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Good Data, Bad Results; Cash Crunch; Placing Blame

Emrah Turudu | E+ | Getty Images

Recapping the day's news and newsmakers through the lens of CNBC.

The Devil's in the Data

Notes:

Pretty good news across the board with Thursday's economic data. Too bad stocks were hammered.

Factory activity in the mid-Atlantic region—a good proxy for economic health—was up in June to its highest level in two years on surging new orders and job growth. And sales of existing homes were up more than $5 million for the first time in over 3½ years. Sure, first-time jobless claims were up more than expected last week, but that's not so much as to signal a shift from a slowly improving employment market.

Chairman Ben Bernanke has said that the Fed needs to see definite signs of economic and employment strength before it starts to taper its bond buying; could this be it? If so, good news for the economy appears to be bad news for shares, at least for now. Indeed, all the major stock indexes were down big Thursday. But it might not be too long before the good news takes hold.

Quotes:

"There is an interesting dynamic that's already taking place right now, which is this: The Fed is telling you they're going to keep buying. The market hears taper and basically sees the end of buying and starts to price in rate hikes maybe sooner than expected. My question is this; which wins that battle? It's the market's fear over rate hikes versus the Fed's actual cash in the market."—CNBC's Steve Liesman

"There are four reasons to expect the economy to look a lot better in the second half of the year. We have continued job growth, a housing sector that continues to improve, we also have an energy sector that's just beginning to scrape the surface in terms of growth it can provide and manufacturing is poised for a recovery as well. I think the timing of Bernanke comments yesterday fits pretty well with where it looks like the economy is going "—Ward McCarthy of Jefferies & Co.

Seeking Refuge as Markets Are Hammered

Notes:

With tapering on traders' minds, a possible cash crunch in China with the dramatic rise of its benchmark rate and an end to the bull run in bonds, where should investors ride out the storm?

In bonds, going short duration, high quality and taking advantage of a rising rate environment with an ETF that can offer that kind of exposure could be the best route. The Treasury market, along with high-quality mortgage and corporate bonds are likely to feel pressure, but opportunities could be found in bank loans andhigh yield.

For stocks, quality names in financials, technology and housing could be the best way to go.

What is clear is that rising rates are the biggest contributor to volatility, and bonds will need to stabilize before the stock market can stabilize. Once they do, though, it could be a major buying opportunity.

Quotes:

"We think at this stage we're moving towards a new interest rate paradigm that investors warned for a while now and we've been expecting this move. We think the yield curve is going to start to reflate and I think we're in [a] different world at this stage of maybe the new, new normal."—Michael Temple, Pioneer Investments

"Most people are still invested in equities in larger parts of their portfolio. I think this is an opportunity to get the higher-quality part of the equity market. Look for higher return on equity, higher return on asset and if you can use less leverage than the S&P 500. That should work in an environment where rates back up."—Luciano Siracusano of WisdomTree Investments

Boehner Blames Bernanke

Notes:

Speaker of the House John Boehner blamed Fed Chairman Ben Bernanke for the selloff in the markets, but put even more responsibility on the government for not doing what is needed to fix the tax code and create a better atmosphere for organic economic growth.

Quote:

"The selloff is in large part due to the policies that we've had coming out of the Federal Reserve. You know, you can't continue to deflate our money and deflate it and deflate it, have the equity markets go up without some change. Now, Bernanke has made it clear, he's doing these policies in the absence of the government doing its part to help improve our economy. That's why Democrats and Republicans here on Capitol Hill and the president need to fix our tax code—that would help promote more economic growth and deal with our long-term spending problem."—House Speaker John Boehner

Gold Dusted … for Now?

Notes:

More and more investors are giving up on gold as its price fell below $1,300 an ounce Thursday. Why? Who needs an inflation hedge when there's no inflation? Of course there are different opinions: One gold bear says sentiment has changed, at least in the short term, and a gold bull thinks tapering is a pipe dream because the U.S. is headed back into recession.

Quotes:

"Most of the reason why people got into this trade was because five years ago people started to see the printing presses go on and felt inflation would kick in. Well, it never really happened. People basically were giving up on the trade and that's what you're seeing. You saw it in April and you're seeing it again today when we got this report and the news that Bernanke was indicating tapering."—Thomas Vitiello of Arum Options Strategies

"They think the Fed is going to tighten. They're not. In fact, the next move from the Feb is to expand QE. They're not going to taper it. The U.S. economy is going back into recession. The phony recovery the Fed created is evaporating before its eyes. Interest rates are rising."—Peter Schiff of Euro Pacific Capital

Cisco's Tax Snafu

Notes:

This probably won't come as big news, but another American CEO has said that the U.S. tax system is broken. This time, it's Cisco Systems' John Chambers, who said that because of the U.S. tax code's inefficiencies, the company is unlikely to repatriate some $47 billion it holds in overseas profits. Instead, the company has increased its overseas acquisitions. Cisco, along with Microsoft and Apple, are lobbying for a tax break similar to one President Bush allowed in 2004, which let companies repatriate profits at a discounted rate.

Quote:

"The U.S. tax system is broken. We have waited for four years for this almost $50 billion that we have got overseas to come back. We are assuming that is not going to happen. We do not think we are moving with the speed needed. This is where tax policy can determine where you grow and where you don't."—Cisco CEO John Chambers

Facebook Catches Up

Notes:

Facebook made its big announcement Thursday, and the news is—as expected—the launch of short-form video for Instagram. Users can post up to 15 seconds of video using the usual Instagram filters (compared with 5 seconds for Twitter's Vine).

Quote:

"This has been long anticipated, and this is really a move from Facebook to try to catch up with the popularity of Twitter's Vine video-sharing system, and also to really get into this video space, which is very valuable, considering how valuable video ads are now."—CNBC's Julia Boorstin

—By Doug Cubberley, Special to CNBC.com.

Market Insider with Patti Domm