bull. the bull will be on the bund waterfront across from the financial district, home of china's biggest stock market. they say they'll have it up by early next year. we call bull on that. time for clbl clblt. > . and there it is. live picture of the new york stock exchange. monday afternoon on wall street after a long holiday weekend. dow industrials in positive territory, reversing earlier losses. but it's been a mixed trade on wall street. oil a big story down by another 4%. $64 a barrel. hi, everybody, welcome to "the closing bell." i'm maria bartiromo on the floor of the new york stock exchange. we kick off the week on wall street in a quiet mode here. volume on the light side, under a billion shares, just about 700 million shares. the dow industrials now positive. oil one of the bigger stories of the session, which we're going to get to in a moment. but take a look at where we stand right here. this is actually the best levels of the afternoon.

see the sharp sell-off right at the open today. we have slowly but surely recovered from that, with the dow back above 8,290, approaching 8300 on the dow. nasdaq not so lucky.a nasdaq down today 16 points. the nasdaq is the leadership index for 2009. still showing strong gains on the up side for the year. today money coming out of technology. s&p 500 ditto with oil stocks really among the leadership groups on the down side there. the s&p 500 down about two points. a fractional loss on the standard & poor's. we've got oil, as i mentioned, a big story on the session, and right now oil is showing a decline of about $2.66 a barrel. big sell-off, that pressure in oil stocks, as the group will get into the reflation trade coming up. join meg for the entire hour today is dan niles. dan, it is good to have you on the program. >> thanks for having me on, maria. >> you have moved over to apple capital partners. co-chief investment officer. >> i'm pretty upbeat on technology, so i think the market as we've seen -- however,

for the industrial sector oom a lot more cautious. i think we have one more bad quarter and then i think it's off to the races. >> talking about off to the races as well as that bad quarter coming up, we've got dan for the next hour. meantime, let's get right to our reporters covering the market at this hour. at the nyse the cme group as well as the nasdaq. we kick it off with rebecca jarvis our eye on the floor of the nyse. hey, rebecca. >> hey, maria, thanks so much. and we are seeing obviously a little bit of a bid under some of the dow names but overall the markets pretty quiet day, some to the down side. as you mentioned, the oil names, the commodities names in particular are heading to the down side today, and we are also following on the s&p 500 an important level here. 893. that was the june 22nd low. if we should close below that level, we are essentially back where we were in may. now, what's going on as far as the commodity names are concerned? you have sort of a double whammy. first off, a stronger dollar, but on top of that the question mark in traders' minds right now, and it's a big one, is is the economy really improving?

have we overshot some of our assumptions and some of our optimism? the employment picture we received as of last thursday didn't look as good as my had hoped, and that's a major concern. how we will answer that question will be in part due to the earnings cycle we see coming ahead. alcoa kicks things off on wednesday. it will be a very important earnings report. in particular for the commodities space. and some of the important factors are did traders get ahead of themselves? did they anticipate too much optimism in a lot of the commodities names? too much demand? one of the things we've been hearing from industry insiders, from ceos at these companies like r. ford mitchell as well as nucor steel is that things aren't looking like they're going to turn around, at least in their universe, this time of year. we do have to go to bertha coombs, who has some breaking news. bertha? >> thanks very much, rebecca. reuters is reporting that the new york port authority says that larry silverstein and the developers of the world trade center site have now walked away from the project. this project has been mired in

delays despite the fact that there is building going on at the site. at this point that is all we can tell you. but this is something that the city has been watching, the state has been watching, and officials have been wanting to see progress there, but now it appears that once again it's at a standstill and that the developers have walked away. we'll continue to monitor the story and bring you more details. but for right now let's move on over to the nasdaq and brian schactman. brian. >> incredibly big news, bertha. thank you very much. let's get you through the market very quickly. we've basically cut our losses in half but if you look at the market internals declines over advances basically 2-1. want to update you on data domain. it's up 2.7% at 34.12 and i'll get you to the significance of that in a second. emc came in and upped their offer to $33.50 a share all cash. data domain has already said it likes net apetter at $30 a share. that's cash and stock. it's going to be hard to turn your nose at 33.50 in all cash. net app has come out and said they're considering all option ppz the 34.12 is interesting

because it's trading above that emc number.?ñ so maybe the street expects it to go even higher. let's talk about some of the big names here and the weakness we're seeing today. apple down 1.4%. research in motion 1.9. amazon.com down 1.6%. we're especially seeing some weakness in the chip stocks today. take a look at the philly semiconductor index as well as broadcom and nvidia, those down bettern 3.7%. on the sother side of the ledge, let's take a dell, up 3.1%, strong all day, bernstein came out and said listen if we have a rebound in pc sales in the next two to three years dell is better positioned maybe even than hewlett-packard and they're getting a bounce there. courtesy of mike huckman, a couple items. amag, jpmorgan upping the price target to 75. that's right. now at 53.82. and descend rion. merriman kernan ford they like the future of prevent so much they're giving a price target of 49 to 50 moving forward into 2010. i love looking at that chart.

that year-to-date chart is unbelievable. some weaknessar you figure oil down. well, people maybe don't figure an investment in solar is as big a deal with oil on its way down. take a look at solar stocks getting hit hard. and with that segue let's go to sharon epperson at the nymex. >> oil has been down for four straight sessions and the slide that we've seen more than $10, or thereabouts, since the highs that we hit for 2009. that was just last week that we were over $73 a barrel. we can point to the fact that risk appetite seems to be waning and we can point to the fact that demand seems to be dwindling. but keep in mind the places you really see this is going to be in the gasoline market. we're looking at gasoline prices that had been the leader for 2009, being among the worst performers in the commodity complex for the past month, down about 10% in that period of time. thankfully, that means prices at the pump have stabilized around $2.60 a gallon. but that means also a lot of folks were not driving this

holiday weekend. down 3% from a year ago. we're going to turn it over now to bertha coombs at the breaking news desk. bertha. >> thanks very much, sharon. we've got more on that dispute between silverstein properties and the port authority. both have now issued statements. silverstein property says they have issued a notice of dispute letter to the port authority. this initiates a ten-day period in which they must have talks and in which they can call for an impartial group to issue some binding arbitration. the silverstein properties officials say today's action is designed to inject a renewed sense of urgency to these discussions and should those discussions fail to take the matter to an impartial panel of experts as early as this month. the port authority, meantime, says it is unfortunate spi, that's silverstein properties-s walking away from the negotiating table simply because the public has been unwilling to sacrifice critical transportation projects to

subsidize private speculative office space. clearly this is a dispute that's ongoing, but at least for now it looks like it's a ten-day cooling off period and this is something that we'll continue to watch. maria, back to you. >> all right, bertha. thanks very much. that developing story we'll get back to you on it. joining dan niles and myself on the floor of the nyse right now to break down the action in the market is dean kernan, president of macro risk advisers, along with dan greenhouse market analyst with miller tabak and company. good to have you here. what is your feeling here we are in the second half of the year we're waiting on earnings to come out. beginning this week with alcoa, of course, which kicks off the second quarter reporting season. what are you expecting, dean? >> the market has definitely moved to a stance where it's priced in an expectation that things will continue to get better. i think we saw a little bit of that last thursday with that unemployment report. if you look at the unemployment reports from the first quarter you see that despite the terrible unemployment levels the numbers that were being reported the market actually rallied on days when payroll fell 700,000. clearly there's been a shift in

the stance for the market where the expectation is things are going improve. our concern is that the unemployment situation is so bad and it's so closely linked to the mortgage problem that things aren't going to improve. >> and dan niles, your point is yeah, it looks like things have improved but it's largely been about inventory, these companies built up inventory and the first half of the year was all about getting rid of that. it's not actual end demand driving things. >> yeah. i mean, when you've got companies purging millions of cars and trucks, for example, in the auto industry and then they stop, all of a sudden it feels like things are a lot better when in fact end demand isn't any good, it's just been off-loading inventory. >> so from an investment standpoint what do you do, then, in this scenario, and do you agree with this? >> i agree. dean and i were speaking earlier, and i actually agree very much with what he was saying. from an investment standpoint i think the market is in a sort of pause and wait and see mode right now with respect to the second half. much of the rally that occurred was predicated on the belief that the second half would be better than the first half, and as dean said, that's why we would rally in the face of

700,000 job losses. now comes the point where, as bob pisani said, from weeks it's show me. and we really want to hear out of the company that the second half end demand is looking better, it's not just going to be inventory restocking you're going to see top line growth. >> so how do you invest, then? what are you doing? >> well, right now it's really difficult because again, i'm a little bearish with respect to the second half. i'm not as excited as some of the other people are. a lot of the growth that we're going to see, again, is due to inventory restocking. and how you -- >> you want to be raising cash? >> i'm neutral right now. as a general rule. how you start to see these companies predict the second half is going to go a long way toward determining where you want to put money. if you want to allocate funds it can be in my opinion a little more defensively. but in terms of getting excited about outsize corporate earnings going forward i think there's a real risk to that assessment. >> i agree. this earnings season is actually going to have a lot of disappointments on the industrial stocks. i think you can see a real retracement in that. but i actually do feel okay about the back half of the year. the sell-off can be brutal when you go through earnings. >> dean, what do you think?

>> the key to us at macro risk advisors is the quickness with which we think the investment community can change its mind. we did a survey last week, we asked 100 derivatives traders if they think the vix would go to 40 first or 20 pirs first. the vix was at 30. and 75% of them thought the vix would hit 40 first. i think you get back to all those unknowns that continue to plague the market. it's house, it's commercial real estate. it's really the unwind, the long and painful unwind of a debt bubble, for which there's really no easy answers. bernanke and company have been out in front of it. he's a sturnt of tdent of the g depression. but it's a very challenging situation. there's not the cash and demand out there. >> so far i haven't heard any ideas as to how i invest in this market. >> we're short consumer discretionary. we've said this for a long time. we just don't think there's any money left in the pocketbook given the overleveraged stance of the balance sheet. we're long commodities near term. we think ultimately that runs out of steam. commodities are really a substitute for dollars. at least near term. but ultimately we think that gives way, again, to a faltering global demand outlook. >> how are you guys looking at

technology? i mean, tech has led the market up till now. how do you view that going forward? >> technology is sort of a place to hide in some sense and then obviously try focus on those stocks for which the p/es aren't too high. but you know, the qualities we're looking for in stocks right now are, you know-g free cash flow ratios, very low debt, no -- you know, they don't have to refinance, tap the debt market. and technology companies generally fit that bill. >> we'll talk more about technology coming up in the program. gentlemen, tau very much. we appreciate it. dan, dean, good to see you again as always. we appreciate it. we are right now about 45 minutes before the closing bell sounds on wall street with the dow jones industrial average right now off just about six points or so. quiet sessn, but a lot of action for oil and technology today. tech sector has been greatly outperforming the broader market for this year. you can see from the chart. up next dan niles tells us how you can keep profiting from text in the second half of the year. then some automakers hiking their production targets after closing better than expected sales figures last month. coming up find out which

companies outside the auto industry could really benefit from a potential auto rebound. after the bell a special interview for you. california state treasurer bill lockyer with me, telling us when the golden state may actually be able to repay more than $3 billion in ious issued so far this month. that's an exclusive. 4:00 p.m. eastern on "closing bell." first here's where the action is on the street today. the most heavily traded stocks p and once again the banks dominate the list. back in a moment.

hi, folks. i'm matt nesto with your "closing bell" realtime flash. you know, i'm fishing around today looking at the markets trying to find some action. so i'm in the russell 1000 and what grabs my eye but student loan corporation, stu. hello, stu. look at that on the bottom. 6% higher. you know, sallie mae was the best performing stock in june. it's in the consumer finance space. and then you look at the dow, led by a 5 1/2 gain in american express, discover financial also strong in an otherwise kind of weak and lack lustler market.

so take a look at those consumer finance names. clearly there's some buying going on out there with those names. except for sallie mae, which of course is up 40% already. got in most of its action. back to you. >> all right, matt. thanks so much. with the economic storm taking a toll on so many sectors this year investors have been betting that technology will be the first to benefit from the recovery when that takes hold.f the technology-heavy nasdaq composite, for example, has advanced more than 12% this year. well, the dow is down almost 6%. pretty good comparison there. joining me now to discuss the opportunities in technologies is our guest host, dan niles, co-chief investment officer at alpha one capital partners. dan, where do you think the opportunities are in technology? and by the way, do you think that move in the nasdaq is justified based on what you see in terms of end demand? >> sure. i mean, i think a couple of things. i think the opportunities in technology are really focusing on places where consumers feel like they can save money. so for example, ebay's a name we have an investment in. i think the auction space model

is something where customers are looking for the lowest prices possible. that's a stock that should do well going forward. a lot of discussion on amazon. you're trying to save sales tax. another name that should benefit. in terms of the nasdaq itself, yeah, i think the move is somewhat justified in the sense you that don't have the balance sheet issues, the structural risks you have with a lot of other companies and areas like financials or commodities, et cetera. but having said that, i don't think end demand has improved as much as people think. it's just you're not burning a ton of inventory anymore. >> yeah, advertise what you said earlier. it's really the inventory depletion as opposed to end demand that you're seeing real buying. >> exactly. >> we spoke to eric schmidt last week, and he made a point in discussing the sustainability and strength of mobility. do you still think that there are investing themes around mobility? >> yeah, i really do. because i think everything is trying to get smaller, more mobile. you want to get information everywhere you travel. sow i think that's going to continue going forward. and so whether it's your cell phone you get that information

from or your pc i think it gets debatable but i don't think it really matters. i think the iphone's a great example of that where is it a miniature pc or a cell phone? who knows? but it does a lot of good things very well. >> now, remember when you were on the show back in march you actually predicted that we would see a pretty good rally in technology. that was a nice call. it's exactly what we saw. does it still have legs from here? >> yeah, that's a good question. no, i think it does. we're taking a pause right now as people are dealing with the fact that maybe unemployment isn't improving as much as we thought. but if you look at the technology companies, a lot of them have terrific cash flow. they're actually fairly inexpensive still. even with the rally we've seen. and the balance sheets are pristine. so if you think about the back half of the year i think those are companies that will actually continue to outperform as we look for it. >> we've got earn frgz amazon.com coming out july 23rd. you mentioned ebay. ebay's coming out july 22nd. do you want to be putting new money to work ahead of the numbers? or you said you have an

investment nechlt bay already. >> ebay's a good one because it's the epitome of everything i look for in a stock. it's very cheap. analysts in general don't like it. they think amazon's going to put them out of business. but if you think about what they do, they help you buy things you that want at the lowest possible prices, in an auction style model. if you look at 2001, they did incredibly well coming out of 2001 while a lot of stocks were hitting new lows in 2002. so i think what they offer is something that consumers are going to really latch on to. and then you see who's done a good job. >> recently spoke with the new ceo at ebay. and he was talking about the promise of paypal. this is one of the most important areas of the business. sow think you're buying only an auction company, but actually paypal's a lot bigger than that. >> exactly. and i think people have liked paypal for a while. i think you're going to see text panned and market share going forward. what's really held them back is their poor marketplace business. but i think in a tough economy, funnily enough that's actually going to help them. >> let's look forward for a minute. the last time you and i spoke for an interview for cnbc.com,

we talked about the mining business, about other areas away from technology, and i was interested to hear you putting your toe some some of these areas where you've always been about technology but you're actually looking at the reflation trade, if you will. alcoa reports this week. what do i want to be doing in that area? >> well, i think each of the metal names or industries is a little bit different. i think an aluminum you still have a fair amount of supply. so alcoa's one where i'm not sure the numbers are going to be that great, but i'd look to buy it after they report and potentially reset guidance yet again. but i think in a lot of areas like steel or copper we have an investment in u.s. steel, we have an investment in the tall steel. those are areas where the stocks are trading at value. i think as the auto industry stops purging a ton of inventory as auto sales start to pick up over the next couple of months with cash to clunkers, those are areas that can do a lot better. >> people look at the number of people in the world and then the commodities that people need, and there's a real gap there. but of course then there's valuation you that need to look at as well. >> well, i think the valuation

argument is one of the reasons i actually like a lot of these names pape lot of these companies have recapitalized the balance sheets. and even though the stocks in a lot of cases have doubled you're still looking at stocks that are trading at book value. you're not paying a huge premium for them. >> we're going to talk more about this inflation trade coming up. we want to get your thoughts. we've actually booked a nice roundtable to talk about how you invest in the whole mining space and metals space overall. so we'll get back to that. dan, stay with us. we're going to have dan throughout the hour to talk more about the markets. meanwhile, we're about 35 minutes away from the closing bell for the day. dow industrials right now up about 7 points. nasdaq is negative. we're going to get into banks next. bank of america ceo ken lewis has been under some fire from angry shareholders for a while now. he is facing additional pressure apparently from one of the most powerful unions. charlie gasparino is reporting that. and he'll be out to tell us more about it. first take a look at the bond market today, where interest rates are. you're watching "the closing bell." we're back in two minutes. in my lower back. feels kin.

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welcome back. ken lewis has been under fire from bank of america's board and some shareholders. and now charlie gasparino is reporting he might have another group on his case, a powerful union. on-air editor charlie now with the deils. hi, charlie. >> i just have get this off

chest. bank tellers of the world, unite. talking about he. we're we are talking about one of the most powerful unions in the country. the seiu, the serve empyees international union. whh essentially is going to battle with bank of america, with ken lewis, essentially trying to force him to unionize the bank tellers. and one of the levers they're using, obviously, maria is their powerful hooks within the obama administration. they spent $60 million putting obama into office. they have key people in the administration. and they're basically calling now for ken lewis's -- they're doing two things. number one, they're calling for ken lewis's resignation. they've written timothy geithner to basically get ken lewis removed. they're doing that on the one hand. on the other hand, they're demanding a meeting with ken lewis so they could try to get these bank tellers unionized as part of their union. and you know, here's the interesting thing here, maria. i am a son of a union ironwork. i have nothing against unions. i actually think they do very

good things, particularly in trades where youisk life and limb. i juston't e it in bank ing being one of those trades unle yo count paper clipas an occupational hazard. t i did this story speaking with a lot peopleery close to ken lewis and asking about the threat that this poses, and for all the things we're talking about, maria, as you know, he's come under pressure for shareholders. the shareholders have put pressure on him. regulators aren't too happy with him. you know, they fear this union the most because of its plugs within the obama administration, and they fear it because they're basically holding a sword over his head. they're going to push with the political people to get -- to basically force him out unless he does something which they believe would be very bad for the bank, and that's unionize. we're talking tens of thousands of workers. and this is a place, maria, where let's just say they can't afford it. but like every bank they have cost issues. but that's one of the problems

you have. bank of america is partially owned by the federal government right now. and the obama administration is one of the most union-friendly administrations there is. there is a rift from what i understand between the sort of political folks, who are ve heavily influenced by unions, and theconomic folk, the people le tim geithner and paul voler and larry summers, who ar't necessarily buying the union stance right now. but thatould all chang with one call from the presiden so this a pretty big issue if you're inside bank of america, and it's a pretty big issue for ken lewis. at least his people are telling me that. >> well, there will be a big fight between shareholders and the unions if in fact there is a move to -- i don't know if shareholders feel the way unions do on that ise. that for sure. >> then there should be a big fight, a there shou be. this ia pretty important issue. we have politicized banks tremendously, and if they're able tpoliticize it this much, basically bailinout a bank and then forcing them asart of th bailout to unionize,

that would take this whole nationalization and what's going on in washington right now to a whole new level. >> charlie, we'll see you later. thanks so much. charlie gasparino. up next, "fast money" final call. then oil. it's been on a sharp pullback recently over the last week. should you be adding crude to your portfolio on the decline? we've got some answers. crude no at $64.01 a barrel. back in a ment. you're tolon lady! diarrheacotipation, gas, bloatin that's me! can i tell you what a difrence phillips' colon health has made? it's therobiotics. the good bacteri atets your colon back ibalance. i'm good to go! phillips' colon health fidity, traders learn from t pros. say you want tbacktest an entire portfoo of stocks. market experts show u how

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hi, folks. i'm matt nesto with another "closing bell" realtime flosh. did you see oshkosh today? osk is the ticker here. they make heavy trucks and also some armored vehicles now for the military f troops in afghanistan. the team at key bank say this is a game changer, it's a buy, it's

a billion dollars worth of business that they never did before and they're pushing the stock higher. what's even more amazing is just when you thought water couldn't boil anymore you get another buy and they think the stock is on its way to 30, so you have at least another 40% up side on top of what you've seen today because if you peel i lack and look at three months or a year to date on oshkosh you've seen the stock gain over 150% just in that period of time. so osk. there it is. 141 year to date. nice. maybe the best is still ahead of it. maria? >> thanks very much. we're in the final stretch here about 25 minutes before the closing bell sounds. let me give you a sense of what's going on in the markets today. two groups you want to look at and those are the banks and the oils. those are the groups that are the biggest pressure on this market. even though the dow is now positive by a fraction. 8281. but it has been slow going for any move on the up side. one of the big reasons for the dow's support here is american express. that stock is up 5%. you also have a handful of the broker-dealers higher which is

helping the s&p 500 not take a bigger dive. nasdaq, however, it is down. about 1%. and that is due to fractional moves downward in the likes of amazon, google, as well as apple computer is down about 1.5%. we have a number of tech names under selling pressure. the stock index down about 2%. semiconductors weaker. s&p is down as well by 3.5 although it's a mixed performance for the banks. one of the issues for the standard & poor's, stocks like chevron and exxon mobil down better than 1% apiece. the autos are also down. ford, for example, down 3.5%. and you also have the banks under some selling pressure such as bank of america up. also weaker by 6% on bank of america. jpmorgan down 1%. boeing is an issue. that's down 1 2/3%. time now for the "fast money" final call. oil is the story. it's been on a pullback recently, the last couple of days, seeing weakness. today it is down more than 4%. what to do with oil? we've got some answers right now with joe terranova.

he joins us. chief alternative strategy with vertus investment partners and a "fast money" trader. good to see you, joe. tell me what you do with oil on a day when crude just below $64 a barrel. >> well, maria, it's been a liquidation story clearly for the last four or five days. the question for investors now is do you step in? are you remaining flat or do you begin to look at these names from the short side? i'll take the other side of that trade. i think what you do in oil right now is you basically want to remain flat, you want to maybe look at the larger integrated names, and you're looking for a spot to get back into the market. >> you just want to look for declines and see what would be a good entry level. joe, thanks. we'll see you soon. we'll see you tonight on "fast money." joe terranova. the markets looking for direction as oil falls today. also, on "fast money" tonight with the guys and melissa lee the traders kick off the week-long series "the porn trade." how you can profit from the seductive world of adult entertainment. what do you think about that,

dan? >> i think i'll refrain from commenting. i might get myself in trouble. >> i think that's a good idea. 25 minutes before the closing bell sounds. we've got t market mixed day. dow industrial down about five points. nasdaq also weaker. commodities ke steel and coeray get a bigoost from a potential rebound in the auto ctor. or should you staying away from anything related to the autos right now? we're going to check that story out coming up. then after the bell we're discussing whether president obama's historic trip to russia will help restart some strained relations with the country. we are back. we have a t re on "closing bell." stay with us. the ctor diagnosed arthritis iny right knee.

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welcome back. isi group says u.s. auto production will hit 6.5 million units in july. a 67% increase month over month. while commodities are lagging that production increase would give raw material stocks a boost likely. but are they a good bet right now? joining me to talk about that is steve nemeth.

eric ross, director of u.s. equity research at cannacord adams. and our guest host for the hour, dan niles at alpha one capital partners. good to have you on the program. do you want to buy into this idea that production will ramp up again and you want to be buying all the commodities related to that? >> we were on a couple weeks with you, maria, and we felt there was an inflection point in the basic materials trade. so right now we're going to stay out of them. there there's a little bit of an auto rebound which a lot of people are expecting for jushlgs still too early to call whether it happens, i think u.s. auto sales account for 15% of u.s. steel output. 15% actually goes into construction. so we don't know that a rebound in auto sales is enough to drive steel prices here higher, which probably gets many other commodities up as well. >> and it is questionable whether or not it's an actual rebound in auto buying and not just a depletion of inventory, which is the point dan was making earlier. from a commodity standpoint, eric, what do i want to do with oil at $64 a barrel and after the huge runs we've seen in some of these hard assets?

>> definitely. we've been very bullish the last six months on commodities, and a couple weeks ago we got much more negative on it. i think you basically hold off. i think they go down lower. i think oil goes below $64. >> how do you view this recent rally we've seen? what do you think really drove it, then? because you had oversupply the whole way up in the oil markets really. >> actually it's a u.s. dollar trade more than anything else. so it was a play on -- the economy wasn't in freefall. so it did recover to some degree, and then the u.s. dollar weakened substantially so, that drove commodity prices up pretty dramatically. >> interesting you think oil is going to go down. but do you think it comes back up? in other words, is tla better place to get in? >> i think there may be a better place to get in but i'm not 100% sure it's going to go up. i think it will. but we're still working on this, whether deflation is going to happen sooner rather than later. we know it's going to happen at some point, but we're not sure exactly when. >> you're more worried about deflation than inflation. >> i was worried about inflation all this year and now i'm starting to worry about deflation. >> so i mean is this really a

call on the dollar to some degree in terms of how you want to play oil in your mind rather than the fundamental commodity supply and demand dynamic? >> it was, definitely. and now that oil has hit $70 and pulled back a little bit, the cost of the price of gas has obviously gone up for a lot of people, so they're not driving quite as much, they're starting to see the demand destruction happen again, even though used auto sales are actually up on a three-month basis. so it looks like people are buying cars but not quite as much as they have been. >> steve, how do you see it? are there commodities out there that you feel are must-owns or do you agree we're going to see lower lows? >> we're out of the basic materials, but energy we are a little overweight. they generally have a very high correlation because of the dollar trade and the inflation trade. we feel there's less elasticity in the demand. i don't know how many more skyscrapers and casinos are they're building in veg vegas right now but i bet if the economy slows they can go to zero. maybe auto sales are down, driving is down a little bit. you notice it on the roads in new york city. the amount of traffic on the roads is lower, it's absolutely

incredible. demand for traffic could be lower. it appears there's a glut out there. but i think it will go down less than other basic materials and i think you want to have an inflation hedge in your portfolio looking three years out. i think we could have inflation in three years. >> but steve, i mean, to some degree demand right now you could argue is better than the way it looked on october 1st when lehman -- right after lehman went under. so if you just have some activity starting to improve, auto sales are down where they were in 1980. we think the world's bad, it's probably not as bad as 1980. won't that in and of itself help aluminum or steel or copper or other materials just as people think about buying a car again? >> you know, good point. there's a valuation between the valuation trade and the sentiment trade. sentiment is likely to get a little bit better over the next few months, or auto sales and other commodities. but in reality when you look at the earnings of these companies, whether it's alcoa, u.s. steel, these companies are trading at ten times earnings looking out three years on a recovery if a recovery occurs. i think the valuations are fair at best. but you're right-f sentiment improves a little bit the stocks

could go up. temporarily. >> what about the broad market here, steve? how are you investing today? >> i ran the portfolio before i became because i'm always astounded under bad news situations the market seems to rebound. our value fund is trading about 10 1/2 times next year's earnings. that's a very low valuation. the average dividend yield of the companies we own is about 4 1/4. the tax treatment of dividends is favorable. 10 1/2 times earn wgz a 4% dividend yield for value stocks a little bit higher for the s&p. a lot of bad news, which dan may be implying-s baked into the valuation. >> nice. >> back to valuation you could look at u.s. steel and say that's trading at one-time sales which we own. or missal -- sorry, one time. that seems like a reasonably good point in terms of valuation. >> we look at amat. similar price to sales metric. i think it's a little too early. many of these companies over longer periods of time never earn any money. they did over the last five

years. you look at ford. they've never earned any money. maybe in '03, '04, '05. since then they haven't earned any money. steel companies look the same. >> eric, as far as your portfolio overall broadly speak how do you want to approach the second half of the year? >> i'm looking at second quarter earnings and then i'll worry about the second half at that point. but second quarter earnings i think are going to be pretty good in general. i think we're going to have better compares. i think financials are going to be better than expected. i think tech is going to be editor than expected -- >> but you had a big run in financials. >> we had a big run in financials. so i think we're going to be sort of playing into that. and i think we're probably in a positive through the rest of the year, but at least through the rest of the summer. >> gentlemen, great conversation. we so appreciate it. eric ross, steve nimeseth, and dan niles with us for the hour. thanks so much. critics of president obama's health care reform say it will end up hurting the health care industry. how do you view the plan and the sector's ability to provide investors with healthy profits going forward? got some answers on alth care

coming back. d#: 1-800-345-2550 'm rethinking everything.. tdd#: 1-800-345-2550inclut lk after my money." td: 1-800-345-2550 tdd#: 1-800-345-2550 he dust might be settling. tdd#: 800-345-2550 that's great but i'm not." tdd#: 1-800-3425 tdd#: 800-345-2550 "i guess i'm just done with dog nothg, you know?" tdd#: 1-800-345-2550 tdd#: 1-0-345-2550 "oh, i'm notnking about moving mmoy. tdd#: 1-800-5-2550 i am moving it."

things are improving here as we approach this final stretch. dow industrials now up 31 points. it has to do with technology. google and ebay turned around. microsoft, you've got ge turning around in positive territory. some of the banks also doing a bit better. oils are still under pressure, although not as weak as they were at the top of the hour. so that's also helping the dow industrials show some gains here. and as this market today really is showing some fractional gains on the dow and weakness in the nasdaq, many long-term bulls are falling in love with defensive stocks. cnbc's matt nesto now looking at just where the love is strongest and weakest. matt? >> it's interesting, maria-n moments like when th when the leaders and the strength and technology shares turn a losing day into a winner, you're going to see that defensive position harder to justify. we talked a lot about the vix and sort of the defensive indications that that might carry as well. but the reality is that when you look at this sort of analysis on a sector by sector basis stam

stovall of the strategists room s&p went right in and he looked at the sell side buy, sell, and hold numbers for the different sectors and what he fnd out is health care, which has been the greatest underperformer since the trough in the market, is actually the most loved on wall street just by the sheer percentage of buys. so if you take a look at what i'm going to call the love-hate relationship, sam uses the s&p 1500, which is the amalgamation of small karngs mid cap, and large cap s&p indexes, 400, 500, and 600. 43% love buy ratings within that index. and only 8% sell or underperform. whereas the health care the most loved sector 51% versus that 43 in the s&p and only 5% also noted. the flip side, the most hated, not surprisingly, would be the financials. only a 30% love ratio in the s&p 500 analysis, or 1500, excuse

me, with 12% hated which was also the high there. the healthy, wealthy, and wise picks within health care include names like davita, for example, doing very, very well here. they do kidney dialysis. allerg allergan. merck. c.r. bard, a medical equipment maker. all very, very strong in the near term. maria? >> matt, thanks very much. healthy, wealthy, and wise. what did ben franklin say? >> i do not remember. >> early to bed, early to rise makes a man healthy, wealthy, and wise. what are you doing for the second half of the year, dan? how do you see things playing out? how do you want to be investing second half? do you agree with eric, who just said flat next six months? >> no, i actually don't. i think we've had a lot of green shoots talk. now the question is do these green shoots turn into yellow weeds or do they actually turn into good flowers, and i think earnings season's going to start to break that out. i think what you're going to see

in technology is a lot of these companies actually starting to perform better. they got the best balance sheet cash flows out there. i think you're going to see numbers actually starting to move up. areas like semiconductors in particular. i'm having a hard time finding any company that will -- having said that things like heavy machinery, guys who produce trucks or tractors, et cetera, i think you're going to still have some issues with a lot of those areas that rely on credit for growth. so i think you're going to start to see now earnings starting to drive the market versus just sentiment of it's a buy, it's a sell, which is what you've been seeing so far. >> you make a good point. because it's really been about strong balance sheets. that's why some of the companies that were able to raise an enormous amount of capital did sell well. because people are saying you know what, that's going to be a survivor. okay, so there's trouble and noise around the company now, but i know it's a survivor in the long term. so is that where you want to be looking, healthy balance sheet? >> i think you want to be looking at healthy balance sheets primarily. and i think the bad thing is that some of the companies that people think are healthy today like some of the banks, you know, a lot of -- there's a lot of commercial real estate that's still got to get refinanced pape

couple of trillion dollars over the next two years. >> that's what i'm worried about too. >> i don't think that's over yet, and i think in the back half of this year we're going to go from worrying about citicorp to worrying about a lot of the regional banks. you can't bail every one of them out. >> that's the thing. because a lot of companies have exposure to the commercial real estate market you that don't necessarily think of right off the bat. and so if we were to see a real shoe to drop this is going to be broad-based impact. >> and i think it will make people rethink, oh, well, are these banks really safe? and if they're not then where does credit go from here? because you can't keep running $2 trillion deficits forever. so at a certain point you have to feel like the system can stand on its own. and if it doesn't at the end of this year i think that's what's going to medicate first half of next year really ugly. >> what do i want to avoid in this market? >> i think you want to be very careful about the financials. i think in the back half of the year. i think people are starting to figure out there might be another shoe to drop. i think the industrials for right now are tough. but i think things like commodities i think will start to improve just because so much

supply has been stripped out of the system. and i think tech will continue to do well because you know, what those names, rock solid balance seitz, no question about survivability. >> so is that what i need to be looking at in terks those companies that are rock solid in terms of the balance sheet? >> yeah. >> because for example, you look at a microsoft. $40 billion in cash or something mind-boggling like that. the number is unbelievable. but that stock hasn't done anything in five years. >> well, but look at it over the last couple of months. that stock's one of the best performers in all of nasdaq. and they have a new product cycle coming. i think they also have a lot of cash, which doesn't matter in a good economy. in a bad economy you can swoop in, pick off companies that you think are injured, damaged, and get good values for it. and that's why you're seeing the m&a activity many pick up in a lot of tech. even hostile bids. you saw this with broadcom recently. i think you're going to see a lot more of that in the future. that just speaks to how strong a lot of these names are. >> where would consolidation be likely in technology right now? is there a trend in terms hardware, software, whatever

sectors, subsectors within technology you that see the consolidation will take hold? >> well, i think the big trend you're seeing is the hardware and networksing spaces increasingly it's getting harder to tell them apart. you're also seeing the pc and the cellular industry starting to converge. is apple a pc company or a cellular company? well, it's a little bit of both. you're seeing dell talking about getting into doing some acquisitions as well. so i think those are the areas and software's just going to continue to converge down into fewer and fewer places as oracle keeps consolidating and others join in as well. >> really great conversation. dan, we've been privileged to have your brilliance for the last hour. thank you very much. >> thank you for having me on. >> dan niles, co-cio of alpha one capital partners at the nyse. come back soon when you're back in new york, dan. >> appreciate it. >> up next the closing countdown, and then right after the bell an exclusive interview with california's straight treasurer. bill lockyer. he is my guest. find out if he thinks investors can regain confidence in the state if a balanced budget is filly pass. where are ? ♪

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stronger in these final moments of trade. but they've mostly been stronger throughout the day's session. some of the less risky assets out there, the so-called consumer staples firming up throughout the day's session from kellogg's to kraft, as well as a number of the names here on the dow. kraft, coca-cola, mcdonald's, procter & gamble, all of these names been stronger throughout the session. the drag has been the commodities names. as we know, oil prices down today almost three bucks a barrel. 64.05 the close at the nymex. and here what we see as negativity across the board. freeport mcmoran. u.s. steel. alcoa. that name taking a big hit ahead of earnings. they come out on wednesday with that earnings story, and what we'll be looking for is not only a demand picture. how are people reacting? how is the universe reacting to demand for aluminum as well as other commodities? but the pricing picture going forward for the second half of the year. there's the