meaningful pickup. we haven't seen it this year. so much else, it's hard to imagine any significant up tick it's increased its different every year since, it brings us to the morning twice -- how should walmart celebrate with customers and shareholders? tweet us avmt cnbcsquawkst. i wonder if that's the walmart post. >> they're doing the walmart cheer. i know it well. give me a squiggly. [ laughter ] >> amazing run for the stock. customer always. i know that one. having done two documentaries on walmart and been to my share of not just annual meetings, but all sorts of other things i've heard a lot of walmart cheers, but never on the stock exchange. >> no. coming up next, walmart posting pretty impressive gains over the last quarter. the stock is up 14%. will the rally continue? as we head to break, a look at this morning as early movers on this first day of the third quarter. stay tuned. 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[ rodger riney ] at scottrade, we give you commission-free etfs, no-fee iras and more. come see why more investors are saying... i'm with scottrade. bug bug milestone for walmart this morning. the world's largest retailer celebrating 50 years since it first opened its stores. shares of walmart heading toward a new 52-week high and up more than 30% over the last year. debra has a buy rating on wall matt. rabbit carroll has a neutral rating, and i guess that's the place to start, it's ten bucks above your price target, why are you not more positive? >> well, we actually raised our price tart this morning up to $69. but i mean -- >> what's the point by the way the having a 69 when you had a 59, just raising it to where it is now, will that help anybody figure anything out? >> no, more a justification that we do think the stock is justified in where it's trading right now. the key thing we have looked at is with the market being in a risk-off mode, walmart's defensive characteristics play into that. it's how the stock has performed during those pertains, and do think that at $69 it's close to fairly valued. >> you know, debra, the stock has had a significant move, and one right after the mexican -- we're still dealing with fpca, but the scandal reported at length at times, that being said after a rally look that, ten years of doing nothing -- >> well actually just raised our price target. we have in empty pocket theme that seems to be playing out. family dollar came out last week saying they're actually seeing an increase in the paycheck psyched. we're seeing a pullback in gas prices so the consumer -- we're actually seeing them pull back even more. >> which means what? i'm not following here. that would seem to be not a particularly good thing for walmart. what you're starting to see is maybe more middle income or slightly above that is trading down or into the walmart, you know, mainly their more kind of traditional consumer profile, so i think walmart may actually be gaining more consumers in this environment. >> last week you also had a lot that saying higher income consumer feel the stock market volatility more than other demographics. does this paints a pictures of a consumer under duress and at the low end, they continue to trade down is it it's not a very pretty picture. >> no, i think we've definitely been surprised, and i think what you saw in the first quarter, and they -- i think a lot of us were very disappointed, and what happened is we've got a proponent of retail technology, but retailers spent very heavily. >> hey, robert, a story in the paper about back-to-school promotions beginning now, if in fact the consumer will be constrained going into the second half of the year, doesn't that bode well for a walmart as opposed to some retailers? >> well, it does, more justification of why the stock is fairly valued where we think it is now. if you look at where people's expectations are, where you saw ticket positive, traffic positive, and the expense leverage, which drove the eps beat, we think people aric looking differently at walmart. it's been that turn and their return to the core competency on price that leaves them well situationed, but we think it's fairly valued, from either, you know, an uptick or even kind of further expansion of some of the smaller format stores. >> depend ra, it's not as though this investigation is over, and there are some concerned the act will come back here to hurt the company. do you expect or does that figure into your thinking about the future? >> we absolutely dove into that hook line and sinker, and when you're talking a few pennies to earnings, when you think about, we look at top line and bottom line, what we've got coming is apparel, back to basics, the first quarter, and obviously apparel is the highest margin thing they have, back to basics, the first time they're fully rolled out. so their apparel and other seasonal hard lines categories, second quarter should really roar for them. >> they've had trouble with apparel in the past. >> so second quarter earnings i think will be better for them. so i agree with robert, we have seen improvement, but i think we'll see margins play out for them, and big focus on investing in price, so i think we'll see it will be an inflection point for them. >> all right. debra and robert, thanks to you both. >> thank you guys. >> walmart does turn 50. how should the retailer celebrate with customers and shareholders? it can be anything you want. tweet us, we'll get your answers when we come back. first at the losers, dupont leading that list. a lot more "squawk on the street" is back in a moment. t. for the travel add leisure sector in the third quarter it's all about the economy. aside from clear growth stories liable trip adviser, priceline and expedia, they're crowded into defensive stocks. margins for gaming and cruise lines, well, they remain real tough, but if the corporate travelers hangs in there, mammoth hotel chains should keep their pricing power, because there's so little new supply. ceos worried the high dollar will keep tourists away. conversely, the whole industry should benefit from lower gas prices, but it's how the consumer feels, the level of consumer confidence that is also the main driver. that's your q3 channel check for t & l. i'm simon hobbs. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. 50 years ago ago sam walton opened his first walmart. how should the company celebrate with customers and shareholders? pat writes -- by reducing the socksto 99 cents. i would have thought they were already 99 cents already. >> john writes -- everything 50% off for a month, and for shareholders a 50% cut. cheerily not on shoulder. >> after turning 50, it managed the age where it can be hired as a greeter in the stores, which is a good one for a lot of people, we should point out. >> yeah. they've had great succeeds, but not in the storm until literally the last few months. >> since the bribery bottom -- >> interesting story, and congratulation to them. when we come back, and construction spending data when "squawk on the street" comes right back. e calcium they take because they don't take it with food. switch to citracal maximum plus d. it's the only calcium supplement that can be taken with or without food. that's why my doctor recommends citracal maximum. it's all about absorption. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 the spx is on my radar. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus. tdd# 1-800-345-2550 i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones to help me find tdd# 1-800-345-2550 possible trading opportunities quickly. tdd# 1-800-345-2550 i can also bounce my ideas off their trading specialists - tdd# 1-800-345-2550 on the phone or face-to-face. tdd# 1-800-345-2550 and i can trade wherever i want, whenever i want. tdd# 1-800-345-2550 tdd# 1-800-345-2550 the kicker? 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well, not so much. it seems -- here we go. we see a couple basis point drop in yield, and that appropriate. we can certainly see the s&p and the dow moving much lower. david faber, back to you. >> all right. thank you very much, mr. santel santelli. let's get to the road map for the next hour. as we gear up for another earnings seasons what is next for the markets? we'll talk those fears in just a few minutes. groupon is battling to stay relevant. but as the stock still down over 48%, is there any hope for a turnaround? the construction spending number was positive. the private spending number up. of course public spending has been negative, though not quite as negative as it's been. the big story is the residential spending, up 3% versus 1 -- office spending up, commercial spending up, everything up, manufacturing spending even up, so that's good. i think that's going to tend to flatter the second quarter gdp numbe numbers. i see no flattering there whatsoever. production was down, though still above the 50 mark at 51. the only one that kind of stewed up curiously was the employment subindex. prices also fell sharply, which is i think ultimately good for the manufacturing, but the backlog fell, exports fell, imports about the same, so this is a weak number. it doesn't necessarily say recession here, but certainly the softness in the economy is evident in the isms. i think carl, one of the interesting things is it hasn't been in the isms until this number right now. >> we knew the regionals were weak. richmond, philly and so forth, but the confidence numbers last week, collectively is it clear the slowdown is accelerating or not? >> not accelerating. i think we have seen the numbers come down to fit. i think the one hope you can have for the economy right here, carl is lower gas prices will translate into better spending and birr economic activity, and perhaps europe coming off the is something that might help business. i don't think the end of the novel is necessarily written, though the beginning is a little depressing. >> you also want to layer in perhaps this housing hay finally reach some sort of bottom, dare i say it. construction spending, especially on residential, we saw data last week. that can become an important engine for the economy. we forget it, it's been so long. >> and people had sort of given up hope on that. maybe it's that moment when people give up absolute hope that things tend to turn around. there's a long way to go with housing. if diana oly was here, she would you say hitting us over the head, all of that stuff, but there does seem to be some selective building going on, and of course raising on a percentage basis, a number that's so much smaller. it does add to the gross domestic product, and this is not going to be enough. i think a number like this, you see what's happened to the ten-year rate. in the last couple minutes, it has fallen, and i think brings the fed in. >> yeah, right, ism trumping that. of course your points are well taken, we're growing off a base that's nothing like what we had in '05-'06. >> with the nasdaq and s&p coming off the biggest gains, the next guest says as a whole the stock market is cheap. let's bring in scott black. he joins us from boston. always good to see you. good morning. >> thank you very much. >> i know you're not forecasting a recession on a macro basis, but i wonder if the number like the ism and some of the numbers last week are giving you pause? >> i think the economy is slowing anyway. you obviously have 20% of the earnings in the united states, s&p come from europe, china about 4.6% of their exports go to europe. an ben bernanke basically didn't help us with another operation twist. i think he signaled to congress he need some fiscal policy, but the fact is if you look at the fed policy, at 1.9 plus trillion, it's really -- so all the monetary bullets have been fired at this point. >> in terms of sectors, you know, i.t. for the quarter was down almost 7%, but you are seeing some good plays and you're a value guy, right? >> absolutely. if you look at some of these companies that have bulletproof balance sheets, a company like qualcomm, with over $14 in cash, telling at 10 1/2 this times earnings if you back out the cash, a new play here in massachusetts, emc, which is the leader in virtualization, because they own 80% they also have the dish drive business. that's selling about a 13 p.e., and two smaller plays, one teradyne, and they dominate the space. that's selling at a ridiculous six multiple less the catch. a little company out in florida, which is an leader in internet, network storage, you back out the cash there, the stock will rum about 88 cents, it's 5.7 sometimes earns, they all have debt-free balance sheets, and the earnings are up this year and next year, unlike the semiconductor equipment companies like the front end or -- where the earnings are rolling over. >> scott, you were just talking about the slowdown and companies in a sector which have pretty large exposures to europe as a percent of their revenues. how do you req size the european exposure to what you say no financial risk in these stocks? >> well, i didn't mention oracle here. we do own oracle and microsoft, yes, they were exposure. there's no financial risk, in that they have much more catch off balance sheet. there's earnings power risk, and oracle had a very good quarter in selling licenses up 7%, but in the prior quarter, you remember, there was a slowdown, especially among state and local governments in europe, which did affect them in the prior quarter, so there is some rick, but companies like emc and qualcomm are mo dependent on the u.s. market and asia than they are in europe. >> scott, the comments from nike and ford last week all centered around weak international business with potential effect on the quarter to come. will those be ka nentuca nairie. there were some head winds from europe, but overall the retches were in line. it was the earnings that missed badly. >> ford, too? that is materially. that's significant, right? >> it is, but you know, when i did the barron's roundtable, i used $103 worth of earnings, s&p was in the eion sphere. i think 103 is still realistic. of course, balance sheets are the best they have ever been. about 1.74 trillion in catch equivalents, so they'll live to fight another day even if there is a recession. >> we'll see if that happens. scott, thanks so much. >> thank you for inviting me. all right. scott black. let's send it over to seema mody. >> david, a look at best buy, continued takeover speculation is helping shares move sharply higher, reports indicating that the ex-founder is looking to take the retailer private. the stock has lost over 30%, but just in the last month has jumped over 25%. that's news helping best buy move higher. back to you. >> seema, thank you to which. how do you play a market that's down 5% over the last month. we're joined live to answer that question, back after a quick break. [ tires squeal, engine revs ] ♪ ♪ ♪ [ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. low low valuations, market reforms and the prospect of monetary easing were all supposed to spur a turnaround. however a slew of weak data tempering hoping. goldman sachs originally photographed an increase of 30%, but recently adjusted that forecast. nice to have you here. >> good morning. >> it's been a long way for investors in shanghai to see anything reassembling up. when is that going to change, especially given these growth numbers that keep coming in to show slowing growth. >> sure. i do think the fundamentals have been challenging this year, but we have seen more decisive policy action recently. i think part of the reason why the market has really struggled is because a lot of investors were on the sidelines waiting for something to happened in europe. they said, look, the china policy cycle is moving in the right direction, but no full decoupling. china may not have great absolute returns, either, so let's wait and see. >> but you're talking about a market that did not go up despite incredible growth numbers in 2010 and '11. >> indeed, if you look at earnings growth, gdp they were very strong, but the market derated valuations really sink, particularly from late 2010 until recently. china's relative valuation versus global markets went count 20%, 25%. i think that's -- because people have been wondering what's going to happen in terms of reforms. >> how clear is it to you that china's been active in supporting all things europe? think like the euro and so forth, because it is an important export market to them. >> i think policy makers have been trying to kind of strike a fine balance between not really throwing oil on the fire and not committing too much in terms of bailout money, either. i think certainly europe is a have i important trading partner to china, but i think china does have two advantages. one is that it's run so much counter-cyclical policy over the past few years, to offset some of the trading weakness. >> exactly. i think china doesn't have too much financial channel transmission is we were. banks and insurance companies don't own a lot of europeans stocks, so that gives a bit of a unique situation. >> what is your expectation in terms of what policy makerings might do to the end of the year in terms of however they can juice the economy? >> well, policy makers have already made a number of moves earlier than expected interest rate cut. there's been a number of cuts since late of last year. we probably would still expect one more operate cut later on this year, and more importantly i think another area that people haven't spent enough time on is really looking at fiscal policy, where china has not been doing a lot of proactive things over the last couple years, instead has been paring back, so a lot of capacity there to do more if europe runs into more problems. >> there is uncertainly in china as well. they've been trying to develop a consumer-led economy, but the receipts uproars, especially in the communist party and corruption there, at least i hear from a number of people on the ground, has brought spending back a bit. >> if you split off the consumer segment, there is the high-end luxury segment, which has been all the rage and focus of a lot of attention, and then there's the mats market, right? i think on the luxury side that's certainly more distressacy, more cyclical, and not a surprise we have started to see a softening of data, but i think things are reasonably stable. that was really never bet fitting from some of the cyclical upturn. in fact it's gotten bigger and bigger, so i think it will be an offset of the cyclical factors, but some of the structural factors, the mass market starting to compensation. >> we've seen some big exampling of companies here in the u.s. or overseas who will start manufacturing in the states, right? google will make their new products, airbus is opening a new plant, as opposed to china where they might have opened it up a few years ag is it clear the trends that made china what it is, manufacturing, efficiency and pricing, urbanization, are those in reversal mode? are they slowing down? >> i wouldn't say they're in reversal mode, but i think the competitive advantage as a low-cost leader will probably continue to erode. that's not necessarily a terrible thing. but, of course, if that happens too abruptly while other segments of the economy don't pick up at the same pace, we may have sockly cal issues. >> is that a threat to the consumer who you say is holding up the lower end mid market consumer if this continues to erode? >> well, i think the lower end and, you know, mass market consumers are the key beneficiaries of the wage increases, and the wage increases are really not a reversible trend. it's a structural trend that the government has decided has to happen. as a result of that, china is manufacturing competitiveness has been placed until challenge, but it's something that the government hats decided they will have to follow this course of action, maybe we have to do other things, like more innovation. know, other things to may the competitiveness, you know, stand out more. >> helen, thank you very much. helen ju. mean tile carlisle group teaming up with so sue knocko. >> have you interesting deal. they finally came together with a deal they're expecting to close. carlisle is not actually playing sunoco for this asset. they're going to contribute cash, help finance its operations with the assist, but they're going to -- sunoco will take a minority interest. this is an example of what's happened to the refinery business in the last few years. it's a business that's a lot less profitable. these assets are selling for relatively low valuations. delta purchased a refinery, a first for an airline. also a fp refinery, and they did that for about $150 million, as i recall, with a subsidy from the state of pennsylvania. in this case, there's not actually money changing hands, but of course carlyle had spend money to keep it going. there are capital-intensive parts to this process. shipping it across the ocean. it looks as though jpmorgan may help with that, but an interesting moment in this business. where job preservation, and one of the byproducts of a refinery like this. also a lot of hope about domestic crude oil. the bakken shale could be a great source of crude oil for a refinery like this, and carlyle talks about building the ground transportation to bring that crude oil to this fp plant rather than taking it from overseas, which is what they have to do right now. >> interesting twist, kate, on a story i know you have followed from the beginning. groupon tanking over 48%, as competitors google and amazon continue to steal, how did the pure play model survive. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. what ? customers didn't like it. so why do banks do it ? hello ? hello ?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello ? ally bank. no nonsense. just people sense. this this you realize this's ecb meeting put some pressure on this moment? willy williams is with associatee generale. >> i think we will continue to see euro under pressure. i think sentiment going into the meeting on friday was so low the market was due for a rebound. >> wouldn't it be viewed as a good thing for europe in they did cut rates, so that might be beneficial for the euro trade? >> i think -- if you look at some of the things that came out of the summit like the attempt to avoid the subordination of spanish bolts, potential for esm to step in, these types of things means there are other types of trades in euro. i actually look big short of the euro dollar. >> so what are yew target levels? >> i like selling euro dollar at 126 with a stop-loss at 128 with a target towards 122. >> the way too play the euro for this whole entire year has been to play the range. has a new range been set? >> i don't think so. there are a lot of technical factors supporting the euro just above 123. i think they're still in play. in the interim, i think there are much better way toss play a rally in europe. whether that's periphery bonds, whether that's emerging market rates, but i think that could directly put down pressure. >> most people expect the ecb to cut rates on thursday. how much of the delivered we are seeing on the euro/u.s. dollar a part of that expectation? >> i think a larger part has to do with the realization that it appeared that germany made a lot of concessions on thursday and friday, about you in reality what we are seeing today is there's still a lot of conditions that need to be met before these programs go into place, so i think the sentiment has changed, but we have not seen any game-changing outcomes from the summit. >> willy, going to leave it there. good to see you. willy williams of socgen. catch "money in motion" every friday, or go to currency class on cnbc.com. five of the biggest banks in the country now have a plan for going out of the business. which one is the better investment? we'll talk about living wills after the break. ♪ ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfection. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. 7:30 on the west cost. the drop, of course, below 50, indicating contraction in manufacturing for the first time since 2009. walmart and coke with highs this morning, and the vix up 3% today. the commodity space has been seeing big moves, so let's check in with sharon epperson and check out what she's watching. interesting development in the oil market, we did see headlines, drafting a bill, proposing a blockade, of course that's the key taking a lot of oil tankers through it, and of course this is due to the sanctions that have gone into place as of yesterday. we have heard over the last several days, a lot of warnings coming from iran about that capabilitying of hitting targets. they do have the capability to hit these targets, so the risk is still in the marketplace, but overwhelmingly traders are focused on this ism data. we are still looking at lower oil prices here. lower gasoline prices is good news for drivers for this holiday week. we are looking at prices down about 25 cents from where they were a year ago, and this 12 or 13% slide has a lot to do with it. all of those concerns about refineries along the east coast being shut. relief to drivers, much needed. we're about an hour into trading. let's go back to chicago for more on the market's latest move. bob is with us at the cme group. >> i'm very disappointed to hear my name done correctly. i was waiting for it. [ laughter ] >> the weakness this morning in stocks, is that, as you pointed out in your notes the realization that this european fix is not going to be simple, or does it have more to -- >> it's a little of both. we have a shortened week in the u.s., so there's liquidity issues, you could see volatility raptly spike and compress, but having said that i believe personally third quarter will be good for equities. you have to play u.s. equities from the long side, just based on the health of the corporate balance sheets, versus governments, foreign courses, u.s. corporations have the best balance sheets on the planet bar none, so i think you have to play stocks from the long side. >> yeah, there are some out there this morning who are looking at not just ism, but what chicago said, what confidence have said, what ford and nike have said, and 2,7 doesn't look too bad. >> no, it doesn't, but the traders have taken over this market, i mean people like myself, people who get in and out of things yearly, people who adjust their tax responsibilities. i'm talking about the ten-year buy and hold people, so when you look at they dips coming in, people will be buying stocks for the short term, the medium term, those number actually provide an opportunity to provide dips. you can see oil telling us a lot about the view of the global economy, given what could be a huge shrink in supply, and it's really still struggling in price, so there will be opportunities to buy these equities at good p.e.s and stay in them for a short to medium term. >> goldman is out today talking about crude, not just saying it doesn't add a lot to -- it's not a huge economic tail wind in their view because of what they call the microfundamentals but would you be wading into those first if earp going to go back into stocks? >> i can't even spell microfundamentals, so i'm not sure i can act on something like that. >> i'm told to break in really quickly. scott cohn has some breaking news. glaxosmithkline is in a $3 billion settlement that covers a number of matters with the u.s. justice department, the settlement being announced right now at justice department headquarters. it involves the reimbursement or average wholesale price that glaxosmithkline was claiming for a number of drugs that affects the reimbursement. also allegations involving a plant since closed in puerto rico that was producing substandard drugs and other matters as well, this being announced now. glaxosmithkline had talked about this case and an agreement in principle as far back as l.a. fall, so presumably this is a load -- a cloud off the company at this point, but grab osmith klein in a $3 billion settlement, huge sentiment with the justice department, shameless plug, our documentary on medicare and medicaid fraud airs tomorrow afternoon 2:30 eastern time. back to you. >> scott, thank you very much. bob iaccino, i apologize for the interruption. you were probable touching on gold as well. >> the point about the energy stocks for me is that's really a fundamental economic play. i feel that's to sort of hit or miss to what's going on, the data will affect that too much. so for me, i would rather look at it from a more macro perspective and say that regional banks, your bb & ts, maybe even pncs are better to buy dips in, the area where you would buy dips in the s&p has crept up from about 1255 to 1279, to even 1300 even. stock pickers will win and i think the long side is the way to play it. >> thank you, bob. >> thank you, carl. deputy attorney general james m. cole hosting a press conference any moment -- actually i believe we already did that. let's move on to banks. u.s. regulators are requesting resolution strategies for nine of the largest living banks, and how they could be dismantled if they became insolvent. you know, this idea, matt, of being able to say this is how it would go and therefore we wouldn't suffer the consequences, do you buy it? do you think it's really possible to dismantle any of these institutions so we wouldn't suffer dislocations? >> i would take it with a grain of salt. i have no confidence this will actually be implemented in a successful fashion. when you look at a living will in a personal situation, when you implement it, it still results in a death. if any of buff these banks goes out, the consequences for -- for all banks as well as the markets of catastrophic. when you usually look at a personal situation, most of these deaths are enforeseen. i really feel what the fdic and others will do is push higher capital ratio. so i would take it with a grain of salt. it will be interesting reading, but i don't think there's going to be an actual investment opportunity off these guys. >> you raise that point. at the end of the day, many people would say the best way to guard is to keep moving capital ratioing up, but you don't buy that as a real detriment -- or something that could stop failure? >> well, if you look at higher capital ratios. they had the highest, and it still went out. capital is like oxygen for banks however. when your body is fill with cancer, in the case of europe yap debt or stupid derivative trades, it doesn't matter. if these bangs go out to where -- it's my opinion it will be unforeseen circumstances. none of these banks want to put themselves in a position. my answer is a volley them. buy the ka nailedance banks high-quality different-paying stocks. i don't want to own something that's already preparing for its own demise. >> so speaking of stupid derivative trades, matt, you don't like jpmorgan at all? i'm asking you. in friday's session on a day when we had outside gains across the board, they actually closed the day lower. today it's sort of holding in there, but i want to see your take, because there's so many people defending this stock. >> sure. jamie dimon has a bloody nose, he'll find a way out of it, but this hurts. i think as they're seeing their losses is 9 billion, i think many people assume it's going to be worse, many people assume they'll have a terrible -- i don't like jpmorgan at this time. i think there's better opportunity for the canadians banks that don't have exposure to the u.s. and europe, and i like big different yields. >> we should be clear that we don't know what the loss is, actually. >> it's going to be worse. fimplgts first of all, 9 million -- why do you believe it's going to be worse? >> i think you look at it, look at what's happened right now, first two, then four. why wouldn't they come out and try to clarify it. if you look at something like this, you're trying to quantify an unknown. my situation is avoid it. you have exposure to some of this volatile areas of the market, why put your capital at risk in some of these volatile names where there's other opportunities, higher quality, better dividend names that don't have the volatility in an unforeseen, you certain market. the best way to do it is live cleanly, buy high equal stocks and you can cleep at night a lot better. >> good advice. matt mccormick, thank you. we'll find out why one investor says there's only a matter of time that best buy goes the way of circuit city. it's very important to understand how math and science kind of makes the world work. in high school, i had a physics teacher by the name of mr. davies. he made physics more than theoretical, he made it real for me. we built a guitar, we did things with electronics and mother boards. that's where the interest in engineering came from. so now, as an engineer, i have a career that speaks to that passion. thank you, mr. davies. you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. 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that is four cents higher than street estimates. earnings this quarter have been held by strong -- that's aquuity brandt, up better than 12 march now. shares of groupon down more than 7%, one analyst cutting the price targets this morning. herman leung, good to speak with you. >> hey, melissa, how are you? >> you're citing risen transactional spending? you -- what will this increased spend get them? and is this an investment in the future? >> obviously the company is still undergoing a lot of rapid growth, so a lot of initiatives the company is pushing. yow side of a core daily deals business so we're highlighting groupon goods. >> the groupon goods, how do we understand that business? is it a lower profit margin? >> think of amazon. you know, the tim cal margins is about 15% to 20%, i would say. you are seeing some of that gross margin reflected in the past few quarters. i will say some of the data highlighted in our note this morning basically says that north america groupon goods is now -- last quarter represented about 11% of bookings in billings which means cosmetically it probably inflated take rates about 200 basis points on our estimates for the first quarter. >> herman, it's been a while since accounting concerns were front and center, does any part of your rating reflect what they went through? >> i think, you know, the company -- the first quarter has actually did take a pretty good step in terms of addressing the street in terms of the accounting issues, but i wouldn't say one quarter would market trend as refund reserves continue to grow in the business, so i don't think what i'm specifically calling out for the groupon goods is an accounting issue. it's just a mix issue of what's going on in the business. >> right. in terms of that upper management structure, has the company changed in any market way since the board makeup was changed? >> has the company -- i don't -- you know, i don't know specifically what's been -- has the company changed specifically? i think the first quarter is a good step in the right direction, but again you have two board members that are now -- that can help them guide through financially a bit better from a guidance standpoint, so we'll have to see. i don't think you'll have a good answer for that until the next few quarters play out. >> in terms of facebook, they finally set the date for their earnings, july 26th after the close. what are you expecting out of that? do you think the company will actually give guidance? >> you know, that's a good question. i don't know. i do expect them to potentially give at least one quarter of guidance. i think, you know, like groupon, you know, facebook is growing very fast, but i -- you know, i think the long-term opportunity for facebook is much higher than it is for groupon at this point. >> all right. herman, thanks for your time. >> thank you very much. >> herm many leung of susquehanna. what are the best ways to play the next quarter? rick, what are you working on? >> well, what a way to start a new quarter and a new month. you know, optimism ends in an ism, and ism is not going to give you optimism. if anything it's putting the markets in a bit of stress today. another stressed area, grains. you know, stress reins in the grains, and i'm not talking about rains like in the midwest this weekend. i'm talking about reigns, like a king and we'll talk about that at the top of the hour. rick rick santelli with your what to watch for in the quarter ahead for the have erbilry complex. first has to be the federal reserve. there's two meetings in the third quarter. we're going to look for stapes on the first of august and the 13th of september. main points to pay attention to, how much nor accommodation if anything will be ahead, and will it take the form of new programs? if you look at the second issue, it europe. anxieties go up, interest rates go down, anxieties give way to solutions, look for yields to pop a bit. a good way to measure, not only with boones but euro currency itself. last but not least supply, treasury supply, monitor that demand, whether safe harbor or general interest or slowing economy, they all affect supply. that's your third quarter channel check. chances are, you're not made of money, so don't overpay for motorcycle insurance. geico, see how much you could save. ♪ ♪ ♪ [ male announcer ] not everything powerful has to guzzle fuel. the 2012 e-class bluetec from mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. tdd# 1-800-345-2550 we're hitting new highs. tdd# 1-800-345-2550 and i'm on top of it all with charles schwab. tdd# 1-800-345-2550 tdd# 1-800-345-2550 i use streetsmart edge and its tools like... tdd# 1-800-345-2550 screener plus - i can custom build my own screens tdd# 1-800-345-2550 or use predefined ones. tdd# 1-800-345-2550 and i can trade wherever i want, tdd# 1-800-345-2550 whenever i want. tdd# 1-800-345-2550 the kicker? tdd# 1-800-345-2550 i pay $8.95 a trade. tdd# 1-800-345-2550 that's a deal in any language. tdd# 1-800-345-2550 open an account tdd# 1-800-345-2550 and trade up to 6 months tdd# 1-800-345-2550 commission-free. tdd# 1-800-345-2550 call 1-866-393-6174. for profit education higher on a ruling on gainful employment. herb greenberg tracking the sector for quite sometime, joins us with the latest. what does this mean. >> nobody knows what it means. what you have is a u.s. district judge in the district of columbia overturned part of the u.s. education gainful employment ruling. this went into effect last year. there are three segments to this thing that create gainful employment, debt to service ratio, debt to service to discretionary income. what the judge did was said on the low repavement aspect the numbers the government used were arbitrary. it's a surprising decision, a decision that came out on saturday. stocks started moving ambitiously. but you still have the issues of, a, what's the department going to do. i've tried to get ahold of people in the department of education. no callback yet though it is assumed there will be an appeal. you also have the election coming up. depending on wins, there's concern about which way could this entire gainful employment thing government the industry group that filed the suit obviously wants the whole thing tossed out. some of the analysts are reacting saying even without this, there's still challenges facing the industry. so we'll see. i think it's interesting because i've seen these stocks, they opened up big and they have come in quite a bit. >> herb, are there differences between the stocks? i'm taking a look at the board and the stocks, reaction to the news. some are reacting much more sharply, those like devry aren't reacting. >> there are also some metrics that affected these companies from the education department. look, they are not all created equally but they all have to have certain bench marks. but i think something like a devry under pressure because metrics aren't what they are expecting. >> "washington post" up a bit in many ways an education company. fifty years ago today in 1972, sam walton opened his first walmart, company went public, priced at $16 each. four years later the company declared a cash dividend of $0.05 a share. squawk on the tweet. for its 50th birthday how should they celebrate with customers and shareholders? tweet us at cnbcsquawkst. ♪ ♪ ♪ [ male announcer ] what's the point of an epa estimated 42 miles per gallon if the miles aren't interesting? the lexus ct hybrid. this is the pursuit of perfecti this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. recently, students from 31 countries took part in a science test. the top academic performers surprised some people. so did the country that came in 17th place. let's raise the bar and elevate our academic standards. let's do what's best for our students-by investing in our teachers. let's solve this. mine was earned off vietnam in 1968. over the south pacific in 1943. i got mine in iraq, 2003. usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection, and because usaa's commitment to serve the military, veterans and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. let's get to squawk on the tweet for monday morning. fifty years ago in 1972 sam walton opened his first walmart in rogers, arkansas. we're asking as they turn 50, how should the company celebrate with customers and shareholders. matt writes, by opening some more checkout lanes. that's a start. leon writes, walmart should bribe us all to buy their stuff. chuck writes, at 50, walmart should start thinking about retirement. any good 50-year-old, plan for the future. what are you going to do in your golden years. judging from the stock, you guys, these may be the golden years, breaking out of that range. >> indeed of the walton family benefiting incredibly from sam walton and what he was able to accomplish. coming close to owning 51% of the company recently, then they put money into a trust. almost a controlled company, just gives awe sense of the ownership and wealth created both for shareholders along all the way and for the walton family. >> who get dividends sometimes numbering in the -- >> 800 million a number of years ago. they have significantly increased the dividend since then a month. >> 800 million. >> to the grandchildren. what's tonight on fast. >> walton grandchild. nice move on apple. we'll talk more about the war between apple and samsung, thermonuclear war, a technical analyst. >> talk about breaking out of a range. guys, see you later. if you're joining us this morning, here is what you missed early on today. >> announcer: welcome to hour three of "squawk on the street." here is what's happening so far. >> everything i do, i talk about how we're going to get our state to be the number one place for jobs. this election like 2010 is all about jobs. >> in the middle of the crisis in 2007, 2008, they were worried about their reputation. they wanted to have their submissions lower. when they put in, there's 16 banks that submit these numbers. that's public information. they wanted the markets to think barclay's was doing better than it was. >> no shortage of things for the market to focus on that could be negative. at the end of the first day, a nice half. a nice june erasing losses we saw in may in europe. >> if you take the attitude of investors today, selling this market 13 times against a 1.6% treasury and give me some show of u.s. leaving soft patch and emerging world soft landing, i think that's a dynamite combination for a higher stock market. >> we have june ism slipping under 50, slipping under 50, 49.7. >> a lot of investors on the sidelines waiting for something to happen in europe. the policy cycle in the right direction, no decoupling. if europe does poorly china might not have nice returns either. let's wait and see. >> good monday morning. welcome to the third hour of "squawk on the street." the third day of the third quarter. s&p 500 off. a big gain for the s&p so far this year. on the back of this morning's ism number, first sub50 we've seen in the index since the summer 2009. micron, one of the biggest gainers after the company and chipmakers unveiled it's plan to buy the company for $2.5. they believe it will boost their position in the energy chip market. biggest losers, oil and nat gas lower, wpx, pioneer, range, exxon, conocophillips in the red. road map looking for new ways to gauge the health of the american economy. we will see how truck sales, google searches, even applications to buy a gun are hinting at a turnaround. plus, as internet retailers keep growing and growing, should we prepare to say good-bye to brig and mortar stores? companies like amazon killing traditional retail business model. amazon, sales tax loop they love so much could be disappearing. texas the latest state to start charging sales tax for amazon products. see what it means for amazon investors. the bull case for rim. we found an analyst who says now is the time to buy into this down beat tech giant will we'll talk to him live. all that coming up in the next hour. first squawk on the beat, retail giant walmart turns 50 today. it's not the only retailer celebrating half a century of success. courtney reagan looking at how walmart stacks up to other 50 years old out there. >> good morning to you, carl. today might be the half century birthday but does mark for other retailers, target, kohl's, they turn 50, too. 1952, first forgot, kohl's in brookfield, wisconsin and sam walton opened the first walmart in rogers, arkansas, 50 years ago. they didn't go public overnight. target october 15th, 196 67. the stock split three times since. 50 cash dividends since the ipo, averaging four a year in the last decade. kohl's began in 1962, it wasn't incorporated until 1988, going public may 19th, 1992 at $14 a share nonsplit adjusted. at the date of the ipo kohl's had 76 stores. today there are more than 1100 and sales increased by a factor of 18. world's largest retailer went public in 1970, 300,000 shares for $16.50. since then shares have split 11 times. walmart declared it's first cash dividend of a nickel and increased that dividend every year since. so which retailer returned the most since going public. if you invested $1 240u at kohl's in 1992 your stake would be worth $24,457 today. sounds pretty good. if you invested in target in its ipo in 1967, your stake would be worth more than $73,000. so what about the world's large eretailer? if you invested $1,000 at its ipo in 1970, your stake would be worth more than $1.8 million today. look at that percent increase. 182,823% increase. not a bad little investment there. carl, back to you. >> courtney, thank you so much. courtney reagan back at hq. as we kick off the second half of the year investors should be watching. look off the grid. good to see you, nick. welcome back. >> thanks so much. >> before wets to off the grid things you tend to watch, overall comment on ism today? >> certainly disappointing but close to the context we've seen from other indicators over the past month. so i don't think a big surprise. some lower level economic growth whether recession in the back half remains to be seen but definitely slowing. >> to a recession, do you think, or are you counting on more than 2% growth this year? >> i think between 1 and 2% is a very rational expectation with the data we've got so far. nothing points to a deep recession, but definitely slowing and it's something to be concerned about. >> let's look at some of the things you talked about, not particular metrics for the economy. one is used car prices holding up well. >> very important time for u.s. auto sector, an important driver for economic growth. used cars are important. when somebody buys a new car, they have a used car, the better the used car, more trade-in, more lucky they are to buy a car. an indicator to keep new car sales going. >> get the indicator this week. pickup truck is a mirror for small business. >> absolutely. we focus on big pickup trucks, f-150s, big chevys, gmc, what small business is doing. we've had the best comps year over year growth for pickup sales in the last several months which shows the small business cycle while still depressed from all the things we talked about is beginning to rebound as well. >> food inflation stabilizing but we all missouri what the drought has done for some commodities this quarter. how encouraging and how much might it reverse. >> what's been encouraging is we saw a spike in food prices. over the course of the past year, tailed off and flattened out. whether the drought leads to a spike higher remains to be seen. we're coming off a base that isn't that same spikey growth of last year. a modest positive. >> the jolt survey, showing people are a little more willing to take a chance, quitting their job in hopes of getting a better job. >> it's our take this job and shove it we call it internally. half the people who leave a job are quitting versus being fired shows they have confidence their next job is just around the corner, another modest positive side. >> some of the negatives, the number of households that continue to rely on government programs, food stamps is growing. >> still the biggest concern. we've got roughly 20% of households in the u.s. on food stamps, 15% of all people. over a third of all children in the u.s. rely on food stamps to make ends meet to buy food. the fact those numbers don't go down with the growth in jobs shows you there's a soft patch in recovery at the low end. >> number of people filing the paperwork to buy a gun is at a new high but has been growing for a very long time. >> this one of the odder indicators we tracked. what it shows over the past few years the number has doubled from 8 million a year to 17 million this year. that shows you on the plus side people are willing to spend money on something. these are expensive items. on the downside it's a bit concerning perhaps they are worried about public safety. >> or social order. >> exactly. >> or the degree to which we rely on paper money. can you make all sorts of arguments there. >> flip side demand for gold and silver coins has been in demand for the past six months out of the u.s. mint, people are less worried about the solidness of the dollar, which is good news. >> so negatives and positives, do they end up net one way or the other. >> negatives and positive still end up on positive side because of critical factors. if that sector continues to improve and we see car sales this week as you said, that's a positive side we're not going to slip back into recession. bullish. >> i'd love to meet your team of researchers. you must have an army behind me. >> an army of two but they are fantastic. >> nick, come back. come back soon. off the grid numbers. speaking of off the grid, sometimes rick santelli in chicago. hey, rick, good morning to you. >> hey, who wants to do what everybody else on the grid, definitely off the grid. if we lo at today, we have to definitely consider ism, what it means for general market conditions. granted no one single economic data point really is enough or should change any investors' minds. but when you start to see these data points start to pile up, when you start to expand from national to international and see the same trends, i would go so far as to say today's ism in its entirety is really kind of changing the perspective from half full to maybe not nearly half full. i don't want to say half empty because i'm not sure that we're quite there yet. you remember when we did chicago pmi, we had alice with us from the group that calculates that number. she went on to say for the last couple of months that chicago was in a zone and it's still above 5067. the way it's getting there, recessionary. let's look, headline, new orders, export orders. they are all sub50. new orders in particular did a two handle change. it was slightly over 60. now it's in the high 40s. that's very unusual. all of those points, plus one that's under 40 in terms of prices paid, all of those go back to '09 in one form or another, not maybe the exact month. now, let's switch gears a bit, put that data point in the international set of data points and you see 11.1 unemployment for the 17 currencies in europe sharing euro currency. let's switch gears now. let's talk about what's going on in grains. we all know anybody in the midwest, we had one nasty storm around noon yesterday. but i have to tell you grains, impact of drought and heat, stress isn't changing from one downpour. as a matter of fact, you look at charts from intraday to year-to-date, new crop december corn. can you see prices up over $0.20 now. we've had over 30% rocket off the lows in june. and at 4:00 eastern today as we do every monday, we'll get a crop conditions report from the usda and we're not very optimistic. carl, back to you. >> all right. thank you very much. rick santelli. want to send it back to seema mody at hq. >> take a look at dupont, jeffries downgraded from hold to buy on weak demand. stall price for a titanium dioxide, weak demand in western europe. that's the reason for the downgrade. shares under pressure down better than 3% of the brokerage lowerist earnings estimate on dupont. >> how the internet could be killing best buy. next,nouncer: up >> announcer: up next, what is the future of best buy? we have one guest who thinks it's going the way of circuit city. is it crazy to think of electronics stores as extinct? >> insane. >> announcer: "squawk on the street" will be right back. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. we've seen what digitizing music books have done to stores and video, replacing physical retail in early stages. is it only a matter of time before the likes of amazon have to say good-bye to best buy. he sits on the boards of several companies including pinterest and open table. jeff, good to have you. >> thank you very much. good morning to you. >> this dynamic not new to anybody who reads the paper or shops in this country. you say we're approaching a sea change in retail even still. what's it going to look like? is the problem getting worse or not? >> the problem for off line retail is significant. online retail continues to gain share. it's been a relentless rise w that mass actually the impact for retail occasion. food and drugstore categories very little online share but the categories like electronics and apparel and home are growing strongly. for example, electronics retail online is now 15% of the total. >> so how does best buy navigate this hurricane, as you call it? obviously they have their own online component but they are also highly leveraged with a lot of physical facilities. what is the path for them? >> you know, they are facing a big challenge. i have a lot of respect for best buy as a retailer, what we're talking about here are macroeconomic effects. the total addressable market is shrinking, lower in 2010 than 2005. retailers are very highly leveraged. they have to have minimum store labor. they have rent. they have inventory. all those costs are fixed. so small decreases in their top line flow through to the bottom line. best buy has had negative comp store sales three of the last four years. it's kind of at a 1 to 2% profit margin now. if those same macroeconomic trends continue, i think they are very challenged. >> your point is, it's not that they can't swim in the online world, or at least learn how to swim, but they are trying to swim as they are anchored by these huge physical buildings. it's hard to unload those in a hurry? >> it's a bit of a dlem ark, book, music, movie, a lot of them tried to go online, they just can't go online as fast as they need to to compensate for the anchor of the physical business. probably the retailer trying the hardest right now is barnes and nobles. books in physical retail is tough, the ereader trying to reinvent into the online world. i think best buy would need to do something that radical to optimize their long-term chances. >> is it obvious who benefits the most, obviously point to amazon first but is that argument too simplistic? >> overall, online retail is going through a new renaissance of innovation. amazon is the player. they are the place to go if you know what you want in movies, books, electronics in particular. there's all kinds of innovation in ecommerce around pro ration, creating new opportunities overall, online retailers are really gaining share. >> to put a period on this conversation, it's always hard to forecast the end of a company, especially for best buy shareholders but how long would you give them? how long can they survive? >> they can't survive if their comp store sales continue to be negative. as online continues to gain share, if anything that share gain will accelerate, it's a real challenging situation for physical retailer with massive off line assets. >> jeff, good talking to you. come back soon. >> thanks very much. you should know we did reach out to best buy, the company could not immediately be reached for comment. so far we continue to reach out to them. in the meantime gold rallying on the back of eu bank plan announced friday. is the bullion bounce here to stay. count you down to the close in europe in 10 minutes. on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? begins with back pain and a choice. take advil, and maybe have to take up to four in a day. or take aleve, which can relieve pain all day with just two pills. good eye. 's. 's. let's get to rick santelli talking about the data we're going to get this weekend, already got. >> absolutely. i want to tie up the theme about less ism in the form of less optimism. dan the man, that's his nickname on the floor. i know you like to watch these numbers. tie this up. >> i live and die by ism. that's always been my excuse, my argument as to whether or not the economy is doing well. i've been somewhat positive about it because even in the low 50s okay. this truly disappointing me, making me rethink my outlook, thursday's ism coming up, nonmanufacturing, see how that does and friday's unemployment. a big week. light volume because of the holiday here. i'm turning not pessimistic but way less optimistic than i was 20 hours ago. >> okay. you brought up employment. that's a nice place to go next. 11.1 in europe. i know that considering the 17 countries whom that number affects, the way they compile that back to the mid-90s. the highest since that point. our trajectory in jobs with 69,000 last monday, already downward sloping. does this make it even larger? maybe not this month in particular but over the next several months, could we get a negative number? >> if the ism manufacturing component along with nonmanufacturing continues to fade, yeah, we could possibly see it. i'm not at that point where i'm going to believe that can happen yet. i believe it can happen but don't think it can happen. a couple more months' worth of numbers and it's not looking good. >> i even remember in the major portion of the credit crisis in fall of '08 and part of '09, there was still much debate, many economists weren't universal in their agreement that we were going to go into a recession. while this discussion was going on as we learn in high tech, we were in a recession. nobody likes to talk about it, very few like to predict it. are we on our way to a recession here? >> i'm not going to say we're there yet but closer. >> europe, obviously countries like the uk and others that have negative gdp that by very definition are in recession. do you think this is going to escalate some of the slowdown in france and germany? >> you know, i think they have problems inherent on themselves. i don't know hour problems will hurt them a whole lot. >> pretty much with their anxiety separate, i'm wondering if we're going to have a stereo effect here. >> could very well. a confidence issue, consumer sees things and back off. you know yourself when you go into a storm, you start backing off, slow down to see what's going to happen if you can get through the clouds. >> one final question, what's your prediction for the jobs number friday? >> i'll say 75,000. >> all right. you heard it from dan the man. he's a little lower than expectations but then again the last several numbers have been a little below expectations. carl, back to you. >> i think consensus is still 90. thanks so much, guys. when we come back, the bells about to sand across europe. all the action with michelle caruso-cabrera with details in the states after this. after after all the euphoria in europe, some troubling headlines on that continent. unemployment back to a record high. ecb meeting this week, we're expecting a cut. france lowering gdp forecast for the year. chief international correspondent michelle caruso-cabrera to wrap it up. >> stinky manufacturing data as well. bad headlines out of europe when it comes to the economic front. yet, the two most important data points we've watched continuously, spanish ten-year yield and italian ten-year yield, they are still markedly lower than they were before the european summit. spanish yield slightly higher, when you go back and look at what's happening, still definitely an improvement. believe in the bond market the eu summit mattered. 5.72% is where it stands right now. euro got hit earlier in the session because finland and netherlands have come out and said one of the key ten either supposedly agreed to at the eu summit, big pot of money, rescue fund able to buy debt in secondary market, those countries say they fight that. that took euro off the highs. remember, what we learn at the euro summit, negotiable, despite lines in the sand. european close positive across the board, continuing the rally we saw on friday. off the highs but still, got to consider two days in a row is pretty good, that's even though, like you said, manufacturing data, employment data, horrendous numbers out of france. by the way, carl, greece got a billion dollars in cash, money left over before the election. they were supposed to get this and everybody wanted to see, wait, see how the election goes, are you committed to reforms? maybe we'll give you a billion dollars. they got it today. i'm sure they needed it. back to you. >> before i let you go, when finland and netherlands come out and say we plan on voting against esn buying bonds, is that a deal killer if it happens or not? >> not necessarily. what we've seen before side deals cut that brings them to the table. like i said, i don't think anything is set in stone. angela merkel saying, not in my lifetime. it's such a harsh, harsh stance, what did we see? we saw concessions at the event. not necessarily, no. if it were, you'd see the markets getting hit harder than they are. >> market has been counting on something happening for sure for a while. michelle caruso-cabrera, thanks. >> mary watching action, too, hey, mary. >> hey, dow coming off the worst levels of the day. worst story, manufacturing data we received earlier coming on the heels of weak readings in china and europe on manufacturing, cast a pall over the market. look how they reacted to it, choppiness in the beginning, then strength, then, boom, hit. home builders particularly hard hit on this. they were approaching basically a four-year high before the data came across. they have turned to the south, even though the april -- may construction numbers were stronger than expected and in large part due to better than expected building in the residential areas. of course when you have weakness in manufacturing, that is hitting commodities lower pretty much across the board. in today's session, a little choppiness improved. crb index under pressure as well. cyclicals, one of the worst performing groups we follow. here are sectors we follow in today's sector down 1.18%. hmos weaker. winners continue to be utilities seen as a safe haven. also telecom building on gains in the second quarter, the best performing sector during the second quarter. of course one of the reasons we might see the market being supported is because we have a lot of deal flow today, a bit of a merger monday. coming off the second quarter when global deals down 14% investors like the news reflected in part that our volume on track for an average day, something you may not expect in a holiday shortened week. bristol miles buying amylin. general motors selling to everbank. it expects it to add to its earnings. micron technology getting a lift from the news buying a japanese firm. a winner, acquired by inland micro, $69 or $9 a share, audiotape healthy 62%. dow down 68 points. carl, back to you. >> thank you so much, mary. mary thompson and nyse. gold in interesting territory, "for the moment off six bucks. ira at the cme. good to have you. >> hi, carl, how are you? >> heck of a rally friday. how long lived might it be? >> that was the first rally that told you you can't be short any more. seasonals kick in mid july, early july, mid august, kick off that period from september into year end. if i'm right you should not revisit 1530, 1545 basis august contract and say that again for this year if you're going to have a bull year. if those numbers are taken out, you flip-flop, carl, and start look at 1380, 1350 as a potential price drop. i think we've got our bottom in. that's what friday was all about, taking out the shorts and letting people reassess what they think. >> tough quarter, worst we've seen in several years. is the pivot if it lives surround policy in europe or physical buying in india? what's the overriding dynamic right now? >> i think the dynamic is going to be printing money, getting out of debt, austerity control in europe at the same time as printing money and china coming to the table with more growth. in other words, inflation, which is the only story we really haven't had in the first half of the year and gold had everything else thrown at it and couldn't rally. i think it's the inflation story, better economies and inflation going hand in hand with it. >> if you have the nerve to play in this pool, which not everybody does or should, is gold or silver likely to give you the more interesting riot ride? >> i think it's going to be gold. the reason i say that is silver just hasn't come alive at all. the market that you have to watch is copper. copper market can be the big surprise. if china really turns on the spigot and starts deciding more infrastructure at home, they demand more. if europe can get over this hurdle and finally get ontd a path where everybody agrees on somebody, that's going to be known july 9th when germany votes yes or no. if they vote yes, which i expect, better things down the horizon for the copper market, too. >> i keep thinking back to last september, 920 on gold, ira. any guess how long it would take to reclaim some of those highs? >> those highs are not going to happen right away. the story isn't there. the highs will happen with the inflation scenario and scenarios kicking in europe, kicking in america and kicking in china. that's what we need to see. as you've talked about in the past half hour, that's not what we're seeing. the ism report showed that. we're just not kicking on all these cylinders. we're in sort of a glide motion down. we have to get out of that. i'm not looking for the 1900s certainly but i am looking for a move if we're going to be good back to the 1700 level by year end. or as i said, 1380. i don't want to see those lows taken out that we made just a month ago. >> certainly getting people's attention again. ira, thanks. >> back to seema mody with market flash. >> deals announced as mary thompson was alluding to. one of the deals talking about. ingram micro buying brightpoint, 66% premium. ingram micro says this deal will add $0.18 to its fiscal year, 13 eps. market cap stands at $607 million. back to you, carl. >> seema, thanks so much. seema mody. when we come back after a break, we'll talk to the analyst who says now is the perfect time to buy research in motion. that's right. rim. down another $0.16 today. we're back after the break. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. [ male announcer ] aggressive styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the 2012 c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. in your fight against bugs. ortho home defense max. with a new continuous spray wand. and a fast acting formula. so you can kill bugs inside, and keep bugs out. guaranteed. ortho home defense max. zagat just gave hertz its top rating in 15 categories, including best overall car rental. so elevate your next car rental experience with the best. coming up in coming up in just a bit on halftime, are global slowdown fears become a reality with bar ron's and goldman sachs, our fast money traders have a hedge. which takeover target is next. the man behind one of the best year's performing tech funds names his top picks for the second half. carl, see you in a bit. >> rim upgraded from hold to buy. daniel made the call and joins us this morning on cnbc news. always good to have you. good morning. >> thank you for having me. >> some would call eight bold call. looking at your notes. if you're going to do this, you have to assume there's going to be some kind of sale. >> we're not doing this because we're waiting for blackberry 10 to turn the business around. we're doing it because at $1.6 billion enterprise value, there's just too much potential strategic opportunity to unlock there. it's a very digest i believe figure for any number of large players who really want to be in mobile. the future of computing is mobile. rim is one of the players there. they have a globally network, itself the book value is $2 billion. it's trading at less than the value of the networks they built. they do $4 billion in annual revenues in the services business, serving 78 million subscribers. i think that's an opportunity for someone like even a microsoft to go in and sell microsoft host exchange server to those blackberry enterprise customers at the carrier level. google could do that. there's any number of guys i think could digest $1.6 billion. that doesn't count the fact they might have ip value embedded in there. the handset building could be downsized to a manageable figure and the rest licensed out to oems, micro max india, too much opportunity here. but yes, it's definitely more of a speculative opportunity, not really much of a fundamental turnaround opportunity. >> it takes your price target to $10. you point out the population of companies that might be interested actually seems pretty large. isn't the key risk the company's unwillingness to do a deal like that? >> any number of things could go wrong with this call, carl. there is a lot of variables. but yeah, i think you called it, first and foremost is the board of rim at that place, have they realized they need this. if you look at the recent history, very recent history, last two months of trading of hp or nokia, these things can always get cheaper. i think rim's management ought to be looking at that and saying we're really in a strategic box here. we need a partner. but probably you need to be on the same team rather than a partnership. >> yeah. >> this is probably now or never. >> i think it's interesting. your point about your lack of faith in the ten is punctuated by the idea if there is a strategic buyer, you think in an ideal work they cease development of the product. >> yeah. i think this they gotten it out a year ago there was an opportunity to introduce blackberry 10, next gen operating system. put in front of a ceo managing devices. you know what, it's blackberry, secure, enough apps, it works well. let's give our executives and sales guy these devices rather than risk everything else on the network. i think there was that chance but it's gone. i don't think there's a point today for another smartphone operating system. the developers don't have time for it. they don't have time for it of the market clearly doesn't have time to wait. >> finally, we talk to other analysts who would like to make this call. they don't have it in them right now. are you going to be able to sleep at night? >> you know, i've been both right and wrong on this in the past. i would call this, you know, if i was running the front, a small position. i wouldn't be betting the farm on this opportunity. i think there is a lot more homework to be done. i'd like to better under the ip portfolio, recall these guys lost one of the biggest cases in patent history. but they did just co-buy the nortel patent, so there's a lot in there. i'd like to get a little better sense of what the strategic opportunities are. maybe we'll start to hear whether the team is entertaining bigger options rather than a micro review. >> well, if the deal gets announced, daniel, we hope you'll come back. always good to see you. >> thanks for having me. >> daniel ernst from hudson square. you know the amazon exemption you get from the online retailer, you don't have to pay sales tax or state sales tax? that may come to an end. we'll tell you why and what it means if you own the stock right after this break. >> here is what to watch in the social media sector in the quarter ahead. all eyes will be on facebook's first earnings report as a public company. we'll see how much money the social network is making on mobile and whether it's launches and ad network or online retail to bolster payments. the big question is whether or not social ads work. zynga will be working to shift gamers to a stan alone platform and get more people to play to pay. oracle, microsoft, how they tend to profit. that's channel check i'm julia borsten. ttd#: 1-800-345-2550 you get at some places. ttd#: 1-800-345-2550 they say you have to do this, have that, invest here ttd#: 1-800-345-2550 ttd#: 1-800-345-2550 you know what? 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[ male announcer ] the highly advanced audi a6. named to car and driver's 10 best. ♪ after after severe storms in the u.s. knocked out instagram, pint rh pinterest, amazon, wonder how safe is the cloud? >> as i was tweeting, who would think a server farm is a vulnerable to a thunderstorm as a real farm. we learned when services by amazon.com were taken down by lightning. this isn't the first time cloud servers have gone down. it's one of the first big storm related disruptions, which gets to the question what about gmail, any service that amounts to a lot these days. i haven't heard back from apple. here is what you need to know. the services amazon operates, they are just machines. they are not in outerspace. they are in buildings. other companies go to companies like amazon, google and others, microsoft and rent out space on those machines. amazon is the biggest cloud provider right now. it has machines in multiple geographies. here is the catch and here is what happened. as a customer, not a business, you or me you rent space on multiple geographies. if you want to diversify your natural disaster risk. companies like instagram knocked out bhi the storm certainly did not do that. neither did many others. it costs too much money. good news, costs are falling. keep an eye on rack space. they have something called open stack, open source, which would sort of let comes use multiple providers along different geographies, manage it themselves. since costs are coming down, that may be one to watch as this cloud evolves. >> the biggest comment i heard over the weekend was what they don't have redundancies around the country? >> that was it. that was it, carl. there are redundancies available, just costly to do it. that's where -- especially startups, you know. >> interesting stuff, as tough a story as it was for those in the area where the outage occurred. after weathering the storm on the eastern seaboard, amazon took a sales tax beating. in texas, weighing in, a couple of analyst,s mark, anthony an analyst at barclays. good morning, good to have you. texas starting taxes july 1st, anthony, making people wonder if this is the beginning of the end for the exemption. is it? >> this has been an advantage amazon had thanks to a supreme court rule in 1992 that avoids an online sales tax in areas where they lack a physical presence. this has, at least in theory, been an edge amazon had over physical retailers, right in if we went to an environment where more of the states or hopefully a federal solution to this, to even the playing field, more of the states or entire country started requiring amazon and all ecommerce providers to collect sales tax, that would limit one competitive edge amazon has. of course, the big thing for consumers on amazon is convenience and price. theoretically this would force amazon to find other areas to compensate for people not paying taxes. of course we're all supposed to pay taxes with returns. online shoppers, nobody does. >> absolutely. >> the idea is like this evens the playing field. to a certain degree, amazon might have to lower prices that could eat into margin. the other rebuttal to it, however, they then are able to put distribution centers closer to the consumer. in places like new jersey where they will begin collecting taxes, they have have more of a close proximity to consumers, that helps give them a competitive edge because they aren't further away. >> shorten the shipping time. if they did try to play hardball with texas. things just didn't go their way. i wonder if they only collect in a handful of states around the country, can we quantify how material that has been to earnings over the last few years. >> that's what everybody is looking at. near term, quite frankly, i don't see much of an impact to earnings or revenue. i think there's enough secular growth for the company to weather these prices. longer term, though, narrowing the pricing gap or price advantage that amazon has i think does represent more of a problem, especially as you start to see more of the physical retailers start to focus on it. but as far as the actual impact to earnings right now, i don't think there's any way to quantify that. not yet. >> it's a tough one. arguably you would build a model to look at margin impact but earnings might be tougher. >> anthony one last question, we talked about the storm's impact over the weekend. is that material as well, this notion that an amazon or netflix might go down because of weather or does that register pretty low on consumer's list of concerns. >> i don't think it's near term issue. amazon with cloud service and amazon web service providing a lower cost outsource solution for folks like netflix. you could build a bear case in theory which says if a cfo of one of those vendors gets a little more worried or concerned about outages and not having communication, they will bring that in-house. i actually don't think it's material, especially if it's something that happens infrequently and only happens for a few minutes at a time. the vendors are getting the benefit of this low cost cloud service. >> finally, anthony, you're rating is? >> equal weight on amazon. we love the revenue story but, you know, we are kind of in the camp of we'd love to see more profitability. then when you look at the evaluation on the discounted cash flow basis, spending a lot of time thinking of the valuation of the stock in relation to future cash flows, we find the stocks more close to fairly priced here. >> for you, mark, as well? >> we've got a market perform rating on it. our biggest concern really is the valation. if it can return, perhaps it looks attractive. the visibility for that we are a little concerned about. you've also got the issue of, you know, the margin erosion has been pretty strong over the past year. i think a lot of that has to do with their added distribution centers. we just don't have the confidence they can return to the 4% margin in the near term. >> carl, will you stop buying on amazon if you have to pay taxes? >> i thought about that. i don't think it's a big deal for the every day consumer but thanks for turning the tables on me. >> i was just curious. >> guys, have a great afternoon. >> meanwhile keep tweets coming. fifty years ago sam walton opened the first walmart in rogers, arkansas. for their birthday, how should they celebrate? your answers after the break. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ a i'm with scottrade. it's another reason more investors are saying... this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. tweet tweet time. walmart is turning 50, so we asked how the company should be celebrating with customers and shareholders. carrie writes, 50 spanks by the greeter for each customer walking in the door. paul writes, now that walmart is 50, it can go on a midlife crisis and go on a bild

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