tv Power Lunch CNBC April 23, 2012 1:00pm-2:00pm EDT
netflix earnings after the bell tonight. that does it for us. don't forget to catch more "fast money" tonight at 5:00 p.m. follow me as always on twitter. "power lunch" is all over the market selloff as well as the walmart story and it begins now. thank you, scott. three hours to go in the trading day. it's feeling a little like ground hog day. a european government is out. another is back in recession. and the markets are selling off. is this a time to buy or a time to run? >> start taking a hit on allegations of corruptions of dealings in mexico. what does it mean for other companies trying to grow outside the united states? >> and don't forget earnings. we have netflix today. apple tomorrow. we will tell you what to watch for. i'm brian shactman with the lovely sue herera and the charming and whit ty simon hobbs. "power lunch" begins right now. after the markets have been selling off since the opening bell after a series of negative headlines out of europe while
we're off the lows of the day we're down about 40 points plus on the s&p. the nasdaq down a quarter. the pulse of the market slowdown in europe worries has oil and gold trading lower. wti down 1.25% and gold down $10. the volatility index about the only thing in the green right now. 11.3%. dipping back below 20, was above it for a good portion of this session. now to our midday movers, kellogg getting hammered after cutting its outlook. more on that in a few minutes. sun trust up 3.75%. they reported strong earnings and microsoft reporting just in the last hour selling patents to facebook. we'll have more on that later. it's down more than .75%. we want to get to the trading floors. we have full team coverage of this selloff. bob pisani at the nyse, sharon epperson atd the nymex and seema mody at the nasdaq.
we begin with bob. >> the french elections doesn't matter who is the president. the french have rejected austerity. going to be tough there to get the necessary reforms that europe needs to get through. here in the united states not so much in the way of a panic. look, here's the bottom. right around noontime right with the european close we've been moving off of that. not a lot of big selling. not a lot of big volume going on here. look at the major risk-off factors here. you see materials down. interestingly consumer staples equally weak today. consumer discretionary down and industrials as well. my key point, brian showed you the vix. you don't want to look at the price spot on the vix. put up some vix numbers today. here's your spot down 11%. that's not the big number here you want to watch. you want to look what's going on on the curve. may, june, august. these are vix futures. not down that much. 2% declines. if there was some world changing event going on in france and the universe was panicked, you would
see these numbers going way, way up. normally the vix the cash is up on mondays for various technical reasons. if the rest of this was really a panic, you'd see all these numbers go up. that's making the markets calmer today. sharon, of course, we see weakness in commodities. >> risk-off is the key phrase i'm hearing on the floor, bob. we are looking at lower prices pretty much across the board in the oil market and many traders are saying the eurozone worries definitely a factor. the data out of china another contributing factor to the lower energy prices. and of course we've seen hedge funds cutting long positions as well in energy markets and other commodities. keep in mind as well as we look at prices, the price action could fall below the $100 a barrel mark for wti. that's what traders are talking about. they're also talking about the fact that gasoline futures have fallen some 30 cents in the past month. and right now we're looking at prices at the pump that are below where they were a year ago. the first time that's happened in about two and a half years. finally, natural gas, that is back above $2.
and we have seen a nice surge here in natural gas. remember the contract expiration on thursday and the fact that a lot of folks may be covering their shorts ahead of that expiration, that may have more to do with what is happening to natural gas more so than some of the weather forecasts calling for above normal temperatures in the month of may. seema, over to you at the nasdaq. >> sharon, we're seeing a selloff in tech. that's impacting the nasdaq as well as the nasdaq volatility index. check out this chart. it's been running at a discount to the vix over the past year. but just in the last week we've seen the nasdaq volatility spiking and trading above the vix. that's basically telling us that traders are expecting, anticipating, more variance, more ups and downs in tech than the overall s&p. now, some of the reasons include disappointing tech earnings and the sharp move in apple. investors rotating out of the gains they see in apple ahead of earnings. and going into these defensive names which we've seen today. fear of course also creeping back into the momentum high beta
names check out first solar, baidu. sue, back to you. >> seema, thank you very much. europe is really moving today's selloff. three drivers to keep in mind. first, the french elections. president nicholas sarkozy fighting for his political survival after his main socialist rival won the first round of voting. second, the dutch cabinet resigned after austerity talks collapsed. and spain plunged back into recession after the economy there contracted for a second quarter in a row. and, simon, it's always great to have you on the show but particularly today because of your very interesting and unique perspective on europe. of those three factors, is there one you think should carry more weight than the other? >> it's quite clear spain is the pressure point. you can see that because of the yields at the moment. there are two very common themes running through all of them. look at growth. if you look at the survey data, the indication is that the recession in europe may be worse than we thought. and you know how that will impact the ability to repay
debt. and secondly, the wild card was always going to be the politics. will the people of europe continue to vote for austerity? and as those big elections come up increasingly they're beginning to splinter. so you see it in france, you see it in greece, which also of course goes to the polls importantly in two week's time on the same day as the second round of elections you have in france. and now you have the netherlands, which of course is part of that tight core. and the question -- what i mean by that is of the aaa rated those that have been lecturing everybody else. if the dutch are going to be peeled away now from that central core as they appeal to an anti-islamic group within their own country, then obviously we have a difficulty. >> what about possibility of a downgrade? you mentioned it earlier this morning. the aaa rating in the netherlands. the dutch have always prided themselves on that. it's been one of the places that money that has flowed within europe because of the aaa rating. do you think that's in danger now? >> i think longer term all of them are in danger. last week we had a rumor france would be downgraded again.
of course that's quite possible and quite likely. i don't think they'll do it in advance of the elections. i think that's too political move for the rating agencies to do. having said that for the dutch election we may have to wait until september or october. maybe there is potential for time to throw that up. it's not good. >> no. >> sorry. >> no. it's not good. not in any way, shape or form. especially with all three coming together on the same day. let's head to brian at the stock desk. got a cnbc market flash. what are you watching right now? >> we're focused on walmart and walmart mexico, sue. let's take a quick look at the intraday and see if the selloffs are holding up. we had about two and a half plus hours to the close. walmart intraday obviously the weakest in the dow and dragging it down by several -- i think 25 points or so now. take a look at walmart to mexico down 12%. obviously very much focused in that country. the "new york times" allegations of bribery.
we'll see what the statute of limitations are. easily today it's a sell on those names. back to you, simon. thank you, brian. walmart is the story leading our power surge today. damaging allegations of bribery by walmart's mexico unit. we're covering this major story from every angle. our chief international correspondent, michelle caruso-cabrera, you guessed is in mexico city. we begin with courtney reagan at a walmart store in syracuse, new jersey. investors are clearly angry, courtney. are shoppers still shopping? i assume they are. >> they are, simon. it appears shopping as usual here at the walmart. and many of those that we spoke to weren't even aware of the bribery allegation against the world's largest retailer. when we told them, one common theme emerged. no one was really surprised. and despite many wanting to shop elsewhere, it's the low prices that bring them back. >> it's lalmost like you really have no choice these days. walmart is everything.
>> i still don't want to shop at walmart. like i said. it's just unfortunately there's no way around it. they undercut everybody. that's how they are. >> they have to really do something to me wrong directly for me not to go there. >> well, analysts think the serious allegations could be an overhang on the stock. none of those covering walmart have made any cuts as a result. citi believes the retailer is dedicate today a thorough and transparent review and recommends buying on weakness. there's no impact on the fundamentals in the company but a management shakeup could be. deutsche bank's chuck thinks it will be harder for walmart to sweep under the rug. foreign malpractice cases are expensive. jail time isn't completely out of the question for a number of those implicated executives both current and former. sue. >> courtney, thank you very much. and now let's go to michelle caruso-cabrera. she's done extensive reporting
in mexico on business and how it's done there and on the culture there. she joins us now from mexico city. michelle, what's been the reaction from mexico city? >> well, from business leaders some have shrugged their shoulders. some surprised a company like walmart would be accused of such a thing. but paying of bribes nobody was surprised that i spoke with. they felt it was business as usual. let's show you the mexican stock exchange. brian highlighted how walmart of mexico is trading. it's well off of its lows but still down 12% and the second largest stock. so as a result we see the mexican lower by more than 1.5%. it had been down almost 2.5% earlier. as walmex came off lows it's improved. if you read the "new york times" article they clearly focus on a man called eduardo castro white. he's now the vice chairman of walmart in the united states.
david faber actually got to sit down and talk with him last time he was updating the walmart documentary. we listened to the interview to see if we found anything interesting or telling. we found this particular sound bite when david asked him about the remodeling of the stores and he invoked the spirit of sam walton. >> what we're doing is we're being pretty much the way sam walton would like us to be in and the way he would like us to do things. >> he did not respond to requests for discussions or e-mails or comments. and once again, sue, the lack of response is almost startling. very few newspapers have actually covered this story. it's not the lead story on the newscasts either. that's how common they find this. >> amazing. one could assume it would probably not impact business in mexico either. it doesn't seem to be here in the united states so far.
>> i just spoke with one of the best investigative journalists here in mexico. and he said, look, the statute of limitations on bribery is five years. these are actually very small crimes. he says i can't imagine it will impact revenue in any significant way even though the stock is getting hit hard today. i've heard that from other leaders here as well. >> michelle, thanks very much. onto the stacks and facts view. it's the largest retail in latin america. the chain was founded back in 1958. it was called eed cifra then. in 1997 walmart bought up cifra stock and then it was renamed. walmart operates more than 2,000 stores in mexico and employs more than 200,000 people f. you do the math and the allegation is of bribes to the extent of $24 million, it works out at only -- i say only, it works out at $12,000 a store.
>> per store? >> yeah. >> story we're going to continue to follow here on cnbc. also the markets though next on "power lunch" volatility has been soaring today. fears about europe's debt crisis, slowdown in china fueling the selloff. we'll show you some smart ways to protect your portfolio. and as we head out, let's take a look at how the broader markets are fairing from the wall. you can see it is red right across the screen except the utilities not doing as badly. ov, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
welcome back to "power lunch." rick santelli on the floor of the cme group. look no farther than a 10-year note yield to see what the results of elections are. the dutch government potentially breaking down and having to call for new elections. we're only down three or four basis points. but open the chart to february 1st, this is an important area especially considering it wasn't that along ago talking about 2.5%. lowest close since the first week of february. now open the charts towards the stock markets in germany the dax we all know it's the best of breed with regard to europe. the cac french stock market down for the year. this is still up 10%. but look how it's come off. it's now trading at lowest levels since early february. and chart of the bund going back to february. there's only one yield lower and it's just by a whisker and that was around april 10th. we are hovering at the lowest
yields ever in the bund. it's not austerity that's the issue, the issue is insolvency and very few want to vote to be clobbered by austerity with no growth in sight. >> that's it in a nutshell. thank you very much, rick. what rick just outlined has resulted in stocks taking a dive today amid the renewed worries over europe's debt crisis. how should investors be protecting their portfolio right now? joining us is steven wood, chief market strategist with russell. quincy, i'm going to start with you because your expertise is also in emerging markets. you studied them for many, many years. give me your read on what's going on in europe. and if indeed spain is back in recession as they say they have, how big an impact is that going to have on u.s. investors? >> well, it's going to have an impact on a number of levels. one, if it turns into a credit stress crisis as what we had last summer, it's going to cross over to the united states. and we'll be watching the credit markets get very nervous.
right now it's still at bay. so it's not that bad. the other thing is however when you have a major slowdown in growth, we've come out of the downturn with very strong export market. and we need to have our exports attractive and we need global demand. i think it's one of the reasons that we see our domestic market without the industrials moving higher. because it has been based on u.s. growth, not growth outside the u.s. >> quincy, people at home though may smell a crisis in the air in europe and be reluctant to buy, for the moment, if they're sitting in cash if they have that luxury, is that the right way to play it would you say for the moment for the summer? >> well, no. if you're sitting in cash right now, what you want to do is you want to wait for this consolidation to pass. it's always interesting. we always talk about the market needed to pull back. we needed to have a 5% pullback before we would go back in.
then when you finally have it, everyone gets nervous. >> right. >> so let's go constructive on the u.s. market. and we believe wait for some of the diceyness to come out. and i think then you're going to start seeing investors, particularly institutional hedge funds, start working their way back up. retail investors come in and the momentum begins on the upside. that's when they typically come in. >> so, steven, when they do come into this market -- i know you favor u.s. equities although you see value elsewhere in the world, certainly, but you think maybe the u.s. is best of breed. where should they be allocating their money into their portfolio to try and lessen some of the volatility? >> well, that's why we preach these globally diversified strategies to give you the discipline. quincy's right. the only thing that would surprise me would be if we didn't have a 5% or 7% correction in any upward move. look at the united states equity space. fixed income in the united states, not necessarily treasuries.
and that be your base camp. the valuations are still reasonably attractive. the earnings season is still quite strong for many areas of the market. even within europe there's troubled countries on the fiscal side but there's good companies within europe given all the valuations. we get some attractive entrance points. but emerging markets for longer term disciplined investors, look into commodities and emerging markets. we think the globally diversified multiasset risk portfolio makes a lot of sense for a lot of people. especially given liquidity as your benchmark -- >> stephen, where are you in the united states? in particular on the growth and fears that perhaps we're beginning to store and where we are on the earnings revision and the forward looking statements at the height of earnings season? we're going to talk about kelloggs in a minute. >> i think the united states the growth is going to be okay. in that 2.5, 3, maybe a hair
more. nominal gdp won't be very strong. there's not a lot of inflation there. but i think the united states in our estimation avoids a recession. europe is in one right now. our business cycles are highly related but not perfectly related. it could be we avoid a recession. that's our expectation. earnings in 2011 were an all-time record. they're going to decelerate and that, simon, is why you get into a stock picker environment. not all balance sheets are created equal. you need to pick better securities. and over extended periods of time that will bode well. >> appreciate it very much. thank you, quincy. thank you, stephen. >> kelloggs is one of the stocks we're watching today. the stock is under a severe amount of pressure. the cereal maker having outlook for the year and seeing challenges ahead. darren rovell is looking at what's driving that weakness. now a 5.5% loss on the session. >> kellogg's tony tiger says the frosted flakes are great.
the same can't be said for kelloggs today. under revised guidance they'll at best miss previous analyst estimates by 18 cents a share. shares of kellogg again down about 5% today. let's pull you out to a five-day chart to show you the drop. kellogg's has had a rough go in recent years. operating profit has stood stead sdi hovering around $2 billion for the last four years. staple brands in cereal have suffered for a variety of reasons, price pressures, knockoff and cereal isn't what it wasn't once. sales down more than 3%. the most upside kellogg's has breakfast might be the nutri grain brand as the consumer shifts to on the go. what will be the big make or break? they made a big bet buying pringles for $2.7 billion. and one positive sign, symphony says its special k crackers were the fourth best selling new product in supermarket ths year. earnings of course coming out on thursday. we will watch them.
but doesn't look too positive given today's earnings revision. sue. >> darren, thank you very much. as darren mentioned, we do have a lot of earnings driving this week. still ahead on "power lunch," netflix reports its earnings after the bell. we'll show you the key metric that you need to be focusing on. >> and when we come back, the big bet that carmakers are placing in china. china's automaker is the largest in the world, so how concerned should investors be that it's starting to slow down? that story next on "power lunch." this at&t 4g network is fast.
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♪ welcome back to "power lunch." i'm brian shactman with a market flash. briefly a few minutes ago the energy sector peaked into positive territory. the only dow component in positive territory is exxon mobil outperform at raymond james with $100 price target. earlier in the day, simon, we had everything in the red and we have exxon up slightly. >> thank you very much. the world's biggest automotive makers are gathering in china for the beijing auto show.
investing a ton of money there, but would those fears about an economic slowdown in china, what does the future hold for those american carmakers? cnbc's phil lebeau is in beijing. >> here in china there's a lot of talk about auto sales slowing down. but if you talk with the folks at this bmw dealership, they'll tell you they still expect sales to grow anywhere between 8% and 10% this year. at the end of 2012, china will still be the world's largest auto market. that said, things are slowing down. in the first quarter sales dropped 1.3% largely because a lot of incentives out there for new car sales, they've been pulled back. and some automakers have noticed a dramatic decline. ford's sales dropped 13% in the first quarter. but overall analysts are optimistic that u.s. automakers should do well in china this year. >> we did see a pause. and i would characterize it as a constructive pause in the first quarter. but we see 2012 as being another
growth year. not the double digits that we've seen in the past. but healthy growth. >> so what are the chinese buying these day sns well, compacts and sub compacts are still more than half of the sales here in china. as for the local chinese brands, they are improving and getting more sales, but most chinese still prefer foreign automakers. in fact, the european brands seem to lead the way. in fact, bmw in the first quarter sold more cars in china than in the united states. that's the story from here in beijing. back to you. >> phil lebeau there. staying with the auto-related news, dollar thrifty is raising profit guidance for the year. so is eaton after topping earnings estimates. they of course make automotive parts. and a programming note, our very own jim cramer has an exclusive interview with eaton ceo sandy cutler about the latest earnings and outlook. that's on "mad money" tonight at 6:00 eastern. and what may be the most anticipated earnings report of
the week, we're going to talk about that next on the program. all right. we're going to say -- we can get you ahead of the stock of apple. the stock now in correction territory -- she try today say. we'll show you what to watch for. and big companies making a big bet on emerging markets. the investigation into walmart change how things get done? back in a minute.
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welcome back to "power lunch." brian shactman here at the realtime exchange. we've reset the markets for you. we are off of the lows. seeing a little improvement in the major indices. and the vix has eased slightly although up still 11% plus. you see a slightly stronger dollar. we'll get to gold in a second and crude off lows as well. take a quick look at s&p winners and losers here. chesapeake the best performer in the s&p 500. a lot of talk today about regional banks off of suntrust, maybe that's a pocket of strength for u.s. focus and not europe exposed. sandisk rounding out the top five. walmart wier hauser, first solar and kellogg off earnings.
you hear what darren rovell had to say about that. we have gold just shutting down at the open outcry session. sharon epperson at the nymex. gold down about $10 today. >> brian, we've been talking a lot about what has happened in europe and the concerns about a global economic slowdown, china manufacturing data also weak. all of that weighing on metals prices across the board. gold actually is holding up relatively well compared to some of the other metals that we have seen selloff pretty sharply. and it's relatively quiet here in this gold options pit. keep in mind we are looking at pretty big selloffs in silver, copper and palladium down about 2% or platinum i should say down about 2%. we are seeing net long positions that have been cut by hedge funds in the past week. that is part of it. and a big trade, very popular trade has been to short the gold miner stocks and be long the gld. we are seeing that in play as well in this session as that gdx, that gold miner's etf hits a 52-week low, sue. >> sharon, thank you very much.
>> okay. now back to that headline grabbing story in the "new york times" about walmart's business dealings in mexico. since it broke it's had many people scrambling to understand the laws that actually apply. cnbc correspondent scott cohn is here with a breakdown. >> you first hear about a company paying bribes in mexico and tell me something i didn't know. but the fact is u.s. companies paying bribes in foreign countries is flatout illegal and it has been for 35 years. the foreign corrupt practices act makes it a crime for any company, officer of a company, director, agent or stockholder to pay or even offer anything of value to any foreign official to influence their decision making. that's the heart of the act that went into effect in 1977. the law includes stiff penalties, fines up to $25 million per offense and prison sentences up to 20 years. but here's where it gets a bit murky because there are some exceptions. if a payment facilitates a
routine action. something to move the process along, that's okay under u.s. law. if the payment is legal in the foreign country, meaning specifically written into the law, then it's okay for u.s. law. or if it's for a reasonable expense, like travel, that too is legal. but even walmart does not seem to be looking at these narrow exceptions as an eventual defense. in first disclosing the investigation back in december walmart says it is already taking remedial measures suggesting the company knows there was at least a problem. and a much bigger issue if it's true are allegations of a cover-up. prosecutors look at cover ups as evidence of intent. if that proves true in the case of walmart, it would clearly trump any loopholes in the law. so a lot of work ahead for this company trying to contain the damage. >> interesting, scott, stay with us if you would. because as corporate america continues a course to push further into emerging economies, how can business navigate those local laws and avoid foreign corruption charges?
insight now from dr. robert shapiro. sir, welcome to the program. thank you for joining us on cnbc. >> a pleasure to be here. >> it would appear from what scott has just said that actually the type of activity that walmart was involved in where it was essentially paying fixes on the ground might easily in its interpretation have fallen into some of the caveats to be simply facilitating or expediting routine actions. it almost could be legal, could it not? >> well, not if you take the account of the "new york times" seriously, frankly. what walmart was doing or what walmart's mexico subsidiary was doing was paying tens of millions of dollars in bribes in order to expedite a process which normally takes 18 months into about one month. and this was the process of getting approval to open new stores, about 2,000 new stores,
it was part of a commercial strategy to stay out in front of the competition. you know, it's kind of what walmart reminds me of, that is in bentonville, is the investors in bernard madoff. they had this record that was simply too good to be believed. too good to be true. and which is to say a process which they knew took two years repeatedly time and time again was taking one month, six weeks, maybe eight weeks. giving enormous economic advantage. and they said, well, that's just because we're more competent just as the investor said, well, it's just because bernie madoff is smarter. nobody could produce those results. bentonville not only should have known that, but bentonville in 2009 did know it because the facts of the bribes were
reported were investigated by their independent investigators and then turned over to someone -- one of the officials in mexico who are in fact has been implicated in it to resolve it. so there's -- it's a very sticky wicket for walmart here. >> it's a sticky wicket for walmart, but, scott, it's a cautionary tale as well, is it not, for other companies trying to expand into emerging markets, be it asia, mexico, latin america, south america, because timing is key and execution on a timely basis is key? >> right. i mean, companies have to decide whether they want to throw good money after bad. that's really the theory behind the u.s. law. and also a lot of these emerging laws that are coming out. the uk has a law. russia actually has a law now. and the idea is that in the long run the cost of paying this money just to grease the skids is going to be outweighed by all the risks involved and by the
fact you wind up getting addicted to it. and so there is a agreeing consensus now around the world that corruption's not a good thing. wow. and bribery is not a good thing. and there are efforts to reign it in. and companies run a foul of that at their peril as we find out with walmart. >> having grown up abroad, i can say that things aren't as cut and dry as they might appear on capitol hill or in a television studio. as cot eluded to earlier, there's a vast area of grey, is there not? and i think will always be to the interpretation of the person at the cutting edge of that who may find actually that they're locked out of the markets with the incumbents who are already behaving despicably and money going backwards and forwards. it's a nightmare to operate in emerging markets, is it not?
>> it can be. and if the production is e vassive enough, you can't operate economically in that environment even if you grease the skids. the fact is pervasive corruption distorts all market signals. the fact is walmart has been successful in many, many countries without bribery. they didn't need to bribe these mexican officials. the mexican subsidiary or some of the individuals in that wanted not only to an advantage but they wanted to prove to bentonville that they could perform better. and so they greased the skids. but the fact is walmart's own investigators told bentonville that in fact they had a very serious problem. the real question for walmart is when they were told this in 2005, why did -- why were actions taken in effect to close
it down until the "new york times" started to investigate it and then walmart came clean. >> dr. shapiro, thank you for your time. scotty, i wish we had walmart on the program to defend themselves. hopefully that will happen. these are still allegations at this stage. >> in depth coverage and reporting on walmart continues in a special section of right now on cnbc.com. you'll find the latest reporting on the investigation, potential fallout for the company and video clips from key interviews. check it out. >> up next on the program, apple shares in correction mode. off more than 10% from their recent high. we'll have the latest buzz ahead of course importantly, sue, of the earnings tomorrow night. >> indeed. and speaking of earnings, netflix reports after the closing bell. what's the one metric you should be looking out for when those numbers come in? we'll tell you next. hey, did you ever finish last month's invoices?
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world of worry. we span the globe for the hot spots dragging down this market. we also sift through looking for opportunity to put your money to work. plus, a big bold call on oil. one that indeed could have ramifications here and abroad. not to mention the cost of your travel plans. and we just heard from phil lebeau about slowing china auto sales. but he's back with us on "street signs" from beijing with the turbo faceoff for the uber rich. now over to sue and simon on "power lunch." actually, i'll take it quickly. market flash. we've been waiting to see what analysts are going to think about walmart, walmart mexico on all this news. look at walmart demexico. in the last few minutes you have william blare downgrading from outperform to market perform. so analysts haven't said much about the impact on actual business. but one of the few analysts chime in and have a downgrade. thank you very much, brian.
tech earnings on tap with netflix close after the bell today and apple tomorrow. apple is formally in correction mode. the stock is down 10% since hitting an intraday high of $644 per share on april 10th. joining us now is senior editor at all things digital who blogged about netflix today. jon fortt and julia boorstin also with us to talk about those two stocks and more. peter, i'm going to start with you. you did blog about netflix this morning. what specifically are you going to be watching for this stock because it's had a very tough year? >> sure. the number we're going to look for remedially today is domestic streaming subscribers. how many people are paying for netflix in the u.s. to get an $8 a month web subscription. the company says to expect up to 26 million, the number way higher, you'll see the stock move a bit. >> all right. jon, do you agree? >> i do. i also think the streaming margin contribution is going to be important. it was mentioned last quarter as something that was better than expected. they upped their target
suspecting it to grow 100 basis points going forward. are they still that optimistic? i guess we'll see. >> julia, weigh-in. >> absolutely. i think this is the one number that will move the stock today. eps, revenue, those numbers will be secondary. i also think there will be a lot of attention to ceo reed hastings letter to shareholders. he writes these letters talking about everything including competition. we are seeing a lot more competition for netflix not only like comcast but services like verizon and red box teaming up together. and a number of new companies like amazon and dish which are getting into the streaming video business. >> okay. let's change the topic and talk about apple tomorrow night. jon, given the rating that apple now has in the overall market, i guess it goes without saying this is the most important earnings statement of the season. >> definitely very important. and i think unlike some previous quarter, analyst estimates on apple have gotten a bit more
optimistic. often analysts are more muted. i think there's a big question on how the ipad did. if people slowed down their ipad buying ahead of the march launch and the numbers aren't as big as analysts expect, that would have an impact. and then you have the iphone was it 28 million, was it 29, was it 30? those will have a big impact on how well apple does. of course we want to look for their guide in the next quarter as well. >> the problem i guess, julia, is that the market now seems sensitive to anything negative coming out of apple. if they miss on one of those metrics -- >> absolutely. in addition to the iphone 4 sales and ipad, there could be attention on the mac sales. just looking at the computer sales, it's only about 15% of the company's revenue, but that still could be meaningful and there could be a lot of questions about what role the actual computer plays in the company's future. >> you're at the cutting edge on all these tech companies. where are you going into earnings? what in particular do people have to look out for? >> i think we have apple well covered.
if you want a reason to freak out about apple earl lif tomorrow morning look at at&t numbers. you might see commentary there. an extra data point for people to freak out. >> increasingly not be willing to pay subsidies that they'll look elsewhere? or simply at&t won't make the figures -- >> i'm just saying you have one of the major retailers of apple products. last week we heard from verizon saying their sales were soft. that was to be expected. but if you're looking for additional data points in advance of the earnings, there you go. >> julia, you get to weigh-in on the fact that microsoft sent sml like a billion dollars buying 925 patents from aol and now they're selling them -- at least half of them, to facebook. what's behind that? >> they're selling about 70% of them to facebook for $550 million. this to me is a defensive play on facebook's part. facebook is getting sued by yahoo! over patent infringement. facebook knows the patent wars will only heat up and they want
to protect themselves and don't want to be involved in anymore lawsuits. >> peter, do i note a sense of cynicism when you talk about people freaking out? >> no. both netflix and apple are widely held stocks. widely held consumer stocks. great story stocks. they're very volatile. and sometimes we like to impute too much of a reason for them to move one way or another. they're going to move regardless. >> okay. >> thanks, everybody. appreciate very much. coming up next on "power lunch," fears about europe sparking today's selloff. walmart's bribery scandal also pressuring the markets today. >> so what are investors to do? financial advisor will weigh-in on how to navigate these volatile markets. [ male announcer ] while others are content to imitate, we'll continue to innovate. the lexus rx. why settle for a copy when you can own the original? see your lexus dealer.
brian shactman here with a market flash. take a look at best buy. a lot of people looking at walmart to see if there's a pop in some competitors names. almost all the competitors are negative. best buy's up 1.5%. whether it's a walmart reverse move here also brian dunn might get $3.3 million in severance if he's not found to be let go for cause, but best buy is up.
>> brian, thank you very much. breaking news now. let's go to washington live and john harwood. john. >> sue, we've got the release of the trustee's report on medicare and social security. last year the trustees reported that medicare was going to go broke earlier than expectations. this year they say social security, the funds will go broke in 2033, excuse me, that is to say they will be in the red by that point. it's driven mainly by the increase in expenses for disability insurance. this will provide another prod for washington both the white house and congress to deal with our long-term structural deficit because that is driven so heavily, sue, by medicare, social security and the looming retirement of baby boomers, which means we've got to find a way to cut spending, increase revenue or both. >> indeed, john. it certainly makes it more important than ever that people plan very well for their retirement. and the volatility in the markets is not helping them do that. the market's down triple digits today. good earnings aren't enough to beat back concerns over europe.
another reason for already nervous investors to debate whether to get back into this market or not. sharon epperson with a special guest on ways to protect your money and the long-term investments that you may need for your retirement. this news from john harwood, sharon, certainly makes it more important than ever. >> it certainly is more important than ever. i'm here with an exclusive look on a new venture called freeretirementreport.com. the veteran manager here with me to talk about the markets today and what retirees should be doing with their money. we've been talking all morning of course about the situation in europe and the political uncertainty there. and of course we have political uncertainty here in the u.s. how are retirees, boomers, how should they be investing in light of all this? >> obviously this is a quick reassessment of their portfolios. i think the boomer has learned one thing, the certainty of volatility in their performs especially now as we go into an election year. we've been encouraging people to ignore volatility and stay the course. >> tell me about free retirement
report.com. what help can i get now? >> we view as free financial health care for over 70 million baby boomers in the united states. what it is it gives them a free mechanism report on any device, pc or mobile. >> this is also linking them to 20,000 advisors you say? >> correct. we want to create a conversation between 70 million baby boomers and 1.6 million financial advisors in the united states. with our partners we have created a platform where a boomer today can get a report immediately and literally pick up a phone and call a local advisor all for free without any obligation. >> we have to wrap it there. but sue, we did this. i can't retire until i'm 90, but at least i know what i have to do to get there. >> good for you, sharon. we'll both be working in tv when we're 90. coming up, a final check of the moments. "power lunch" back in two minutes time. americans believe they should be in charge of their own future.
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i remember the day my doctor told me i have an irregular heartbeat, and that it put me at 5-times greater risk of a stroke. i was worried. i worried about my wife, and my family. bill has the most common type of atrial fibrillation, or afib. it's not caused by a heart valve problem. he was taking warfarin, but i've put him on pradaxa instead. in a clinical trial, pradaxa 150 mgs reduced stroke risk 35% more than warfarin without the need for regular blood tests. i sure was glad to hear that. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding, and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have a bleeding condition like stomach ulcers, or take aspirin, nsaids, or bloodthinners, or if you have kidney problems, especially if you take certain medicines. tell your doctor about all medicines you take, any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk.
other side effects include indigestion, stomach pain, upset, or burning. pradaxa is progress. if you have afib not caused by a heart valve problem, ask your doctor if you can reduce your risk of stroke with pradaxa. demand media expands on the big board. well, one of the best known and iconic paintings in the history of art, edvard munch
"the scream" could easily fetch $80,000 or more. be sure to watch "power lunch" this friday. we're going to head to zuter byes in new york under heavily armed guards you'll get the very first live sneak peek of the painting that could shutter world records for the most expensive art piece sold. >> well -- >> i'm not sure. >> if i was going to say anything about the last 60 minutes on "power lunch," we've eased slightly in the markets. we're just a touch better than where we started and off the lows. >> look at the market averages. we wanted to give you an overall snapshot. look at crude oil. it's interesting the crude oil market i think sharon mentioned earlier was starting to sell off as well. a number of commodity markets are moving to the downside as well. >> everyone's calling for oil to go below $100. and then it firms up a bit. >> yeah. and then the gold market down $7.60. holding up relatively well given the move to the downside in the market today. and