HIGHER THIS AFTERNOON, EDGED

HIGHER BY ENERGY SHARES.

STOCKS,IGHS ACROSS U.S.

BUT IS THIS STILL A HEATED BULL

RALLY?

WE WILL GIVE YOU THE EVIDENCE

AND LET U.S. -- LET YOU DECIDE.

JOE: PLUS, A NEW KIND OF

GLOBALIZATION.

MARK: AND WE WILL LOOK AT THE

RESULTS FOR WALMART MEAN FOR

RETAIL.

SCARLET: WE BEGIN WITH OUR

MARKET MINUTE.

OIL AND HEARD A BULL MARKET.

IF YOU LOOK AT EQUITIES.

IT WAS KIND OF MEANDERING FOR

MUCH OF THE DAY.

JOE: MEANDERING IS RIGHT, BUT I

WOULD SAY IT'S A CONTINUATION OF

WHAT WE SAW DURING THE FED

MEETINGS YESTERDAY.

ESSENTIALLY, IT WAS A

SLOW-MOTION CONTINUATION.

MARK: I THINK MEANDER IS A GOOD

WORD FOR STOCKS.

I WANT TO START WITH A GROUP

THAT LED THE MARKET HIGHER.

WE TALKED ABOUT OIL GETTING INTO

A BULL MARKET.

HERE WE GO.

THE ENERGY INDEX HAS BEEN A

PRETTY BIG PART OF THE RALLY.

YOU CAN SEE HOW MUCH IT GAINED

TODAY.

IT WAS UP 60 BASIS POINTS AT ONE

POINT.

HIGHER, NOTMARKET

AS MUCH WEIGHT ON THE S&P AS IT

USED A HAVE, BUT STILL AN

IMPACT.

WE HAVE UTILITIES AND

FINANCIALS.

THE TWO THAT MAKE

HEADLINES EVERY DAY.

IT DEPENDS ON HOW THE MARKET

FEELS ABOUT INTEREST RATES RIGHT

NOW.

RIGHT NOW, WORK EXPECTATIONS

HAVE GONE DOWN.

FINANCIALS STILL HANGING IN

THERE.

I HAVE TWO COUP KIND OF FUN

STOCKS THAT POPPED UP TODAY.

STOCKS -- WE GOT

NEWS TODAY THAT PRIVATE PRISONS

WILL SHORTLY BE NO MORE OR AT

LEAST CEASED TO EXIST IN THE WAY

THEY DO NOW.

THE PRICE OF PRIVATE

PRISONS GOT CRUSHED.

DAY ON THE QUIET

GOVERNMENT BOND MARKET,

CONTINUING YESTERDAY'S TRENDS.

AND 10 YEARAR

YIELDS AS EXPECTATIONS OF SAID

POLICY CONTINUE TO EASE.

EASE, ANDONTINUE TO

THE DOLLAR DECLINED AS WELL.

THE POUND WAS A BIG JUMPER AS

HARD DATA OUT OF THE U.K. SHOWED

ONCE AGAIN THE ECONOMY HOLDING

UP BETTER THAN EXPECTED AFTER

THE BREXIT VOTE.

YOU TALLIED UP,

INFLATION, UNEMPLOYMENT CLAIMS,

AND RETAIL SALES HAVE ALL DONE

BETTER THAN FEARED.

THE YEN IS CURRENTLY BELOW 100.

YOU CAN SEE THE HEAD AND

SHOULDER PATTERN OUT THERE.

THE NECKLINE THERE, AND

FXORDING TO BLOOMBERG'S

CURRENCY TOTHE NEXT

WATCH IS DOLLAR-YEN.

JOE: BOYLE IS UP 30% ON THE AIR.

IT FELT LIKE JUST A FEW DAYS AGO

WE WERE TALKING ABOUT THE OIL

BEAR MARKET.

NOW, IT IS BACK IN A BULL

MARKET, UP 22% FROM ITS LOWS AT

THE BEGINNING OF THE MONTH.

IT IS AMAZING TO ME HOW FAST THE

STORY CHANGES.

JUST A FEW MONTHS AGO, WE WERE

LIKE, THERE IS ALL THIS SUPPLY,

INVENTORY, SPILLING OUT OF THE

TANKS.

SAW WHAT HAPPENED

EARLIER THIS YEAR ON

SPECULATION.

MARK: IT'S A PRETTY BIG MOVE ON

HOPE.

SCARLET: YOU JUST NEED PEOPLE TO

BELIEVE IN IT.

THAT IS YOUR MARKET MINUTE.

LET'S TAKE A DEEP TIES INTO THE

BLOOMBERG.

YOU CAN FOLLOW THE FUNCTIONS AT

THE BOTTOM OF THE SCREEN.

TRY LOOKING INTO THE RETAIL

RUMBLE.

TARGET SALES DISAPPOINTED IN THE

COMPANY SAID U.S. SHOPPERS ARE

CAUTIOUS.

MEANWHILE, WALMART SAID

CONSUMERS ARE OK.

WALMART SHARES HAVE OUTPERFORMED

TARGET, AND YOU CAN SEE IT IN

THE RELATIVE SHARE VALUATION.

, SHARES LINE GOES UP

ARE INCREASING.

RIGHT NOW, WALMART'S SHARES ARE

AT A 20% PREMIUM TO TARGET

SHARES.

>> EACH HAS ITS OWN ISSUES.

LISTEN CAREFULLY WHEN

SOMEONE SAYS CONSUMERS ARE

CAUTIOUS.

MARK: TARGET IS STILL TRADING

BELOW AVERAGE.

SCARLET: GOOD POINT.

AT INITIALOOKING

JOBLESS CLAIMS AS I DO EVERY

THURSDAY.

THEY KEEP IMPROVING.

THE WHITE LINE IS NOT JUST

SEASONALLY ADJUSTED CLAIMS.

THE DOTTED LINE IS THE MOVING

AVERAGE.

MOVING OUT TO GET A BROAD TREND.

ANOTHER POST CRISIS LOW ON THIS

MEASURE.

WE JUST DON'T SEE ANY SIGNS OF

LABOR MARKET WEAKNESS.

IT GOING TO BE A

BIGGER DEAL WHEN THE LINE STARTS

TO MOVE UP OR WHEN IT STARTS

FALLING?

JOE: IT TICKS UP FROM TIME TO

TIME, BUT THE DEGREE TO WHICH IT

IS CONSISTENT IS PRETTY

ASTOUNDING.

MARK: IT LOOKS LIKE THE WORLD'S

MOST BORING ROLLER COASTER.

JOE: GOOD ONE.

MARK: I AM GOING TO LOOK AT A

CHART THAT LOST, BUT I AM GOING

TO DOUBLE DOWN, RMB ON THE US --

RESEARCH AND DEVELOPMENT ON THE

S&P 500.

I AM LOOKING AT THIS WITH THE

HELP OF MY COLLEAGUE, KEVIN

KELLY.

WHAT HAPPENS WHEN

COMPANIES AREN'T SPENDING AS

MUCH AS THEIR PROFIT MARGINS ARE

FALLING.

WE ARE BASICALLY SHOWING PROFIT

MARGINS GETTING THINNER AND

THINNER.

THIS IS A NORMALIZED CHART BACK

TO 2014.

PROFIT MARGINS HAVE SHRUNK BACK

TO 14%.

ONE THING HAS EXPANDED QUITE A

BIT, AND THAT IS RESEARCH AND

DEVELOPMENT.

YOUR BALANCE ON

SHEET AND WILL EAT AWAY THAT

PROFIT MARGIN.

MAYBE COMPANIES WILL BE

REASSURED THAT THEY ARE SPENDING

A GOOD BIT ON RESEARCH AND

DEVELOPMENT.

JOE: MOORE AND MCCARTHY JOINS US

NOW.

THANK YOU.

HAVING A BIT OF A RALLY

HERE, NOT HUGE.

WHAT DID YOU LEARN YESTERDAY

FROM THE FED AND WHAT IS THE

CORRECT INTERPRETATION?

>> THE FED IS IN NO PARTICULAR

START RAISING

RATES.

THEY DO SEEM INCLINED THAT THEY

WOULD LIKE TO GET A RATE HIKE IN

BY THE END OF THE YEAR.

THE MINUTESTHING IN

THAT SUGGESTED IT WOULD HAPPEN

AS EARLY US UP AMBER.

THERE IS STILL A WIDE RANGE --

AS SEPTEMBER.

THERE IS STILL A WIDE RANGE OF

INTERPRETATION ABOUT THE

ECONOMY.

THEY ARE STILL TRYING TO FIGURE

OUT WHAT, IF ANYTHING, BRAGS IT

MEANS FOR THE U.S.

FROMHEY ARE STILL SMARTING

THE SPRING, WHEN THEY THOUGHT

THEY WOULD BE ABLE TO RAISE

RATES, AND THEN DEVELOPMENT

PREVENTED THEM FROM DOING SO.

THE RISKS OF BEING LATE ARE NOT

AS BAD AS THE RISKS OF BEING

EARLY.

M.O.IS THEIR AMMO --

NEW NORMAL SAYS THE

MEANS ONLY 80,000 JOB GAINS

NEEDED PER MONTH.

DOES THE MORE HAWKISH FED

DOVISHN THE HEELS OF

MINUTES THREE WEEKS AGO TELL YOU

ABOUT THE FED'S CONFIDENCE IN

THEIR MODELS?

>> I THINK WHAT THE FED IS

TRYING TO DO RIGHT NOW IS WALK A

FINE LINE BETWEEN BEING

OPTIMISTIC ABOUT THE ECONOMY --

BECAUSE WHEN THE CENTRAL BANK IS

OPTIMISTIC, IT'S EASIER FOR

PEOPLE IN THE MARKET TO BE

OPTIMISTIC, BUT AT THE SAME

TIME, STILL VERY CAUTIOUS,

BECAUSE THEY DO NOT WANT 2-D

RAIL WHAT THEY HAVE ENGENDERED

THAT WHICH IS A RECOVERY

HAS LASTED QUITE A LONG TIME.

KEEP IN MIND, WE HAVE JACKSON

HOLE COMING UP, AND IT SEEMS

LIKE THE MESSAGE FROM JACKSON

HOLE IS GOING TO BE THAT THE FED

WANTS TO RESET THE FRAMEWORK IT

USES FOR IMPLEMENTING MONETARY

POLICY.

THAT'S ANOTHER REASON IT'S A

LITTLE DIFFICULT TO DECIPHER

WHAT THE MESSAGE IS BECAUSE IT

SEEMS LIKE THEY ARE CHANGING

THEIR VIEW OF THE WORLD AND

CONSEQUENTLY HOW THEY WANT TO

AFFECT THE WORLD.

ARE LOOKING AT A FEW

METRICS HERE THAT THE FED

CONSIDERS INFLATION.

AVERAGE HOURLY EARNINGS.

EVERYTHING IS TRENDING UPWARD

OVER THE PAST YEAR, GETTING

CLOSER TO WHERE THE FED WANTS TO

BE AS WELL AS JOBLESS CLAIMS

STABILIZING AT A LOWER LEVEL.

IF YOU LOOK AT NOW VERSUS LAST

YEAR, THE PROBABILITY OF A HIKE

.AS SO MUCH HIGHER

IS THERE SOMETHING WE ARE

MISSING?

>> I THINK THE MARKET HAS BEEN

LEARNING FROM FED BEHAVIOR.

THE FED TOLD US THEY WOULD RAISE

RATES FASTER AND MORE OFTEN THAN

HAS ACTUALLY OCCURRED.

.ARKETS TEND TO LEARN BY DOING

SAID FUNDS FUTURES CONTINUED TO

PRICE IN A RATE HIKE THROUGH THE

END OF 2017, WHICH IN THE VIEW

OF BUILD DUDLEY IS BEING

SOMEWHAT COMPLACENT, BUT ON THE

OTHER HAND, JAMES CAME OUT AND

SAID HE THINKS THE FED SHOULD

ONLY RAISE RATES ONCE OVER THE

NEXT TWO YEARS, WHICH IS

BASICALLY TELLING THE MARKETS

THEY HAVE IT RIGHT.

UNTIL THEY COME UP WITH A

UNIFIED MESSAGE, I THINK THE

MARKETS ARE GOING TO CONTINUE TO

TRADE OFF PAST BEHAVIOR, WHICH

MEANS THE FED WILL IMPLEMENT

HIGHER RATES SLOWER THAN THEY

SAID THEY WILL END LATER THAN

THEY SAID THEY WILL.

OF COURSE, THERE IS A

LOT OF SKEPTICISM OUT THERE

ABOUT HOW EFFECTIVE MONETARY

POLICY IS IN THE U.S. AND AROUND

THE WORLD.

PAUL KRUGMAN TOLD

US.

>> THERE'S AN ACCUMULATION OF

EVIDENCE THAT MONETARY POLICY IS

PRETTY INEFFECTIVE.

FOR A WHILE, WE CAME INTO THIS

THINKING 0% RATES WERE

INEFFECTIVE.