tv Squawk on the Street CNBC December 30, 2014 9:00am-11:01am EST
i think. i think a little bit upgrade. >> it's been something to -- as you say, therefore but the grace of god. >> would make a great movie. >> the whole thing? >> sony. >> thank you, jeremy. join us tomorrow. "squawk on the street" is coming up right now. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen and simon hobbs at the new york stock exchange. david and jim are off today. the penultimate trading session of 2014. premarket red after the s&p's 54rd record of the year. case-shiller housing data is out. no relief in oil though. a new 5 1/2 year low.
hit $52.70 on wti. the ten year continues to slide below $2.18 this morning. our road map begins with oil. 5 1/2 year lows. >> more details from the planned shake shack ipo. why the strongest growth may not be where you think. >> the latest case-shiller report. you'll see it flashing at the bottom of the screen. we'll speak with robert shiller about what he thinks 2015 will bring to housing. >> you can see futures are off premarket. crude continuing to fall. it all began with that sell-off midday yesterday. albeit on light volume. unbelievable what's happened to crude. you thought some of the worst was over. it clearly isn't. russia's gdp down in november for the first time in five years. it's beginning to have more and more spillover effects. >> the ruble is up today. that's something positive. >> almost down 8% yesterday.
>> down 44% for the year of 2014. it's been a brutal year for russia. the u.s. is where it's at and continues to be. 53rd record close? heading for a third year of gains for the s&p 500. double digit percentage gains. something we haven't seen since the '90s. today we'll get consumer confidence. light volume trading days toward the end of the year. the move is higher as oil feels like the move is lower. >> narrowest trading range for the dow the entire month yesterday. saw you had these narrow ranges. intraday records for the s&p, the russell, utilities. >> that's what companies are do. we knew they would spend a lot of money. we are only up marginally for the month. remember the beginning of december was rough. not a lot of people are buying then. a lot of that corporate buying has been delayed. the most fascinating conversation is the fact we are
5 5% from the highs on the nasdaq. the changing composition of the nasdaq investor appetite, biotech. it's a fascinating conversation we'll return to very shortly. joining us deutsche bank chief's u.s. economist joe lavorgna and dan morris from tia cref. the nasdaq after 15 years coming up towards the highs it had way back in 2000. 5% below that now. what do you say to clients about overvaluation in tech soundness of the market and how it could confirm how the other indices traded? >> we don't see technology stocks overvalued. if you look at the landscape for u.s. equities it will be more difficult for companies after how many years to increase earnings growth. you need productivity. that's where you like technology. there is the most opportunities
there to come up with new products to reinvent ways to do business. that can spread out to other parts of the economy. it does seem to be more interesting to us. >> i'm not sure how far the nasdaq is a technology index given walgreens when it reforms at the beginning of next year will be there and marriott and other people are part of that index. on tech itself would you admit in the start-ups there are overvaluations? staggering figures as they attempt to get an early first? >> of course. if you compare it to other sectors within the u.s. it's one of the view where you can argue there is still opportunity in terms of valuations where a lot of the other sectors are at full value, if not a bit above. >> i want to mention the home price index. it's the 11th month in a row we have seen slower price gains in housing. some of the markets as we learn in this report that broke are
seeing accelerating price gains. across 20 cities it's lower. is housing going to catch up with the rest of the economic recovery next year? >> i hope so. we are going to grow nearly 3% this year with a horrible first quarter. have virtually no meaningful contribution from housing. i would have told you i thought gdp would be 3 this year. i thought housing would have been a contributor. it hasn't. sets us up with a better 2015 with housing being a more meaningful contributor growth. >> what is your diagnosis why it will turn around? >> we dug a real deep hole in the first quarter on housing. number two, it's been a lack of credit coming back into the market. haven't had a lot of financing. it was only in the third quarter where the fed survey showed easing of mortgage standards that likely continues this
quarter into next year. when financing comes back you'll see housing do better. >> one of the lines of argument over the nasdaq is whether or not people still have the appetite they did for equities. if we get back to the highs, we'll will rehearse those arguments. if housing can you say there is not a fundamental change in psychology holding back the housing market? >> for sure. that's why homeownership rates have fallen as they have. in aggregate, if you look at the vacancy rate across the country, which includes homeowners and renters, we are at a 25-year low. we'll have less housing formations and fewer buyers but we still need places for renters to be. there is a shortage of housing. when i talk about housing, there is going to be more rental properties. why we've seen the multifamily sector take on increasingly larger share. >> how do you square 2.17 yield
with your rosy outlook? >> i can't. fundamentals will give you the direction of rates, we'll have the best job growth since '99. the economy has grown 4.5% on average. ten-year yields down 2%. if the fed moves rates next year inflation starts to pick up as i believe it will we'll see much higher yields. well above where we are right now. >> i'm just astounded as to whether you think inflation will pick up next year. >> a little bit. energy in the short term is a major tax cut for businesses and households. that core rate is not going to be sensitive to energy. if this labor market -- we push sub5% unemployment as i believe we will in '15, it's hard to think wage pressure the bulk of business costs is not going to accelerate. that's going to push inflation higher. >> if you look at the u.s.
there's been more investor interest in the u.s. because of the latest gdp figure. problem is u.s. equity market valuations already reflect that. it's not attractive on a valuation basis. decent earnings growth. perhaps overvalued. we are looking internationally. biggest opportunities look to be within japan. we had a resounding victory for abe in the last election. there are parts of italy and france where parts of the government realizing they need to change but the public hasn't bought into that. ultimately it will be difficult to push through reforms. >> or corporate taxes like in the u.s. in europe we have this political scare in greece. italy managed to sell 10-year debt which shows the contagion is not there. does that mean we don't have to
worry about these problems in greece having a party there that is anti-austerity, anti-bailout and anti-euro zone? >> i don't think we need to worry all that much. even if you come up with the scenario where the party does get the most votes, it may be difficult to form a government. they are not going to renege on any commitments the government has. we think the contagion won't spread across europe. what you see in italy is more a reflection of the fact this last of impetus toward reform. it's not necessarily a good indicator they are able to have such slow rates. it indicates they are not growing. >> good to see you, dan morris. >> joe lavorgna i feel there is an inevitability you'll be on the show before the end of the week. always a pleasure. >> thank you. wreckage has been found from
the missing air asia flight. katie tur is in singapore with the very latest. >> reporter: good morning. really tough day here in southeast asia as officials confirmed they found wreckage and bodies and that wreckage and those bodies are from air asia flight 881. relatives found this out watching live local television and seeing those bodies on live tv without any warning. there were 162 people on this flight. 17 were kids. one was a baby. the search effort will begin again tomorrow in earnest. they are going to send divers down to an area they saw large shadow. they believe that is where the bulk of the wreckage is. they are hoping the divers will be able to recover the black boxes to figure out what happened. and whether the bad weather in the area was a factor. >> families will be getting a
charter flight tomorrow to take them around the islands halfway between indonesia and singapore. it's the area that flight was last known to have contact with the control tower. they'll be able to pray there. hopefully these bodies will be i.d.'d in a timely manner and they will be able to start their funerals and memorials, everything they need to do to get them honored in a timely manner. this search and this recovery will go on for quite a few days. they are calling this a rescue effort. they are holding out hope there might be a survivor. back to you. >> katy thank you for that. when we come back with, more on the case-shiller numbers. robert shiller is with us after a break. >> tobias levkovich will join us with his market outlook for 2015. take one more look at the premarket.
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slower pace. rising only 4.5% in october versus 4.8% gain in september. joining us first on cnbc via skype this morning, the co-founder of the case-shiller index robert shiller. professor of economics at yale university. good to see you again. >> good morning. >> so why? clearly, this number beat expectations. it wasn't terrible but why are we seeing this continued streak of moderated price gains and sluggishness in home prices right now? >> well what we are seeing they are still going up. they are going up just about on expectation. i did a survey with anne thompson in june. people are expecting 4.5% price per year for the next ten years. so far, we are right on track. i think our optimism when we rebounded from the bottom in 2012 is tempering a bit. it's not a dramatic change. >> i guess the fact we saw 9%
growth at least in miami and san francisco and some other cities accelerated growth that is a good sign. does that mean things are bottoming and perhaps we can see higher growth when it comes to home price gains? >> yeah. the two best cities on the 12 month basis are miami and san francisco. there is a pattern here i think. glam glamour city. i suspect as some data do with their history of speculative buyers. i don't think of it as a good sign. i think it's getting a little too bubbly in san francisco. >> let me pick up the broader point here professor shiller. my reading is actually optimistic. i've got eight cities breaking
out with higher growth rates. they are speeding up. i see your colleague david blitzer is suggesting house prices could accelerate into next year. could we deal with the glass half full side of the argument which seems the strongest given where we've come from the recent surveys? >> actually if you look at the seasonably adjusted data we reported today, we are up 0.7% in one month. that is like -- or 0.8% in one of our series. that is like a 10% annual appreciation. it's a mixed picture. you have to remember we are in a slow month reporting on october, which is normally a slow month. >> what happened to home sales in the month of november? we saw a dip for new home sales, a dip for existing home sales, are these numbers going to recover in the new year? s. >> you know those numbers trouble me a bit.
i think there's also the worry that the very low interest rates we've had with the 10 year just above 2% that has been driving this market. i think that's fragile. i think of the market as looking on track with expectations, but fragile. i worry that -- one thing i learned in forecasting home prices is that they are different from stock prices. the rate of appreciation is very steady. if it starts slowing down that could be a sign of a turning point. i'm not calling a turning point yet, but i feel a little bit of anxiety about the market. i mention ten-year expectations being on target now, but expectations in home prices are often very wrong. there is a risk of -- it's always risky investing in the housing market. there is a risk of a turn down. >> finally, i'm sure you get
this question all the time. in 2015 if you had to own stocks which you said are expensive for a while or a house, which is the better investment? >> well my cyclically adjusted price ratio is getting to 28. it's breaking out of the range the stock market was in from 2004 to 2007. that's troubling. i don't think of housing as a good investment unless you are a smart real estate manager. >> so maybe neither. >> i would stick with the stock market. >> still go with the stock market. bob shiller, good to see you, as always of the s&p case-shiller index and yale university. >> thank you. following up on burger shake shack filing for an ipo that could raise as much as $100 billion. interesting details. the middle east has proven to be
the company's biggest growth market with about 20 restaurants there. they cite a potato bun as risk factors. and custard's first stand, dog run and madison mixer were all considered. it's actually raised some discussions about how well restaurant ipos have done this year. average consumer ipos up 30% in 2014. average tech ipo about half that. >> that surprised me. >> you look at what loco has done and zo's. >> habit burger? that chain that popped 90% on its ipo? as far as ipo s-1 filings go this was a good read. it was very colorful. we should point out the growth rate at shake shack, though there is a lot of excitement is slowing. they call it same shack sales growth. this out of the s-1.
slow to 3% from 5% a year earlier. the year before that was 7.1%. something potentially investors want to know more about. >> how they get from 63 stores to 450, which is the promise. i think the most important footnote here is you have a big private equity player leonard green trailing with a 40% stake four years ago who is clearly looking to plot an exit at some point. that has been the story of the year, of course. notably with the lights of blackstone taking businesses to market to plot an exit strategy. it does mean they are using this period of market calm and a very good ipo environment to set themselves up. >> the timing is beautiful with what gas prices have done. darden had a record high yesterday. chipotle had a record high. fast cat ul has gotten better. >> and burgers are in a sweet
spot. they advertised grass-fed, vegetarian fed, 100% natural. those are the buzz words when it comes to these fast casual restaurants. they have plans to open ten a year going forward. when we come back art cashin celebrating 50 years on the floor of the new york stock exchange. became a member this date in 1964. he will ring the opening bell and join us on this landmark day. futures, as we have chop in the premarket.
take a look at cebo the company providing temporary long term housing for oil workers, plunging in after-hours trading after weaker than expected guidance. the market capitalization is under $1 billion. they've been hit by the prospect of oil companies cutting back spending amid tumbling crisis for crude. they expect an operating profit for the full year $250 million. now saying they will deliver half that. expected to have a rough open in four minutes time. >> art cashin will ring the opening bell this morning at the new york stock exchange. celebrating 50 years as a member of the floor populated with a lot of his family and friends.
that is the man of the hour. december 30 1964 a 23-year-old art cashin becomes a member of the nyse. 50 years later he is ringing the opening bell surrounded by friends, family some colleagues from ubs, we are told by folks here at the exchange this is very rare. very rare for someone to ring a bell opening or closing simply for an anniversary, but how many anniversaries do you have that celebrate 50 years? >> he is a simply rare man.
look at the crowd that came out. we have him on the show nearly every single day. he started his career in 1969 as a clerk on wall street. today is a celebration of art cashin. >> only took him five years to become one of the youngest men to ever hold a seat at the nyse. we'll talk to him in a few moments about his career. i would love to know how you become a partner at that age and get a seat in five years. an amazing trajectory. >> what the stock change was like and how it's changed. >> not only does the exchange celebrate cashin those of us here at cnbc for whom he is a member of our family. >> arthur!
>> what a great moment. art cashin ringing the bell here at new york stock exchange. over at the nasdaq doing the honors as well. i don't think we know because we spent so much time paying attention to art. >> it's newt. >> there is a look at the s&p at the top of your screen. we'll talk to art in 15, 20 minutes what this means to him and what it's been like to watch 50 years at the exchange. and what he sees in the future which we talk every time he's on. you might imagine it might be a little bit of a thin trade today. with all the volatility in oil, again west texas coming down to $52.70, it might get interesting as we mentioned at the top. russia's economy, the ruble action this week. their forex reserves below $400 billion. >> they are trying to keep the
currency from a freefall and spending a lot of money. obviously, that will hurt when it comes to their reserve cushion. watching all the major s&p groups are in the red. fractional moves here. we'll see what happens, keeping in mind we are coming off another record close. >> i think this is quite good news. you are getting a fall in the energy stocks in the open. it's muted compared to what you saw in the open. oil and gas suppliers were down heavily. that's not happening at the open here. yes, i've got some of them edging lower. by no means falling out of bed despite the fact you have record supply stock piles of oil in this country. a lot of people found that shocking. hence the reason the price of oil slipped again to a five-year low. >> in the final two trading days, you are going to get funky action when trying to avoid capital gains, taxes the end of the year. you have to wonder how much
activity business that versus implying the trend of the end of the year. santa claus rally, hope we don't borrow from 2515. they are saying the forecast is solid. 8% to 10% gain is the consensus. >> oil refiners and nabors transocean chesapeake and so forth to the bottom of the list. tesla might get a boost on news china plans to extend sales subsidies on electric and cell fuel vehicles through 2020. they had been scheduled to expire 2015. what a ride tesla, falling below $200. obtuse tweets from elon musk as it tries to make its way back to $260 range. >> china story is key for growth. gmail came back online.
gmail had been out in china for a few days. now we know it's back. >> we mentioned this just before the opening of the bells. the latest oil-related stock to warn of low prices. civeo. it provides temporary housing for oil workers. 42% loss at the open. suspended quarterly dividend. the expectation is now that they will deliver half the operating profits that the street marked up. >> this is a hedge fund stock. janna is in this stock and green light capital. that is a painful one today. >> art cashin taking pictures with his family by post 8. he'll make his way over in a moment. watch ups and fedex. they are changing their pricing strategy because the boxes that are being sent from online retailers are getting so large that they have come up with a
new formula. goes into effect in a couple of days. for u.s. ground they will price it its dimensional weight. >> size matters. >> if you order something from amazon, it has a big box and they have bags to cushion it around. >> more and more is being shipped online. it's been a smooth season. >> a lot of housing names are down. toll brothers and lennar down 0.5% after s&p case-shiller continues to slide a bit. one of our questions for shiller might have been what happen wes we see negative numbers year on year? does that spur some bargain hunting among folks or does it spark fear?
next time we'll get his take on sentiment long term. >> you have a reacceleration coming through in san francisco, tampa, denver. those could be market leaders. san francisco is out there on its own to a certain extent. that is the reading. he sees us setting ourselves up for reacceleration of housing prices. it could be a very good year for housing. that could be one of the final spokes we get moving on the economy. >> how low do prices have to go before it draws in new buyers and the always-elusive first-time home buyer which hasn't been participating? las vegas had negative prices. they saw their price decline. >> you fixed your 30-year at such a good deal, you feel you don't have to move or want to move for quite a while. the bargain was so great. >> can i point out one of us is getting a mortgage and she is
getting a much better deal than i got two, three years ago. >> it's low interest rates. i'm taking advantage. >> dow is down about 20 points. bob pisani is on the floor. >> we are all talking about art. sitting around telling art cashin stories. a lot of people asked me about 2015. generally,em's optimistic. i watch earnings and the numbers carefully where people are expecting things to happen here. good news. we are going to have good numbers in 2015. earnings growth will be from 7% to 10%. look at 2015 eps expectations. it was about 8.8% two weeks ago. one thing i'm concerned about. it's been dropping in the last month. particularly the last two weeks. now down 7.6%. the problem is in energy.
it's been affecting earnings expectations next year. two weeks ago the numbers were coming down fast. now look at it today. just in two weeks it's come down another eight percentage points. we are expecting s&p to be down 20%. earnings are starting to come down to the overall market. when you get 8% 9% of the index coming down dramatically you start having overall earnings being affected. i'm optimistic. we are about 16 times forward earnings. i don't think that's overvalued. i see tail winds for the stock market. i see labor market improving, wage growth dividend growth confidence across the board. housing, small business confidence and lower energy prices. i call that a positive that is going to benefit all the heavy users like materials and
consumers. i do see head winds that are out there. the most important one i see is any change in fed policy. higher rates that would be influencing the markets. that's the number one worry. i also am concerned about an inflation ramp-up. that would be a head wind for stocks. i get the argument about revenue shortfalls. value investors have been screaming stop talking about pe ratios. how about price-to-sales ratio? revenues are going to only be up about 2% again. value guys hate that. this has been going on a number of years. i understand from a value perspective the market might be overvalued here. let's talk about the most surprising events of 2014. i try to be bold. nobody i know expected a 40% decline in oil which is arguably the biggest story of the year.
it shows how difficult it is to a make a strong prediction how the markets are doing. the continuing decline or low yields on the ten year. i was not in that camp either. let iturbe to art cashin the man of the hour. we'll talk to you in a minute. this is the sacred book of the new york stock exchange. it's only brought out on very small occasions. it's been signed by members since 1718. that's john d. rockefeller, march 15 1882. rockefeller was a member of the new york stock exchange. jpmorgan. the man of the hour this is the one we are interested in. i can't pick the book up it's that big. december 30 1964 one arthur d. cashin jr signed that book.
we've been going down some of the old-timers looking at some of the other names that signed it. a few people are still with us thank heavens. we've been asking for comments overall. the important thing is the most important historian and our dear friend art cashin has been with us. you are going to go over and talk to the guys when you look at a book like this give us your thoughts with all your family around. >> it's a terribly great honor. not only rockefeller and jpmorgan and showing my age, this is the original book. there are three more books after this. i had the great honor of being in the same book with some of the great names of finance. >> why don't you go and talk to carl and the guys. i know some of the guys have a few questions. maybe i'll have a chance to toss them to you. back to you. >> what an amazing relic.
thank you for showing us the book. first a check on the nasdaq in the opening few minutes. looks like flat action but we are watching that key level back to 2000. what's moving? >> that's right. how do i follow up a signature from rockefeller? nasdaq is pretty much flat ever so slightly lower about five points lower. taking a look at the nasdaq composite for the year we are on track for 15% gain. that's trumped only by its large cap peer the nasdaq 100 which is on track for 20% gain for the year. taking a look at some of the stocks leading this rally all year electronic arts up about 120% for the year. avago up 90%. keurig green mountain up 80%. other big cap numbers, apple, facebook intel to name just a few. that put the nasdaq within 5% of
its tech bubble era record close going back to march 2000. that is what everyone here is focused on moving forward over the next couple of weeks. many expect we can hit that close and move past it. strategists telling me if that's the case all the indices will be at new records. that will mean they are in sync above resistance. that is a good thing for the market going into 2015. we are keeping an eye on the russell 2000. we've seen small caps come back and rally. they are hitting their own fresh highs. folks are focusing on because of that so-called january effect. historically small caps tend to outperform large caps from destine to about february or march each year. keeping an eye on both indices today. >> thank you. let's hand it over to jackie deangelis at the new york merck.
>> looking at wti 53.87. coming off those session lose. what i want to talk about is prent crude brent at 57.84. significant under that $60 level. you had arab saying we are going to stabilize around $60. a lot of people are talking about $50 for brent crude. that implies $40s. yesterday you had baker hughes talking about reducing its rate count. data points all over the country with companies doing system plar things starting to reduce head count. starting to see these lower oil prices are starting to hit home. traders telling me we could bounce around the $50s. january would get hit hard when books rebalance. we are getting an upside to gold. short covering out of asia. also end of the year rebalancing for gold k. can't seem to break back over that $1,200 mark.
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he is a familiar face to many. art cashin celebrating his 50th anniversary as a member of the nyse. he became a member december 30 1964 as one of the youngest men to hold his seat. here is a look at art over the years. >> you basically spent your life here. how long you been on the floor? >> i came down here in swaddling clothes. >> arthur d. cashin. december 30 1964. >> the man you probably want to hear from the most is standing downstairs, art cashin director of floor operations with ubs financial services. happy friday. >> happy friday i think. >> great to have you here today. i suspect you don't want to admit how many of these kinds of days you have seen. give us your perspective right now. >> i have seen a great many things. some very pleasant some terrific rallies in stories.
>> this is a civilization-changing event. certainly, you don't want to have terrorists appear victoriously. >> people are beginning to get pour despondent. >> it's a stampede to safety. >> too early for the all-clear signal. often the second mouse gets the cheese. >> we had kind of a bipolar five days. >> this is a global crisis. >> banks dropping like dominos all around the globe. that's got everybody worried. >> i think we are in for several years of tough sledding. >> this is another fine mess they've gotten us into. >> you've got to keep your eye on the referee. >> i don't know it's time to open the bubbly quite yet. >> sounds like he was not in the same page with his contraires. >> i like your hat.
>> they are very nervous. the pitch goes up. it's sold, sold! as opposed to take them buy. >>. ♪ wait till the sunshine nellis ♪ ♪ by and by ♪ >> art cashin director of floor operations at ubs joins us here at post 9:00. congratulations to you. >> thank you. >> we are so happy and proud of you. that tape looks at a lot of financial crisis. we could have played tape from '87, 9/11 the dot-com boom. >> a lot of stuff has gone over the dam. >> 50 years ago you're 23. what is it like for a guy that age coming on to this floor at that time? >> it's a little strange. i don't think there were any or maybe one or two other brokers under the age of 45.
the floor had been frozen in place for a while after the korean war was over. things changed. i wound up having a group coming along with me. we had one fellow in particular who was young. came up behind me. i had my trial badge on. he tapped me on the shoulder and said are you the new broker? i said yes, i am. he said how old are you? 23. he said when is your birthday? i told him and he said ha-ha, i'm still the youngest broker. that's how competitive. he didn't buy me a drink. >> did you always want to work on wall street? >> not originally. i had thought about doing some other things. my dad died when i was a senior in high school. i had to come to work to support the family. i came to wall street at the
tender age of 18. five years later there was a seat in my name. things went reasonably well. >> one of the six governors of the floor. what is the secret to longevity? being able to stay with it? >> you have to have shall we say, certain fluids that preserve you. i marinate ice cubes on a regular basis. >> we just happen to have something right here for you. >> uh-oh. >> you might recognize the color of this box. i'm going to open it for you in the interest of brevity. it's from tiffany. it looks nice. that will do nicely. >> i'll get this filled immediately. >> as a final note are you interested in where the s&p closed on this date 50 years ago? >> if i had to guess, i would say somewhere around 780.
>> s&p on this date december 30 1964 s&p closed at 84. >> the s&p, i'm sorry. i was thinking the dow. >> since that time if you bought on that day you're up 2,040%. >> i did, but told it four days later. >> if people ask you if the stock market is a long-term bet now? >> it is. one of the key things people can do particularly if they are starting their investment plan there is dollar cost investing in which you set aside a certain amount of money, 200 500 and you buy it every specified day every month or every six months. that way if stock prices are down you wind up with more shares, if stock prices are too high, you don't buy too much. dollar cost averaging works out well. the stock market continues to be a good investment. >> art, congratulations again.
we are looking forward to another 50 years. >> i thank you. i'll try and get past 45 anyway. >> art cashin joining us here. a lot more "squawk on the street" in a moment. >>pretty good? i know i have a 798 fico score thanks to the tools and help on experian.com. kaboom... well, i just have a few other questions. >>chuck, the only other question you need to ask is, "what else can you do for me?" i'll just take a water... get your credit swagger on. become a member of experian credit tracker and find out your fico score powered by experian. fico scores are used in 90% of credit decisions.
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good morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and simon hobbs. david faber is off today. we got down to 52 and change. it's had a bit of a rebound. gold on the move up $24. back to $1205. even on a day before a couple days before new year's getting volatility. let's get to the cme group. >> if consumer confidence comes out 92.6 lower than expected this is a big deal. the fed is trying to figure out how huge a deal these lower oil prices on the consumer because they want to balance them against the job destruction. this is a good number but not quite as good as we hoped. stock market came in under
pressure. it lost about one handle. down 7.5% now. ten-year yield stayed about the same at 2.169. back to you, sara. >> economists looking for number 94 there with the help of those lower oil prices. officials confirming debris found in the indonesian waters is from the air asia flight that vanished on sunday. >> reporter: day three in the search for air asia 8501. the wreckage has been found and some of the bodies. recovery efforts are hampered by bad weather. waves as high as ten feet. crews are facing this even though the waters in the areas where they are operating are shallow. they are doing what they are doing at night and facing these waves. this is going to be a big challenge. there is a discrepancy in terms of the number. how many bodies have been recovered. earlier on indonesian naval
officials said 40 bodies had been recovered. now we have confirmed reports only three bodies have been recovered. the president said the priority for indonesia is to recover all the 162 passengers and crew onboard 8501. he extended his deepest condolences and sympathies and prayers to the families and people onboard and thanked the countries involved in a multinational effort nine countries involved including the united states which is sending a destroyer with two seahawk helicopters to aid. we await on the weather. >> watching the market activity with the dow down 40 points. not as many new 52-week highs on the s&p. no dow components. the ones that are continuing to work continue to revolve around the consumer.
darden carnival cruise lines. ralph lauren kroger lowe's. >> kroger has been a monster stop. consumer staples are the only ones positive. utilities are the worst performing sector after they had been the best of 2014 on the lower yield play. we are seeing the 10-year below 2.18%. >> southwestern energy is one of the worst performers today in contrast to people cutting their expenditures within the energy sector. southwest western said it is planning to boost capital spending by 8%. they are hoping to double down on the situation which the industry finds itself. they believe that extra investment will pay off longer term. a broker upgrade today given where the stock has traded
recently. you can see it is the biggest loser on the s&p 500. >> gold is rising. gold stocks getting relief today after a difficult year. the dollar is weaker. that's been a big trade for commodities. commodities have been under pressure. if you look at the crb index, down 20%. that tracks copper to cocoa to corn. >> what worked in commodities this past year? copper has been a loser. oil's been terrible. cotton. coffee perhaps? >> coffee is the best performing commodity. that's actually hurt a lot of the consumer companies. i've seen them having to raise prices. >> we'll talk to somebody next hour for whom starbucks is their top pick in 2014. >> yes. >> if you priced commodities in dollars, they are going to tend to be quite rough on the year overall. >> correct.
>> coffee was different because of the problems with the weather. >> correct. >> let's talk more about the equity markets. citi out with its 2015 report card. which sectors performed the best last year? joining us tobias levkovich. good to see you. before we jump to next year you and the rest of the wall street strategist community were not optimistic enough in 2014. what did you miss? >> partially was this late year santa claus rally. i'm not sure we'll keep as there are problems the market will jump for next year. >> you predicted how much? >> 2000 this year. >> we overshot that. does it mean that we are borrowing from the gains of 2015? >> we are looking for 2200 2015 commesurate with earnings gains this coming year.
in essence, we may have borrowed from next year in the last few weeks. a fairly liquid market. you can push markets when people are sitting on beaches or ski slopes. >> is that equally suspect? >> i think it's more illiquid. it's not an illiquid market generally speaking but where so many people are on vacation. >> discount after two unsuccessful attempts? does this mean nothing? >> look the market is healthier. economy is better. earnings are there. it's more about the relative performance in the case of large caps and small caps. we've been on that path since december last year. we reiterated in september good things don't come in small packages. we are likely to see continued pressure on small caps.
even though people are worried about the dollar. >> to come back to your central thesis here what is the dynamic that is driving the market higher at the moment? >> part of it is there is some money flow coming into the market as people are seeing the returns. relative performance of the u.s. versus other equity markets around the world has also been a factor. people saying the u.s. is on a better economic trajectory. even if the fed will confirm some of economic activity by raising rates, the dollar will strengthen. foreigners coming into the usa saying good xhishgs better dollar returns, which was a big problem in 2014. >> they had nowhere else to go? >> there is no alternative. >> sounds like there are two schools of thoughts with global stocks. stick with the u.s. because it's working and that's the outperformance or you look for cheaper stock markets over in china, over in europe. if you look at the s&p by pe
ratio, it's above the historical average even though jeremy siegel says we are not at fair value. how do you account for two stories of valuation? >> you've got to be careful when you start talking about pe ratio of the u.s. versus europe versus china. the indices are different. in europe about 4% of europe is sitting in tech. tech companies trade at higher multiples. in china, 40% market cap is coming from financials which typically trade at much lower multiples. the u.s. is probably more in the 14%, 15% on financial side. >> are you saying it's not as expensive? >> no. you can't just look at the aggregate pe saying you are getting insight. >> you are ham strung by the
fact you have to talk about valuations. i'm reminded of what was said the other day. the attitude you have from the central banks is setting you up for 1999. you had a surge in the stock markets and it crashed three years after that. you could on the argument you are making have this market surge to quite strong valuations or overvaluations and sit at that level during the course of next year something you can't recommend because you are so fact based. >> i love the fact you had i'm ham strung being fact based. i'm excited about that idea. i've been accused of many things, but being serious, thoughtful is not generally one of them. from the concept of can you have upside diskrisk or downside risk is geopolitical events. or people just chase performance and run up the pe to whatever. one difference with 1999 versus
today we had the tech bubble. the man with the plan was getting a tremendous amount of money. the one close parameter you could say of some of the private valuations of some of the tech companies. those aren't public-trading vehicles. >> my follow would be in late '90s we had mom and pop talking, buying obsessed with stocks in general. it's not happening now. do you think 2015 is the year that happens? >> i've yet to have a taxi driver tell me what i should be doing with stocks. >> do they ask you about facebook? >> back then or today? >> years ago. >> i don't recall. since i'm personally not on facebook. i'm not a social media guy. >> you are too busy being serious. >> i'm watching all my other medias on tv. i don't have enough time. the earnings story is the most
important one. what hasn't happened is the consumer sectors have not got any pop from the energy price declines. analysts are not -- >> why not? >> i don't know the real reason. maybe people are on vacation. there could be a lot of different factors. materials and industrials you might see estimate cuts. on the other side you might see an increase. >> tobias levkovich -- what did you say? >> ham strung by valuation. >> u.s. strategist from citigroup. >> let's get to dom chou. >> we are watching an activist shareholder stock getting interest today. american capital realty surging after management disclosed a run of 7% stake in the company. corvex chief was with carl icahn
capital. corvex says american realty is under valued. stock down 25% over the past 12 months. maybe trying to unlock some of that value at american realty capital. up next chipotle trading at record highs and shake shack filing for an ipo. feel find out what it means for the fast casual industry. plus data breaches all too common for retailers. you're driving along, having a perfectly nice day, when out of nowhere a pick-up truck slams into your brand new car. one second it wasn't there and the next second... boom! you've had your first accident. now you have to make your first claim. so you talk to your insurance company and... boom! you're blindsided for a second time. they won't give you enough money to replace your brand new car. don't those people know you're already shaken up?
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shares of darden restaurants trading at all-time highs to the ipo in may 1995. then chipotle moving lower after nearing record highs yesterday. stock up 30% on the year. with darden and chipotle leading the way, can investors expect continued growth for the fast casual restaurant sector in 2015? joining us piper jaffray senior analyst. great to have you back. >> thanks. >> what a nice tear to the upside for chipotle and dardened a year end what explains that? >> basically what we tell investors is don't look at any one segment. i hear you talking about fast casual. that is a lot of comp growth and traffic in store development or sales growth but there can be
winning brands in any segment. a story like darden is quite interesting showing even legacy brands have power in this environment. >> i'm thinking employment getting better. obviously, you think of gas prices. i look at mcdonald's and even with the miserable numbers, $9d 5 this morning, is it setting a natural floor or unnatural floor with names that do deserve to go lower? >> i think it may be. when you think about mcdonald's, it's more to do with the cash flow yield than obviously with the current fundamentals. it's interesting when you look at compare and contrast mcdonald's and chipotle. mcdonald's comps have been negative of late. if chipotle gained all that comp not that they would or are, but it translates to an 8% gain. they are clearly taking share. >> it's the difference between a value stock and growth stock within a space, i guess. >> i would agree.
>> why do you like starbucks more than chipotle? >> the reason being they kind of have the perfect recipe when it comes to brand equity which can be intangible. it's the great human capital leading this brand at executive and store level. it's translating that to international asset development. somebody taking that equity and paying you to use it. the license business. we see that as a huge huge opportunity for restaurant brands. everything in the grocery aisle is becoming branded. starbucks can capitalize on that the best. >> it's not like every single fast casual or start-up fast food chain is up. pot belly had a difficult year down 50%. noodles and company struggling. these were hot ipo's on the concept. how do you distinguish between a fast grower one that can record chipotle comps and these other
guys which seem to be more fads that are struggling? >> that is a phenomenal point. first and foremost invest in management teams. don't invest in a segment of the industry. that would not have worked this past year. it will not work for the next year. yes, we like concepts in fast casual but we like concepts in stocks. the difference tends to be how many multidimensional triggers or sales opportunities can they pull? some of these fast casual brands that underperformed have shown us they were too one-dimensional in nature. focusing on unit growth and not having the traffic or comp to go with it. >> something we'll be talking about over the coming weeks with shake shack. one last thing on dunkin. why is there so many pessimism
surrounding dnk? >> it's domestic unit growth story. that is what investors don't like about the starbucks story. i think that is somewhat what weighs on the stock making it a great opportunity here. just not the same international growth drivers. they have the whole bean legacy coffee platform in cbg but haven't capitalized. they are night and day. >> nicole one of the deans of the industry. good to talk to you. you are coming from new orleans today. let the good times roll. see you next time. >> thanks. happy new year. one thing for sure over the last year there have been numerous retailers suffering data breaches. what is going on at the checkout and how safe should you feel? courtney reagan is at hq. >> it's that time of year when credit card bills are higher than normal and vulnerabilities of checkout. target confirmed a massive data breach 12 months ago.
in 2014 there have been as many as 20 retail breaches home depot, michael's. two weeks ago staple's. impacting at least a portion of the store fleet over the past year. retail is impacted by 24% of all data breaches second only to financial services. why do breaches keep happening? there are unfortunately a number of reasons. payment systems are multilayered with many layers from the software developers to hardware providers to payment processors. hackers are often one or more steps ahead of software and technology. it's hard to test for every possible unknown weak point and payment system especially the new ones. omni channel opens up more opportunities for data flow to be intercepted. the amount of data retailers are collecting necessities automation which brings speed and efficiency but opens up
another vulnerability for attack. retailers are doing what they can, many upgrade and hardware to accept chip-enabled cards. no one wants to be a victim of a breach many consumers express concern but it hasn't been enough to deter us from using our credit and debit cards at checkout. >> i'm sure that story will continue to be a big one. thank you. up next find out which chart could impact nearly every aspect of the market in 2015. it is 2014's chart of the year. what's ahead for travel and leisure in the new year?
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forget oil, forget the stock market. the 2014 chart of the year in my opinion, is the u.s. broad trade weighted dollar. this is a look at the dollar and how it trades against all sorts of currencies emerging markets and developing markets currencies, which is why it's the best indication how it will impact corporations and economies. as you can see, it broke out in 2014. reaching levels we haven't seen since back during the height of the financial crisis early 2009 when there was a massive rush to safety. this time the dollar is gaining because people like it. they like the u.s. growth story. they like the idea that the federal reserve might raise interest rates. that makes the dollar much more attractive. i would argue it's most important because it will reshape the investing landscape next year whether it's stocks drives money into the u.s. stock market into u.s. bonds, hurts commodities, hurts corporations that operate overseas. watch the dollar.
it will be a big story. most strategists will tell you it will continue to strengthen in 2015. >> i would argue for marriott if we were just doing a chart of the year. >> or oil. or the ten-year. or dollar/yen. >> can i tell you why the dollar beats all of these? it impacts more. the dollar is the back bone of the global financial system. your stocks your commodities, priced in dollars, more people own dollars than any other currencies. when it strengthens like this it hurts economies in corners of the world. there you go. >> she told us. >> she did. >> that's my job. >> just two trading days left on the year. we continue to break out the play book for 2015. this hour i'm taking you inside travel and leisure.
in travel and leisure 2015, investors will book profits and hertz will be the big turnaround story. another win for carl icahn. there will be cheap deals to cruise the caribbean next fall. the caribbean markets already saturated and supply growth is reaccelerated. 40,000 new berths over two years with norwegian and msc getting real aggressive prices will be cut to fill those ships especially next fall. >> investor the will turn cautious on the big lodging stocks. hotel industry is cyclical after six years of profit growth the big question is when will it slow? true, this time the supply of new rooms hasn't ramped up. ubs notes two tell-tale signs. luxury is beginning to underperform and they are looking to sell properties because prices have risen so much.
finally, hertz will be the big turnaround story. with activist investor carl icahn holding an 11% stake, the new ceo will move past its accounting scandals to better profit 30% share of the car rental market. introducing the sophisticated dynamic pricing you usually associate with airlines and hotels. a work of art, i think you'll agree. >> looks good. >> how many of your predictions last year turned out to be true? >> that was recorded two weeks ago. glenn view capital and viking global declared stakes in hertz. the stock has done well because they announced price increases. hertz will be a huge story this year. >> as it has been. west texas crude hitting a new low today. lowest since may of '09. more on what that means.
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crude and brent crude are heading back down to levels not seen since 2009. unless energy prices have a big economic effects, it is dragging down the overall earnings estimate for the s&p 500. that's according to a new report from s&p capital iq. more than one company have seen downward revisions to fourth
quarter earnings and earnings estimates for next year. joining us is analyst lindsey bell. >> earnings are being cut drastically in the energy sector. since june 30th we've seen earnings estimates come down from positive 6.6% for 2015 to an expectation for them to decline by 21%. >> do you have a feel whether you are stabilizing at that decline of 21% or in such a volatile environment, these could be cut again? >> it's a really good question. in the last two weeks we've seen those earnings cuts come more significantly. two weeks ago we thought earnings would decline 13%. now they are going to decline by 21%. that is a huge move. >> what does that mean for the market overall? >> for the s&p 500, the energy sector is significantly
impacting earnings estimates. originally june 30th we thought earnings estimates would increase by double digits 11% for the 500. including this new energy problem, earnings are expected to only increase by 7.6%. >> there are obviously other areas of the market arguably the majority of the market who should be able to get higher margins and higher profits. that should have a counterweight and push overall earnings estimates back up in the other direction. are you seeing that yet? is that a more slow feed through you might not get till quarter one, quarter two? >> right now what we are seeing are estimates across the board are coming down. would you expect consumer discretionary sector to see earnings boost given the benefit tax cuts consumers are feeling with reduction in energy costs. usually earnings estimates decline going into the quarter. then they end up beating by
about 300 basis points. last quarter earnings estimates beat by 470 basis points. hopefully we get close to that double digit earnings growth we were originally expecting. >> that opec meeting, exxon was at $93, it's at $94 -- $93 then $94 now. stocks haven't moved in tandem. >> no. that's right. usually stocks bottom two months prior to the oil price decline. exxon, chevron these integrated guys, we think they are good plays to own into the next year as oil prices coming down. they are going to be impacted the least. they have the downward the down stream and upstream businesses. down stream upsetting the impact from the oil price decline.
>> are we going to see the revenue growth we need to keep the stock market going? that's about corporate earnings. i feel revenue growth has been sluggish relative to the bottom line beats. >> revenue growth has been sluggish. we need to see that to keep the market going higher. this energy impact is starting to impact the top line as well. hopefully earnings come out better than expected when we start to see them in the fourth quarter earnings in january. >> to boil it down to people at home what is the simple message where the market will go next year from what you know now? >> global markets intelligence group at s&p, we believe that the market will end next year at 2250 up about 8% from where we closed yesterday. we'll need to see earnings growth to support that. if you think about fundamental economic environment, it's supporting growth which is why i think you are seeing the stock market continue to march higher as earnings are coming down
making the valuation look expensive. hopefully we'll get a beat on earnings for the fourth quarter and that will spur investor interest. >> happy holidays lindsey. >> thank you. >> lindsey bell. >> we've got two trading days left in 2014. time to break out the cnbc 2015 playbooks. diane olick is in washington with predictions to bank on. >> good morning. talking housing. fits and starts and not enough starts. that's the best way to describe the u.s. housing market in 2014. existing home sales fell to a six-month low last month. that followed two straight months of strong gains. what is an improving economy and more jobs mean for real estate in the coming year? take a look. the housing recovery took a step backwards in 2014 as home prices rose too far, too fast. incomes couldn't keep up.
now as employment improves 2015 is looking brighter and perhaps bumpier as buyers run head-on into rising rates. there will be more houses. there have to be as household formation improves builders are looking at more developed lots easier credit and better labor market. i'm going with 740,000 single family housing starts in 2015. a little cooling on all that rental apartment construction. mortgage rates have nowhere to go but up. we predicted rates would rise this year and we were wrong. with the fed pulling away from mortgage buyers, interest rates have to break out of the current lows. it won't happen immediately, but we should see the average rate on the 30-year fixed edging closer to 5% by the end of next year. home prices have to cool off. sticker shock sank the market in
2014. home prices jumped double digits and payback wasn't good. slower sales and morinventory of existing homes added to all those new homes i'm predicting will keep price gains tight. we could see a few months in the negative. for the year a gain nationally of i'm saying 2% 3%. s&p home building index is object pace toned the year up around 9%. that's not a bad gain but still below the broader s&p. if we see the economy continue to improve though we'll likely see gains not just for the builders, but for the building supply companies. >> i have one more question a prediction from you. are we going to finally see next year the return of first-time home buyers or ever? >> let's hope so. one thing is rents are rising.
with rents rising so much maybe that will tip people to homeownership with the new low down payment mortgage products. >> are they actually building the housing stock first-time buyers want? most these home builders have gone for expensive, luxury high-margin properties which is not what most people need. >> that's one of the biggest problems. they are either going into the active adult sector which put told us or much higher end, toll brothers doing very well. when they start to see that buyer come back they will start to respond to that. question is when. we still have lower end price existing homes. if the prices ease as we are beginning to see, that could get first-time buyers back into the existing market. maybe not the new home market. >> thank you very much. hold to you those predictions on
welcome to new york squawk box. this is one of the sectors doing the least bad. >> all those sectors are in the red. materials are having an outperforming type day across the board. one of the best performers materials. much of the gains in the stocks benefit from gold $20 an ounce jump in price today nearly 2%.
plenty of gains amongst gold stocksing barrick gold. >> having a nice bounce today. thanks, tomorrow. judge what challenges lie ahead in the big bangs in terms of new regulations and requirements. mary thompson is back at hq with more on that story. we've been used to more of that every year. >> that's right. this year could be a little bit different. there is a republican controlled congress coming in. that's likely to whittle away at parts of dodd-frank. dan ryan says the most likely change to the law, raising the size threshold for large banks subject to the heaviest regulatory burden. >> i think we'll see peelback on dodd frank and unity will be around maybe raising the
requirement what is a systemically important bank in the u.s. the $50 billion may go to $100 billion. >> even if a smaller number of banks are deemed important, ryan says it's unlikely to reduce the anti-bank rhetoric from certain law makers most notably democratic senator elizabeth warren. >> she is the most vocal of the anti-wall street anti-bank crowd. she is both one trying to preserve dodd-frank from the democratic side but also she is potentially a presidential candidate. >> quite a platform. 10% dodd-frank remains to be written. in the new year watch for new rules including the final one on additional buffers. limit on exposure to other banks and minimal long term debt requirement for big banks. all this rule making made the big banks safer, but potentially less attractive investments. >> the real issue is what does that mean for bank investors? are you going to want to invest
in business that has to hold 30% cash in reserve for future date? >> that is a question investors will grapple with in the future. for more read the rest of my interview found on cnbc.com. >> good insight. thank you so much. when we come back the million dollar homes competition is back. this time it's all up to you. we'll show you two multimillion dollar homes. you decide which one has the best bang for the buck.
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cnbc's popular million dollar home competition is back with a twist. this time we are blowing the roof off the $1 million price range showing you the most expensive homes we at least, could get into. these mega mansions are battling to see which one is the best bang for your buck. you, the viewer will determine the winner. last time's winner waterside wonder takes on a new challenger southern belle. go to cnbc.com/vote. the winner moves on to the next
round and the loser is eliminated. get ready to vote. here is the next million dollar mansion. welcome to your own private oasis. this victorian mansion since on 11 acres of pristine shoreline and includes a private beach, dock and salt water pool. inside enjoy spectacular water views across 7,500 square feet. five bedrooms 5.5 and a half baths. and three fireplaces make this the perfect place to relax to the sound of the ocean. perfect your swing on the private tennis court. the gardens, and the greenhouse. and the third floor office studio. this seaside escape is yours for 13750 13750,000 dollars.
>> mosey across 22,000 square feet, i dorned in details like this custom chandelier. the custom built fireplace is look like the ones in the white house. my word. outside, sprawling views of the tennis court and swimming pool. featured on a hit network tv show. this southern belle can be yours for 16300,000$16300,000. >> which home is the best bang for your buck? vote right now. and in the meantime let's bring in real estate super broker. >> waterside wopd onder is in stonington connecticut. a spectacular piece right on the
water. and the southern bell is is nashville tennessee as you could probably hear in the little twang in the info. >> a private beach, that has to be a premium. such a scarcity. >> exactly. as the little tiny beach but the whole water view and front is a well a scarcity. >> although if i know you i'm going to guess you would prefer the tennessee situation. taxes in the connecticut. insurance risks by the water. >> both are so high. taxes in the connecticut are 77,000. but the other taxes are 90,000. >> wow. >> huge taxes. to me the only thing. i love the nashville house. i would i prefer that house. the question is 22,000 square feet? what do duowe do with it? i'm sure people can fill. >> it you have to learn ballroom dances and invite your friends around. >> and six bedrooms and 22,000
feet. wow. >> one held of a party. >> it has to be a premium just being in the northeast. in connecticut on the water. >> but is connecticut near rhode island? it is not like connecticut greenwich. >> that's where i thought you were going to go. >> the race is tight. only a few seconds left to vote. >> they are both gorgeous. sprawling, gorgeous. >> southern belle is in the lead. you're telling me you would prefer the house but you would buy the ctonnecticut estate is a better investment. >> it's irreplaceable in a lot of ways. in nashville you could find another nice piece of the property and build another 22 square foot out. and visually they are so magnificent it is so difficult. between the two it's hard to say which would you really rather love. >> what is your forecast for the luxury high end real estate? does it cool off in 2015.
>> this part of the market is really insulated. these are people who don't have to worry about paying the bills. so i don't think. i think we're fine in this part of the market specifically. >> if you were trying to move this home. is an international buyer even in play in this? or is that only miami, new york? >> they have had new yorkers tour the house. swear to god. >> in tennessee. >> country home. >> exactly. >> very interesting. >> yeah. >> and on a day where we have a kay shiller numbers again beginning to soften. >> this is different. really super luxury high end. private plane high end because the houses are so big and so expensive to maintain. >> overall in new york city are you saying prices come down, at least price appreciation slow down a bit? >> i'm seeing volume come down a degree that is a little scary and i think volume comes first.
then prices drop. prices have not dropped but volume has. >> but it's christmas. >> but we're very busy generally in christmas. a lot of foreigners. really very busy. >> southern bell does win. moves onto the next round. dolly is going to be back with the next match up in power lunch and crown winner. >> five minutes till "squawk alley" takes the air. kayla tau shische is here. >> good morning. investors in consumers ipos fairing better than most. what does that heen normean for 2015. and couldal alibaba buy ebay? re/code thinks so. and what other block buster acquisitions that blog is
>> second to last trading day of 2014 and declines across the board. nothing major but still almost 50 points on the dow. declines across the s&p and nasdaq. and interestingly enough simon, if we close at these levels and we are seeing these drops, this is the worst in two weeks. and just speaks to the steady persistent nature of the santa claus rally. >> does about it --. i think the dow and the s&p are still positive for the year. >> sure. >> and you have to remember when you look at this the very heavy selloff we had. energy inspired hat the beginning of the december. almost a v shape. yes we're back to record highs but oil is really key today. >> all the way down at the beginning and back up a little by and now slightly lower. the energy stocks are under pressure. consumer staples fairing less