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tv   Squawk on the Street  CNBC  May 3, 2012 9:00am-12:00pm EDT

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. >> we don't have time for the tipping point on this inflation. jim paulson, thank you very much. >> a great two hours. >> thank you very, very much. >> make sure you join us tomorrow. good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee and david faber live at the new york stock exchange. jim cramer has the week off. let's take a look at futures. that claims number that we've got this morning, not too bad. 365, a little bit below the estimates. basically flattish action here in the states. a lot of attention being paid to the ecb, of course, in europe, holding steady at 1%. spanish auction going okay, selling above the maximum target, although some of the yields in spain were a little higher this morning. >> we begin with the markets. the countdown is on for the jobs
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report tomorrow. will the report be fodder for the q.e. 3 argument? >> a mixed bag for retail sales in april. limited racking up another strong month. costco missing for the second month in a row. >> and general motors beats expectations with its earnings, underscoring strength in the core north america operations but highlighting weakness in overseas market. we'll be speaking with bob lutz. >> and green mountain coffee, investors questioning consumer demand for k-cups and the company's ability to compete with starbucks. some analysts out today trying to defend that stock. claims and productivity, both coming in better than expected this morning. jobless claims dropped 27,000. u.s. productivity fell .5%. and the ecb holding its main
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interest rate at 1% as inflation offset pressure to support the weak eurozone economy. there was a big debate this morning going into the number, the ecb number. what were the odds of a cut? zero, just above zero. clearly they are holding their fire maybe until rates are closer to 7% than 6%. >> or until they positively have to. draghi's still speaking, i believe. simon is listening to mr. draghi. no surprise on that front. the key questions that remain for the ecb are very large, how much more short-term liquidity will they need to inject? and unemployment hitting a new eurozone high, the highest it's been since 1999. we know that. a lot of things on mr. draghi's plate. >> and some of the headlines crossing right now, how we see ourselves in ten years, he also says they're better off consolidating through cutting
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expenses as opposed to raising tax and by investing in infrastructure, that should create jobs. all eyes on that spanish auction, the first auction of long-term debt since that country got a two notch downgrade from s&p last week. it met expectations in terms of the amount sold when you compare it to last month's number. this time around, 3.617. they did sell the amount they wanted to sell. >> and in fact they almost always do. a lot of the banks do step up. the question becomes the secondary market and what we see in those yields. oftentimes a successful auction does not necessarily auger for yields coming down in a significant way. we haven't really seen that. we pay very close attention to that spanish bond market, to the ten-year in particular. >> we'll talk more about the claims number which the job market in this country is as
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clear as mud as somebody said on twitter this morning. but first, mary thompson has breaking news on avon. >> reporter: i'm outside the place where they're holding the annual shareholders meeting here on 59th street in new york city. of course, it comes at a time where there's a lot of controversy surrounding avon, most notably it's nonexecutive chairman who recently stepped down is still at the frm firm. we had the chance to speak with a man named david mitchell who served as ceo and chairman of avon until 1985. and he's a little bit angry that ms. young after stepping down as ceo in december is still at the company as nonexecutive chair. here's what he had to say. unfortunately, we don't have that sound bite from mr. mitchell. but essentially he wants her to go. the problems with avon include this. the company said very poor performance because of weakening sales in some of the more
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developing countries like russia as well as brazil, it's also been -- there are also some allegations with foreign bribery, et cetera. that is the scene-setter for this annual meeting. we spoke to other investors, too. they are concerned about ms. young who served as ceo for 12 years. they basically want her out. very tightly controlled meeting. i couldn't talk to any shareholders inside the meeting. they have just a couple of items on the agenda. we'll have the details. back to you. >> mixed trade in terms of the premarket trade on avon but one we're watching today. let's go ahead to costco, gap and target. sending the stock sharply lower. costco, i know -- carl, you have the chief costco correspondent -- >> you're mr. costco now, like i was with walmart. yours was only recently a great
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documentary. >> the comps are going to get tougher as we go through the rest of this year. they had a very strong spring last year. the summer was incredibly strong. average out march and april, trending with january and february. but there is a larger concern given what target and macy's said today. maybe the mid-tier consumer is having some problems, even though some of the comps of the nordstrom's of the world at the high end are doing pretty well. >> it was the smallest same-store numbers for costco in 32 months. it got downgraded to a hold from a buy at deutsche bank last week. erns about the price cuts the company initiated last spring lasting longer than expected and especially in canada where the company is going to have to go head to head against target. are they going to keep the cost cuts in place? sit going to further contract margins in that area of the world? >> at the sears shareholder meeting yesterday, a lot of talk that costco has been stealing
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share from sears, especially in electronics, right, and televisions, which we all know is a hypercompetitive market space. and the other thing, easter -- april had it last year. this year did not. it's extremely difficult with such a big weekend like that to compare year over year. >> the other one that's worth watching is the gap. there are lots of expectations about a turnaround here at the gap. it was a miss, a decline of 2% in the month of april. analysts predicting a decline of .8%. just last week, janney raised the price target on the gap saying all that colorful denim that david likes to wear on the weekends has helped sales. >> how did you know? >> those orange jeans. >> those are my favorites. >> wait till j. crew starts posting -- they'll be coming to you. >> luckily j. crew's a private
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company. they will be public again. no doubt about it. target do see may same-store sales up in the low single digits. >> and even though lower than expected on the comps for the month, beats the quarter. >> that's true. let's move on to general motors. reporting a first-quarter profit, beat expectations as it was able to boost vehicle prices and cut losses in europe. the stock trading slightly lower premarket. phil lebeau has more on this. >> reporter: melissa, we're talking about a company, rail a tale of two companies, north america phenomenal, europe continues to be a problem. overall earnings and revenue for the first quarter, beat the street reporting earnings of 93 cents a share, eight cents better than expected. by the way, before earning interest and taxes, that comes out to $2.2 billion. on the revenue side, $37.8 billion. slightly better than expected.
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when you look at the two worlds of gm, in north america, phenomenal first quarter earning $1.7 billion. profit margin jumping 1.3% all the way up to 7%. but in yueurope, they lose more than a quarter of a billion dollars. when we talked to the cfo, he is keeping with the company line, which is, they're working on it but it's going to take some time to fix europe. >> i think you're going to see a series of steps as we move through the year, actions taking already along the way, boast on the cost side and on the revenue side. it's going to be a gradual story and gradual progress. >> reporter: and because it's a gradual story, that's the reason why shares of general motors down 30% in the last year. guys, you indicated the stock is probably going to open lower today. what i'm hearing repeatedly from analysts and investors, let me know when you're going to really fix europe. it's not a series of small steps. unfortunately i think that's what we're going to see from gm
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for the immediate future. >> europe is one issue. but some of the guidance for q2, q3 in the u.s. is also getting some attention this morning. >> reporter: right. it's supposed to be in line with the first quarter and a lot of people are saying, are we not going to see any more growth in the united states? and their market share is now at 17.4%. they're making more money per vehicle. but that market share being down that low has people saying it's going to trend lower for the rest of this year. >> i want to bring in bob lutz for his insight. bob, always good to have you. good morning. >> good to be here, thanks. >> are you more -- what's your bigger issue for the company? is it europe or is it -- >> i think this thing is europe is way overplayed. when you put europe in context with the rest of the world, it hardly matters. everybody's having a problem in
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europe. ford is losing money in europe. gm's losing money in europe. fiat is losing money in europe. it's just the general economy. now, gm is not kauai as well positioned in europe because a lot of the costs are in germany and that's the problem that has to be fixed. there is a strategy to reduce the level of employment in germany but obviously the company isn't going to divulge that. >> reporter: what about the rest of this year in north america? dan ammond says we might be nearing the end of price guidance. would you be worried? >> no, i wouldn't be worried. it's not going to be a super year. there's a lot of uncertainty before the election. economic growth isn't very robust. we are seeing some good replacement demand. but the company is moderately optimistic because they have raised the forecast for the year
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from 13.5 million to 14 million. they've raised it to 14 million to 14.5 million. as far as pricing power is concerned, gm is now premium priced to most other manufacturers. chevy cruz, interestingly enough, has an average transaction price that's between $2,000 and $3,000 more than an equivalent toyota corolla. so there's a reversal when an american car is demanding higher prices than its japanese equivalent. >> reporter: bob, are we near the end of the cycle? you know how these cycles go. you have pricing power for the market for a period of time and then it starts to ease back and then you see incentives creeping in. are we near the end of the cycle for the industry? >> no, because the fixed costs -- everybody's fixed costs are lower now. so there is less incentive to just drive volume to keep the plants running because it's so expensive when the plants aren't running. right now, there's a lot of --
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there isn't a lot of free capacity -- production capacity is relatively tight. and there is -- gm is still de-insenting, reducing sales on fleets. cadillac is almost totally out of the fleet business. i think their strategy is the right one. and you didn't mention the market share in april is up versus march. as long as the share is around 18%, 19%, i wouldn't get worried. >> bob, if you can, pull out your rosetta stone for depfeiffering gm speak. when ammond says they still have a long way to go, in your view, what sort of a fight, how long will this fight last? >> it depends on how bad the debt crisis gets in europe and the general european economic recovery. but i think two years is probably a good time frame to look at to get out of that
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problem. >> bob, thanks for getting up early. well, it is 9:13 here on the east coast. talk to you next time. >> okay. thanks. >> bob lutz and phil lebeau, thank you very much for bringing us those numbers as well. there's green mountain coffee in morning. down nearly 40% premarket, trading after reporting first-quarter result that is widely missed estimates on both the top and bottom lines. guidance well below expectations. herb greenberg who's been following the story from the beginning, if there was a beginning, herb has more headlines. >> this may go down as one of the very worst earnings calls i've ever heard. with some variation of the word "understand," used by analysts in the company at least 15 times. the issue here is growth. sales growth tumbled to 37%. that's up. but it was 101% year over year a quarter earlier. and the company also warned of moderating growth going forward. bullish analysts on the call
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actually sounded blindsided. one even said he was confused. the company is on the defensive. here's the ceo talking about visibility. >> we're very positive about this business going forward. but there's a lot of moving parts. and we continue to invest in our abilities to try to predict it. there's just a lot of moving parts. >> a lot of moving parts. and later, here he is talking about k-cup demand. >> we're working it. we're working it hard. i just don't want to go out and communicate that we understand it, and then a quarter from now, have to change that. we're working to try to understand it. >> all of this perhaps gets to the most important question of all -- if the company does not fully understand why the dynamics of the business have changed, why does it continue to offer earnings guidance? guys, it's an interesting
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question. we'll see -- >> herb, it's david back here. what's your best read on what's going on here? in terms of the movement of the stock, we know, incredible momentum stock. it's probably broken now. but what about the business? what's your sense as to what's actually happening? >> david, i think with the business what you're seeing is the dynamics are changing. you have a situation where patents are coming off their k-cups later this year. competitors are already coming into that market. as that happens, margins start to fall. a lot of excess production capacity affected the margin going into this quarter. you've got a business model. the company says it's not broken. you have a business model that certainly is challenged. >> or, herb, maybe the dynamics haven't changed and actually the dynamics are the very same and people are only realizing what a terrible picture it is right now. remember, david einhorn questioned about how the company was marking down inventory,
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where that inventory was landing in terms of the supply chain. >> by the way, that's the accounting issue. there's the accounting issue that doesn't even play into this. we're just talking about the business issue. there's still that accounting issue overlaying this. where did inventory go? when was it shipped? that's still going on. there's an s.e.c. investigation here. the company actually discussed that in its earnings release when it talked about costs, they weren't including the costs of that. but a ton is going on here, guys. a number of analysts downgraded today as you'd expect after the fact. one from janney montgomery who's been one of the biggest bulls on the stocks, reiterated as buy. >> whitney's remains short on green mountain even with the stock decline of 40% this morning. that's one view out there. herb, thanks so much. >> you're welcome. coming up later, the ceo of ethan allen interiors will be on set with us to talk about the country's expansion. and later, an exclusive
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it was a record-breaking night at sotheby's last night. in 12 minutes, edvard's famous painting "the scream" sold for
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$119.9 million, making it the world's most expensive work of art to ever sell at an auction. bertha coombs was there. she just narrowly lost out on that bid. >> yeah, you kind of start sweating it when it comes to something above 100 million bucks. very exciting evening. sotheby's had a lot of invested in making sure this one sold for a record price. it's perhaps one of the most famous screenings. this was one of four versions of the painting. this is the only one privately held by family friends of the painter. it started out with five bidders. quickly narrowed down as it got up above 100 million bucks to two phone bidders on the phone. and it looked like it would top out at about $105 million. but at that price, the auctioneer could afford to give the bidders the luxury of time. here's a taste of the final bids.
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>> i shall sell it then. can i say i love you at $106 million? it's $1.6 million. $107 million. $107 million, charlie's bid against you stephan. i shall sell it then for the historic sum of $107 million. sold. thank you, charlie. >> thank you, charlie, very much. that was the hammer price. but with the commission, the world auction price, $119.9 million, soelt sales to the night, just over $330 million. williams capitals analyst calls it a great night for sotheby's but notes that last year's second-quarter earnings was a record for the auction house. they've got a very high hurdle to beat with next week's auction on tap. and even with the $12.9 million
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commission on "the scream," between the costs of marketing, it's not always clear just how much they actually make on one of these massive sales. but the benefits of the publicity ultimately helps with other sales. it brings in the premium buyers and the premium sellers. so it's one of those things that it's not a bad thing to have on your books, melissa. >> certainly is not. bertha, best of luck next time. >> yeah. >> bertha coombs. >> i think there's three others, right? there's four "screams." bertha still has a chance. >> i have my eye on a rothco. >> saving your millions for that. "the scream" is what we're tweeting about this morning. complete the sentence. if i'm paying 120 million bucks for something to hang on my wall, it better be able to, what? we've got your response throughout the morning. got to be able to make money, maybe? i don't know. a lot of options out there.
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p/e firm carlyle group set to start trading on the nasdaq. kayla tausche has all the details. >> carlyle group priced its ipo at the low end of an already lowered range at $22 a share. the alternative asset manager went on the road from coast to coast here in the u.s. and canada and throughout europe, marketing a range of $23 to $25 a share. that would have valued carlyle group at as much as $7.6 billion, a number that would still look like a discount compared to its peers. but the peers haven't traded well. both blackstone and apollo have never touch the price they ipo'd at. and based on where carlyle was able to price when the books closed on tuesdays, investors didn't think it was enough of a discount to guarantee the stock would go up for them. we'll watch to see what happens when it opens today. only 10% of the company is being floated in today's offering with a lion's share of the company still in the hands of the firm's three founders. even after the offering, william
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conway, daniel danello and david rubinstein will own 46% of the company and their stakes will be worth about $1 billion apiece. these founders are the last of theirs to try to monetize their companies. blackstone was taken public at the peak of the market in 2007. a reverse merger to get kkr in exchange in 2010. investors are appeased by the fact that none of carlyle's founders are selling shares in the deal. that's a sign the name plates that have given the firm clout in deals for years aren't going anywhere anytime soon. not to say if carlyle trades as well as they're hoping, they wouldn't seek to take some money off the table at a higher level. it's set to open in just about an hour. carl? >> kayla, it's david. wanted to get quickly in there. i know people who are offered the stock lower saying they thought they'd get the pop, that is the underwriters.
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let's not forget, carlyle does an enormous amount of business with wall street in its business. it's an important deal for the underwriters who are doing so much of the advising on their m&a work or the financing, where the real money is made. then you bring it up, the lock-up. a lot of people say, when the lock-up comes is when they'll get the stock price up, when the insiders really start to sell out. >> and if the founders are pricing below their range, that's not necessarily an incentive to get them to sell out at that price, especially if they believe it should go up. >> thanks a lot, kayla. talk to you later. just a few minutes from the opening bell. we'll get all the action in the first few minutes of trading starting in a moment. don't go away. academic standards acrossnsiste america.
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auction, a lot of earnings last night. an ipo on deck from carlyle, as we just mentioned. we'll see where we go. very narrow range yesterday. opening bell and the s&p 500, at the big board, everbank financial, florida's largest lender celebrating its ipo today. over at the nasdaq, junior achievement ringing the opening bell on behalf of the carlyle group, which is celebrating its ipo. typical of carlyle to do something charitable, which is one of their big pushes, of course. anybody who lives in new york knows how much david rubenstein has put his name on charitable causes. >> they allow the organization to maintain and keep talent. they've distributed equity through it. it allows the founders to start to exit. years ago with a private equity firm, going public was not on your conscience.
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not with a public offering. that's changed. but many question the performance of so many of these firms that started with fortress and we've seen followed by blackstone. kkr, apollo, now carlyle, none of which have been good performers. >> and the big piece in "fortune" this morning about how difficult it is to value these offerings, blackstone among them. do you go off management's fees, performance fees? in "fortune's" view, there is value in what carlyle is doing, despite the debate about whether they priced lower because there was a lack of interest or they wanted to do it for the long term. >> and they are giving themselves a pretty nice market value regardless of where it prices. take a look at blackstone. probably still the cream of the crop in some ways in terms of assets management because they have actually built out significant businesses aside from private equity, whether it be real estate, which is partially private equity or distressed or even investment banking in terms of their advisory work they do on m&a.
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blackstone. and just pure money management, blackstone has shown itself to be a significant alternative asset manager. >> a notable pop in shares of chesapeake today, up by almost 2%. two possible camps there, perhaps it's fairly valued based on the value of its assets. perhaps people simply want to get out because its largest shareholder with 13.6% of its shares has changed its stake to an active stake with 13-d filing. this happened yesterday afternoon. that's causing some to say, there's no reason to short this stock. certainly if you are short, beware because the reason why they change it is so they can be more active in corporate governance and to hold significant talks in their filing. that can trigger a big pop in the shares at any moment if something happens. clear out of the way. this is part of what we might be seeing in today's action, up 1.9% there. >> on the lows of the day
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yesterday, a lot of selling pressure. what a week for chesapeake. >> bernstein today says book value close to record lows, cash flow per share, close to record lows. even they say watch out for the iceberg theory. that is that there may be stuff that still lies below the surface that we don't know about. we haven't mentioned whole foods yet either. >> no. better-than-expected earnings. it was the best results according to the ceo in 32 years. they're seeing -- it was a beat and a raise essentially. they saw very strong growth when it comes to sales we are square foot in their suburban stores. whole foods at the early going hit a fresh 52-week high. $90 a share is the level of the 52-week high, trading just below it right now. a nice 5.8% pop. goldman sachs this morning, i guess this is sort of -- of
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course they say there should be a favorable reaction in the shares based on the earnings release. wonder about that. seems obvious. >> we haven't mentioned viacom. last night -- >> that stock looking okay. >> even as "the journal" says spongebob has some issues. >> it's a big problem but not necessarily on nickelodeon. but viacom is hanging in there. avon products, you saw mary thompson at the top of our show, holding their annual meeting. that stock down again another .5%. below $20 a share. that bid from cody, looking a bit better at $23.25 when you have a stock below $20. bears some watching. as we know, andrea young, taking heat in that meeting today. >> zillow, the real estate website operator has been able
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to raise prices that it charges realtors. that's good news. we're going to talk to the ceo of zillow in your 10:00 a.m. hour. >> and visa's stock is down just slightly right now. it did hit a 52-week high very recently. had earnings out yesterday. the earnings looked good and actually raised their forecast for the second quarter. but on the conference call, they revealed the department of justice is launching an inquiry into debit card pricing in terms of the fees. mastercard and visa under a little bit of pressure this morning even though they both posted better-than-expected earnings and are both close to 52-week highs, pulling back just a touch this morning. bob pisani's on the floor of the new york stock exchange along with david faber. >> i hate it when faber looks better than me. >> we talked suits. i really like that. >> it's a tougher one to match. >> quite a tie as always. >> you go with the black and the black. >> you're up, right?
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>> mr. draghi is trying to talk down the idea that he is going to come to the rescue with more ltros, more stimulus of any kind. predictably, the euro went up. the stock market in europe went down because mr. draghi said, don't come to me for any near-term stimulus. he mals said the perception that i'm not going to do anything right now is correct. that's what immediately moved the market. he talked about the prevailing uncertainty from the weak data that's been out there, that that is on issue. he said the government bond-buying program, he wanted to remind everybody, they still have that out there. it's still there. that was literally the phrase he used. the government bond-buying program at his disposal is still there. but he basically left the impression, i'm not doing anything right now. >> i haven't bought bonds. that's different than the ltro. they haven't bought bonds in a significant way -- >> for a while. but it's still there and still at his disposal. the point s don't look to me to do anything near term. it's in the ball of the government's court. let's talk about april retail
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sales. this is a very tricky way to look at this. on the surface, it's disappointing. sales up 0.8%. the expectations were for a 1.5% gain. tafs disappointment. the first miss since going back to november. a number miss expectations, target, walgreens, buckle, a whole bunch of them did. but the comps last year were amazing. april 2011, same-store sales, 8.7% because easter was at the end of april in 2011. there was huge amounts of resistance here. you had to overcome that. everybody was freaked out about costco this morning. the comps in april of 2011 for costco were 12%. and they still beat -- they didn't beat. they were up 4% for this april. people were expecting 5%. 4% up when you had 12% last year in april. this is a pretty darn good number. >> target gave a target for may
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as did a number of the other retailers. >> there's no real kind of heavy move here for may that we can see. my point is, they're holding up very well. you're really trying to split hair ifs you say they were a real disappointment. a number of companies guided higher. that's the key point. gap, limited, aeropostale, american eagle, ross stores, all guided higher. it's not a disasters. the off-price retailers, the tjxs are continuing to take market away from the kohl's of the world. the retail index is at a historic high. what do we do with this information? it's not terrible numbers. but we already priced in significant news. >> there's one retailer that all those sales added up don't equal. and that's walmart. we don't hear from walmart. >> but 21 companies are the only ones reporting now. there's 120 publicly traded retailers. only 21 report.
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the one positive note, cotton prices are down. a number of people said this morning that's going to help in terms of margins in the second half of the year. >> we're done over here. back to you guys. >> let's take a look at how things are trading over at the nasdaq. check in with seema mody. >> the nasdaq opened higher. since then, we've pared gains. traders saying that we should expect another day of sideway's trading ahead of tomorrow's labor report. today's data somewhat mixed. a slightly better jobless claims number. productivity coming in lower. then retail sales, pretty mixed bag there. but mostly to the downside. let's take a look a a few retailers. ross stores offering brand names at a discount, beat estimates with sales increasing 11%. right now trading lower. t.j. maxx. and then costco failing to impress the street. movers in the tech world include
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tera data, they beat street expectations raising its full-year revenue growth outlook. the company is seeing strong demand for its data storage packages. >> thank you very much. let's get to bonds and the dollar. rick santelli's at the cme group in chicago this morning. good morning, rick. >> good morning, carl. today at 8:30 eastern, we had a much better-than-expected drop in initial claims. and that is good news. whether that leads to a timely creation of jobs is yet to be seen. today's number isn't going to directly impact tomorrow's number. but at 8:30 eastern, you also had mr. draghi on the wire. it gets very difficult to distinguish exactly what the market was paying the most attention to. an intraday of ten-year here and in europe, they're highly correlated. they jumped up on rates and gave a little bit back. many believe the jump-up in rates was due to the better-than-expected claims. as you look at an intraday of the dollar index or in this case the euro currency, you can see
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that probably draghi has a bigger effect on moving the euro around because of his somewhat laissez-faire approach to inflation, probably because he's worried about different types of projects to try to help the company, like more ltros. back to you. >> thanks very much, mr. santelli. time a take a look at viacom and cablevision. one distributes programming in the sense over a cable system. the other makes the programming. viacom shares are up this morning after reporting its numbers, which were not bad. and in fact, did show some -- or stemming the decline in advertising, particularly at the nickelodeon network where there's been concern about ratings over the last, let's call it two to three quarters. there you see advertising unchanged overall. affiliate fees up rather nicely. in terms of segment revenue, media networks up, filmed
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entertainment was down. the total revenue number up about 2%. when we get to segment operating income, it's a similar story. media networks showing a nice bump-up with filmed entertainment and the total there. also important to mention that viacom continues to buy back a significant amount of stock. that really is an underlying story in so much of media these days, whether it's a news corp. or a time warner. but etch a viacom, you get the sense how much they have left to buy back. by the way, cbs buying back significant amounts of stock. the stock is up. it is interesting, we talk about nickelodeon and spongebob, so spornt to th important to that network. a survey that bernstein did, are people watching it on their ipads? are kids watching it via netflix and is it ultimately hurting? is that one of the reasons why we've seen ratings come down for nickelodeon. >> you could argue that for cable channels all over the place for shows that are not in
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real time like a "dora." notice how many titles i'm going to rattle off right now. >> before you get to that, quickly on cablevision, that stock is down, not on huge market cap. a few quick things to mention there. they actually did add video subs, different than much of the injury but at what price was the question. free cash flow was down concerning investors there. and despite a decline in free cash flow, they increased their buyback. that's a very significant leverage ratio, so to speak, as we like to say, as we take a look at the numbers there, perhaps giving some investors pause as they fight through having lost tom rutledge who left. the free cash flow numbers coming down, perhaps they got prices down because they had to compete with the likes of verizon fios. >> it's the second worst performer on the s&p this morning. we want to remind you out
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there to tweet us. you've heard about the record-breaking auction of "the scream" at sotheby's. so complete this sense. if i'm paying $120 million for something to hang on my wall, it better be able to do, what? tweet us. we have some of your answers later this morning. but first, the trade on whole foods. see how you should play this stock for the next quarter. and we're still waiting on carlyle to open for trading on the nasdaq. we'll bring you that first trade when it does happen. take a look at this morning's early movers on this thursday on wall street. auto-bliss.
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♪ whole foods profit topping street expectations yet again ringing up earnings of 64 cents a share. same-store sales up 9%. shares up more than 5%. right now hitting a fresh 52-week high earlier on in the session.
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chuck covers whole foods among other stocks. chuck, great to see you. >> good morning, melissa. >> in terms of whole foods, i think the only -- most people would say it was a very strong quarter, nice margin expansion, very strong same-store sales. if there's anything to poke a hole at whole foods, that would be the valuation of the stock. what sort of valuation can this stock grow into? >> it's been the pushback on the stock since we upgraded it several years ago in the 20s. people that haven't bought it because of valuation have obviously missed a good run. people are placing a premium on growth and retail and retail and growth are technically oxymorons at this point. with high 20% eps growth, a low 30s multiple is fair at this point given the company's balance sheet and superior performance over the past couple of years. >> i want to try and understand the expansion in the margins and
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where the company is getting that kind of leverage. the ceo said half was operational leverage, half was in part contributions from reductions in cost of goods sold. to me, that read as, we're squeezing our suppliers. should we be concerned about the company that is feed into whole foods? whole foods is actually able and has the power to exact better pricing from these companies so therefore these companies may be feeling some margin pushback? >> i think you nailed it, melissa. the key reason why the stock is up, gross margins are up 70 basis points. half of that was from better buying. i don't know if they're necessarily squeezing their vendors more. given they're the largest organic procure in the company, costs are beginning to decline allows them to keep their retails flat and essentially benefit from the drop in sourcing costs. they've put in a lot of systems over the past several years to do better buying and to reduce shrink. i don't think this is a case of
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whole foods really trying to squeeze their vendors. that's not walter robb's style. i think it's essentially a lot of them benefitting from a lot of the system improvements they've put in over the past couple of years. >> seems like a lot of those improvements -- are they necessary? you look at the traffic of stores that are 15 years and older, up 7.1%. at a mcdonald's, how are the updates coming, but i wonder if that's even a factor for these guys. >> i think that's a great point. one of the key things out of the release last night was both the older stores doing better than stores 15 years earlier up over 7%. one of the things we really like about it is the fact that their new stores are doing so well. they're up over 23%. operating margins up over 34%. to me, that's the real key story here. this company is opening up stores more disciplined than they ever have in the past. i think that's a sign that
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walter robb really knows he's running the country at this point in time compared to five or six years ago. >> more broadly, a lot of these names that have a lot of sentiment, emotion behind them -- green mountain, groupon, zynga, netflix, open table -- they're all down almost 0% in the past month. if you can sum it up, what is wfm doing that separates them from that club? it would be easy to lump them in from a momentum standpoint. >> i think the real key thing about whole foods right now -- this has been a testimony to walter robin ever since he became ceo, they try to keep prices in line and keep prices low. one of the things they spoke about on their call was even though the margins are very good in the quarter, up over 36%, they made a point several times on their call to let investors know that's not going to be the norm. they're going to continue to invest back in price.
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and the key there is that's going to allow their same-store sales over time to continue to improve. they could have a much better quarter this quarter, next quarter. but they're in it for the long haul. i think that's the key thing that differentiates whole foods today. >> chuck, great to speak with you. chuck grom has ha $100 prigt target on whole foods market. when we come back, we'll read some of your responses to our twitter question of the day involving "the scream" which was auctioned off last night. and then the ceo of zillow will join us. and find out how some sellers are making millions of dollars selling their homes. still waiting for carlyle to open over at the nasdaq. when that happen, we'll bring to it you. a lot more "squawk on the street" is back in just a moment. it's that time again. how would you like to win a hat signed by the entire "squawk on the street" gang? all you have to do is nail the
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number. if you can guess this friday's non-farm jobs number, it's all yours. tweet us your guess @cn guess @cnbcsquawkst. you have to be at least 18 years of age. for all the details, go to sots.cnbc.com. good luck. tdd# 1-800-345-2550 let's talk about fees. tdd# 1-800-345-2550 there are atm fees. tdd# 1-800-345-2550 account service fees. tdd# 1-800-345-2550 and the most dreaded fees of all, hidden fees. tdd# 1-800-345-2550 at charles schwab, you won't pay fees on top of fees. tdd# 1-800-345-2550 no monthly account service fees. tdd# 1-800-345-2550 no hidden fees. tdd# 1-800-345-2550 and we rebate every atm fee. tdd# 1-800-345-2550 so talk to chuck tdd# 1-800-345-2550 because when it comes to talking, there is no fee.
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let's check in with simon with a look at what's coming up next hour of "squawk on the street." >> you were talking about the internet stocks down 30% so far this year. one standout is not. zillow is up now 76%. we're going to talk to the ceo in the next hour of the program. we've got ism services data coming in. we'll talk about gap, target, jcpenney. goldman sachs will talk retail with us. and also the ceo of ethan allen interiors will be with us. so somewhere for you to hang your hat. >> make your pay over to post 9, simon. time for "squawk on the tweet." a record-breaking night at sotheby's last night. in just 12 minutes, edvard munch's "the scream" sold for
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$119.9 million, the world's most expensive work of art to ever sell at auction. we asked you to complete this sentence. if i'm paying $120 million for something to hang on my wall, it better be able to, blaing. andre writes, peter be able to stop banks from foreclosing the home. and another says, have the common decency not to collect dust. ism nonmanufacturing data numbers are coming out. don't go away. [ laughter ] ♪ [ female announcer ] each one of us is our own boss. ♪ and no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. ♪
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welcome back to "squawk on the street." we have the april read on ism nonmanufacturing. 53.5. looking for a number around 55.5. last month, of course, was 56. 53.5 is the weakest read we've had of the year, actually. the last time we were 53 handle was december of last year. so one month doesn't make a trend reversal. but weakness here, of course, and we saw some weakness in chicago. the national ism manufacturing kind of the odd-man out. and of course, today's drop in
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initial jobless claims is just going to make predicting tomorrow's jobs report that much more complicated. we are seeing the equity markets move a little bit lower. and interest rates a basis point or two lower in the long end as well. carl quintanilla, back to you. >> rick santelli, thank you very much for that. get some reaction to the ism data from steve liesman back at h.q. what do you see inside the number? >> an interesting number. the top line, a definite disappointment especially because the factory number held up pretty nicely. new orders were down. that's an important number right there to be down. employment also down. interesting things in here. inventory's unchanged, prices were down. the backlog was higher, exports higher. a mixed picture. no doubt that the top line's a disappointment. i think this would have been sort of a green light for the bulls on tomorrow's number. but i think now it's flashing a
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little more yellow as a result of this. let's take a look at the jobless claims number this morning that rick mentioned. they were higher than -- they dropped more than expected. and you can see here the important thing is it did sort of undo the spike we had that some people attributed to that earlier easter and some people say it was a roll-off of the warmer weather. i want to show you the commentary out there. steven stanley saying, quote, this should be a significant blow to the "here we go again" crowd. but obviously tomorrow's data basketball decisive. bmo saying the welcome drop in claims suggests labor markets continue to improve moderately after hitting a minor speed bump. and another says, too soon to declare, that the run-up in claims around the easter holiday was a temporary seasonal phenomenon. -farm productivity declining less than expected. but on the negative side, 0.5% down. still on the positive side.
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2%, we know the fed's going to be watching that. just take one look here at a long-term chart of productivity. the gray lines are the recession. part of that phenomenon is small business hiring which happens or several years sometimes after the end of the recession and small business tends to be less productive than big business. guys? >> steve, i'm just thinking about the regional surveys, factory orders, gdp, durables. everybody says the other side is trying to spin. but who do you think has more ammunition right now, the bears or the bulls? >> both sides are trying to span. i put it in the middle. nothing has really swayed my opinion that it's sort of a 2.5%-ish economy. i think the 2.2% number from the first quarter understate where had we were. i think it's 170,000 in terms of jobs. and i think it's about an 8% to 8.2% unemployment rate economy. nothing's changed that.
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there is some talk that finally this summer we may clear out all this debris that's been the noise in the data and see an actual spike in jobs growth. but that's not in this data right now. >> last year was the earthquake in japan. >> and all those were real, carl. >> no year is ever completely clean, steve. >> that's right. you could have more tornadoes, got forbid not. but motornadoes or hurricanes or things like that that offset it. but the tsunami was a very big deal along with the spike and a resurgence of europe. i think the thinking right now is we are getting that springtime swoon we've had with the first quarter but you don't have the headwinds you had last time. the swoon could be both temporary and shallower than the prior ones. >> steve, thanks a lot. as we head into tomorrow's jobs report, there's an opportunity for you to nail the number. tweet us your prediction for what you think the april non-farm payroll numbers will be and you'll have your chance to win a hat.
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autographed by the "squawk on the street" gang. visit sots.cnbc.com for official rules. >> quite a handsome hat. markets, as you know, lower, following this morning's initial jobless claims report. biggest weekly drop that we've seen since this time last year. let's bring in our guests. guys, great to see you both. stuart, let's start with you. you think we're going to be a trading range for the rest of the year, 1,400 to 1,450. what gets us up to the 1,450 side of the range? >> i think primarily it's going to be slow growth in the economy. we're looking for 2.5% gdp growth this year. we think earnings are going to be up on the order of 6.8% for the s&p 500. we think as we move through the
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year, the jobs picture will slowly get better. i think by late in the year, consumer confidence and spending will look better. and i think broadly you're going to see more confidence, a little more investor confidence. and that's the environment later in the cycle where you get a little bit of p/e expansion. not looking for a lot. there's not much move between 1,400 and 1,450 at this point. i think we'll have volatility between here and there. but i think the trajectory for the economy is slowly up. gdp, 2.5%. >> ross, as we sit here on this thursday morning, just about 24 hours from now, we'll have another read on the jobs market here in the united states, what are you expecting and is your call on the markets predicated on what the fed may or may not do concerning q.e. 3? >> yeah, i think first of all, in terms of the jobs numbers, i very much agree with what steve said before the break. you're kennedying 2%, 2.5% economy. job growth probably increasing by 150,000, 170,000.
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while some numbers are a bit better a bit worse, we think that's the trajectory for the remainder of the year. the downside is most of the risks are actually -- you're going to dispoint because of gasoline prices or europe. in terms of another round of asset purchases, i think that's likely as we get into the back half of the year. but to be honest, i don't think it's a game changer. it probably helps a little bit on the multiple side. you get a bit of multiple expansion. but in terms of change in the growth rate of the economy, i don't think there's much the fed can do at this point. >> there always seemed to be some reason why we may have a problem. it's shots from outside. they may be tempted, stuart, to increasingly focus on areas of the market that are winning to reduce their diversification and chase. what would you say to people who are increasingly tempted to
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sharpen their focus on areas of the market that are working, rather than a broader portfolio? >> well, i think that usually over the long term is a mistake. it is true that we've seen a good move in the technology stocks and technology earnings in the first quarter. but significantly important, the large cap portion was in apple. makes a good deal of sense, especially if you think the cycle is going to grow another couple of years, which we do, at a modest pace. makes sense to broaden out your exposure into some of those industrial areas, materials area, consumer discretionary area that will benefit from that over the next couple of years and not chase the stocks that were hottest most recently. investing is a longer-term process. and i think that investors should be expecting growth in the economy another several years at least for this cycle.
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>> russ, what would you say to people who are looking to buck the classic diversification models? >> there's a good cautionary tale from last year. last year, everyone piled into utilities. the sector was up 15% in a flat market. it was the classic defensive play. it was the quest for yield. this year, one of the worst-performing sectors. market environments change, valuations matter. simply to chase the winners is rarely a good strategy over the long term. >> in terms of countries, russ, you like brazil, china, taiwan and russia. would you recommend etfs to get into these or do you have specific stocks you recommend in investing in these countries? >> we like the broad baskets. there are great opportunities in places like china which you can access through etfs like the fxi. good opportunities in latin america and brazil. generally a theme we have is
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you're going to see better growth in emerging markets, not just over the long term but over the near term. many of these markets are actually cheap. you look at china and brazil. there's a lot of pessimism discounted into the price. we think there's more room for upside in these countries than most of the developed world. >> stuart and russ, thanks so much for your time. we appreciate it. >> thank you. before we go to break, want to get to the roadmap. we're staying on top of carlyle group. price of the private equity firm's ipo sliced to $22 a share. and we have two different ways to play a real estate recovery, zillow serving up strong quarterly results, the stock on a roll. today it's up 15.5%. and ethan allen seeing a boost from sales. we'll be talking with the ceos of both companies. with many large store chains posting disappointing april sales numbers, where could investors find bright spots? we'll talk to the senior retail analyst at goldman sachs when "squawk on the street" continues. ncer ]e a what if you had thermal night-vision goggles,
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still on deck, the ipo of the day, carlyle group trading under cg. still not yet open for tried. $22 is the price, the low end of the lowered range. as soon as we have the first trade, we'll bring to it you. atlanta's real estate market has been suffering in a big way compared to the rest of the nation, amid signs the city's
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market may now be bottoming out. there appear to be opportunities in distressed properties. certainly there's been a surge in short sales. diana olick has that story. >> reporter: good morning. we're in atlanta's buckhead neighborhood, one of the priciest but not immune to price drops. atlanta was one of the worst offenders on the latest sarah palin case-shiller home price report, down 17% from a year ago putting these high homeowners under water. it's al >> flthere have been short sell as high as $5.5 million in the last year. that property was originally listed at $19 million, i believe. so there are short sales happening in every price range and obviously the higher price range is just as affected. >> reporter: hirsh is listing
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this house at well over $500,000. short sells, he says, are the newest, latest thing. and they're surging. there were nearly 1,800 short sales in atlanta in january of this year, up 120% from a year ago. and that's on pace for 5,400 here just in q1. why? because banks and realtors are more willing and they're moving more quickly. also fannie mae and freddie mac just announced new rules to answer short sales requests in 30 days. unfortunately, hirsh and others aren't buying that. >> the banks can make all the rules they want. the bankz are to lars are too l that nimble. you expect them to turn around in 30 days and give you an answer on whether they are going to forgive the money you owe them? it's going to take longer than that. i wish it would happen in 30 days. but that's my dream world.
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>> reporter: what's really interesting, hirsh tells us a lot of these short sellers he's working with don't actually have to show any hardship to the banks. the problem is the banks see them as potential walkaways. that's why they're doing the short sales. interestingly, he's also seeing a lot of the clients who did short sales now coming back into the market, buying other homes and actually getting mortgages. these, carl, are strange times in real estate. >> you've got that right, diana. thank you very much, diana olick, with us in atlanta. sticking with housing, we'll zero in on zillow, the real estate information marketplace reporting record revenue in the first quarter, up 103% from its first quarter last year. so far this year, shares of zillow are up 60% and today, shares up a little bit more than 16%. here on cnbc, the company's ceo, spencer rascoff. great to have you back. congratulations on the quarter. >> thank you. >> average monthly unique users up 84%.
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at what point do these komcompst a little bit more difficult? >> as you continue to grow, comps get more difficult. one of the things propelling our traffic growth is the smartphone revolution. zillow reported a very significant milestone in the quarter. now we have more homes viewed on mobile than on the web. so we're really one of the first major internet companies to tip to become a mobile company. the smartphone revolution is really benefiting zillow. >> i want to understand the smartphone revolution much more in terms of how it impacts profitability. in march, you had 57 homes were second viewed on a mobile platform, that's up from 16 homes per second a year ago. that's certainly a tremendous uptick in terms of the use of mobile. at the same time, for a lot of companies out there in the internet space, when there is a transition to mobile, it's usually less profitable. can you walk me through what the metrics are here? >> we're very fortunate to be blessed not just with huge mobile usage but also with
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mobile monetization. we make our money from our marketplace revenue when ae connect a home shop we are a zillow premier agent. when you're out shopping for a home looking an your zillow app, you're more likely to want to contact a real estate professional. we help that home shopper connect with a real estate agent. it's the very rare example of online media where the advertising unit is content to the user. it's not a distraction. the user says, i can call and learn about this house. that's helpful to me. >> it doesn't make a difference whatsoever -- in any way, profitability, whatever -- in terms of whether or not people access via mobile or just on a pc? >> we would prefer more mobile usage. the eventuallity of 80% of zillow being on mobile is fantastic. >> the share price has been phenomenal so far this year.
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up well over 17%. you've bucked the generally downtrend we've had on interpret companies recently. what about the barriers to entry? i appreciate that critical mass and first mover advantage are very important. but what about some of the other big guys potentially getting in on this opportunity? >> well, i think what you're seeing is investors are clearly rewarding high growth companies, companying growing at 50% year over year. companies that benefit from the mobile migration. specifically with respect to zillow's motes, we have a brand lead, product innovation lead and traffic lead. and we have a living database of all homes. what makes zillow unique is we have property information on every home in america, 100 million homes. we have six years of user-generated content where nearly a third of all those homes, 31 million homes, have been edited and improved upon by our community of users. our mote is our product innovation as well as our living database of homes. >> you feel confident you can
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maintain more than the 50% ebitda growth? >> we give one quarter out revenue in ebitda guidance. what we said to investors is this next quarter is a quarter where we're going to continue to make significant investments. we're bringing our ebitda margin down. the first quarter, it was 24% ebitda margin. and the guidance is around 13% for the second quarter. we're in investment mode. we're not in profit max mization mode. >> i'm assuming from what you said before in this interview that that's potentially a major breaking your business model -- these are not necessarily
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companies that might have the same sort of commercial relationships with you. they're single individuals. >> well, rentals is a huge market. 70% of all movers are renters. so you can't really be a significant real estate company, online real estate company without a significant rentals business. the acquisition of rent use ] puts us in the tools business where we provide software for rental property managers and rental brokers. the reason that's so important is to the extent that they manage their conversations with tenants and their listings inventory through zillow's tools, that improves the consumer experience for zillow's rental shoppers. 5 million people use zillow every month to shop for a rental. we're already a significant rentals business on the consumer side. but the acquisition of rent use puts us into the professional tools side of t. >> if as individuals they were more able to sell or rent their homes, there are huge profits in, for example, manhattan that
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are being made by some of the brokerage companies on an international comparison. can you see yourself opening your way to breaking that out or is that really a bridge too far? >> that's not the business we're in. and there are other companies that are in that business. zillow is an online media company. we sell ads, not houses. we have a nearly $30 billion addressable market just in the real estate, the for sale, rentals, mortgage business that is we're currently in. the stuff that gets me excited is we are the largest real estate website and the largest real estate mobile company and yet we have less than 1% of what real estate agents spend on advertising. real estate agents spend 99% of their ad budgets elsewhere even though we're the largest real estate website. that's the market we're chasing, not the transaction. >> spencer, thanks so much for your time, spencer rascoff, ceo of zillow. coming up, a record-breaker in the art world. edvard munch's painting "the scream" selling at sotheby's for more than $119 million.
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is the stock a good way to bet on art? in our "squawk on the tweet," complete the following sentence -- if i'm going to hang something on my wall that costs 119 million bucks, it better be able to, blank. tweet us at @cnbcsquawkst. we have your answers straight ahead. zap technology.
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market flash here on prestige brands. pbh, you remember about a month or two ago that mexican company offered to buy this company for $16.60 a share. that offer was rejected and now the company making the bid, genomma labs are withdrawing
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their bid to buy prestige brands. that's why we are seeing prestige take a big tumble today back to the level it was pre-offer. it's a tough day, but this was an $7.50 stock back in december. prestige brands makes products like this -- clear eyes and maybe the investors need a little redness relief of their own today. did you see what i did there? >> that's skill. that's tv magic what you just did, brian. thank you very much. >> thank you. when we come back, some breaking news on natural gas inventories. a watch on how the prices prove. now that the sales report cards are out, which chain stores are your best bets? we'll talk to goldman's senior retail analyst when "squawk on the street" comes right back. [ donovan ] i hit a wall.
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i'm sharon epperson with breaking news from the energy department on natural gas storage levels. natural gas supplies rose by 28 billion cubic feet in the last week. and that is slightly less of an increase than what analysts were expecting. analysts were looking for a consensus somewhere around 30 billion to 34 billion cubic feet. we're still right around that 2.30 level for natural gas prices. again, up about 3% or so on the session. keep in mind that this increase
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in supply is less than we normally see this time of year. less than the five-year average or the increase for the same week a year ago. and so that has brought some bullishness back to this market. still traders are looking at the 2.42 level as perhaps a potential top. barclays saying that's a point where they would then start to pare back on natural gas. meanwhile, crude oil prices, take a look at the big drop there. looks like the ism services data has canceled out the positive manufacturing data bump that crude oil got earlier in the week. down about $2. right in the middle of the range that crude oil's been trading in. the wti futures, that is, for about four or five weeks now, right between that $100 and $105 level. back to you. >> thank you so much, sharon epperson. sharon mentioned the big drop we're seeing in crude. that is helping to pressure the markets today with the energy sector, one of the biggest laggards here. the xle is down by almost a full percentage point. broader markets, you wouldn't be able to detect it. we're hat a flatline as we
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anticipate the jobs number. the nasdaq down about .5%. and the dow down by 39 points. take a look at the internals of the markets. advancers leading decliners and over on the nasdaq, it's about a 3-to-1 ratio over there. want to head over to the cme group in chicago and check in with scott nations. good morning. >> good morning, carl. >> you were writing about how this range we've been in, 1,350, 1,420 range, every time you think you find a catalyst to bust out of it, it's not happening. didn't happen with earnings and i guess it's unlikely to be jobs tomorrow, barring a major surprise. >> given the alphabet soup of news we've gotten today and yesterday, i don't think that jobs is going to be the catalyst to move us to the upside. a number below 125,000 might drive us toward the downside portion of that range. but the disappointing things as
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far as earnings is they were really good. you would have thought we could retested 1,420, the top of this range since the first week in march. when the markets don't do what they should, it just indicates that there's a big headwind. with the markets running in place and great earnings aren't getting us any higher -- the problem with that 1,420 level is if we don't reclaim that level, the s&p chart is going to start showing a series of lower lows and lower highs and that's never a good thing. >> yeah. and you look for leadership. you look for someone who posts a blockbuster quarter. it's hard to imagine a quarter that was better than apple's. and yet complacency seems to have seeped into the name. why do you think that is? >> even though apple had a great earnings result, it's just not showing leadership anymore. more than 10% off of its highs. we can't count on apple anymore. earlier in the year, some of the sickest banks, whether it's bank of america or citi, which i'm long both of, were doing well.
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they're both 10% from their high. bank of america particularly disappointed that it couldn't reclaim the $10 level. we might back to china for leadership. but if we do that, we have to look at companies like caterpillar, caterpillar, more than 10% from its recent highs. i don't know where the leadership is going to come. that's also not a good thing because i don't think people are going to get brave and buy the broad market just because they're bullish unless we get some sort of good news and leadership. >> especially given what cat has said about china in just the past couple of weeks. scott, thanks again. tune in tomorrow to see scott on cnbc's "options action". some of the biggest misses being reported by target, walgreens, gap and costco. adrian shapiro is a senior analyst at goldman sachs, covering the broad lines retail sector. thanks for joining us. >> good morning.
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>> target and costco are both in your coverage universe. i think target, you have a buy on. >> we do. >> how do you think about -- what do you think about what you're learning from the company now? >> i think the point to focus on is they still delivered a 5.3% comp for q1. that was above plan. we definitely saw an acceleration from where they were in the fourth quarter. you definitely saw some weather impact and the easter shift, april was always planned to be slower than march. that's really what we saw. i think the more important is to step back and look at march and pribl together. and for names like target and for names like the auf pricers, for nordstrom's, you definitely saw a continuation of the strength that we started to see in the early part of the quarter. >> we did see some standout, particularly in the luxury sector, adrianne. one of your most recent research notes highlights the same-store sales. 82% correlation. but the two are diverging right
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now. that suggests either one has to go higher or one has to drop. what do you anticipate will happen? >> i think the high end is always more about the mood to shop than the means. so the relationship, as you would expect, is pretty intuitive. the fact is, we continue to see strength at nordstrom's, saks, they had the shift that was more like a 5% to 6%. you continue to see outperformance at the high end. even bloomsdale's and macy's is quite strong. confidence continues to be robust. and the high end should continue to outperform. as far as the market, will it catch up or not? what's important is we're going to be heading into earnings for retail. while we definitely shou apraw showers, we think we'll see may flowers to continue to improve confidence at the high end. >> some of the luxury retailers are doing nicely. but you point out some of the valuations are in line with historical averages.
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which ones will hold up the best and maintain their valuation? >> we keep talking about this wedge of performance where the gainers continue to widen the competitive mode th from their competitors. i think nordstrom, which is a buy-rated stock, should continue to outperform. they put up a very strong 8.5% comp for q1 well above their plan. the consistency of the months of march and april was remarkable despite the weather and the easter shift. they continue to deliver an april comp of 7%. i think nordstrom is in a great place, continuing all they're doing online to continue to outperform. >> let's talk about sears. a rough open for people in that stock. you still have a sell rating? >> we do have a sell on sears. >> and just talk us through -- i think we're coming relatively near to your price target now, $58.77. >> yeah, our price target is around $29, $30. we still have some room on the downside there. i think the point is that while
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we might see some blips here and clearly sears did a nice job of getting inventory under control. and you saw some better improvements on margin, i think we know how the movie ends here. i think the share donation will continue with sears. i think categories that they have been strong historically, consumer electronics, home, a lot of those categories are moving online and would expect sears to continue to be a shared donor in a world that continues to be -- retail continues to see a minefield of digitization. >> nothing that you heard out of the annual meeting or read in the letter from lampert, the splip-off that is may take place, the separation of management, nothing encouraged you in terms of the future of that company? >> they're controlling what they can, this is important. what's difference is perhaps the pace of deceleration is moderating. i think it's pretty clear that
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where we're going to see sears end up in terms of continue to be a share donor, that's no different. i think the difference is the pace. clearly in a moment where jcpenney is a share donor, perhaps a little bit more than sears these days and perhaps helps sears, but i think the final chapter of sears continues to be one of shrinking sales and shrinking margins. >> shared donors. >> adrianne, thank you very much for the analysis. >> thank you. take you to the nasdaq. still waiting for carlyle to open. pricing at $22 last night. range was originally $23 to $25. it will trade under the symbol cg. when it opens for trade, we'll get that to you. sometimes it takes a little
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while. >> on the nasdaq, yeah, takes a little longer. looks like that $19 to possibly $24. we'll see the range come in as it gets closer to the actual -- it's that time again. how would you like to win a hat signed by the entire "squawk on the street" gang? all you have to do is nail the number. if you can guess this friday's non-farm jobs number, it's all yours. tweet us your gue guess @cnbcsquawkst and don't forget to use the hashtag, nail the number. and you have to be at least 18 years of age. for all the official rules and details, go to sots.cnbc.com. you've got until 8:29 a.m. this friday morning. good luck. zap technology.
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up 1.4%. talk about not leaving any money on the table. looks like it was priced almost exactly where it is going to trade today. but of course it is a long day ahead. kayla tausche's back at h.q. watching that story. kayla? >> carl, i think it's interesting to see this has hardly moved. we looked at the cross before it opened, it was just at $22. normally you see that mooufg up and down. this is one of the more accurately priced ipos if this is the barometer that we've seen so far in the last several months. interestingly, carlyle is the biggest ipo of the last two quarters since allison transmission, one of carlyle's portfolio companies raised about $600 million back in march. interestingly, the performance of that ipo was what led carlyle to believe -- and its underwriters -- that the market was ready to handle an industrial name, a name that represented more volatility. the market had a little bit more of a stomach for risk. because carlyle is an alternative asset manager, that
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term has a whole basket of things involved. it's a private equity firm first and foremost. it also has fund-to-funds and real estate funds. but it's the buyout arm that's what it's best known for. and that, of course, has owned brands like dunkin' donuts, home depot's supply unit, philosophy and allison transmission was its most recent ipo. david u you know a lot about this company as well and how it should trade based on what you've been talking to people about as well. >> we'll see if they can keep it above $22. they'll probably declare victory and try to move on. keep an eye on the lock-up when some insiders may try to sell out and whether they move the stock up in anticipation of that. that would be some time out. but as you pointed out -- as we pointed out this morning, the performance of so many of these alternative asset managers has not been particularly good. you go back to fortress years ago. but so many of them have come,
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whether it's more of a hedge fund or an oak tree or a carlyle or an apollo -- >> and david, oak tree is one that came into play very recently. and that had a little bit unfortunate timing for carlyle because it did ipo just a couple of weeks ago. and it has been down about 6% at my last glance since it went public. that played a very large role because a lot of the same investors were coming to the plate for carlyle that invested in oak tree. if it goes down 6% in just the first few weeks of trading, how is it going to trade as you go into the lock-up? there's a lot of selling that's anticipated. >> yeah. and people are sort of doing the metrics to a certain extent off the multiple that oak tree is getting in the market at this point. but they got it done. the underwriters are going to try to keep it there. they do a lot of business with carlyle whether it's taking its companies public and its portfolio or advising it on mergers, those are the big fees for those guys. >> it's a perpetual deal machine. buy companies, take them public, sell them to other companies.
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they give the banks a lot of business. that's the very reason this is one of the more volatile plays because it has exposure to a wide swath of sectors. so a lot of times, these companies are as cyclical if not more as the overall economy as well. >> kayla tausche, thanks so much. looking for new ways to play the housing recovery? net sales for ethan allen up 8% year over year in the last quarter. since last september, ethan allen has refreshed or replaced 60% of its lines with new products. farooq kathwari, the president and ceo, joins us here on post 9. farooq, always great to see you. >> good to be here. >> in terms of seeing strength in the housing recovery, sit better for your business? does it match up better with the demographics of your customers? >> it does. in the last couple of years, consumer confidence at this level of demographics has improved. we are seeing continuously that
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their ability to make faster decisions is also improving. and as you know, we are this year celebrating 80 years of ethan allen. and the only way we have been around is we have completely reinvented ourselves continuously. now as you also mentioned, gaininggain changing 60% of our product lines in one year is not easy. but we're also benefiting from our structure of having 1,500 interior designers. i believe we're the largest interior designer company in the world. i think it's a combination of service, good quality and improving consumer confidence is helping us. >> is the hill you've had to climb from an expense standpoint revamping the product line? is that over or is there more to come? >> more or less. keep in mind in the last three years, the great recession, we have made more changes than we could have done in five years. we have consolidated our manufacturing, our logistics,
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changed 60% of our product lines, introduced a lot of technology. and i felt we had to do it as fast as possible because you don't want to take a long period of time. most of it is behind us. despite that, our sales are up 8%. our eps doubled. we increased our dividend by 29%. we're maintaining good cash, despite the fact we're making all these investments. >> the gross margin widens to 53.6%. where will margins go from here? >> i think 53.6% compared to about 51% last year, has shown tremendous improvements. our objective is to sort of maintain that kind of a margin, which is very, very healthy. where we now are working is to increase our sales. last quarter ending march, orders we have taken were about 25% greater than what we shipped. so as we increase our shipments,
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our operating expenses as a percentage of sales also get into life. but we've made a tremendous amount of investments in people. >> are you taking people on? what is the employment situation because that's obviously what a lot of people in aggregate what employment situation? that's what people in aggregate would like to know at the moment. >> we have since last year overall increased 5% to 7% of our employment, all across from manufacturing to retail to designers. and we've done close to 5% to 7% a year before. we are increasing our employment every year now. >> we were talking to the head of zillow, who's making a big bet on the rental market as well as dealing with agents and so forth. are you more leveraged to rentals than home ownership? people are still worried about household creation, even despite low mortgage rates, people aren't going to want to make that plunge or can't get the loan? >> in our case, people, whether they rent or they buy, they've
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got to furnish it. from our perspective, this housing recovery is just getting started. even though our sales are up 15% last fiscal year, 7% or 8% this year so far, it's not necessarily due to the fact of housing recovery. it is about to take place. our recovery is being taken place because of the fact a fair amount of the people are interested in moving forward. they're tried of the great recession, and we see that. >> a big expansion market is china. how does your product stack up there given much of the furniture in the world, i would say, is manufactured these days in china? so much of it moving from here in the united states to there. are your margins just as good there. >> you look at this, we are sort of bucking the trend. we have maintained 70% of our manufacturing in the united states. we are now 70 locations in china and 60% of the products that we're selling in china is being shipped from our u.s. facilities. we have a number of plants in north carolina. one right here in new jersey,
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across the river. in passaic, new jersey, if somebody had said five years back we'd be making thousands of lamps for china, you'd have said we're crazy. that's what we're doing. the china market, of course, is growing. they're also interested in good name brands, and it is for us, of course, the clients we're dealing with want american made products. so we're benefitting from that trend in china as well. >> farooq, a pleasure to speak with you. thanks for coming up. farooq kathwari. >> we're going to take another peek at carlyle. going public today. does this defuse the enthusiasm for ipos? no pop today, up 1.7%. >> one that's correctly priced for once >> and rick santelli working on the next hour for "squawk on the street." what's coming up?
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>> we're going to analyze the mixed data. it paints a positive picture if you're trying to trade the markets. and we'll talk about issues going on in europe. spain had a terrific auction today, but the rate was significantly higher than on march 1st. last but not least, whether it's the debt ceiling, whether it's taxes, whether it's the outcome of the supreme court on health care, these are all huge moguls to investing. we'll talk about it top of the hour.
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stocks flash here. you have to take a look at value click. according to themselves, the world's largest integrated marketing company, basically doing online marketing, online devices, et cetera. the company coming out with earnings that disappointed. in fact, you got cuts now at bmo capital markets, citigroup, and think equity, all cutting price targets. stevens downgrading the stock as well. earnings and revenue both missing estimates, guys. another one of these names that herb greenberg talks about a lot. high valuation. when you miss, even by a little bit, you're going to get a huge drop. i think the next stop you're talking about kind of fits into that as well. >> that's absolutely right. green mountain coffee is the one we were talking about. fresh 52 week low on this stock. you know the story here. there is basically no
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transparency, no good guidance when it comes to company management, what they had to say in the conference call. they said that it's difficult to understand what's going on. we're still trying to understand. that's what the ceo said. to what extent these things will manifest themselves when it comes to volatility of k-cup orders or weather impacting. i don't know if you drink less coffee when it's warm, simon. >> this was one of the debates what schultz said about the quarter and what green mountain said about the quarter. is coffee consumption? is it like soup where it really is affected by temperature? >> we're always drinking coffee up here. >> to brian's point, though, it is a brutal reception that the stock's had today. you could say, look, this is a high growth company. inevitably, there might be high volatility. perhaps it's temporary. but the market is quite clear in the reaction today. completely unforgiving. >> down 44%. again, a lot of the short sellers, they're still hanging
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on to this one. they're not covering. whitney tillson spoke to him last night, and he said even on those stocks, 40% decline last night, that he's still sticking to the short. he sees further room to the downside. >> long some other names that others would want to short, right? on tillson's front. >> are you speaking about barnes and noble? >> yes, barnes and noble. is he long netflix or not? >> i don't know. >> he can move quite rapidly, though. >> that's very, very true. >> horrible chart to look at. let's get the squawk on the tweet. sotheby's had a tremendous night when edvard munch's the scream sold for $19.9 million, making the world's most expensive work of art to sell at an auction. we'd ask you to complete the following sentence. if i'm paying $100 million for something to hang on my wall, it better be able to blank. frank writes, it better be able to grow arms and paint me
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another one so i can get my money back. "it better be able to sing the mcdonald's fish filet song. bud fox, "for $120 million, it better be able to transform into j.lo and serve me cocktails." what have we got coming up? >> we'll talk about apple's store within a store. apple is one of the few stocks trading higher in a sea of red. >> coming up at 11:00, we're going to talk about the spanish auction today.n didn't go too bad. didn't meet maximum target, but some of the yields did creep higher. >> ecb, french election, all piling up. >> after the debate last night, no clear winner is what they say. >> there isn't a clear winner, but the market might be getting okay with the idea that hollande could win. >> i notice the trade contract shows hollande 90% likelihood that he wins on sunday. that's going to be interesting to watch. we'll start the 11:00 a little
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early. here's what you might have missed this morning. welcome to hour three of "squawk on the street." here's what's happening so far. >> a little rule of thumb is, if the measures of financial stress in the financial sector are abnormally high, don't believe the macro econo metric models. >> revenue up, even up, margins improved, and better cash flow year over year as well. >> dropping claims from a revised 392 down to 365 will probably be perceived as the good news of the day. >> what were the odds? cut zero or just above zero? clearly, they were holding their fire, maybe until rates are closer to seven than six. >> maybe so, or until they absolutely positively have to. >> when you put europe in context with the rest of the world, it hardly matters. everybody's having a problem in europe. ford is losing money in europe. gm's losing money in europe.
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fiat is losing money in europe. it's just the general economy. >> opening bell and the s&p 500. >> this company is opening up stores more disciplined than they ever have in the past, and i think that's a sign that walter really knows how he's running the company at this point in time relative to five or six years ago. >> april read on ism non-manufacturing, 53.5. we're looking for a number around 55.5. >> we're really one of the first major internet companies to tip to become a mobile company. this smartphone revolution is really benefitting zillow. >> good thursday morning. welcome to third hour of "squawk on the street." let's get a look at the markets. dow currently only 13 points or so from the open. s&p is down 2 at 1400 on nose. nasdaq is down 6 at 3053. one of the big stories of the day, green mountain coffee
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tanking nearly 40% after they reported sales weaker than expected. gmc also lowering its four-year guidance far below what the market was looking for. and nokia's incoming chairman saying today he will attempt to foster an entrepreneurial spirit at the struggling handset maker. nokia's latest device so far is failing to gain a strong following among consumers despite very heavy discounting. let's get to the road map this morning. retail in the headlines after costco, target, macy's all missed expectations for april. is this the beginning of a broader downturn for that so-called midlevel consumer? also, orbitz out with first quarter results after they lagged behind big name competitors. we'll start down with orbitz ceo in a few moments. plus creeping back onto the street's radar, aig. but can investors trust aig ever again? we'll break that down.
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first, let's talk retail, specifically big misses out of consumer names. costco, target, macy's, were those misses just the after effects of an early easter, cooler weather, or is there actually a stronger trend forming of weakness amid the midlevel consumer? courtney reagan joins us with more, especially given, courtney, that some of the luxury retail names have done okay today. >> exactly. we've seen that trend for quite some time. the retailers that target the middle consumer have had to fight a little harder than the retailers at the high end and low end. while expectations were pretty low for same-store sales, thompson reuters expected a growth of just 1.5%, they still did disappoint, growing just 0.8%. few know costco better than you, carl, but i would argue it's higher than midlevel. it's got gasoline, currency, fluctuations, some other retail who report monthly don't have to deal with.
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including international for electronics, it becomes the weakest. electronic sales have been weak for a number of months, and while traffic remains strong, average tickets slowing to the lowest pace in more than a year at costco. warm march weather and an early easter likely did pull demand forward for macy's. but the majority of analysts are still bullish on the magic of macy's the next 12 months. the average price target is 44, which is 8% higher than where we are right now. the cooler weather does seem to have impacted target's apparel sales. the big box did see strength in food, home and beauty, and household goods sales. their growth has accelerated until april. but analysts aren't entirely concerned that a disappointing april will translate into a weakening trend. >> i think what's important is we're going to be heading into earnings for retail, and while we definitely saw some april showers, we do think that q1 will continue to flower for many of these retailers
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>> and barclays also recommends buying on the weakness as fundamentals and earnings guidance remain strong in the vast majority of these retail companies. carl? >> i'm just thinking about the costco thing. in shooting the documentary and talking to some of their buyers, who obviously source from all over the world, one of the questions they asked me the most, even though i was there to ask them the questions, was what's going to happen with the euro. there's still so much uncertainty regarding those forex effects that you mentioned. we have seen downgrades of costco in the past couple of days, largely built on those comps, which are not going to get easier as we go into the summer. >> charles gromette downgraded the last couple of days. again, costco has to deal with the forex that a lot of other retailers don't have to deal with. >> we'll keep a close eye, especially given the jobs numbers tomorrow raising questions about the american
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consumer and where he's at right now. our capital markets editor gary ka minski can talk carlyle later on. but you're going to start with something else. i know what it is now that i see herb next to you. >> shame on anybody who didn't pay attention and listen to mr. greenberg the last year and a half on green mountain coffee. i want to read something from the green mountain press release that i pulled up last night, from the press release last night. here it is. "after several quarters of robust adoption, we now expect a more moderated growth trajectory going forward for both keurig brewer and k-cup pack sales." why does this stand out? over 20 years, every time you see these hypergrowth momentum names, and the lawyers probably redrafted that sentence 15, 20 times to figure out how they say it. and the question is -- and i'm going to turn right to herb because i don't know the answer, but i know he does. herb, when you look at these momentum, hypergrowth names, the ones that get the big multiples, and the growth begins to slow. i think of opentable, et cetera.
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you've done huge work on this. in your experience, when they try to transition these stocks out of momentum names into value buyers on the idea that growth is slow but growth can rebound, can you think of a situation where growth begins to reaccelerate again? >> no. because you're resetting the clock at that point. you really change that. it's no longer a growth story. here's what's interesting. this green mountain story, you got the analyst from janney out here saying when moderating growth is not that bad. he's not trying to make the case it's not that bad because they have a big installed base. you're going from 101% growth rate a quarter ago to 37% growth rate today. that's a slowdown. that's more than just a little slowdown. >> carl, it's so important to understand, when you get the high multiple stocks, there's a saying on the street in terms of swimming in the big boy pool. when you swim in the big boy pool, you buy the high momentum, high multiple names. you have to understand, when you see a stock down, in this case, 40-some-odd percent today, you
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think, oh, it looks cheap. >> new 52-week low. >> that's the problem. the problem is the buyers of these names, once they exit and it's no longer a high multiple, high growth name, they're gone. they don't come back. and then you get the value type bargain coming in, and that's the dangerous thing. >> these are considered damaged goods. people don't want to go back to damaged goods. by the way, when the growth continues, that's when companies like a surgical or a hansen, that's when the shorts come in. that goes the other way. >> and that's the warning. by the way, i'm going to give you another one of those warnings on an upgrade, a stock we've been following this week, later in the program. a warning here that i want to make people aware of on this upgrade today. >> you're talking about chesapeake, no doubt a bernst n bernstein. and no cheap argument. >> i'm going to go through that upgrade and tell you why we've seen this before and why you have to be prepared and be aware of these things. listen to herb on these things. the guy knows more about this than anyone i know. >> you got that right. thank you very much, guys.
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talk to you soon. let's get over to cme this morning and check in with rick santelli, see what he's got built for the santelli exchange today. rick, take it away. >> carl, data are the best building blocks to try to predict what the markets are going to do ahead. of course, i'm on a trading floor where the predicting is very key. it correlates very highly with your income or lack therein. so let's just take a peruse over the last month or so on datdata. when we look at the last unemployment report, 121,000 private sector jobs, it was definitely on the light side. since then, three major housing numbers, existing home sales, new home sales, housing starts. all of those on the weak side. we had had a weak empire index. we had a week new york and chicago manufacturing index. we have weak durable goods. we have weak factory orders. 2.2 gdp. these aren't good things. of course, we've had some on the other side. jobless claims was in that camp,
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but today initial claims definitely moved down 27,000 to an area where people feel more comfortable in the correlation with higher job growth ahead. we've had some good confidence numbers. university of michigan comes to mind. retail sales, .7, .8, arguably middle of the road. when you consider all the other issues we're dealing with, there's mitigating sirbg circumstances. where am i going with this? let's add in the next topic, europe. spain moved 2.5 billion euros of three-year paper, and everyone was dancing in the streets, but it's significantly higher yields than they did on march 1st. these issues, along with the election, maybe some significant polar changes in the leadership in the parties in europe, whether it's france, maybe the netherlands, these are all balls that are up in the air, and they're going to affect investors. last but not least, jim bianco, my good friend and economist, thinks we're going to reach the debt ceiling by the end of may
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and stretch it out to october. that will be an election issue in his mind, which could bring the tax issue for the end of the year. you zsee where i'm going? it's difficult to predict the markets. the next jobs number is going to make it easier the next several weeks. >> a lot of mine fields still to navigate. when we come back, a quick programming note. maria is going to sit down with aig president and ceo robert benmosche for an exclusive interview on "the closing bell." expedia rallying over 50% this year. why is competitor orbitz lagging behind its peers? wggw i bathed it in miracles. director: [ sighs ] cut! sorry to interrupt. when's the show? well, if we don't find an audience, all we'll ever do is rehearse. maybe you should try every door direct mail. just select the zip codes
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not trying to be too much of a downer, but take a look at hnt. revenue fell, it posted a loss
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of 32 cents a share and cut its forecast for the rest of the year. according to the release, which i'm going through right now, there was a bunch of last-minute claims that came in that kind of crushed the quarter. it's a medical company, basically medical records and insurance company. healthnet down more than -- look at that. 29. that's bad. yeah, that's not good, guys. >> it's not, brian. thank you very much. on the upside today, orbitz has made substantial gains after announcing it narrowed its losses in the first quarter. gross bookings rising 5.6%. shares of orbitz clearly up over 6%. barney hartford is the president and ceo of orbitz worldwide. good morning. >> good morning. >> how do you feel about the quarter? >> we feel good about the quarter. we delivered accelerated growth of 12% in hotel gross bookings. hotels are the most important part of what we do at orbitz, and we feel really good about the progress we were making. >> barney, you know it's inevitable in this environment that people are going to compare you to expedia and priceline and
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the growth they've had there and the phenomenal out performance they've had in their stocks. just talk about how you feel in the comparison and how you can catch them up, if that is the aim. >> i think we have a different mix of business in terms of the orientation between domestic markets, international markets, and in terms of the mix of the online travel agency business, where we sell air, car, hotel packages and the hotel only business. i think we feel very good about how we're doing comparatively. for example, in business, e-bookers grew room nights 33% president on the a. on the air side of that share, we were gaining 30% against online competitors. we feel really good. >> but from a low base because the main focus has been the united states, it's been airlines, and that's not where the other guys are touting the growth. >> at orbitz, 29% of our revenue in the last 12 months comes from our international businesses, and i think it's also important to understand a mix in terms of
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hotel and air. in the last 12 months, 37% of our business came from hotels versus about 39% from air. so it's actually more balance than some folks give us credit for. >> how much are you worried about -- i'm just looking at an analyst note here that talks about signs that the competition, in his words, has stepped up. is there a compliment you can toss to your rivals' way? are they doing some things better than they've done in the past? >> i think i'd prefer to focus my notes on orbitz. i think that note was written before we anoupsed our results. i think we've stepped up our gain. i think the growth that we've seen this quarter, both the acceleration we've seen in u.s. room night growth and the strong growth we've seen and acceleration in europe is a function of being on a new platform. we've got great new technology we're able to go in and deploy, and we're using our own in-house search optimization and marketing technologies. this allows you to get great
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coverage, spend more and get more at the same time. >> in fairness to you guys, you've done the technology transformation. that's been the main focus. now you might say you're improving the product to customers. you regard yourselves as a technology company. you believe the algorithms will give you a cutting edge as the consumer comes to you. how will that materialize itself in the business? >> you're right, absolutely. we are a technology company through and through. that materializes itself in two ways. firstly, a better customer experience. as we use technology to learn from the way that millions of consumers around the world interact with our websites and use that to go and make our websites better, to make better personalized recommendationed. for example, did you know someone shopping for a mac versus a pc, we can take that into account when deciding what hotels to recommend to customers. secondly, the way it allows us to operate the business more effectively when we know the relative placement, the relative value of different placements across the web, we can line up what we're willing to pay for
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traffic to relate to that value. every day we're tracking the value of 40 million different placements and providing 14 million different bid updates into these systems that are allowing us to create this incredibly sophisticated arbitrage machine that's been a major investment area for us over the last 18 months, and it's really helped us grow the business. >> barney, thank you very much for your time. barney harford joining us there, the ceo of orbitz. >> after this break, we'll get the latest from the avon shareholder meeting, and amid all the cody takeover talk. and we'll count down the close in europe in just about ten minutes time. >> it's that time again. how would you like to win a hat signed by the entire "squawk on the street" gang. all you have to do is nail the number. if you can guess this friday's non-farm jobs number, it's all yours. twees us your guest at cnbcst
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send it back to mary thompson, who's standing outside avon's annual shareholder meeting. ma mary, what's going on today? >> reporter: at a quick, tightly controlled, and sparsely attended meeting today, carl, the company's former ceo andrea jung and current chairman called this a tremendous change for the cosmetics giant, but for current chairman and former ceo david mitchell, the changes haven't been enough. >> andrea shouldn't be there. i don't understand the board to have this lame duck ceo, so to speak, hanging around when her record over the past year is terrible. yet she's still there, i
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suppose, training miss mccoy. >> jung stepped down as ceo in september after a 12-year tenure. she's staying on as chairman for two more years, working with her ceo successor cher lynn mccoy. they blame jung for a host of problems, including flagging sales in the u.s., brazil, and russia. a number of earnings misses, charges of bribery, and a loss of shareholder value, down 51% in the last five years. several also frustrated with the board that they see as too old and out of touch with the need to use social media and new technology to drive sales and efficiencies at the firm. here's avon sales rep billy calder. >> i believe our most senior management and the board are out of touch with the realities of how women in particular interact today in the social media space. >> still all of the directors, including jung, were reelected
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today. a number of investors leaving the company expressing pessimism about the firm's future. still others hoping for a sweetened bid from kody, who offered $20 billion for the company, an earlier bid that avon's board rejected. >> it's always a tough thing when you don't have confidence in your own management, but you want the bid to be sweetened from the outside. i wonder what price they think a kody bid would be fair, mary. >> it's something that what was interesting to note, carl, is that wasn't even mentioned at the meeting today. it wasn't even referred to by ms. mccoy or ms. jung. of course, avon maintains that ms. mccoy, the new ceo, can do things with this company which will improve shareholder value much better than a sweetened bid from kody. >> you can see the frustration both in and out of the company. mary, thank you so much. mary thompson joining us in new york. the bell's about to sound across europe.
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we'll get the close there. it's been quite an eventful day on that competement. and it's going to be quite a weekend too.
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this was the big day in terms of news flow out of europe. a spanish auction that went okay. obviously, the ecb standing pat at 1%. mario draghi, the president saying, it's not enough to change the baseline scenario
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which foresees a gradual recovery in the course of the year. let's hope. >> and on top of that, the u.s. data. ultimately, that is what's moved the european markets today. let's have a look at the three major indices, and you'll see exactly what i mean. we were going great guns at you in europe. the earnings were a key focus, actually heading higher during the course of the session. then, of course, whoa, there we go. and then we got the data that came out of the united states, and that's really what's moved us. the ism services sector, the idea that the united states might not generate the growth that everybody else was banking on in equity markets around the world, has actually hit us, or hit them very badly in europe today. those stocks that were doing well like bmw that earlier was up 3%, 4% in the wake of having a gang buster quarter in china. it's cut its gains. this food operator, half of its money coming from the united states. food lion is the chain it's
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having difficulty with there. that's earnings. that's history. let's have a look at the map of europe. it is a negative buy because of the data that's come from the united states, at least for a lot of europe in that central patch there. >> european markets are closing now. >> now, as carl mentioned, importantly today, we have the european central bank meeting that didn't move on rates. nobody in the market really thought they would. they emphasize the risks are to the down side potentially from here, which means they might move in the future. again saying the governments need to follow through on austerity. that was central to what had to be done, but again draghi importantly holding out an olive branch to some growth pact further down the line. >> unfortunately, often countries found themselves in urgent situations where they basically had no time other than doing the easiest thing, which is to raise taxes and renew
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capital investment expenditure. but this, even though it can be understood to be a short term measure, it should be corrected in the medium term. >> however, what he failed to do and specifically asked by the audience -- and he was in spain today in barcelona where there were riots two weeks ago, heavy police presence there. he refused to say that he would reignite the bond buying for the spanish markets despite the efforts the government is making. what's interesting is the way in which over the last month we haven't really seen yields appreciably higher in spain. we seem to be okay for now. into the frame, of course, you've now got the french election this weekend, two important elections. nicolas sarkozy last night clearly failed to deliver a knockout blow against his opponent. so our working assumption has got to be the socialists will take power come sunday in that election, and there are very many unknowns that are connected with that. what i would say at this stage,
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however, is that on the bond market at least, the price action in france seems to indicate that people are relatively relaxed. again, this is a one-month chart of the yields in france. you will see, if anything, the yields have actually fallen recently. it might amount to nothing when the analysis comes through on sunday night. it's important to market, i think, at this stage. too many people in the market, the more immediate concern now is what happens with the greek elections, which also come through on sunday. and what might happen there, what is important to note there is that the two main parties may not -- and they're showing at 38% in the polls -- they may not actually come through with enough of a majority to lead in parliament, and therefore follow through on the promises that they've made to the rest of the european union. so depending on what we get, it may open up the prospect of a stand-off between the rest of europe and greece on getting the money that has been promised and following through on austerity at the same time. and that raises a lot of
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questions, not least weather, potentially greece might be asked to leave the eurozone down the line. or another bailout would be the other argument. >> it's almost funny talking about greece, knowing there are much bigger fish to fry in terms of trouble right now. >> if michelle caruso-cabrera were here, she'd point out there's not a large amount of private money at stake in greece, it's more public money. therefore, the dynamic of contagion has shifted, not through the banks, but if you start talking about greece leaving the eurozone, it could ignite the spanish and italian bond markets. that might be your point of pressure is the advice. >> italy would definitely be a problem. simon, thanks. simon hobbs. let's get to markets editor gary kaminski, who promised a take on chesapeake later in the show. >> we've been discussing it for several weeks. did get an upgrade today. much like herb and i were talking about, much like the value guys coming into the broken momentum names.
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the street is littered by sell side analysts who try to pick bottoms on names like chesapeake, for example. i read through the report today. a lot of respect for bernstein as an institution, a sell side institution, and i read through the report. basically, as you pointed out, this is like saying a stock is cheap based on certain assumptions we're going to have, and therefore, we're going to upgrade it. you were right. we had it under perform. we're going to upgrade. the fundamental issue, when it comes to chesapeake that we try to make people understand, it's about leverage, leverage, leverage. while assets were being sold, certain assumptions were made. you listen to the conference call about where the gas will be, what the concentration is going to be in terms of trying to deleverage the business. to say the stock is cheap simply to make a name for yourself as a sell side analyst, as i say, the street is littered with attempts to do this. there's very limited down side. if you're right, you become a hero. if you're wrong, you simply say, well, some of the assumptions
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aren't there. so buyer beware in terms of the research report on chesapeake today. >> gary, for a note that is ostensibly a buy, there sure are a lot of caveats. there's the warning about the iceberg theory, that is, there could be a lot under the surface we don't know about. at the end, they still say, this trade is not going to be for the faint of heart. >> is you've got to deleverage this business. if you try to do that, if you think back to the financials of 2008, when you do that in an unfriendly marketplace to try to do that, it's not the easiest thing in the world. again, just a buyer beware. >> let's do carlyle really quick here. >> you got it. >> is this healthy long time for the ipo market, a 1% pop like this? >> absolutely. they wanted to make certain -- the deliver on the promise here was simple, that this, unlike the other private equity firms, was not going to break the syndicate penalty bid. that's why it priced in there at
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22. it's holding in there at $22.03. this was trying to set the bar that the investors have had. so far, they've done a significantly good job because they said they were going to price it at a level where it wasn't going to immediately break the bid, and they have done that, and that's what's important here. >> they're riding it awfully close, up .2%, gary. >> even if the stock closes at 22 today, carl, the message that was delivered will be the message that was received. >> you nailed that theme yesterday. thanks for that. we'll talk to you in a few minutes. bob pisani is here on the floor of the nyc. hmos at the top today. >> i've got a lot of questions with why healthnet missed. hmos are having a problem, and they're coming off the highs. there's two fundamental problems. let me show them to you. these are the misses, healthnet,
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aetna, coventry, humana. people aren't going to the doctor. itment booed out last year. now the money they have to spend per patient has been going up. the other thing that's really important is the supreme court is going to rule on the affordable health care act probably june 25th. if they vote to uphold this, 30 million people are going to come on the roles for hmos. that's going to be hmo positive. but the indication is they may vote against it. that's very important for hmos. a lot riding on that. here's the hmo index the last several months. as we've gotten these misses the last week or so, it's coming off its highs. this is understandable and the uncertainty about what the supreme court is going to do is really what matters. i want to move on and talk about the alternatives, people going into other thing. let me show you a company that does simple medical supplies.
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qvidium. as health essentials have been moving down, this has been moving up. this is a simple medical supply company. they supply stuff to doctors. a simple alternative to hmos. a lot of people switching to that as an investment alternative. let me comment on retail sales. we've said a lot about that. the important thing for retail sales, there's going to be a lot less noise. we can't talk about easter in may. so there's going to be a lot less noise associated with it. retail earnings had been terrific. we are expecting -- and this is retail metrics expecting a gain of almost 10% for the quarter. the s&p only 7%. and look at all the companies that raise their guidance here today, carl, before i toss back to you. limited loss, tjx, and gap all raising guidance. that's the biggest concern there. >> thank you, bob pisani. let's get to rick santelli in chicago, who's got another special guest this morning. >> thank you, carl. congressman michael grimm, republican new york, welcome.
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yesterday you made big news. earlier in the day i talked to james catous who represents many mf investors who still haven't gotten their money back. we're talking about mf global, halloween surprise, seventh largest bankruptcy by assets in u.s. history. can you tell me what letter you circulated yesterday and what it may mean for this investigation. >> sure. it's very simple. we're calling on the attorney general to put in place a special prosecutor. there are so many different things surrounding mf global that i believe public perception is that it's been -- the system is compromised. and i think that it makes a lot of sense right now to give the special prosecutor an opportunity to come in and give that, if nothing else, the public an opportunity to believe that there is a fair system in place and that someone is going to protect these customers. there's just too many things that have gone on that lead to the inference of impropriety,
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and for that reason customer service is certainly warranted. >> just to get the viewers up to speed, let's run through it real quick who some of these characters are. we have governor and senator jon corzine, a bungler for the current president, but also one of the co-authors of sarbanes-oxley. he had help with that from gary gensler, head of the cftc. it was on his watch that mf went down. he recused himself, and that really caused the glide path of this investigation, or this bankruptcy, shi say, to move more on a securities avenue than a futures avenue. we're also talking about regulatory capture because mr. gensler, according to bart ch l chilton, found mr. corzine a very tough foe when it came to changing rules. so they bent a lot of rules. rule 125, they were allowed to invest in europe. these are some of the allegations. do you have any more you want to add or comment op the ones i'm throwing out there? >> i think you hit on something
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that's extremely important. rule 1.25, july 20th, is when mr. corzine had a conversation, or a conference call, not only with the chairman gensler, but also then later with commissioner chilton, and that's the same day the cftc decided to pull those rules and put them on ice. but yet after the collapse, within five weeks of the collapse of mf global, they implemented those rules. that's exactly what i'm talking about that people don't have confidence. the other problem is no one's been speaking about the bankruptcy. when you look at the bankruptcy, 36,000 accounts were under the cftc's purview. only 318 were brokerage accounts. yet it didn't go under a cipa bankruptcy, not a cftc bankruptcy, which put all of the customer is in a much worse position because now they're treated adds creditors, and they're going to be fighting to
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get their money from europe. that should never have happened. i think we learned our lesson from bear stearns as well as the other firm, lehman brothers, where it takes years to deal with these foreign courts. these segregated accounts never should have been put in that position. >> a lot of people down here agree with that. real quickly, let's talk about the process. is the number of signatures you amass what triggers this, or does eric holder have the final say so? what would it take to go from the letter, the signatures, to actually appointing an independent counsel? >> eric holder is going to have the final say so. what we're hoping here is we're going to have overwhelming support. i know we have a lot of support on the republican side. i've already spoken to a lot of my colleagues that agree with me wholeheartedly. i'm really hopeful this will be bipartisan because this is something that affects the integrity of the markets. we cannot play games with our market integrity. i just had chairman shapiro in front of my committee and asked about the bankruptcy issues, and
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i'll be honest with you, i wasn't very happy with the answers. i think that everyone out there on the street, throughout the world that wants to invest in the united states, has to have confidence that regulators can't come in and change the rules or decide bankruptcies in a way that are going to put them at a disadvantage because that certainly goes to the integrity of our markets. that's why i think we'll have a lot of bipartisan support, especially considering the things that are going on. you already mentioned, having corzine as one of the top bundlers for the president of the united states while this investigation is going on certainly sends the wrong message, i think, to the entire world. >> congressman, thank you for being on. i hope you'll come back when we move to the next phase of what your letter may begin. >> certainly. look forward to it. >> carl, back to you. >> thank you very much, rick santelli. the impending facebook ipo means bad news for second market where trading of the social media giant shares came to a stop back in may. how bad has it been for second
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the halftime show, one of the biggest bulls on green mountain coffee finally cracks. he'll tell you why. and a chesapeake bear gets bullish. do you dare follow this top analyst's lead? plus the trade on tomorrow's jobs report today. traders make their calls at the very top of the hour. now back to carl at the exchange. facebook's ipo is bad news for second market, where facebook shares were in high demand before trading was halted at the end of march. now second quarter's first quarter earnings are out, and julia got a look at it. >> second market continued to grow its trading volume in the first quarter, but it did stop trading facebook at the end of q1. so we don't know how much the trading dropped since it lost the social media behemoth. though facebook was in high
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demand, it actually didn't dominate trades. for the first time, software company shares were the majority of transactions, surpassing the category that facebook is part of, consumer web and social media, which comprised 44% of trades. second market will not disclose the companies it trades, but it does say that enterprise software, software as a service, and cloud computing companies like drop box, debts tone and box.net were extremely popular, and they are drawing new investor interest. pinterest is the rising star with a 7% increase. also on the list, online e eyeglass company. software platform service out and software development service global logic. second market is start to go move beyond startups and into hard assets. >> we are making available funds that have access to different types of alternative assets.
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for example, wine and art and even diamonds. >> we'll see just how reliant second market was on facebook in the coming quarter when we see the company's first post-facebook numbers. carl, obviously, there's a big difference in investing in alternative assets like wine and investing in facebook. >> true enough. though funny a lot of those names are names that people talk about facebook potentially one day buying. very interesting stuff. thanks, julia boorstin. today sotheby's in the headline after the scream, that painting sold for a record breaking $120 million.
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i shall sell it then. can i say i love you? $106 million. sir, charlie, it's one six. 107 million. at $107 million it is charlie's bid against stefan. i shall sell it then for the historic sum of $107 million. hammer. sold. thank you, charlie. >> and that was the tense moment as the final bid for edvard
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munch's the scream was auctioned off for $119 million last night at sotheby's. sotheby's stock is up this year, so on the back of last night's win, should you be adding sotheby's to your portfolio? mark riddick, a senior consumer analyst. welcome to you both. good morning. oliver, just out of curiosity first, does a big sale like this, is it material to earnings? what happened? do margins expand? talk about the dynamics within the industry. >> regarding this lot it was such a marquee lot, that i think margins are a little bit lower, given the world class nature of the scream. it was once in a lifetime. the average commission margin as i measure it at sotheby's was closer to 15%. for a lot like this, i would estimate it's 300 to 500 basis points lower in terms of the competitive bidding environment to obtain this lot and the relationship between sotheby's
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and christie's. >> all that said, stock is actually below your target price. have you moved it as a result of last night or not? >> i am incrementally encouraged on the performance last night. we do feel like sotheby's is fairly valued, and we have a neutral rating. for me, i believe the business model could illustrate some deleverage in the first quarter. the first quarter is closed already. "the stream" will impact the second quarter. there is upside of eps of 5 cents to 10 cents from "the strea scream," as i measure it. but aggregate oux revenues in first quarter were down, and sotheby's fixed costs were up about 11%. >> mark, it seems like an awfully tough stock to cover. guidance, i understand, is very hard to come by. it's a volatile market. it's a very limited, narrow audience they cater to. what's your take? >> we currently have a prefer/hold rating on the name
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with a price target of $34.50. last night was a magical night and certainly something that created outstanding theater and was fun to watch. but one of the things about sotheby's which we like as a company overall is they have very difficult comps. last year the art market was incredibly strong and very broad and diverse. while "the scream" is an incredible thing to watch, the overall art market is much healthier when you have more auctions and more lots with more diversity as far as the strength of the market. it's a very tough comp in the first half in terms of sotheby's in the art market overall. >> people always talk about the russians playing in new york real estate. is there not a big wave of very wealthy international people who want to invest in hard assets outside of their country? >> i do believe that's the case. it's one of the buy reasons why you would have on the story. ultimately, we're talking about a marketplace globally. overall, we're looking for sales to be down in the first and
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second quarter. sales were down for sotheby's in the third and fourth quarter last year. it's comping against incredibly strong numbers the art market has seen the last couple of years. >> one last point? >> i would add the art market in terms of as an asset class is interesting and increasingly interesting as it is currency neutral. the other factor is with inflation concerns, people are interested of rotating into art and diamonds as methods of protecting themselves on easing credit. that is a potential catalyst in the back half. >> fascinating, guys. it was fun to watch last night and good to talk to both of you. thanks for your time. >> thank you. >> oliver chen, mark riddick. "the scream" is what we're talking about today. complete this sentence. "if i'm paying $120 million to hang on my wall, it had better be able to do what" hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in,
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of how a shipping giant can befriend a forest may seem like the stuff of fairy tales. but if you take away the faces on the trees...
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take away the pixie dust. take away the singing animals, and the storybook narrator... [ man ] you're left with more electric trucks. more recycled shipping materials... and a growing number of lower emissions planes... which still makes for a pretty enchanted tale. ♪ la la la [ man ] whoops, forgot one... [ male announcer ] sustainable solutions. fedex. solutions that matter. squawk on the tweet. we've been talking about this record breaking auction last night when "the scream" sold at sotheby's. if i'm paying $120 million for something to hang on my wall, it better be able to do what? michael writes, "it better be able to speak to me and t

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