tv Closing Bell CNBC July 13, 2009 4:00pm-5:00pm EDT
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securities. tradertalk.cnbc.com. you know the closing bell. you know maria bartiromo. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to "the closing bell." i'm maria bartiromo on the floor of the new york stock exchange. we've got a rally under way at the close here on wall street. here's what we're following right now. 4:00 p.m. on wall street. financial stocks lead the market higher after an upgrade of goldman sachs, sending the dow jones industrial average and the s&p 500 to the best day in six weeks. financials leading the way. oil continues to spiral downward, falling today to an eight-week low. bankruptcy concerns for the nation's largest lender to small business. the i.t. group. that's all on our agenda right now. let's look at how we finished the day on wall street with the dow jones industrial average on the up side to the tune of the triple digits. up on the session by 183 points. that's the high of the afternoon.
better than 2 1/3% at 8,330 on the blue chip average. volume picked up from last week. just over a billion shares. certainly still on the light side this summer monday. s&p 500 picking up 21 3/4 points. up 2 1/2% better on the s&p at 900 and change. nasdaq composite also seeing real flows into technology with a gain on the session of 37 points. better than 2%. at 1793. we get all the action right now. mary thompson, our eye on the floor of the nyse. mary? >> after four weeks of losses, we have the best day of gains for the markets since june 1st. the dow of course rallying, finishing at the best levels of the day as maria mentioned. clearly light volume, just over a billion shares changing hands as investors get set for a number of earnings and a number of economic data that will be due out this week. the earnings include six dow components, economic data includes ppi and retail sales later this week. financials gain, they were the leaders today. and also we saw a technical bounce that helped out the market. take a look at what happened with the s&p 500 index. a little weaker at the open. we saw a little bit of a
pullback there. opened higher, then it turned lower. it hit 875, which is near-term support for the s&p. bounced off those levels. and that really spurred the rally that we saw on wall street. from then on it was up, up and away and basically went through another resistance level of 890 for the s&p and 895, again, driving the broader markets higher today. as i mentioned earlier, financials were very strong today. goldman sachs was a standout ahead of its earnings tomorrow, the company expected to post profits of over $2 billion for the second quarter, also meredith whitney of course raising it to a buy from neutral. jpmorgan will be reporting on thursday. bank of america and citi will be reporting on friday. materials were also strong today. citi upgrading this group to overweight from market group, seeing strong likelihood of rising production trends and improvement in earnings revision after a recent pullback in these stocks. techs were also strong. take a look at these three stocks, all of them up more than 2% to 3% or so. they'll all be reporting their earn this week, starting with intel tomorrow. we're expecting earnings of 8 cents a share. google was stronger as well as
dow component ibm, which is scheduled to report. csx reports after the bell today analysts are looking for earnings of 62 cents a share for the railroad company. for the second quarter it finished the session with a gain of just about 1 1/2%. bob, back to you. maria, sorry. here you are. >> i'll take that. >> come over here. >> thank you very much. we'll see you a little later. thank you. taking a look at the other business headlines we're following at this hour, moody's cut cit group again today. this is one of the biggest stories of the day. the latest cut coming because of what moody's calls the company's inadequate progress in improving its liquidity position. now, on friday cit said that it is in talks with regulators to bolster finances. treasury secretary timothy geithner says he is monitoring the situation at the company. moody's also says more ratings cuts may be coming for cit, citing concerns about the lender's ability to survive. a lot of talk about the possibility of bankruptcy. former stanford financial cfo james davis agrees to plead guilty on three felony counts in
connection with a ponzi scheme. the deal making it tougher for allen stanford, who is charged with running the ponzi scheme, to maintain his own innocence. davis faces up to 30 years in prison. separately, a class action suit is seeking $24 billion from the nation of antigua, claiming that the government was "a full partner" in the alleged ponzi scheme. oil prices once again down today, falling sharply in early trading. crude finished the session down 20 cents a barrel off the lowest levels. below 60 at 59.69 a barrel. the pullback coming on inventory levels and renewed concerns on economic weakness following last week's market sell-off. we get more on the market right now as we bring in david cass. he's chief investment officer withmate rix asset advisers. along with richard sparks, senior equities analyst with schaeffer investment research. let's talk about this rally we saw today in stocks, certainly led by the financials. david, do you think that the
financials are out of the woods at this point? here we are in a week that has a number of companies reporting earnings. do you want to be committing new money to the group ahead of the numbers? >> we don't think they're out of the woods, but we think in aggregate if you're looking at it on a six to twelve-month basis they're going to be higher and many of them have to be higher you do have to be discerning. we think some of the regional banks are going to have to have some problems but the big money center banks, the two remaining brokerage firms we think are going to do better than expected in their core businesses and we think the stocks do have very substantial up side. >> now, i guess that means that you don't believe in the possibility of a commercial real estate upset. a lot of people feel like commercial real estate is the next shoe to drop, and of course that's going to have lots of implications throughout the financial system. >> we are concerned about commercial real estate. we're watching it carefully. but we think in aggregate the big banks and brokers are going to be able to muddle their way through it, unlike the disastrous that happened in the home lending. >> all right, gentlemen, stay right here. we've got breaking news right now. let's get back to the nerve center at earnings central at
headquarters. matt nesto is there with breaking news. matt? >> yeah, maria, i'm checking out this statement from dell. the company is describing their strategic priorities. but the market is acting on what they're talking about on earnings. essentially, the company saying they're targeting 5% to 7% sales growth. they're also saying that 7-plus percent operating income. they point out that their year-on-year demand for technology products appears to have stabilized but at the same time they say a modest decline in their second quarter gross margins, that's one area of concern. and also a separate headline here. i'm just being handed a note that says steve ratner is leaving as the day-to-day head of the u.s. auto task force. they have overseen the bankruptcy at general motors and chrysler. treasury secretary timothy geithner made this announcement on monday. so double headlines coming off here today. the chart that we're showing you shows a minus 5%. the stock was down about 1 1/2% in regular trade. so it's weakening up by about 3%
or 4% in the extended hours on dell. so we're continuing to track both these stories, maria, and update you accordingly if need be. >> now, they are saying, dell, matt, that they're looking at some stabilization in demand and it's really just a sequential growth here. but the stock is still selling off in the extended hours. this may very well be setting the tone for tomorrow. >> it could be. and that's interesting because i was reading this sxag are they hiding here? they're playing up a positive. stabilization. we're talking about all this change and the rate of change stuff, and that's what they're looking at. and then they mention the margins. but i've got to till, maria, i look at a lot of these margin things, and when you cut prices to move goods your mairnlg's going to take a hit, but you're moving stuff. so what do you want to do? you want a big warehouse full of computers and you keep your margins intact or you want to sell stuff? >> the other headline that you'rerig reporting here, steve ratner stepping down as the auto czar.
>> yep. >> saying this is after -- the government owns gm, basically, 70% of gm, and he oversaw the deal with chrysler and fiat. do you have any reasoning behind steve ratner stepping away? >> presumably he's out of business, right? i mean, this is not one of the job creations that they were looking to do at the white house. but you know, the deal is done. the new gm will be coming our way probably next year. gm is out of bankruptcy. we're all over that story last week. and then the chrysler situation is done as well. so ford has always been out of the purview, if you will, of the obama administration for the most part. so you know, presumably he's moving on. >> i'm just wondering. there was some criticism about steve ratner and the way he handled the chrysler situation and the bondholders, and i'm wondering if there's anything about -- around that criticism that sort of pushed his hand. why now? or is it just simply, as you say, the job has been completed? >> yeah, my work is done. >> well, also there was
criticism, maria, because you're essentially talking about somebody that didn't have a lot of experience, or any experience in the auto industry. my understanding is this is somebody who graduated from yale, was legally smart, but as far as knowing the auto business that was a first-time experience. but his resume is sterling now. in terms of what he achieved in the auto industry, isn't it? >> now, matt, on to the dell story, let's look at a chart here because we're seeing really frantic moves in the stock in the extend hours on this breaking development out of dell here. it's down 4.99%. and let me bring in jim goldman, who is covering dell. is this a surprise to you, jim? what are you hearing on the dell story? >> yeah, you know, when you look at what dell is announcing here, this comes ahead of the company's analyst meeting, which is an unusual event in the company's history. that will be tomorrow at the company's headquarters. but you look at where this story is going, and you see that sales are increasing but margins are going to be suffering a squeeze. dell is one of those pc
companies that's trying to become a significant player in those so-called netbooks, those stripped-down inexpensive personal computers. and we heard this morning from market research that that sector of the business should hit 33 million units this year. that represents about 20% of the overall laptop sales around the world. so we're seeing a dramatic shift now in the pc industry to these less expensive but lower margin units. and dell's going to become a player in that. and i think that's what the trend is that this company is tracking. that may be one of the reasons why when we see what seems to be good news for dell might not be received all that well on wall street, because of that lower margin issue. so dell's business seems to be stabilizing, but the real question is now in what product cycle and whether this affects the enterprise and whether this actually provides us now a window into intel's earnings, which come tomorrow as well. is dell by what it's saying today suggesting that we could be seeing a bottoming of that pc
industry, and could that end up being good news for intel? >> it's a good point, jim p and certainly the netbook business has boomed. and it is a lower expense product and obviously lower margin. gentlemen, thank you. we'll continue watching dell and of course that developing steve ratner story. we will get back to the breaking news desk as news develops. senate confirmation args, meanwhile, for supreme court nominee sonia sotomayor under way. republans questioned her impartiality. t even they expect sotoyor will get the sene endorment and becomehe first hiss payne mber of thesupreme court. republican senator lindsay graham said,less you have a colete meltdown, you're gog to get coirmed." sotomayor hasa lengthy record of business rungs,ut the u.s. chamber of commerce-w more than 3 million members, plans to hold any endorsement until after her testimony. quick break, and then my one on one with richard shelby is coming up next. the alabama republican senator just met with fed chairman ben bernanke. he will give us the details on the meeting with bernanke next. and then is raising taxes on
welcome back. reviving the u.s. economy. it has been the key focus of washington. and next week congress will be looking for evidence of the federal reserve's success. when fed chairman ben bernanke delivers his semi-annual testimony. my next guest just sat down with mr. bernanke today to talk about the state of the economy. he is senator richard shelby, ranking member of the senate banking committee. he joins me now with some insight into those talks. good to have you on the program, senator, thanks so much for joining us. >> thank you, maria. >> can you give us a since of what wen on in your meeting with ben bernanke today? >> well, we had a rather comprehensive talk about the world economy, our economy, our jobless prospects, the state of the banking community in this country, whether or not we will continue to lose jobs and so forth. and i didn't come out of the
meeting feeling a lot -- euphoria. >> you left the meeting feeling euphoria, you said? >> no, not -- i didn't have euphoria. i was rather -- it was a rather sobering meeting. it was not anything that sprieds me. basically, the fed chairman, he thought that some of the financial markets, according to his words, had stabilized. but i got into the jobs. the job creation, the foreclosures coming down the road, continuous loss of jobs, and basically i asked him. i said, could this, mr. chairman, once we start a recovery, could this be a jobless recovery? in other words, an economic recovery and jobs, unemployment stay high? and he said it could be. >> well, look. our viewers, i'm sure, agree, the numbers speak for themselves. with that sobering reaction that you had. you've got unemployment right now at about 9.5%.
consumer sentiment taking a dive in early july. the price of a gallon of gasoline up $1.65 to $2.65 a barrel -- a gallon at the end of june. so what specifically were you mostly worried about in terms of recovery? we know where we stand currently. but what's going to take this economy out of the upset? where do you see the growth on the horizon? >> well, that's actually a question. i'm sure there will be growth, but i don't see any growth in a real estate deal until in housing and banking, that is, mortgage loans and so forth, until we absorb what's there. but what concerns me the most and i think it concerns the chairman to some extent is the continuous uptick of unemployment because there will be consequences with that. >> so senator, you know, we have a lot of stimulus on the table. i mean, the president's stimulus package, let's talk about that for a minute.
a lot of people say that that hasn't necessarily begun to work in its entirety just yet. but we've got a savings right now at 6.9%. is it fair to say that any savings that anybody got people put it in the bank and they're actually saving money, they're not out there spending? what is it going to do to loosen things up where people will get out there again, spend, business wills feel more vibrant and eventually create jobs? >> maria, i believe that people have to have confidence in the economy to start spending. people are saving, which is good to a point. but our economy is -- a lot of it's driven by consumer spending. and there has been a huge contractor there. i don't think that that's going to change much in the months ahead. this is july now. what i ask is where are we, say, in the spring of 2010? i hope the economy's better, but i could see some scenarios out
there that we've still got thousands, hundreds of thousands if not millions of homes in jeopardy, foreclosures. and then we have to worry about the commercial side of real estate too. >> i want to get into that in a moment, senator, but just hit on something. you said that perhaps we see some light at the end of the tunnel in the spring of 2010. is that when the tax increases are going to take effect? >> well, that's not a good sign. i believe you might be right on that. if we start taking more and more money out of people's earnings, they don't have money to spend, it's not going to help the economy at any time. and you mentioned the stimulus earlier. stimuluses generally don't work, and if they do they trail the economic, you know, growth of the economy itself. somebody was talking the other day, maybe we need another stimulus. my goodness. i think that would be a dumb idea. we haven't seen expended or executed the money for this stimulus yet.
>> all right. so you say stimulus packages typically don't work. then is it fair to say that the obama administration stimulus is not working? is that what you're saying? >> i think it's not working yet. i have my doubts whether it's really going to have its intended effect. you know, they said unemployment would not reach what it is today. i think unemployment's going to go higher. i wished it wouldn't, but i think the realism is it's going to. >> so are you prepared to go back to the president and discuss leaving the tax cut plan from the bush administration in place? are you prepared to say stop with the raising of the tax idea on business and individuals given the precarious state of the economy? is that what you're going to do? >> absolutely. i think that should be the republican position. if we can keep more money in people's pockets, they will have more money, disposable income to spend. you take the money, you know what's going to happen. >> so you will be doing that, then. >> absolutely.
>> let me ask you about commercial real estate. you touched on it. how vulnerable is commercial real estate right now? and give us the implications. we talk a lot about commercial real estate and the idea we could see this being the next shoe to drop and perhaps impact entire financial services sector and beyond. how impactful will a bust in commercial real estate be? give us your sense of how vulnerable we are. >> well, i think it's a precarious situation. i hope it won't happen. i hope that the economy ticks along and that people will be renting and collecting rents on commercial real estate, that is, shopping office buildings and so forth. but there's evidence to the contrary out there. i think in the next six months it's going to be very crucial. >> all right. and final question here, senator. i spoke with aufton goolsbee recently, who i think, by the way-s one of the smartest guys there in the administration, and he said business investment is critical to getting the recovery
on track. where are the business incentives? where are the incentives on the table to get businesses to start investing, to get businesses to start spending money and creating jobs? can you give me one or two business incentives on the table today? >> i don't know of any offhand. but i think dr. goolsbee's on the right track. we've got to give incentives to business. small and medium sized businesses. to create jobs. that's the way the recovery will go up. >> senator, how come i never see this, though, out there when you guys are in your hearings and all that? you say that, you know, we shouldn't see tax increases on business and individuals. you say we need incentives on the table for businesses. where are they? >> well, i don't serve on the finance committee, which is the taxing committee in the u.s. senate. but i can tell you i'm voting against taxes. we need people to keep their money. >> senator shelby, always really a pleasure and you a privilege to have you on the program. thank you for your time. >> bye. >> senator richard shelby. signs of life in california, meanwhile. coming up next, we'll tell you
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politicians in sacramento are sounding hopeful that a deal could be cut by the end of this week. jane wells is live right now in california. jane? >> reporter: hi, maria. the good news, both sides are talking. bad news, the toughest decisions are still ahead. >> the negotiations have started out on a good note. >> reporter: that's the governor as he met with top legislative leaders throughout the weekend, spurring on talks perhaps, news from the controller that personal income taxes last month were nearly $1 billion below lowered estimates. this is just for one month. the state has turned out more than $350 million in ious. it could top 3 billion by the end of the month. one of the few banks still willing to cash them is citi national bank. >> in the first week i'd say we honored probably something close to $40 million of ious. and citi national, a $17 billion bank, that's a meaningful number. >> state treasurer bill lockyer says the risk of not making good on those ious in october remains
low. as for solving california's wacky bruudget process he says politician wants to touch things like prop 13, fearing the wrath of the people. but he says the initiative process in california is part of the problem. >> where people decide to spend money or cut taxes by initiative, ballot procedures, without sufficient understanding of what the consequences could be. >> interesting analysis from the public policy institute of california. census data suggests the poor are more likely to leave california in this environment than the rich are. ws a good thing because out of a state of 38 million people, maria, 134,000 people here making $500,000 or more a year, pay 47% of the income taxes. 134,000 people, nearly half the income taxes. back to you. >> all right, jane. thanks very much. digging up that data. the issue of health care reform remans a hot topic as well. who's going to foot bill for that? some in congress have a plan, but it may not sit well with
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he had a message for those americans who have been hearing reports that his health care reform plan is in trouble. the message is don't believe it. >> i just want to put everybody on notice. because there was a lot of chatter during the week that i was gone. we are going to get this done. inaction is not an option. and for those naysayers and cynics who think that this is not going to happen, don't bet against us. we are going to make this thing happen. because the american people desperately need it.
>> but of course healt care is only one of the issues that's posing big questions for obama. one is on health care do you press for rapid action or do you give senators more time to negotiate? they don't look like they can meet that august 4th deadline the president has set. on energy, do you continue to keep cap and trade in that bill or do you strip it out to try to move action more rapidly on energy? and finally, the question of whether you hang tough in opposition to a second stimulus, which the administration does not want to do because of concerns about the deficit. now, one place, maria, where these things are being hashed out is right behind me right about now because legislative leaders from the house and senate are due to meet with the president right about now, and one topic of disagreement is how to finance health care because a senate aide told me this afternoon of this house plan to tax the rich with a surtax to pay for health care. shades of jimmy carter. it's a non-starter in the senate, maria. >> well, we'll see about that. we're going to talk about that right now, john. thanks so much. is taxing the rich the best and only way to close this gap or a shot across the bow in the name
of class warfare? jonathan tafini is with me executive director of the labor research association. ryan ellis is the director of tax policy with the americans for tax reform. gentlemen, good to have you on the program. thank you for joining us. jonathan, let me kick this off with you. you support a progressive tax system in which the wealthy would pay more in taxes but has the debate become less about economics and more abou class warfare? >> well, maria, i think you and i debated this some weeks ago this question o class warfare. there is class warre in this countrand the working class is wling. but i think the problem with this t issue is we dot want look at real issue, which is if we actually h a single payer medicare for l system on the table this wouldt even be an issue. you know, if you took model a of the health care system, which is a 25%, 30% inefficiency in terms of administrative cost, that's the way the health insurance industry works, and the 3% administrative cost that medicare consumes, you sically would save 300o 400 blion
dollars a year if we went for single payer medicare f all system, and we would not en be talking abt having to rais taxes to cover this issue. now, i belve we have to return to a progressive taxation stem to get revenue to cover other ings, both at theederal level and at the state leve but the health care issue is about single payer medicare for all. it would eliminate the issue of taxes. we would save hundreds of billions of dollars. >> jonathan, it's a very good thought, but unfortunately we are talking about this issue and the proposal on this issue right now is to tax the rich. so that really is the issue at hand. now, do you believe in that or not? >> well, again, maria, i know you want to frame it that way, but i think -- >> it's not the way i want to e it. >> you do. because my pnt is that in order to solve the health care system we have to enact a single payer health care program. and would plead with the president and th demrats in congress, givesingle payer the same treatment that you give the other pla in other wordsas the congressiol budget office to
score single payer next to the other proposals and we would not be talking about having to raise taxes for this issue. >> ryan, how do you see it? >> well, maria, this tax increase that you're talking about, one small thing to correct you, i don't think any rich, uber rich people that are jet-setters would actually pay it. that's what accountants and lawyers are actually hired for. who this will really hit is people who are small business owners, people who can't afford all the accountants and lawyers to get around it. let's talk about what we're looking at here. we're talking about a three percentage point surtax on successful small businesses. don't forget that small businesses pay taxes on their owners' 1040s. it's going to be precisely these small businesses that are going to end up paying this tax, not anybody who's uber rich. >> so what you're saying is it's not class warfare at all because it's actually going to triple -- trickle down to small businesses who will actually bear the brunt. >> and maria, if you didn -- if you a single payer system, you would t have that burden businesses. this has en the problem for
instry, whether you're talking about the auto indus or small businesses. we put thi burden on them when we could take that burden o business if we h a single payer syst. the economics o it are clear. all we're deali with really is politics. and at is so sad because we could solve this health care crisis if we took away the ideology and looke at the economics. you're an economist. you're an expert at business. ifou put tse two model next to each other, single payer's the only way to go to solve this crisis. >> well, it makes perfect sense, but why aren'te going that way? well, good int. when predent obama campaigned as candidate obama, he said i'm in favor of a single payer system. he said, however, we can't start th syste from the beginning. and so what he really revealed was he was unwilling, as are too many democrats, to take on a powerful industry, the insurance industry, on behalf of the american people. 60% plus of the american people favor a single payer system. let's put that on the table now. >> all right. let me ask you this. let's talk about the real
possibility, the possibilities that will be included in the final health care bill. do you believe that an additional tax would be included in the final health care bill that the house puts together? >> are you asking me, maria? >> yeah. >> well, again, my suspicion is thathere's going to be some attempt to put a tax in. but thereal qstion's going to be is there goi to be a ll at the end that everybody can get on board on and agree on, ether 's the senate or the house? and what believe islds a silver lining here. i think thisig collaps becaus people can't agree on the financing, they're gng to turn around and say what makes the most economic sense, and that is, again, single payer. >> right. no, what you're saying sounds like it is the most sensible. but what we really want to do is figure out what is reality. what is going to be in that health care bill at the end of the day that we're all going to deal with? so what about -- let's talk about taxing benefits. ryan, where do you stand on that? >> well, at americans for tax reform we're against any and all tax increases. we're for tax cuts, not tax
increases. if you want to -- >> so where does the money come from, then, ryan to pay for health care reform? >> well, if you take a alook at a bill that senator jim demint has. he has a bill called the health care fairness act -- i'm sorry, the health care freedom act. what the health care freedom act would do is it could wo give americans who do not get coverage from their employer or done get coverage from the government an individual refundable advance tax credit which is paid for by rescinding some of the tarp and stimulus money that's been appropriated but not actually taken out of the treasury yet from the last 12 months. that's a very good example of how you can do this and still have it paid for. what people are not wanting to deal with on the hill right now is that these health care plans that they're talking about from the democrat side are going to cost between 3 and 4 trillion dollars with a t over ten years. and they're looking to finance that with tax increases. the only two tax increases that you can do that will pay for that are either taxing employer-provided health care benefits or increasing marginal tax rates toward the top end of
the code, which will impact small businesses. >>jonathan? >> well, ain, i jt repeat my previous point. i think we're inhis box because we have -- we won't let go of th idea, this ideological opposition to e most sensible solutiono the healthare crisis, and that is a medicare for all system. 's the most efficient proam 3% medical cos, administrative costs mpared tthe private industry, which is 25% or 3. if the president and the republicans for a seco, ithe president and the democratic pay want to solve this, they have to take on the insurance industry. they have to say thathe health ofmericans will not be subject toprofit. and let's put that back in -- let's ve them medare for all and we will sve that csis tomoow and save between 300 and 400illion dollars a year, and then your other guest will have no problem because we won't be raising taxes for this issue. >> so maria, let me just ask a question here. so is my esteemed colleague on the other side of this saying that if the government takes
over the rest of the private sector in health care, which is already 50% socialized at least, that costs will actually go down? >> that's correct. actually, here's why. the private sector -- the industry, private insurance, spends 25% to 30% administrative costs on things like marketing and they spend billions of dollars a year for what purpose? to deny people health care. now, that's not just morally obscene, it's economically crazy. >> if you want to talk about the -- take a look at what happened in canada, the united kingdom -- >> -- in our country's history. again, operating on 3%. so forget the ideology -- >> that's a completely bogus number. you're not including all the costs. >> -- what makes sense from an economic point of view you can only say that single payer is the only solution that will get us there economically. >> that doesn't include all the costs of medicare. there's plenty -- >> the costs of medicare. gentlemen, this is obviously an important topic. we hope you'll come back to finish this conversation because you make a lot of great points, jonathan and ryan, as far as
small business is concerned they continue to bear the brunt. so we'll have to get into that next time. thank you, gentlemen. we so appreciate. we'll see you soon. earnin earnings season under way in earnest tomorrow. goldman out with numbers, but other heavyweights including ibm, jpmorgan chase, bang of america will also release results for the second quarter. we are taking you to earnings krernlts, the nerve center of earnings cenal. we'll get yourreview of what you need to know aheadf all the numbers cominghis week.
welcome back. railroad operator csx out with earnings today. cnbc's matt nesto right now at earnings central nerve center. matt, what can you tell us? >> this is the first of the four big railroads to report. and their earnings look better than expected, or less worse than expected. you've got to keep it in mind. if you take a look at the results and what's happening in the market, which is the ultimate arbiter, you're going to see a stock adding to gains it had in the regular session. csx was up about 1 1/2% at last check. i saw the shares were trading higher by about 6%. you can see -- there you go. by 6%. that's on top of, folks, what we did in the regular session here today. so the number, the eps that i look at is 72% -- 72 cents per share on a continuing ops basis. 62 cents was the estimate.
that's down 24% from a year ago. the revenues fell 25% to an in-line $2.2 billion. the ceo saying there are some signs of the bottom that they're seeing here. but if you take a look at the big picture in terms of what's been happening with transports and csx inparticular, this is a company that's been under pressure. if you take a look at since the latter part of june to date, look at the decline in csx. almost 8% versus about a 3% decline for the transport. so there's some catching up to do on the old railroad, maria, but we're going to hear from unp, union pacific, and burlington northern on the 23rd. they're the two biggest. and norfolk southern on the 28th of july. sought first of the big four u.s. railroads is out with stronger than expected results. back to you. >> i know it was wilbur roth i believe on this program a couple weeks ago who said the railroads are a place you really want to be exploring. he's looking for great growth out of that group. csx is just the start of a big earnings week, of course. and we are going to continue
following all of the earnings this week. goldman sachs, google, johnson & johnson, general electric, all releasing their second quarter numbers in what will likely be a crucial earnings period since the beginning of the recession. for a preview right now i'm joined by kamal kumar. and chars nortel. gentlemen, good to have you on the program. >> thanks for having me on. >> good to be here, maria. >> let me kick this off with you. what are you expecting out of this earnings period? arguably one of the most important earnings periods in a decade. >> clearly it is very influential period, maria, and we are trying to see whether the market is going to get out of the recession doldrums or whether it's going to go up. what we saw today i think was basically the meredith whitney effect or the animal spirits effect, call it what you will. but what you have to get over is to see what it means for the market as a whole. i think financial sector is going to do well earningswise
selectively, but the question is does that take care of all the toxic assets which are still in their books? and as you go forward, my expectation is that consumer-oriented companies are going to continue to be hit because those are the ones which are not going to be given any support at all. the retail sales numbers, the unemployment numbers going up suggest that the domestically oriented, consumer-oriented companies are going to be doing poorly both in the second and in the third quarter. >> charle do you aee with that? >> i do indeed. i think it's important to remember that meredith whitney's report really focusedn goldman chs, wch is kind of best of breed in the financialervices industrynd for some special asons she felt that ldman was goingto dowell. and i tend to agree with hern that i'm less sanguinabout the wider financial services i don't think it makes any sense toe focused on earngs per share in that dustry especially when even if the go on a quaer to quarter comparison ty' still going to be well bew the recent peak. so on the fincial services si i'm still very nervous.
on the industrial side i think, as you mentioned, maria, i think the general electric numbers will bear considerable detection when they come out on friday and later when the qs are released. >> so do you want to be investing that way, then? we have seen big moves in the market just this year certainly from the low in march to may and then really stagnating performance until july. but looking into the second quarter earnings season, do i want to be putting my money where the growth is? sri, if you say that the financials are going to do well, should i put new money to work in the financial sector? >> not really, maria. when i say they're going to do well, i say that with a great degree of suspicion. i say to you the numbers look good but that doesn't mean they've gotten over all their problems of bad loans. that doesn't mean they have the ability to withstand problems in the commercial real estate sector, the worsening credit card problem, car loan problem, all of which i think are still in the future. all i'm saying is it's probably a two-week or a three-week
effect at most, and i don't see either, like charles, financials doing well over the next six or nine months because the basic fundamental problem of economic weakness impacting on the financial sector i think is still very much esent. >> charles, do you agree with that? yes. i mean, maria, i think ware living und debt mountain in the united states o america. and as senator was saying earlier on from alabam we cannot rlly borrow and spend our way to prospy. amera's never had so much debt. so there's drama going on in washington tt could well continue to cripple the ability of private sector companies to do well. >> so let me ask you about putting money to work, then. what do i want to avoidoing into the secon quarter earnis season >> i think youwant to avoid any kind of company that is dependent upo getting leverage obtained for its ctomers to buy its product so the o business model, to pickn gm, where you didn reallyorry about how you paid for car, the old gmac would
finance it for you,r a bong or a caterpillar or a deere or indeed parts ofge are very dang to be going long at this moment in my opinion. >> do you want to avoid that area or no? >> yes, i would too, maria. i would say the things you want to avoid are many of the areas that have done well since march 9th. i think the companies that have done well, the banking side may be okay for a week or two, but not beyond that. and i would say commodities, energy, which has been down recently, i think it's likely to pick up later on as a defense, especially if the dollar gets to be a lot weaker and if inflation fears start to rise. so i think in terms of the future, you're looking for worse than in the recent past. >> we'll leave it there. great conversation as always. we appreciate it and we will be tracking the earnings numbers all week and throughout the second quarter and we'll check back with you. thank you, gentlemen. just ahead, the latest on bernard madoff. where will he b spendin that
welcome back, bernard madoff has a new home for the next 150 years, cnbc joins us now to tell us where it is. joe? >> reporter: yeah, cnbc has learned that bernard madoff will serve his time here at the federal correctional institute in north carolina. i am just about 20 miles south of the virginia line 15 miles north of durham, north carolina. madoff requested the facility in upstate new york, he was sentenced june 29th, 150 years for perpetrating one of the largest ponzi schemes in the u.s. history. a little bit about the facility, 3,600 inmates are here. we've been told two to a room, there's a chance he could work while he's here up to 40 cents an hour, anywhere from doing custodial work to food service work. once again, bernard madoff on his way here to north carolina.
reporting, cnbc. >> all right, joe, thanks very much. joe joining us live. it's a busy day for earnings tomorrow as we've been telling you. take a look at that. next after this short break. then some of the other stories that may move the markets tomorrow and the openg bel sound. ing erything... tdd#: 1-80345-2550 including who i trt to look after my money." tdd#: 1-800-345-25 tdd#: 1-800-345-2550 "the dust might settling... tdd#: 1-800-345-2550 that's great, but m not. tdd#: 800-345-2550 tdd#: 1-800-345-2550 guess i'm just done wit doing nothing, you know?" tdd#: 1-0-345-2550 tdd#: 1-800-345-2550 "o i'm not thinking about ving my money. d#: 1-800-345-2550 i amovg it." has the fastest rve in the hisry of professional tennis. so i've come to thisourt to challenge his speed. ...othe inrnet. i'll be using the 3g at&t lappconnect card. he won't so i can book travel plans faster,