time for six in 6 on. i'm starting. you get three and i get three and we begin as soon as the clock comes up. now, all right. family dollar store, the top s&p gainer. the discounter's quarterly profit up 14%. consumer traffic was up and the stock was up as you can see, 11.5%. the biggest gainer on the s&p. moving on to the next name on our list. 3m, fresh one-year high. goldman sachs adding the company to the conviction buy list and brinker operational and the restaurant operator upgraded to buy and merrill lynch which boosted its price target on eat which is the ticker from 18 to 17. >> arch coal upgraded to buy from neutral and the firm upping its price target to aci from 28 to 24. american express upgraded to outperform from neutral. the firm's price target on axp 49. dow chemical fresh 52-week high and upgraded from overweight to equal weight. the price target on dow is 40. they don't tell you as they stop the clock. >> before it comes up. >> there's a story that mark -- i don't know if you saw yesterday, this is a very important story, there is a company in hawaii called island dairy that makes milk. if they don't make milk locally it takes about ten days to get it. they need milk locally and they wanted to get more cows. they went to an ag expo and read a magazine called progressive dary and they decided to get the cows water beds and the cows now have water beds and they're producing 10 to 20% more milk because their bellies get to rest on the nice water bed. >> you bring that up when there's no time to talk about it? okay. i'll see you tomorrow at 9:00 a.m. >> can you imagine the belly right on the water bed? bye. hello, everybody. welcome to "the call." i'm mandy drury standing in for trish regan. we are 90 minutes into the session. stocks are flat and trying to rally off their opening losses after mixed economic data. we'll take a look at the market reaction. larry? >> hello, mandy. i'm larry kudlow. did you see the front-page article in "the new york times" on the fed? >> i did. >> it raises this question and how can the fed catch the next market bubble if it missed the last one? >> and bob doll will join us with his market predictions for 2010. you might want to listen up. he made 12 predictions last year. 11 of them were correct. this is "the call" on cnbc. all right. stocks trying to rally off opening lows and now basically flat after mixed jobs data. steve liesman will have more details on that coming up in a little bit and on the economic front, the service sector grew in december, but at a marginal pace. right now take a look at how the s&p is trading and we've been all over the map and you can see on the chart and right now it's basically positive and essentially flat on the session. the dow right now is up 0.1%. 10,585 and the nasdaq trading on the plus side, but basically flat. let's check in with mandy drury down at the new york stock exchange. good morning, hand pep. >> good morning to you as well, melissa. so much for the first one-day wonder. it seems as though we've lost that momentum in the last couple of sessions and it's still very early days and we've got a long way to go before the end of the trading day. let's take it to bob pisani. yesterday we were talking about the airlines and i believe there's something more happening in that space today. >> we're still getting more of that and it's still very choppy. their december traffic numbers were pretty good and the stocks moved up nicely and some were at 52-week highs right now. southwest was at a 52-week high. tonight it's more choppy data. us air and amr were weaker than expected. the important news is u.s. air is getting a loss that's a little less than expected here and in general the trend is airline revenue is improving. the earnings estimates are generally improving and they're want as bad as they were. the estimates were three or four months ago. i still say the trend is still up here despite spite the fact the numbers weren't quite as long. >> when you go on a plane it feels really full, but things are going well. >> usually they cut their capacity 8. % in 2009 and they're not going to be adding any new capacity in 2010. so very disciplined approach and that's a good sign. completely different sector. >> this choppy thing. remember the fertilizer companies in 2008 all fell apart. i mean, their valuations were cut by more than 50%. mosaic, one of the world's largest makers of potash and phosphate. there's a three-year chart and it was 163 and went to the 30s in six months. fertilizer prices dropped. so what we're seeing there and the numbers came in and the important thing is volume is improving. prices are generally improving and potash is still a very tough situation worldwide and revenues are generally improving. it's the same with the airlines that is with the fertilizer and generally the trend has been improving, too. >> we like the debates where we pit bears versus bulls and it is getting hard to find the bears. everyone is bullish, but maybe guidedly bullish. >> does that send a signal to us. >> the question is how good are sentiment indicators. look at the american association of individual investors and they do a bull/bear indicator. last week you take the percentage of the bulls and bears and it was 70%, traditionally, amanda, when they're around 70% that's often a market top. etig pointed this out this morning. october 2007 and may 2008. we got right up there and those were market tops at least in the short term. so there are some of these sentiment indicators that bear watching and i'll bring people up-to-date on that. >> remember when mark haynes called the haynes bottom? i wonder if he'll call the top. >> of course, we have economic data today and just like yesterday it came in a little mixed moving in opposite directions. let's take a look at what went behind the scenes. steve liesman. hi, steve. >> thanks very much. the employment data shows improvement, but if your criteria is whether it added jobs in december, ism coming in at 50.1, and good for economic growth and the employment component improofed for the second straight month, but at 44 it still shows we're losing service sector jobs. only two of 14 industries surveyed reported job gains. on to the other jobs data, the private sector employment company saying the sector fell by 84,000 in line, pretty much with estimates that were out there. november revised to show a little bit better and 245,000 job loss and non-farm payroll surveyed by dow jones is minus 10,000. so a little bit of a gap there. there has been an ongoing gap between the two which if you put two side by side, there's jobs by industry down 96,000 for manufacturing. service, though, you had the first gain you had in a long time there. manufacturing still losing jobs down 43,000 and small business. it was the best small business number since july '08. you see here we've been undershooting the bls, including triple digit misses in five of the past seven months and they counted 600,000 job losses in the beginning of '0 and it could put them more in line. challenger gray & christmas, their declines were better than expected and more news from them. cuts of 45,000 which is a 73% decline from a year ago. it's a 10% decline from november and the fifth consecutive decline in job cuts. however, for all of '09 we were up 5.3% to 5.3 million, the most since 2002. two different stories here. job cuts in the second half down 56%. when i did the number, guys, i looked and it says when you have job cuts below 50,00092% of the time there, is job growth in the economy and sometimes a 0.22% on average. so three numbers this morning all showing improvement and only two would point you, larry, to saying that we're want going have job declines in the month of december. >> ism services employment 44 points in december and 41.6 in november. that could push you to positive territory in friday's jobs report. >> and two is not bad. two out of three? >> what do you think, steve? >> if you took the prize yesterday for that call, i'm thinking is it now hanging in the air? do we take it back? >> i don't think we can take it back. >> i think we can still eke out a positive number. a positive in november, but the 44 as far as i happened is still consistent with the contracting service sector, but it is an improvement. >> i would never take it back and do such a thing. steve lies mid-cap, stick around. as the economy is slowly up proving our next guest in a front-page "new york times" article raises this point, how can the fed catch a new bubble if they missed the last one? david reinhardt, and chief economist of first trust advisers on. welcome, happy new year. the question is how can the fed catch a new bubble if they missed the last one? >> yeah. so the fed right now is asking for more powers and the obama administration supports that request. when they talk about this one of the things they say is, look, if we had better structures we could have done more to deal with this huge bubble and i agree with that. the second question we need to ask is would they have actually used those structures and when we look at what greenspan and bernanke said in it 2003, 2004, 2005 and 2006. they were saying there is no housing bubble and it is hard to believe that if we go backward in time and give them the extra powers that they would have use them because they didn't use the powers they have to say crack down on some of these crazy mortgages that the fed did have power to crack down on. that's the question that i was raising. >> brian, do you agree with that? >> i think the fed caused the bubble in housing. the one that they didn't see in the first place. by the way, i think there's a bubble right now, too, but it's in government and if you look at the cost of interest to the federal government, they're extremely low and one of the low nest 30 or 35 years that masks the real cost of all these deficits. having 0% interest rates, i think, is going to cause us way more problems down the road than it's helping us today. in other words, the net cost of it is a negative for the economy. >> let me go to related, regarding monetary policy, not regulatory policy, bernanke's speech on sunday basically removed any culpability from the fed in conducting interest rates and monetary scombas creating money. they attacked -- bernanke attacked john taylor's monetary rule and the so-called taylor rule. taylor fights back and he's on the kudlow report tonight, but taylor says wait a minute, the sefrdz overwhelming that low interest rates want only caused the housing boom, but also caused a lot of risk taking brian westbury. what's your take on this debate between john taylor and ben bernanke? >> there's a lot of pieces to it, but i think one of the most important is that ben bernanke says that it wasn't the low interest rates that created all of these exotic mortgage products. i completely disagree. when you have 1% interest rates and there's all kinds of leverage and there's a mirage created. people thought money was free, that risk was very low and we dreamed up a lot of these products and it made it look like the risks of those products were lower than they really were. >> right. >> so i believe the 1% interest rates actually helped create the products that ben bernanke is blaming for the bubble. >> exactly. >> let's go to the central question. what do we do now to make sure this doesn't happen again? how do we write them up. if i read into what david says if they didn't recognize the bubble last time they're not going to this time. do we need different people in charge? is it a structural problem or is it who's in charge? >> i agree with david especially the part where the fed has not come forward and the public accounting of what went wrong, and i also would supplement his conclusions as to why it went wrong with the notion of regulatory capture. i think the fed was too close to the banks and didn't do enough investigation to look at these sivs and these off-balance things. how did they miss whatever number it was that city had off-balance sheet and not see risks there. i will point out, however, the fed has made some changes and whether or not they're enough i don't know, but it's worth putting on the table the fact that the fed is doing much more of what they call horizontal -- >> let me make this point. >> the fed is doing horizontal reviews. >> like they're laying flood their back? >> let's get david back in. >> the concentration of risk in different categories across banks rather than individually vertically within the bank. >> what's the solution? >> i'm skepticel that only if we get better people. ben bern archingy is an excellent central banker. >> what should we do? >> think probably what we need are more rules because we'll always figure out thou justify a bubble. this time it's different. we're running out of real estate in san francisco and florida. imagine that you have something that says, look, whenever the price of houses relative to rents and incomes and relative to something reaches a certain level we start to tighten something like down payment restrictions and we start to make it more difficult for people to get mortgages. instead in this case the opposite happened. it became easier for people to get mortgages and if we had something like that it would be harder for regulators to persuade themselves that this time it's different. i think it's human nature to get involved in financial bubbles and we're never going to avoid them. >> brian westbury, look. i don't want disagree with what dave is saying, but i want to ask you, when you look at the chart the federal reserve for four years, '02, '03, '04 '05, '06, for five years, kept the fed funds rate negative. the real fed funds rate was negative and they kept it below the inflation rate. if you're going to run that kind of easy money don't you spark massive leveraging and risk taking regardless of the exotic instruments and regardless of the government forcing unaffordable mortgages and the rest of that stuff, regardless was mistakes of the bankers. if the fed keeps money so cheap -- >> right. >> so cheap -- >> it is almost like the answer is implied in the question there. >> i don't understand how you get away from this. >> it's the answer. >> i use a very simple model. i use nominal gdp growth and i compare the federal funds rate to it. in fact, i wrote a book about this, it's called it's not as bad as you think. it is out right now and you can get it at amazon.com where i describe this model. when the federal reserve holds interest rates, bad things happen and they did it in the '07s and did it in the early 2,000,000. he wants to use housing prices and jack kemp, steve forbes and lots of people talking about a gold standard. >> larry kudlow. >> commodity price rule for money. >> commodity price rule. >> forget the houses, look at the commodity. they always tell you what's going on. >> we're up against a hard break. >> thank you very much, brian westbury. thank you very much, steve liesman. thank you very much. you will hold on to your nobel prize. by the way this evening on "the kudlow report," john taylor will fight back. the creator of the taylor rule will join me live to sound off on what some are calling ben bernanke's whitewashing the fed culpability in the housing and commodity bubble. that's tonight, cnbc, 7:00 p.m., outspoken john taylor. very interesting. mandy, over to you. we'll be watching, larry. coming up on "the call." the changing economy is changing the decision making process for car buys are. we'll have a new deloitte survey on what generation y wants in a car. ellisa? >> first, he tried to lead the way in financial reform overhaul and now chris dodd is throwing a curveball announcing he won't seek re-election. what does it mean for reform moving forward? that's up next right here on "the call." >> we'll be right back. >> bye-bye. hi, folks. welcome back to "the call." i'm matt nesto. it's the smallest media stock in the s&p 500, but the hottest right now. check out the intraday spike. the stock is up 4.5, 5%. the company with sec filing two weeks before they come out with the second-quarter results and it looks to be much better than expected. 45-47 is what they see, consensus now at least with thompson reuters is 41 and the stock is on the move. the shares have doubled in the past year. they say that their national and local advertising markets appear to be less worse than they original le forecast. so mdp is on the move with a pre-announced second-quarter result that looks better than expected. mandy, back to you. >> we like better than expected, don't we? matt nesto, thank you very much. senate committee chairman christopher dodd plans to pass financial regulatory reform legislation this year despite announcing his retirement next year. john harwood is in our d.c. bureau with more on what retirement means for financial regulation reform. john? ? that's the first question everyone's been asking since chris dodd indicated that he was going to retire. he's had 30 years in the senate, a lot of experience. he was deeply into this issue and his colleagues said on cnbc this morning that his loss is not going to be easy to fill. >> that's a big loss for the senate. he's deeply knowledgeable. somebody that has been really on the front lines of economic recovery and of course, an improvement in the regulation of financial institutions across the country after we just narrowly averted what could have been a global collapse. the loss of the institutional memory is a significant one. >> here's the bottom line, this retirement probably makes it more likely rather than less, the financial regulation would happen. i thought it would happen in any case and now republicans will not be eager to deny chris dodd the victory if he compromise wes richard shelby, the republican who serves with him on the banking committee and later with barney frank in the house of representatives who have passed their bill. so handy and larry, on "power lunch candidate ", it looks like financial regulation remains on track. >> john, one quick question. the likelihood of working with republicans, chris dodd's likelihood of working with republicans i would argue grows larger as his lame duckness increases. >> i agree with that. and you saw over the christmas holidays chris dodd may be anticipating the decision that he is announcing today, announced with richard shelby that they've made progress on financial regulation, getting over some of those sticking points on consumer protection, the role of the fed and other things, and i think the role of the fed is likely to be the toughest sticking point in the house and senate negotiations, but you're exactly right. >> let's have more discussion here about senator dodd and financial reform legislation. joining us, money and politics columnist at reuters break and views and julie raginski, democratic strategist and comprehensive communications group. both are spectacular cnbc contributors and let me go to julie first. i just want to ask you, i know dick blumenthalquen guest on th show. i've known him for 30-plus years and we both worked for pat moynihan. there is a tea party movement sweeping this country, and i say that linda mcmahon can defeat blumenthal in connecticut and pick off his seat. i'm baiting you a bit because i want to get your view on this. i think this is big news. there's a revolution going on, julie, what do you make of it? >> well, i think you would have probably been more accurate if chris dodd had stayed in the game. i think you're right, blumenthal is an extremely good candidate. linda mcmahon runs a very successful enterprise, but she has no experience, and i really think blumenthal has the seat locked up. >> jim, what do you think? >> yes. no experience, but the no experience plus 30 mil