tv Closing Bell CNBC July 22, 2009 4:00pm-5:00pm EDT
moving into the nasdaq, and that certainly has been the winning average for the year. the nasdaq up about 20% in 2009. and today the nasdaq also on the up side by about 10 points. and the s&p 500 under some selling pressure from a handful of banks under pressure today. and we are also looking at a mixed performance within the oil sector, which limited the s&p's moves. qualcomm shares right now is trading -- the stock is trading down. in the extended hours. revenue for the first quarter was $2.75 billion versus an estimate of 2.73 billion. earnings for the third quarter was 54 cents a share versus an estimate of 52 cents a share. the stock nonetheless, even though on the face of it looks like better than expected, is trading lower right out of the gate on these numbers. we will get more on the qualcomm quarter coming up, and we'll check in with some of the holders of the stock to tell you what you want to be listening for on that conference call. meantime, bob pisani's here, our eye on the floor of the nyse, with all the action for the day.
>> and you'll see there, maria, the revenue guidance for qualcomm a bit on the light side. i think that's probably why the stock is trading to the down side. the important thing here is a lot of cautious comments from a lot of companies here today. and the market does not go down. >> people really want to hear what the second half is looking like for these companies. and even though we're not getting great vibrancy and we're getting guarded situations, you don't want to get in front of that train. >> we heard our guests all day saying exactly that to us. let's take a look at what's going on here, folks. some great news. we had deterioration in credit for wells fargo, we had the same situation with keycorp. and yet the stocks didn't really want to go down that much. what happened in the middle of the day? i'll tell you the key story. goldman sachs announced they're going to repay the tarp. are you shocked to hear that? nobody was. but nonetheless, around noon that had some moves. all the big financials to the up side. keycorp, which started negative, even into positive. wells fargo's had a lot of trouble all throughout the day but it was down fractionally. existing home sales out tomorrow but nvr a relatively small home
building company announced amazing numbers. revenues, margins, writedowns of land all improved. and the absorption rate for new orders in their communities also was up 2% year over year. growth in orders, when was the last time a home builder reported that? look at'll home builders here today, they all moved up. in fact, they have been outperforming the market in the last couple weeks. all the big home building names up 6%, 7%, 8% here today. there's your numbers. let's talk about whirlpool here. caution here. they beat on the bottom line but talked about reduced demand in key markets. similar situation with the airlines here today. delta, richard anderson, the ceo over there, reported earnings a tad better than expected, but he said the airline industry was facing its toughest environment since deregulation. and we don't see any meaningful recovery in 2009. that is the ceo of delta. bottom line here, maria, is take a look. delta's down 4%. jetblue is going to be reporting tomorrow, maria, as will u.s. air. i don't think we can expect too much. but these stocks still don't drop dramatically despite those
kinds of cautious comments. good example of what we were just talking about. >> right. because of the guidance. bob, thanks so much. see you later. bob pisani. the quarterly results from qualcomm are out. you heard bob's assessment that the guidance going forward could be an issue here. let's get to jim goldman. he's right now following the numbers and with the very latest on the quarter at qualcomm. jim. >> yeah, maria. in fact, there's lots of issues for this qualcomm third quarter report, especially for a company that essentially preannounced these numbers just a few weeks ago. they're still going to take some folks by surprise. we went through those headline numbers. 54 cents two, cents better in the current quarter than the 52 cents wall street was looking for and also better than expected revenue of 2.75 billion versus the 2.73 billion. you were talking about outlook here. that new revenue range of 2.55 to 2.75 billion dollars stiff'll nicklaus, cody acre was expecting $2.847 billion. light there. and 10 1/4 billion to 10.45
billion against basically 10.55 billion that the street was looking for. we'll get an eps estimate when that company hosts its conference call. but looking at p & l here, the cdm afrnlths wcdma unit shipments is 127 to 132 million units. that's better than the high end of 111 units -- 111 million units that wall street was looking for. but the average selling price is going to be an issue here. $189. qualcomm had already lowered the asp from 196 to $191. and now we get the report today that it's actually $2 lower than that. that could be aaron for this company as well. another key metric, the msm chip sets. 88 million to 92 million units. 87 million to 92 million was what the street was anticipating. so we are seeing action in qualcomm shares on the lower side after a recent rally, and that's because this report going forward seems a little lighter than what investors were hoping for. maria, back to you. >> thanks very much. we'll continue following that and certainly give you another look at the stock chart, if
anything develops. meanwhile, federal reserve chairman ben bernanke giving his second day of testimony today on capitol hill. today it was before the senate committee on banking, housing, and urban affairs. cnbc's steve liesman now with the highlights there. steve? >> thanks, maria. fed chairman ben bernanke found himself defending the central bank's duties and its independence for a second straight day on the hill. a key issue, a proposal by the obama administration to strip away the fed's job of protecting consumers in financial matters and giving that job to an independent agency. bernanke today acknowledging that the fed dawdled early in the decade on consumer issues and he suggested dramatic changes could be in order if the fed is going to keep the job. >> suggestions i would make, one would be to put consumer protection in the federal reserve act along with full employment and price stability as a major goal of the fed. a second steph could be to require the chairman to come before you or another committee, at least once a year, present a report in the same way that we do for monetary policy on our
consumer protection steps. >> congressmen were still very skeptical about that. bernanke would give no ground on the fed's independence and resisted the call to allow the general accounting office to monitor its policy decisions. a congressional proposal with increasing support. >> we do think that the congress has the right to see how we're using taxpayer money. but we're concerned that the congress would be intervening in our specific policy decisions relating to monetary policy. >> the fed chairman retained his caution on economic recovery sighing financial markets would stabilize and growth would soon return to the economy. but inflation and the recovery in jobs would both be subdued. you can see here the bond market took that caution to heart. with yields on the ten-year falling about 11 basis points over the course of the two days' worth of testimony. the fed chairman faced plenty of criticism of congress, but it did not appear, maria, that he undermined his chances for reappointment by president obama. >> and of course that's what a lot of people were looking for, any window, opening there.
welcome back. with the market today down 34 points let's get more on the market action what to expect the rest of the week. how about rest of the zblaer chuck dibartolo, co-portfolio manager at iva funds. and pete sorrentino at huntington asset advisers. let me correct myself here, chuck, because with a name like bartiromo i understand your pain when somebody gets your name wrong. delartimo. good to have you on the program, chuck. >> thank you. >> thank you for joining us. let me ask you your thoughts on second half of the year. where do you see this market? >> i think the government's done a good job of trying to fix the banks and the banks now have probably enough equity that they can withstand the losses to come in the next few years. the issue in this economy is the consumer and the balance sheets
and how much the consumer is going to be willing to open up the wallet in the next six to twelve months is the issue. i think deflation is here to stay. much longer than people expect. and so i expect a very subdued recovery both for the economy and companies' earnings. >> well, it's true. a lot of people are worried about a recovery that sort of bumps along the bottom for a little while. so chuck, are you telling me to buy commodities? do you think that so-called inflation trade has legs? copper is up better than 70% this year. >> i'd be surprised. we do own some gold, different strategies. it's really an insurance policy. but i think the good grade, high yield. so bbs or the bad investment grade bonds, bbbs. in a deflationary environment you still get 8%, 8 1/2% yield to maturity. we say that's likely to repay and i think that's going to compare very favorably going forward with the returns you'll get on equity. >> pete, what do you think?
>> maria, i to some extent would agree with that but our play's been that we think the consumer and defensive areas are not going to be the ones that will recover in the recovery when it arrives. we're going smaller. we're going higher ris wk stocks. probably the corollary with going with the lower-grade bonds. and our view is you that really want to go small, go international if you can, and really focus on industrials, focus on early cyclicals, that once the inventory runs its course they'll be the first ones to turn and start to show revenue growth, which has been sadly lacking in these reports. >> when you say small, you're talking about smaller and mid-cap names? >> absolutely. revenue growth seems to be what the market's willing to pay for. as you pointed out earlier, the nasdaq composite's had a fabulous run this year. you break that down and look, it's the companies that produce top line growth that have been getting the price action. >> yeah, but does the large cap sector have to outperform in order for small and mid cap companies to follow? >> not really. >> you think small can do well even if larger companies are not doing well? >> i think it does. i think it creates an
opportunity for the smaller companies. basically, when the large ones are hamstrung it creates openings, it opens up opportunities for customers to be drawn away. so then the regulatory weight always falls heaviest on the large companies. it could be a case where you've got the wind at the back of small cap much as we saw in the 1970s. >> so chuck, what's your view on that? and let me get your view also on international versus domestic. >> i think pete is absolutely right, that it is much more today a market for stock pickers than it has been in a long time. and so really your portfolio managers are going to be put to the test in the next 12 to 18 months. it's a fairly valued market. so it's going to be really finding the right company. and they may very well be into small caps if you select them well. >> gentlemen, i've got the numbers on ebay that are just out. let me get your take on the earnings season so far. ebay was expected to report a profit of 36 cents a share. it actually came in at 37 cents a share.
this is the eps number. revenue we will get for you in a noemt. but can you characterize for us, chuck, so far of the earnings season? >> sure. what you see is companies bidding on the bottom line but barely make the numbers on the top line. and i think it's very teflg a deflationary environment. and that's here to stay for a long time. and therefore you have a very subpar recovery of earnings going forward and maybe a -- a flat market, basically. i see the market as being fairly or fully valued. >> and pete, what's your assessment of the earnings period so far? >> the top line has definitely been lacking, especially at some of the major industrial companies, and the bamt line you're hit by squeezing out inventory, taking out costs, contracting the balance sheet. at some point that stops and you set up a recovery in earnings for those companies. but again, it could be subpar just because of the impediments that are out there, whether on the macro environment or when
you get down to the regulatory environment as well. >> when do you think that the earnings story turns from a cost-cutting story, a lot of what you said, pete, and chuck, has to do with the fact that companies have been cutting expenses and you that's how they're making their numbers. so when do we get from a cost-cutting story to a revenue growth story in your view? >> when the consumers are ready to spend again. and i think it takes three to five years for them to repair the balance sheets. so it's a long slog. >> pete? >> really when you get to a point where they're forgoing orders because of cost cutting. and i think that really happens in early 2010. so i don't look for a lot of progress on top line revenue until we really spend a couple more quarters kind of limping along here. >> all right. we'll leave it there. gentlemen, great to have you on the program. we so appreciate it. chuck de lardemel lechlt along with pete sorrentino. thank you. the ebay numbers are out. 37 cents a share is the eps number. jim has the revenue and the other metrics we look at p.
>> it's really no surprise when you look at ebay when a company like this beats because this company really has not missed earnings estimates in what, about ten years. it's just been incredible the string this company has enjoyed. you said it beat by a penny. 37 cents is the number. $2.1 billion on the top line against the essentially $2 billion that wall street was anticipating. but when you dig a little deeper -- i'll get to guidance in a second, but when you dig a little deeper here this might be signaling what could be a bottom for this company. citi's mark mahaney is suggesting that this particular quarter, the second quarter would be a trough quarter for ebay. and indeed the numbers seem to be bearing that out. payments, this is the home of paypal, was up 11%. mark mahaney at citi was looking for something on the order of 7% growth. marketplace's revenue, we knew that this would decline a little bit, but it declined a little less than what wall street was anticipating, down about 14%. some on the street were as high as down 18%. communications, the home of skype and other kinds of products over there at ebay, was
expected to grow on the order of 13% on the quarter. instead it grew 25%. so huge success there. and remember that ebay has said that it does plan to spin skooik skype out next year as its own unit. that would indicate some success there. let's talk quickly about the company's third quarter guidance because this is essentially in line. the 34 to 36-cent range. the street was at 35 cents. and the revenue range of 2.05 to $2.15 billion just ever so slightly better than the 2 billion that the street was anticipating. but the reason that this in-line expectation is good news for ebay, some thought ebay's continued bloodletting would occur throughout the third quarter and it seems that maybe the business there is beginning to bottom. maria? >> all right. thanks so much. jim goldman with the latest on ebay. meanwhile, spandex just out with its own earnings and easily beat expectations. take a look at sandisk shares tonight in the extend hours. as you will see, the stock is up 7% here. $19.49 a share. the company earned 36 cents a share versus an estimate of 16
cents loss. analysts were looking for a loss there. breaking down the numbers right now is eli harrar, chairman and ceo of sandisk. good to sigh again. thanks for joining us once again. welcome back. >> it's good to be back. >> can you characterize the quarter for us? >> good quarter. we executed very, very well. the fundamentals definitely have improved. demand and supply in good balance. pricing was stable through the quarter. and the action that's we've taken in the fourth quarter last year, first quarter this year, cutting our expenses, our op ex, cutting our investment, all came home. and i'm very, very pleased with the result. >> certainly the cost-cutting efforts did help quite a bit. in a tough economic environment for so many companies and your sector included. but let me ask you a question that i asked one of the money managers that was on a moment ago, and that was when do we go
from a cost-cutting story to a revenue growth story? revenue is down on the quarter. when do you expect we are going to see returns to vibrancy when it comes to top line? >> yes. so of course the flash market is still a young market. in fact, i think that what you are seeing in the mobile space with the iphone gs, with the blackberry application, third-party developer stores, all driving demand for flash memory. this is almost like a new renaissance for flash. apple today announced that they are putting $500 million into toshiba, a partner to secure more capacity. we think with ssd, solid state disk, coming in the future for netbook and notebook pcs and enterprise, this is i believe the next several years should see significant growth. then i believe sandisk is very well positioned in those markets. >> and of course when you look at the second half and beyond we continue to hear that mobility
is a trend that has legs. so whether it's the netbook, those lower margin, smaller computers, or it's devices like blackberries and other things, mobility devices that need some of your products what can you tell us as far as consumer demand is concerned? and what are you expecting from consumer demand into the second half of the year? >> well, 60% of our revenues in the second quarter came from outside the united states, and we've seen good growth both in europe and in asia. in the u.s. growth was not -- was actually soft. for the second half of the year, of course we are ready to see a pickup in consumer confidence in the united states, but frankly we're not counting on that, we are counting on a global presence, on continuous cost reductions, and creating these new markets. but i think the worst is over for our industry and for the current recession.
and i'm cautiously optimistic about moving on from this point on. >> all right. we will leave it there. good to have you on the program. we so appreciate it, sir. thank you for your time today. eli harari joining us, co-chairman and ceo sandisk. hearings on both the tarp plan, pay to play, among the big topics discussed in washington today. we're going to get into it when we come right back. don't forget, cnbc will be carrying president obama's primetime press conference tonight join us live for those comments on health care at 8:00 p.m. eastern for the president. [ engine revving ]
[ engine powers down ] gentlemen, you booked your hotels on orbitz. well, the price went down, so you're all getting a check thanks. for the difference. except for you -- you didn't book with orbitz, so you're not getting a check. well, i think we've all learned a valuable lesson today. good day, gentlemen. thanks a lot. thank you. introducing hotel price assurance, where if another orbitz customer books the same hotel for less, we send you a check for the difference, automatically. in these markets,
i'm glad i turned to fidelity for an annuity with guaranteed income for life. that's right, guaranteed income for life. my annuity from fidelity means my retirement income is safe. it's guaranteed, no matter what happens. if guaranteed income for life sounds good to you, do what i did -- let fidelity be your guide. call fidelity at... for details about guaranteed income for life.
welcome back. aside from chairman ben bernanke's testimony on capitol hill there were also several other key hearings in washington today. cnbc's hampton pearson is there now with that angle. hampton. >> hi, maria. two interesting hearings to both market watchers and taxpayers. this afternoon a tarp hearing. the subject, the warrants program. goldman sachs today repaid its government warrants to the tune of $1.1 billion. a 23% profit for taxpayers. but are taxpayers getting the maximum return for the risk they're taking bailing out banks? a congressional oversight panel, a report from that group says 11 small banks that repurchased government warrants bought them for 2/3 of face value, shorting
taxpayers as much as $2.7 billion. assistant treasury secretary herbert allison challenged those findings. >> one source of complexity in valuing warrants is that the warrants do not trade on any market. so they don't have observable market prices. models by themselves cannot give us reliable estimates of the realizable price in the marketplace. >> now, that hearing has been delayed by a series of house floor votes. the tarp inspector general and the head of that congressional oversight panel just really beginning to make their counterargument. meanwhile, earlier today the house financial services committee heard -- looked into basically regulating the $592 trillion over-the-counter derivatives market. that was the focus of their hearing. s.e.c. chairman mary schapiro saying the s.e.c. should have new authority to decide when over the counter derivatives are considered standardized. it's a key detail in the obama
administration reform plan which would force all or most standard contracts to be processed through clearing houses. >> it is important that similar products be regulated similarly so that market participants cannot use size and leverage to work around the system. accordingly, we believe security space swaps should be subject to the federal securities laws. >> now, cftc chairman gary gentzler also told that committee he believes his agency and the s.e.c. are making major progress in harmonizing their approach to regulatory reform. maria? >> hampton, thanks very much. we have major news right now. let's get back to jim goldman. he's ghe news on amazon. >> yeah, maria, we just saw these headlines cross cross the bottom of your screen. amazon announcing they will acquire the online shoe retailer zapos.com for $807 million in stock. this is a big deal because it was just a couple months ago you might remember that zappos released a statement saying the company was going to begin
expanding and in a significant way its online retailing opportunities and options for its consumers. the thinking then was that zappos was on pace to become a serious amazon competitor and basically laid down the law, saying amazon, look out, we are lurking and we are on the way and we are ready to test you and challenge you and it's just a couple of short months later that amazon turns around and says there's no threat here, we're just going to go ahead and buy it. $807 million and amazon will also be providing $40 million in stock and stock equivalents to zappos's employees, the management team and the employees will stay intact at zapp. so at the company's las vegas headquarters. and it looks like amazon is expanding itself in a big way. earnings tomorrow. >> nice to have that kind of wiggle room. jim goldman. up next a "first on cnbc" interview with senate banking committee ranking member richard shelby. he'll tell us if he's in favor of giving the federal reserve more regulatory power, why he's against the creation of a consumer protection agency. he's next.
welcome back. ben bernanke made his case over the last two days for keeping the federal reserve's monetary policy independent. he also admitted the fed fell short in protecting consumers prior to the crisis. joining me now in a "first on cnbc" interview, after sitting in on the hearings with his thoughts is ranking member on the senate finance committee, senator richard shelby. republican from alabama. senator, always nice to have you on the program. welcome back to "closing bell." what was your takeaway on the hearing today? >> well, it's a combination i thought chairman bernanke was measured and did well. but one of the concerns that i raised had to do with the fed's role as a regulator, that i
thought that they had failed the american people as the steward of the monetary policy. i think they've overall done a pretty good job. but i think we have to watch what we give the fed in the overall scheme of things in the future regulatory debate. >> so you say that they failed the american people in terms of monitoring the risk that was being taken off the investment banks? >> absolutely. not just the investment banks. i'm speaking -- >> banks in general. >> they were the prime regulator of the holding company, our largest banks. and most of that was outsourced to the reserve banks, like the bank of new york, rich sond, san francisco, you name it. and you have to say that they were totally inadequate to the task at hand. >> what has tim geithner said good that? he was running the new york fed at the time, right? >> absolutely. i've asked him that in the hearings, too. where was and he what happened? and he said mistakes were made.
we've heard that before. obviously, a lot of mistakes were made. so the question is do we put -- burden the federal reserve with more duties other than the monetary policy? i think that brings forth a healthy debate in the future. >> so should the administration and congress actually consider the opposite in terms of giving the -- at a time when the talk from the administration is to put more duties at the fed, should you be looking at the opposite? >> i think we should look at all options. senator dodd has alluded to that at this point. we don't know yet because we haven't fleshed it out. we haven't had enough hearings on it. but just to give the fed more duties where they've been inadequate before, i think that's a big mistake. >> i want to get your take on another part of regulation reform on the table. that is the consumer protection agency as proposed by the obama administration.
you've questioned the fed's having more regulatory authority. you also don't support the creation of such an agency. why? >> first of all, it would take away the consumer duties and responsibilities of the federal deposit insurance corporation, the control of the currency, the federal reserve, and create a new sar for consumer protection. it would change the classic model that we have now where market forces work. people learn, they make mistakes like we all do. they learn through what we call the behavioral approach. this is a drastic departure. we don't know how this would work. we don't even know if it would work at all. but i've seen a lot of power grab there, and i'd better be careful there. i would oppose such a move at this point. >> is this just more bureaucracy? >> absolutely. you have to have a huge bureaucracy to decide every consumer product that any financial institution would offer a consumer. i think we should never stifle
the creativity of the american public. they will create products, and we ought to look at them and see if they work. >> now, when asked about allowing the federal reserve to be audited, chairman bernanke said he's open to the idea but he's also concerned that it would allow for interference in the fed's monetary policy. can the audits take place without such interference? do you worry that the fed's independence will be undermined? >> i do not worry about the fed's independence being undermined. the fed has gotten into some political deals like the bailing out, the tarp, working with treasury i think too closely. some of the bailouts have added to the balance sheet of the fed. the fed ought to have the ability to conduct monetary policy np independent of politics. but when they're getting into the close area of politics i think we can audit that and we should. and chairman bernanke, in a question i posed to him today, and i think i used the question review it, and he said that he would work with us. we don't know what that means
yet. but we're going to take him at his word, that we need to stay away from the monetary policy of the fed. but the other policy of the fed, where they're wearing another hat, congress ought to know, the american people ought to know. >> what are you looking at in terms of auditing the fed or reviewing the fed? >> how much money the -- what obligations the fed has taken on that could ultimately be a charge against a taxpayer. we don't know how much money they've taken on, obligations they've taken on in dealing with buying assets, there working with treasury and aig and other things. we need to know what the fed's doing there. we do not need to conduct monetary policy. but other things dealing with regulation and things that could imperil the fed and the credit of this country we need to know. >> do you believe that the fed does in fact have an exit strategy in terms of winding down some of the programs, the
lending facilities that are out there? >> i think they do. but right now i don't think they're near that point. >> what is the exit strategy, then, senator? >> excuse me. the exit strategy would be some of the tools the fed could work with. >> senator, would you like to get some water? i'm going to have my cameraman give you some water there. we'll get you some water. my apologies that we don't have it right now. we'll make sure senator shelby gets some water. he's got a little crack in his throat there. and we will continue our conversation. we really want to get to the issue of some of the pressures certainly in the face of business right now, an environment where we are still expecting a struggling economy. we'll take a short break. nasdaq is up more than 21% year to date, meanwhile. we're going to talk about the gains in technology. what is fueling it, and does it have legs for the rest of the year? stay with us. we're back with senator shelby and a discussion on technology as well. access to favorite courses
aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it! aflac. we've got you under our wing. a-a-a-aflaaac!
interviews ago same thing happened, you that needed water. we're wondering if you're just skirting my questions and hiding behind coughing. that's not what it is, is it? >> no. probably lack of water in washington. new york's got a lot. >> i'm teasing you, senator. >> i know that. >> let me ask you about some of the policies coming out of the administration here because here we are waiting for the president tonight to talk about health care and of course in order to pay for health care reform we're talking about additional new taxes on the highest earners taking some earners up to 60% of their money going to the government. in an environment where we remain waiting for an economic recovery, certainly a revival at some point as well, is this the time to be instituting more tax increases? what about tax incentives to get businesses to invest in r&d? >> maria, you just asked a central question. is this a good time to tax people more, while we're in a recession? absolutely not. this health plan is not going to work.
and i don't believe in its present form is going to pass. i hope not. we've slowed it down a little bit. we're asking questions about it. our congressional budget office put some real numbers on it the other day that made people stop and think. and we've been thinking the last four or five days this was a costly thing. we've had the best health care system in the world for most people. we ought to build on that, not start all over. >> we want to keep the things that are working. >> absolutely. we don't need to tax people right now. what we ought to be focusing on, although there are problems everywhere there are a lot of good things here. we ought to be focusing on the economy. getting this economy back to work, getting our banks stronger again and hiring people and letting people make money. that makes a lot more sense. >> stoerngs real quick here. you're talking about enormous numbers. the numbers are mind-boggling. $1 trillion for health care. $800 billion in a stimulus plan, not to mention the tarp, the talf, and all the other programs
at the fed and treasury. do you think we need another stimulus package? when are these programs going to show real evidence of sustained strength and recovery? >> we certainly don't need a second stimulus plan right now. i hope we won't ever need one. i voted against the first one. they haven't even spent the money. most of the money has not been spent on the first one -- >> people are saving the money. >> chairman bernanke said today we didn't need a second stimulus. >> senator, great to have you on the program. love talking with you. >> thank you, maria. >> we appreciate you spending your precious time with us. thank you, senator. >> thank you. >> we'll see you soon. senator richard shelby in washington. a blistering run for techs. the nasdaq up 22% this year. its winning streak is now 11 days in a row. best since september 1996. ah, those were the days. is the rally for real? joining me now to talk more about that, mark demos, portfolio manager at fifth third asset management. and doug sandler, chief equity strategist at riverfront investment group. gentlemen, good to have you on the program. would you put new money to work in technology today after a 22%
rally just over the last several weeks? mark. >> i think that technology certainly has had a good run and it's been really all about earnings. you know, the sector's had very good earnings. most companies are kind of missing on the revenue but making good bottom line estimates. technology companies are actually beating both the top line and the bottom line, and i think it gets back to, you know, when we entered this recession tech companies reacted very swiftly to it. they took down production, took down inventories, set expectations very low. and so now they're bettiating te expectations. so i think that technology probably continues to work through the end of the year. in the next couple of months you may have a little bit of concerns about this is just a big inventory build, and i think that's part of it, but i think certainly you want to be well positioned in technology for the end of the year for sure. >> okay. sow think it still has legs. and i want to correct myself. i said last several weeks.
obviously i meant last several months. we're talking about several months. this nasdaq market up 22%. doug sandler, do you agree with the points mark laid out as far as what's behind the strength, the fact these companies were among the first to really get the balance sheets clean, get them as lean as possible to go forward and generate new revenue growth? >> yeah, i think that's a big part of it. i also think, you know, in the end it's really the price you pay for an asset matters. in technology it was really in a period of like eight years of relative decline versus the rest of the market, ultimately got to valuations where it was even with the rest of the market, meaning you paid no more for the s&p than you paid for tech stocks. that's just not right. tech grows faster, has better balance sheets than the s&p, and ultimately we should be willing to pay premium for these kind of companies. and over time investors generally do. that premium's about 1 1/2 times the multiple of the s&p. today it's at 1.2. a month ago, or three months ago it was at 1.0.
in the end i think the first stage of this tech trade is we basically had assets that were just too cheap for the quality of growth and the quality of the balance sheets that companies had. i think there's a second stage coming, though, which is going to be all about growth. >> where is the growth within technology right now, then? >> well, decades of growth in the '90s and '80s were fueled by basically companies trying to become more productive. they bought tech gear like enterprise research plang, software, hardware, et cetera, to get better and more productive. that's just starting to occur in the emerging markets. the solution to emerging markets was we can throw in more people because we're labor-rich. i think that's starting to end. i think you're starting to see folks like oracle and ibm and s.a.p. start to get more and more of their revenues from emerging markets. and that may fuel multiple years of tech growth that's faster than the rest of the market. >> mark, tell me where you're investing right now. where do you see the growth within technology? >> i think one of the big areas to invest in is mobility.
and it's just, you know, getting information anywhere at any time. that's smartphones and that's netbooks. i think those areas we'll see -- you know, they're already very big volume areas within technology. those will continue to see very good growth over the next year. i think with both of those products you're still kind of in the early stages of very solid growth. do you want to invest in companies that have just the technologies that make those products happen? >> it's a great point. i think it was eric schmidt who recently told me, ceo of google, who told me that there are 800 million pcs in the world but 3 trillion mobile phones. so that right there gives you a pretty good sense of where the growth has been. gentlemen, great conversation. we appreciate it. thank you. >> thanks. >> we'll see you soon. mark demos, doug sandler. five dow components set to report quarterly results tomorrow. we will list them, tell you what you need to know. american express, 3m,
mcdonald's, microsoft. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to. tdd#: 1-800-345-2550 when everything feels right though, tdd#: 1-800-345-2550 that's when i get serious. tdd#: 1-800-345-2550 and the minute i get into something, tdd#: 1-800-345-2550 i already know when i want to get out. tdd#: 1-800-345-2550 of course, every now and then i'll talk with somebody tdd#: 1-800-345-2550 who knows what i'm trying to do. tdd#: 1-800-345-2550 (announcer) switch to schwab today. tdd#: 1-800-345-2550 you'll get the tools, the technology tdd#: 1-800-345-2550 and the support to trade your way. tdd#: 1-800-345-2550 go to schwab.com/trader tdd#: 1-800-345-2550 or call 1-800-540-7304 tdd#: 1-800-345-2550 right now. tdd#: 1-800-345-2550 but opportunities can vanish like that... tdd#: 1-800-345-2550 ...so most days, i'm right there tdd#: 1-800-345-2550 when the market opens.
before we take you to earnings central let me reiterate what i mentioned moments ago. there are 8 million pcs in the world and 3 billion with a "b" mobile phones. at&t, mcdonald's, 3m, american express and microsoft all of them dow components all reporting earnings tomorrow. it will be a busy one. mary thompson has a preview. it'll be a critical day. she is at headquarters. >> it will be a critical day. three companies reporting before the bell, two after. all but one, mcdonald's, forecast to report a decline in profits. now, for at&t analysts are saying 51 cents a share. revenue expected to be little changed at 30.6 billion dollars. look for continued strength in the telecom wireless business thanks to its exclusive deal to sell apple's iphone but watch for erosion in the consumer land line, corporate business. sales are forecast to fall for mcdonald's. analysts indicate revenue of
$5.7 billion. watch and see if higher unemployment and lower consumer spending are hurting the fast food chain or helping it as consumers trade down. 3m closing lower in today's or actually turning around closing higher in today's session with its hands in everything from health care to infrastructure to alternative energy. it's a good gauge for the overall economy. profits are forecast to call 32% to 94 cents a share. revenues seen dropping 25%. $5.4 billion. after the bell american express reports and there is no escaping a weaker economy. profits forecast to decline 54% to 26 kraents share though in an earlier note jp morgan writes cost cutting and a slower rate of loan loss provisioning could help the bottom line. microsoft's earnings seen taking a hit from lower pc sales which in turn means lower demand for microsoft's software. earnings forecast to fall 22% to 36 cents a share. revenue down 9% it is expected at $14.3 billion. you can hear all the results tomorrow right here at earnings
central. maria, back to you. >> thanks very much. we head over to the nasdaq market site now. melissa lee standing by ready to rock at 5:00. what's coming up on "fast money?" >> action for ya hoorks qualcomm, as well as mosaic. yahoo shares went higher in the afternoon session. our traders will take their positions on microsoft and 3m, both earnings reports anticipated tomorrow. that's all straight ahead on "fast money." >> thanks. we'll see you in about five minutes. up next we'll tell you what else besides the big dow component earnings could move the markets tomorrow. has the fastest hands boxing has ever seen. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster, email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.
you have questions. who can give you the financial advice you need? where will you find the stability and resources to keep you ahead of this rapidly evolving world? these are tough questions. that's why we brought together two of the most powerful names in the industry. introducing morgan stanley smith barney. here to rethink wealth management. here to answer... your questions. morgan stanley smith barney. a new wealth management firm with over 130 years of experience.
it's up from 523,000 the week before. >> all right. of course we'll be watching the reaction to the earnings we told you about tonight. let's look at where the stocks are. qualcomm and eech-bay each repod earnings. qualcomm stock is under pressure the company diving lower the earnings two cent better than estimates. revenue ditto $2.75 billion versus $2.73 billion. e-bay was higher, better than expected 37 cents a share versus 36 cents estimate and $2.1 billion in revenue. stocks up 8 2/3%. have a fantastic evening. i'll see you manana. "fast money" is up next. microsoft says it's finalized the code for the windows 7 operating system and remains on schedule for a late october release. the treasury says it sent congress proposed legislation on regulating systemic risk and
zapos.com will continue to operate independently by its acquisition by amazon announced after today's bell. "fast money" with melissa lee starts right now. the nasdaq rising an 11th day in a row and e-bay's earnings could make it 12th tomorrow. these are your "fast money" traders. right now we are watching shares of an auction site, e-bay trading higher after better than expected results. we'll go to jim goldman for the very latest. >> good evening you to. this is a pretty good report here albeit much less business that e-bay is doing now than a year ago but nonetheless this is a lot less news than wall street was anticipating. 37 cents beats the street by a penny on better than expected revenue. looking at the metrics here, payments, the home of pay pahl
up 11%. the street was looking for a 7% gain. market place revenue, stub hub and all of the other retailers down 14% but the street was expecting a decline of 18%. then look at the pay pal unit, payments up 25% against the 13% expectation and also guidance is pretty good for these guys, too. citi's mark ma haney says this might indicate this is a trough quarter, that business might be slowing but at least it's bottoming and that could be good news for investors. shares closed today at the year-to-date high. we're building on that momentum right now. the real question now is whether this company has come up with some way to compete with amazon which as you heard earlier just acquired zappos. e-bay might be not necessarily out of the woods but certainly feeling its way. >> the fact there is concern on the street about e-bay getting squeezed at the top by amazon and also at the bottom by craigslist, that isn't off the table with this report? >>