tv Power Lunch CNBC July 29, 2015 1:00pm-3:01pm EDT
t's not cheap. it is selling at twice its growth rate. grown 10%, selling at a 20% pe. love the concept, love the company but it's overpriced. >> stocks are up 100 points ahead of the fed decision coming in an hour. it will all unfold on "power lunch" which begins right now. >> announcer: "halftime's" over. the second half of your trading day begins now. good afternoon, everyone, and welcome to "power lunch." i'm long with mandy drury, i'm tyler mt. son. we are less than an hour away from the fed decision. >> the markets are in wait-and-see mode. but the dow is up for a second day in a row by .5%. nasdaq up by .2%. s&p 500 up by nearly .5%. we are not going to ignore the fed, not one bit. but our top story at this hour is a very scary one for anyone who flies. >> it is an argument in the air with the pilot nearing in on
bingo fuel meaning he's almost dry. you've got allgaunt pilot saying he's funning out of fuel. >> there will be a window of opening in about 20 minutes for landing. >> yeah i don't have 20 minutes. >> this is 426, roger, and that's -- unless it is an emergency, there is grand forks airport which is 70 miles to the north. >> yeah, listen. we're bingo fuel here in about probably three, three to four minutes and i got to come in and land. >> this is 426, roger. all right. you'll have to -- like i said declare an emergency for that with the minneapolis center and then we would coordinate to get you in. >> okay, i'm going to give them about an another three minutes to see if we can set 3358894. then i'll see if we can get this
coordinated prior to -- i get down to having to do that, i'll do that. thank you for that. >> this is 426 roger. your company dispatch should have been aware of this for a number of months. >> okay. yeah. it's just -- we'll follow up on that. >> it was a very calm conversation, phil lebeau between a pilot and an air traffic controller but there is a dangerous edge to it. tell us, what was going on here and what was that last reference to namely that your dispatch -- speak something of allgiant air, should have known about something at the fargo airport three or four months earlier. what happened? >> they closed the airport in order for the blue angels to be doing preparatory flights. they were going to be doing a show there. as a result it was predesignated that it was going to be closed down. we don't know exactly what the fuel level was on this allgiant flight. we have reached out to them and have not heard back from the company in terms of what
ultimately the fuel level was on this particular flight. we should point out that we have also reached out to the faa. it is looking into this and essentially saying that they are trying to find out exactly what took place. it's gathering information about the circumstances of allegiant flight 426 and the emergency landing. generally speaking tyler, all airplanes are supposed to have a predesignated diversion airport that they can go to in case there is a situation that arises. plus an extra 45 minutes worth of fuel. so you should never run into a situation where you're bingo fuel where it's i need to get down within the next three or four minutes. having said that we still don't know exactly where the fuel level was when this plane ultimately landed. and we should point out, it did ultimately land at the fargo airport. >> this was a flight from las vegas to fargo, pa scheduled flight. >> yep. >> apparently somebody didn't know that the airport was going to be closed at that hour for flight operations of the -- >> as i understand it was delayed in terms of getting in
to fargo. that's part of the issue. >> the flight was delayed. >> correct. >> why would it be anywhere close to almost out of fuel given the idea that you just said they've got to have a diversion airport in mind and 45 minutes' fuel beyond that? >> which is why you heard the air traffic control tower say, look you got grand forks 70 miles to the north. that's your diversion airport. you can go up there. because you clearly are going to have enough fuel in order to make it 70 miles to the north. so the big question here the one that still needs to be answered -- we have yet to hear from allegiant, how much fuel was on board whether it plane landed. was it truly bingo fuel or was it a case where the gauge was reading wrong, the pilot was reading it wrong, something like that might have happened. >> possibly. phil, thank you very much. interesting story. i suspect we'll get to the bottom of it some time. we're watching shake shack
shares. insiders will be allowed to sell their shares today. shake shack has been a heavily shorted stock so short covering could be a big part of this. shares are at session highs up over 12%, near 13% now. a news alert in the bond market as well. 5-year notes are up for auction. rick santelli is watching the action. what kind of grade are you giving it today? >> i guess the grade is easy -- an a. this is an a from top to bottom. but to. happen on a fed day i think speak volumes. the yield at the dutch auction 1.625. the bid side of the 1 issued market, we've priced aggressively. the bid to cover, 2.58. higher than the 10 auction average 2 1/2. here's whr it gets interesting. yesterday we had the best indirect bidders in the 2 year
since june 2009. today, 67.5 versus 10 auction average of 58%. i have a 13-year history of 5-year note auctions and it is higher than any of my 13-plus years. so inbelievably strong indirect. directs were 5.3, a little light of the 10 auction average at 8%. this gets an a. fed meeting today 2:00 eastern. tomorrow we'll clean it all up about 29 billion 7 year notes. let's get to somebody who knows a lot about bonds, $1.5 trillion worth, to be exact. pimco's ceo scott maddow i hope you heard rick santelli giving the 5 year note auction an "a." what's your reaction? >> yes. good afternoon. i guess it is not that surprising. we have seen pretty decent demand certainly on the short
end of the yield curve for some time. that's one of the areas the yield curve we think is a bit miss price mispriced but it is a continuation of what we've seen. >> but expect a fed move in september. how do you expect fair chair janet yellen to convey that today, if at all? >> well we think certainly the goal of today's statement is to keep september very much alive without precommitting. the fed's been very clear in their minutes that they've had a lot of discussions about ways to change the communication but they certainly don't want to lock themselves down to moving in the next meeting and that's a practice that sort of they want to walk away from. but other central banks -- >> how will they do that exactly? suggest maybe september but also give them a little wiggle room to move out of that if need be? >> there's two ways. one they have the beginning paragraphs on the economic assessment, there is ways for them to sound a bit more optimistic there just by noting that the labor market's improved since the last meeting and
growth trends have improved. they could do that. the second paragraph which relates to the outlook they could simply drop a word they used before which is "nearly" to describe the risk to the labor market and the growth outlook. that would also indicate they are a bit more optimistic and that would be a pretty clear signal they are planning on moving in september as long as data continues to support that. we have very important data coming out in the next few days with the gdp data as well as the employment cost index on friday. >> if they do say as you expect how do you expect the market to react? >> we think the front end of the yield curve is not priced for a september move. we still think it is priced for a 30%, 40% chance for a move. if they do sound more optimistic you'll probably see a sell-off at the front end of the yield curve. you will likely see financial market sell-off in general and implied volatility will begin to go up as well.
>> you are saying it is not factored in by the stock markets? >> no, we don't think so. it is not really factored in by the bond market or stock market. >> okay. we'll be watching for reaction, that's for sure. pimco's scott mather thanks once again. this week has been a real flood of earnings. meg, take it away first. >> glaxosmithkline, a slight beat on earnings. basically in line with revenues. importantly this is the first quarter they reported since they closed their novartis transaction where they sold their cancer business to novartis acquired their vaccines business and established a joint venture in their consumer business. pharma looked like it beat driven by better than expected sales of their asthma drug and their hiv unit. however, it was pretty light on
vaccine and consumers for the quarter. >> let's go to julia boorstin now on what we can expect from facebook after the bell. boy, that twitter report was an interesting one last night. will it be as much interest in facebook? >> i think there's going to be a lot of interest in facebook. i think that analysts are really expecting more growth from facebook, both in users as well as revenue and earnings. one of the key numbers to watch is going to be average revenue per user. it is expected to hit 1.5 billion monthly active users -- near i had 1.5 million. investors are also hoping for updates on key growth areas, including video ads that will be listening very carefully for commentary an the otension to make money from facebook's other apps including instagram where it's been slowly rolling out ads as well as messenger and what's app. we'll keep an eye on the percentage of facebook's users who check the app daily.
that was 65% last quarter. >> julia, thank you. jane wells now for a preview of whole foods. they've had a bit of a bumpy ride in recent quarters. >> yes, they have. when your nickname is "whole paycheck," you've got your work cut out for you in the face of growing competition and lower prices. street expects growth of 2.9% down a point from a year ago. some say it could go lower. top and bottom line growth expected to both grow at 9%. eps at 45 cents a share. record sales expected of nearly $3.7 billion. we should hear more about the new smaller more affordable concept whole foods want to roll out. is that going to cannibalize sales. what kind of hit, if any, has the chain taken from admitting it inadvertent will i overcharged some customers. also the drought in, is that impacting organic produce prices. what about grocery delivery? some analysts think whole foods could make a whole lot of money in that business.
>> jane meg, julia, thank you. california wildfires are raging on in northern california has already burned nearly 7,000 acres and flared up again burning 150 acres outside of containment lines. fire officials say the blaze is 80% contained. 200 residents and 136 homes are impacted by the additional evacuations. patriots owner robert kraft slamming the nfl's decision to uphold tom brady's suspension. did kraft make the wrong play in not taking legal action on deflategate? counting down to the fed's latest rate decision at 2:00 p.m. eastern, will this be the last meeting at record low interest rates? we'll just have to found out. stay tuned to "power lunch." is tom. i'm raph. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here
dad...work stuff. yes! [laughs] lovin' the new design! konichiwa hirosan. five minutes... all this speed is very empowering. check out the new hardware. with the fastest, most reliable in-home wifi, xfinity is perfect for people who need to get a lot done at home. my name is jamir dixon and i'm a locate and mark fieldman for pg&e. most people in the community recognize the blue trucks as pg&e. my truck is something new... it's an 811 truck. when you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you don't hit them when you're digging. 811 is a free service. i'm passionate about it because every time i go on the street i think about my own kids. they're the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then i'll drive it every day of the week. together, we're building a better california.
in the med lines, garmin missing profits about they say the strong dollar will continue to be a factor for the rest of the year. shares unchanged. goodyear tire reporting a 10% drop in profit but still beating analyst expectations. stocks unchanged. microsoft officially unveiling windows 10 today, shares are up by 3%. speaking of microsoft, kate rogers has a "market flash." >> shares of microsoft hitting session highs today up near 3%.
but that's no surprise given the release of windows 10. according to our data partners at kensho since 2009 microsoft trades positive 71% of the time on a new product launch day with an average return of 1.89%. so far the stock's best performance was after the release of windows 7 and the after windows 8. new england patriots owner robert kraft pulling no punches during a news conference today about the nfl's decision to uphold fomtom brady's four-game suspension. >> it is completely incomprehensible to me that the league continues to take steps to disparage one of its all-time great players and a man for whom i have the utmost respect. personally this is very sad and disappointing to me. >> joining us now, brobob kravitz,
sports columnist for wthr.com and bob was instrumental early on in breaking the story of the investigation of those softer than usual footballs that were employed in the colts/patriots playoff game last year. mr. kravitz, welcome. good to have you with us. >> thank you. >> the bombshell yesterday, i suppose, was not that the nfl upheld its own decision to ban mr. brady for four games, but that mr. brady destroyed his cell phone. is there any possibility that he was just ticked off with the verizon or whoever? >> well maybe he got a really good phone deal somewhere else. i think that's entirely possible. the optics on this are just awful. to think that tom brady would destroy his phone on or about the time that he was meeting with the wells investigators is just hard to imagine. >> but brady, for his part as i understand it issued a statement earlier today saying
that no one had specifically asked for his phone? >> that's what he suggested in his facebook post this morning. the national football league and the wells investigators would take issue with that. they asked for the phone, for information from the phone, and at this point they won't be able to grab those texts and e-mails and the things that they wanted to move forward with the investigation. >> apparently directed someone else to destroy, quote, that phone. so you think the four-game suspension is appropriate. that's question one. and question two is the appeal now -- the appeal is over with the nfl. but what happens now apparently is this going to move into the courts. and it would seem to me -- what the courts are going to be asked to decide is not whether the balls were deflated or not, but whether there was fundamental fairness in the process in which the nfl itself was investigator
adjudicator and judge. >> that's exit actually right. i spoke with michael mccann, a sports law expert at the university of new hampshire. he's actually teaching a class in deflategate next semester which i really want to take. but he was saying that this is going to be entirely process oriented in much the same way that the ray rice appeal was heard in the courts. adrian peterson. they're going to question whether roger goodell, even though there's an article 46 in the cba which gives him broad and sweeping powers to adjudicate in these situations. but there will be some questions as to whether he should have recused himself. >> my dumb opinion here bob, is that the nfl, for many years, was many flawless in the way they handled issues that would come up under rosell and
tagliabue and now goodell. it could be totally capped off by the decision last week now to allow junior sao's family not to speak at the induction next year. >> they have been the last 18 months to three years. you go back to the earlier days of the nfl and the fact is there is a lot of domestic violence that was swept under the rug by the national football league under tagliabue and even early in goodell's tenure. >> a lot of those stories never floated publicly in the presocial media era. bob kravitz, thank you. about 40 minutes until the fed decision. dow up by triple-digits and crude up by 2.5%. what clues will fed chair yellen give about lift-off if any? former federal reserve vice chairman alan blinder gives us
why should over two hundred years of citi history matter to you? well, because it tells us something powerful about progress: that whether times are good or bad, people and their ideas will continue to move the world forward. as long as they have someone to believe in them. citi financed the transatlantic cable that connected continents. and the panama canal, that made our world a smaller place. we backed the marshall plan that helped europe regain its strength. and pioneered the atm, for cash, anytime.
for over two centuries we've supported dreams like these, and the people and companies behind them. so why should that matter to you? because, today, we are still helping progress makers turn their ideas into reality. and the next great idea could be yours. counting down to the fed, what can we expect? alan blinder former federal reserve vice chairman, also professor of economics at princeton university. welcome, always great to see you. i asked richard fisher yesterday, i'd like to pose the same question to you having been in these kinds ever conversations before. how big a role will what is going on in china play in staying the fed's hand or just
in the conversation generally? >> i would say very very little. i wouldn't go quite so far as to say zero because this is the possibility that this really gets out of hand and starts infecting asian markets more generically. but the mere fact that the chinese stock market has fallen by whatever it is -- 30%, one-third or something like that it will be pretty close to irrelevant to the conversation. >> interesting. fascinating. >> so -- >> this is a conversation about the u.s. >> right. >> so a lot of people are centering on september as a possible lift-off date even though obviously janet yellen's been telling us not to focus on the start date rather than the trajectory. do the benefits of the september hike outweigh the risks? >> that's what they're going to be grappling with today and in the weeks and months. the benefit of waiting is always that you get more information
generically. in this particular case it is more information about the state of the economy the state of the labor market which janet yellen has said is much better but still not back to normal and the behavior of inflation which as you know has been flat as a board. if we -- let's put it this way. if we knew that if the fed just held the interest rates where they are, the economy would keep improving and inflation would never budge for the next year. we don't know that of course but if we did, the fed would be waiting. >> so let me talk a little bit about inflation. the drivers of inflation, professor, you correct me seem to be two things. one is wage growth. there's not much of that in the economy right now. and two, i don't know how you get inflation if you've got most of the major commodities deflating significantly. >> well that's right. you're making part of a dovish case. if you simply look at the data, as i said inflation is flat as a board.
if you look at what i might call the fundamentals for inflation, you have wage growth which really -- you have to sort of stand sideways to see any acceleration in that. there's really not much there. you have the degree of slack in the labor market which is controversial right now. but most people think there still is some slack, that it's not really tight as a drum as it was, say in 1999. you have commodities. some people still look at money growth but i don't think the fed pays any attention to that any longer. and so it is very hard to see signs of inflation. >> if you were in the room what would you be urging? >> well first of all, it's a little early now. so they're certainly not going to declare in any way, shape or form that september is the lift-off date. if anybody was suggesting that i would be urging not to do it but i don't think that's really necessary. i think i'd be where i presume the majority of the committee
is wondering and watching and welcoming more data before they have to make a decision which is where they are. >> alan thank you very much. always great to see you, especially on days like this. >> the stakes are so high aren't they? the fed's been blamed in the past for making wrongly timed decisions. counting down here. latest fed decision is about 30 minutes away. it could be a market mover as well particularly for the dollar and gold. "power lunch" has every single angle covered for you. we have instant reaction and analyst from some of the biggest names. plus a 6% rally in the s&p 500. from here to the ends of the year? well we have a chief investment strategist who's making that call with the sectors he believes will fuel the rally. don't go away.
so instead of waiting on hold, we'll call you when things are just as wonderful... [phone rings] but a little less crazy. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. hello, everyone. i'm sue herera. here is your cnbc news update this hour. the german foreign ministry telling nbc news there is a possible terror attack on bus and subway stations in istanbul
turkey. it is warning people to stay away from those areas and borders with cirasiryria in iraq. ester pollard thanked god and israel for standing by her and her husband. pollard is set to be paroled by the u.s. in november. he spent 30 years in prison. four people were killed several others feared trapped after a two-story building collapsed in western india. at least ten people were taken to the hospital for treatment. rescue workers sifting through the rubble looking for survivors. more than 450 migrants arriving in italy aboard an irish navy shipped. it docked this morning. all had been rescued from the sea by the irish navy. that is the cnbc news update this hour. in data out on the health of the housing market. diana olick has the latest from washington. >> tyler, signed contracts to buy existing homes took a turn
down 1.8% for the month after five straight months of gains pending home sales are still higher than a year ago but take a look the annual games are shrinking each month. . culprit here is sticker shot. home prices are still gaining and mortgage rates were a bit higher in june. all of this factors into the possibility of the red raise ig rates in september. mortgage rates could make a move immediately following this afternoon's release. they are already edging higher today. >> thank you, diana. gold prices are closing right now. they're been languishing around 5 1/2-year lows. sitting at $1,093 moving to the downside ahead of the fed decision. sort of stuck by low that $1,100 mark. silver is marginally higher. copper which is down about 15% year to date but it is slightly higher today. palladium and platinum are down. check on the markets ahead of the fed. look at these numbers. remember them and you'll see how
they react, if they react in a measured way. to whatever the fed says. the dow at 17,735 up 105 points. about .5%. nasdaq up by a smaller percentage at 5,096, just about .1%. the s&p 500 up about .5% at 2,103.33. >> gentlemen, thank you very much for joining us. it is a big day today. joe, just how much does today's statement and decision actually matter to you assuming you take a more mid to long term view? >> well mandy, we are looking for the fed to raise rates in september. we'll be looking for any indication that points in that direction. but in general i'm still looking at the economy that's improving. internationally things are settleing down in europe. in china, we're still looking at 5% to 6% growth. so the backdrop is favorable to
equities. it is 22 to 2250 in that range. it will be supported by better than expected earnings. you've got to pick the right sectors. i think that with the dollar stabilizing, oil prices stagizing, we have a good year-end rally coming. >> steve, you're more bullish. you've got a 2,350 target for the s&p 500 by year earned. what backdrop of economy and rates will get you to that target? >> the backdrop mandy, is just earnings being pretty good and people starting to look through to next year's earnings. we think the s&p can do $135 next year. at these levels the s&p's trading at 15 1/2 times. our ideas is that they kind of big macro level forces that have really worried people in the front half of the year are now clearing and we can focus on good earnings and very attractive valuations. i think the other big driver in
the back half is not so much the fed hike which will probably happen in september, if not december. who cares? it's going to be the market becoming convinced that they're not really going that far with these hikes. i think that takes up the pe on equities because the discount rates that people are expecting is lower than they're now. >> you say whether it is september or december it doesn't really matter but nonetheless you still expect a hike this year. amongst your favorite sectors you like reits and utilities which normally prefer lower rates. >> they do. we have the sort of idea of the curve flattening mandy. it is really about -- they're discounted against the 10-year rate. we think 10-year rates are really right in the middle of a range they're going to be locked in for a while, two, two and a half. german bund yields are certainly going to go lower. qe out in europe will put an
upward bound on our rates. yellen will have -- i'm calling it the apology tour -- basically convincing people she's not going to do a lot of hikes. that takes down the 10-year expectation. keeps us in this low range. these dividend paying stocks have really been hammered in the first half of this year with people thinking that rates are going much higher which they're not really going to do. >> joe, what particular sectors are you looking at? >> we still like technology. i'm a big fan of the energy sector because it warrants valuations. i think the cyclicals have underperformed, industrials and materials, they'll have a good year-end rally because we'll see better than expected growth here and overseas. >> joe and steve, thank you very much. get more on powerlunch.cnbc.com to see what joe says will be the next big thing for investors. millions of americans in the eastern u.s. and elsewhere across the country dealing with a brutal heat wave this week. the weather channel's jen carfagno is packing the heat. >> and the heat is on.
every conversation starting about the heat these days. the reason -- we got a big ridge of high pressure and we're going to have winds coming out of the south bringing up the humidity and the moisture. so it is a combination of the high temperatures and higher dew points or humidity that's going to make it feel oppressive. temperatures running 5 to 15 degrees above average. you factor in those dew points it is going to feel at least five or ten degrees higher than these teal temperatures for the coming days. now tomorrow 89 degrees new york city. we have a front coming in the kind of front that maybe brings some storms, a couple of showers, few clouds to break the heat a little bit. but we won't really see a break in that heat because look at this 12-day forecast. right back up to the 90s. that stretch lasts all the the way to wednesday of next week. so summer is now finally officially here. back to you. >> the dress matched the map! bond legend bill cross aulg
all financial markets a shell game. artificial prices artificial manipulation. where's the real price? you focus on making great burgers, or building the best houses in town. or becoming the next highly-unlikely dotcom superstar. and us, we'll be right there with you helping with the questions you need answered to get your brand new business started. we're legalzoom and we've already partnered with over a million new business owners to do just that. check us out today to see how you can become one of them. legalzoom. legal help is here. want bladder leak underwear that moves like you do? try always discreet underwear and wiggle, giggle swerve and curve. with soft dual leak guard barriers
and a discreet fit that hugs your curves. so bladder leaks can feel like no big deal. get your free pair and valuable coupons at always discreet.com [ male announcer ] eligible for medicare? that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans they could save you in out-of-pocket medical costs. call today to request a free decision guide. with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it.
with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. ♪ ♪ o0 welcome back everybody. we're counting down to the fed. dow is currently up by driple digits sitting at 17,732. nasdaq percentage wise is the laggard but still positive. the s&p is still up by .5%. rallying into the fed decision. what will happen after that? you have to stay tuned to "power lunch" to find out. what is the best way to position yourself in this environment? george young, portfolio manager of the villary balanced fund. for my money -- i don't do this because you run a balanced fund. but i think a balance fund is a
tremendous core holding in most people's portfolios because it gives you instant diversification between stocks and fixed income. >> you're exactly right. you stole my thunder. the good news is that our balance fund has 25% bonds. say you do have a crack in the market. good news is bonds are there to protect you. the other important thing, our fund we have 10% of those bonds in junk bonds which means we think they'll have a good pop over the next year or two. >> so what is the rough allocation? i don't want to get on to your market thoughts of your fund. 12 two-thirds stock? one-third -- >> we're at the low end where we can have our bonds right now. we do that because we're nervous about interest rates. we could have big decision from the fed today. >> let's go there. i was speaking last night with brian reed of the investment company institute. he pointed out that if interest rates go up a percentage point -- not too many think will happen, but it could -- that the typical bond fund owner might see their share value decline by 4%. >> i'd say even more than that. maybe even 6%.
the difficulty depends how long the bond is. >> longer bonds go down more. >> exactly right. that's something to be fearful of. that's something we're mindful of. >> as you look at this interest rate environment, you are compressing the percentage of the prflortfolio devoted to bonds. >> our average duration is four to five years. the shorter you are, you have less volatility. credit quality is also important. we have single a bonds for 90% of our bond holdings and 10% are in junk bonds. we don't like treasuries because you don't get much yield. >> are you worried about liquidity in the junk bond area? >> not so much liquidity. but i've heard the phrase buying bonds right now is like picking up a dime in front of a steamroller. >> it's not worth it for a dime. is it? >> no. >> how about stocks right now? roughly two-thirds you are in stocks. do you favor dividend payers in
a big way or not? where are you finding value? >> we think we'll find value in other than dividend paying stocks. if you think about it -- >> because they're so fully priced? >> they are. 2014 was a good example. utilities stocks are up 30% in 2014. not surprisingly. this year they're down 15%. there's always a rotation within the market. we think what's happened here is that the big dividend payors -- utility stocks are a good example of that -- the reason they are off is people have said we want more small cap stocks. we buy small mid cap growth stocks. >> you've been buying growth -- small cap? >> yes. >> give me a classic pick you've made in recent weeks and you it tell me about. >> i can tell you about anything. no problem. >> all right. >> the good stock that's worked out really well for us financial engines. they're designed to help people invest their 401(k). >> financial management. >> they're really good. the important thing an employer such as raytheon or ford they can't tell it the employees where to put their money.
they're prohibited by law. but the employees need help because they aren't financial experts. what financial engines will do this is a company started by bill sharp. sharp ratio, nobel prize winner. >> yes. he started this -- >> sharp guy. >> sharp guy. the interesting thing is since the employers can't even make suggestions to the employees, the employees need some help. so they charge 1% but the employer pays for half of that. the rest of it comes out of the pocket of the employee but they need help to manage their 401(k). 65,000 americans are hitting retirement every day right now. they need help. retirement is a very important subject. >> george, you weren't the general manager of "the new york times," were you? >> that was not me. no relation. >> george thank you very much. we've got a rally ahead of the fed. bob pisani is at the nyse. often we see stocks market time just be a little bit cautious ahead of a fed decision.
arguably it could be quite an interesting day today. right? what in terms of what they say and yet we've got a rally on our hands. what does that say about what they're expecting? >> we've got a rally because of energy and what's going on. the s&p 500, we were basically last hour and a half steady sideways here. look at that move up around 10:30 eastern time that's because of what happened in oil. look at oil, huge drawdown in inventories, caught everybody by surprise. oil spiked to the up side and energy stocks and material stocks all moved up. look at some of the big etfs xle, the vix spiked up around 10:30 eastern time and that's maintained its gains. all the shale names, all the small exploration and production companies like consho and pioneer natural. transportation names, nice moves up in a number of these names here including expe tightditeorsexpeditors.
hopes for a bottom in transports. we'll have the fed decision up in the next 15 minutes. in about 45 minutes we'll also have the close on crude. currently up by 2.4%. the words that can move markets. the closer look at the fed chair janet yellen's most used vocabulary and what we can expect from today's policy statement. also as we count down let's take a look at the sectors. all of them moving higher except for utilities. they're currently on the back foot there. utilities don't normally like higher rates. we'll just have to wait and see what they say and do. "power lunch" is back in two.
seven out of ten power outages in the us are caused by weather. but utilities can now predict where the power will go out, within a few city blocks. working with ibm they're combining micro weather forecasts with detailed data from local sensors. to predict where outages are likely to occur. and send crews exactly where they're needed, when they're needed. ibm analytics from the internet of things is making energy smarter every day. (vo) rush hour around here starts at 6:30 a.m. - on the nose. but for me, it starts with the opening bell. and the rush i get, lasts way more than an hour. (announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity.
fine, what if i just put up the x1 sports app right here. ah jeez it's so close. he just loves her so much. do it. come on. do it. come on! yes! awww, yes! that is what i'm talking about. baby. call and upgrade to get x1 today. ♪ "power lunch" will be all offense the fed decision in about ten minutes. just stand by. stocks are higher with the dow up 100 points ahead of the fed decision on interest rates. as bob was saying largely due to energy shares. strong demand for the 5-year note with a yield of 1.625% and an a. grade from rick santelli.
the words that can move markets every time a fed statement is -- come on up here mandy. come on. come on. every time a fed statement is released, wall street pays attention to every single word and how. some words are used more frequently than others. we took a look specifically cnbc.com did looking at every single words janet yellen has ever said. he's here to break it down. >> every word she's said in the six press conferences that come with meetings. including the q&a. we count all the words, words, 2/25,000. this is just a part of the word -- there's thousands of words. ones in orange the most popular words. inflation, policy rate committee. that of course makes sense but the interesting part is the words that have been growing from her first meeting to the last. the growth words here it's "appropriate," "data," "growth."
it is all appropriate. we have examples when steve leisman asked her a question he said what do you think about this or this? her answer included the word data. she wouldn't give the specific data set but she just says the word data. the words that are shrinking are interesting. it is inflation, unemployment, and it is the word guidance. she's just not talking about guidance. it almost didn't get said at all whereas in the first meeting she used it all the time. forget about guidance it is all about data all about being appropriate. there is an example when she used the word data and appropriate five times in the same answer when a reporter from the "washington post" -- >> look at that. that's just a part of the answer. appropriate, data data appropriate, data. she's not saying exactly what data she is talking about. everyone's not clear what's going on. the other word that's not up here but it is the biggest growth word -- obviously. she think it is all very obviously. obviously this obviously that. that's not answer to -- >> i don't know.
is it that obvious? >> she thinks it's obvious and all of us are trying to figure out what she's talking about. >> what's new? >> fascinating stuff. interesting to look at that that way. i want to see "inappropriate" in there the next time. >> come on. it's janet yellen. she's always going to be appropriate. >> i want to see her being naughty! we are just seconds away from the fed's latest decision. will there be a rate move after nine years? consensus on wall street is no but anything could happen. >> we'll bring it to you live the second it happens. the second hour of "power lunch" kicks off in two minutes' time. this summer, challenge your preconceptions and experience a cadillac for yourself. ♪ take advantage of our summer offers. lease select cts models in stock the longest for around 399 per month.
♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation. have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.
welcome, everybody, to this special edition of "power lunch." we are fewer than five minutes away now from the federal reserve's latest policy decision. will this be the meeting the central bank raises interest rates for the first time in nine years? the majority of wall street not banking on it but anything can happen. we will find out in minutes. right now the dow is higher up by about 90 points ahead of the fed. oil also moving up as well as dow jones reporting saudi arabia said it is likely to cut production by the end summer.
we have our all-star fed panel. we welcome in jpmorgan funds david kelly and bob dahl. bill gross will join us in a few minutes. it's been 53 straight meetings where the fed has not raised rates. >> i think this one is the 53rd, but they're not going to raise rates today. janet yellen has been very careful to telegraph her punches. she does not want to surprise markets. markets don't expect a rate change today so we're not going to get one. >> what do you want to hear them from the fed, david? if we're not going to get a rate increase, what are you hoping to hear? >> well i expect -- well of course i'd like them to begin to raise rates sooner rather than later but i think the interesting thing is will it be unanimous, will somebody like jeffrey lacker perhaps dissent just to put a stake in the ground that we understand not july but it had better be september. i think they'll be getting a
little bit antsy but fundamentally the situation has not changed. most of the important data actually comes out later this week and at the start of september. >> bob, what would be your expectations today from the fed and perhaps the best outcome from the fed today for n tuchltyour equity clients? >> u.s. data is a bit better particularly on the employment side. we've had this drop in commodity prices because of some of the non-u.s. activity. my guess is that janet yellen will still talk about data dependency, about things improving in the labor market cozying up to a race increase giving them the flexibility at the meeting but i agree with david, not go there. >> since that last meeting we got weak retail sale numbers for june. the china situation has not resolved itself yet. xhomd commodity prices continue to be lackluster to say the least. will these factors leak into the
fed's language in your opinion? >> certainly that's part of the dynamic but i think it is the labor markets they've been watching appropriately, very carefully. we've had the best initial -- the lowest initial unemployment claims in over 30 years since the last meeting and so i think the direction is still moving toward -- remember we are starting at zero. time to start thinking about raising rates. >> david, you brought up a very interesting point recently which is the federal reserve, even if they don't necessarily want to raise rates or perhaps feel the data says they should at some point they might raise rates simply because they are in an impossible position if we get an economic slowdown otherwise. explain. >> well that's right. a number of fed officials have talked about this but you can't cut rates if rates are at zero so if we get hit by some shock which pushed the economy into recession, they would have no strong monetary response to that. if this economy's healthy enough to take a rate increase -- i
certainly think it is -- they really ought to build up a little ammunition for the next time they have to cut rates. >> david, that would imply that the idea of the economy facing some sort of sudden shock or recession is actually on the table. is that what you think? >> well eventually it is going to happen. one of the problems is the unemployment rate has come down to 5.3%. we think it might come down to 5.2% in next week's report. 4% is like the minimum possible unemployment rate in this economy. we're about 80% of the way today. by the end of the next year i think we will be there. by the end of next year this economy's going to be running into this potential recession stagflation wall. i don't think there will be an immediate recession but they have to be prepared for that and they're not prepared for it right to you. >> david and bob, sit tight. we'll be joined by bill gross of janus capital shortly after that fed decision. 53 meetings if today happens without an interest rate increase. but you never know.
people are expecting september but it could certainly happen today. we have no press conference today. there will be a press conference after the september fed rate call. dow is up 87. the 10-year yielding 2.29%. oil is up perhaps helping stocks as well. let's go right now to washington, d.c. steve leisman with that fed call. >> thanks brian. no change in interest rates. the fed maintaining a 0% to .25% range for the fed funds rate. no hint at all that a rate hit is coming next week. i'm calling this essentially poker face statement by the federal reserve. looking through the statement what we see was unanimous. the fed continues to say they will hike when it sees further improvement in the labor market and it is confident that inflation will be moving back towards 2%. it continues to say the conditions will likely warrant below normal rates for some time. in its it characterization of the economy, same as last
meeting, sees it expanding moderately in recent months. a little bit of upgrade to the jobs market where it said it continues to improve. solid job gains and declining unemployment. underutilization of labor resources. touch of an upgrade there saying it is diminished rather than diminished somewhat. it also upgraded the housing market a little bit, saying there had been additional improvement instead of some improvement. household spending the same. business fixed investment remains soft in the fed's opinion. on the critical issue of inflation and the outlook for inflation, it said it is still running below its 2% target. it expects it to remain low near term and will rise gradually 2% to 2% over the immediate yab term -- median term. no hint they've made any progress at all. then also talked about transitory effects of energy and import price declines dissipating. finally, they say the economy
will expand at a moderate pace. if you're looking for that clue or hint that the fed was going to raise rates next meeting, it is not in here. it is a poker-faced statement in that regard. >> the market is taking off. dow jones industrial average was up 90 points heading into the meeting, now the dow is up more than 130 points. perhaps a very dovish fed meeting. i just ran a word count on that statement. the word inflation mentioned 12 times. the exact same as it was in the previous statement. the word moderate mentioned three times, the exact same as it was in the previous statement as well. and perhaps, guys -- david kelly, let's go right to you. a lot of people are betting on a september rate increase. but we're looking at nearly an identical fed statement, perhaps a very dovish one as well. do you think there's a chance now the fed will push back any possible rate increase this year? based on what you just heard? >> i don't think based -- this year. i still think the fed will
probably move in september. this makes perfect sense because they are danger dependent. we'll get a big revision of gdp going back the last three years tomorrow. we look at employment cost index on friday and two jobs reports. we have to look at what the dollar and oil does over the next few weeks. they don't want to tip their hand at this stage. that makes perfect sense. why confuse financial markets by changing their story right now? i think it is significant they talk about further improvement to the labor market because they've been saying that they are saying they are seeing that. if we're doing about 2% to 2.5% growth we will see further improvement in the labor market by september and that still i think makes it slightly more likely than not that we will see a september rate hike. >> just to follow up on what you said about the labor market, a new line in the fed statement -- this is important because jobs are a key. the labor market continued to improve with solid job gains and declining unemployment on balance. a range of labor market indicators suggest underyou the
lies you the liesation of resources. but the market taking this fairly dovishly. >> we knew there was not going to be an explicit clue that they were going to do something. they've said they're data dependent so there is not going to be a smoking gun. but i consider this -- call it modest but upgrade to the economy is notable here. that "solid" word is the word everybody's going to talk about. positive comments on labor market, on housing small upgrade, under utilization of labor resources. these are modest upgrades but i think your guest is right, this could all point potential -- potentially to a september rate hike. nothing here indicates to me that's completely off the books here. you see is the typical reaction. one short move up then a move to the downside. if you look at interest rate sensitive sectors, banks, kbe is a standard one i go to in these kinds of situations. slight move to the downside here. normally when you get concerns
about interest rates pro tensionally going up that's bullish for banks. you could somewhat read that there's some hope perhaps they're not going to move. that seems to be what the market is saying right now. the big story continues today to be the oil rise and the move up and those energy stocks are what's keeping the dow holding up right now. we are 2106. we were as high as. and now we're down to 2,099. little bit up and a little bit down. >> we're actually lower than when we went into the decision. rick santelli in chicago, again not much reaction in the bond market. >> no. there really isn't. there was definitely a small little mini roller coaster ride but we're basically getting off the same place we started before the statement. in my opinion, dollar index is the place to start. that's your immediate reaction.
higher rates are going to boost the value of the dollar. clearly the dollar index moved lower. moved lower. it moved lower by about .25%. now it is back to where it was. 2-year note yields at 71 .1.61 for 5s. rates moved down just a bit, base point or two depending on maturity. they came back. maybe the easiest one to follow is the 30-year bond. it's been one week since we settled above 3% exactly last wednesday. we went into it at 3%. we dipped a couple of basis points, right back at 3%. makes perfect sense. imanticipate not telling you what the fed is going to do. i'm not sure the fed knows. but in terms of market analysis that's represented by prices it is about where it was before the statement that didn't really give us any more information. rmplts bob, listen the statement
read dovish at first but to bob pisani's point, that one word "solid" with regard to job gains does seem to be tweaking some people. you've had time to parse and analyst is. what's your take? >> i think solid economy if that's where we are and i think we are heading there is good news for earnings. better earnings is good news for stocks. i think the fed's acknowledging the economy's improving. i like their language around the labor market. the economy is standing up on its own two feet more than it has in some time. this will eventually cause the fed to raise rates. september, possible. december, maybe. i'm still a september man. >> calendar aside, what you're saying if i hear you right, even if we get a fed rate hike in september it is not the end of the world for the rally. >> i don't disagree with that. i would argue that when the fed finally starts raising rates as we said many times, that's a sign the economy is doing okay. that's good for earnings. that's good for stocks. i think the fed raising rates
probably means an environment where earnings are improving a necessary condition for a better second half for the stock market. >> steve leisman, you study fed language in part for a living. the fact that they threw in that one word "solid," does appear to be at least a change with regard to the labor market. how would you read that word? >> i'm sorry, brian. it doesn't do anything for me in terms of forecasting the fed. when i look at the two major conditions for the fed to hike rates, an improving job market confidence inflation is moving towards 2% i had a check on the job market already. the job market is fine for hishging rates. yellen says there's some slack out there. but all else being equal, if you had that inflation on the way up, they would hike rates like that. the problem is that there's been no meaningful change in the inflation forecast or the assessment of inflation right now. what does that say to me? it says to me the fed is running out of time to get the data it
needs to justify a september rate hike. every day that goes by i really think, brian, the focus is not -- i think solid job gains is right. it is important. it is there. but job gains was already in the "win column" when it came tomorrow raising rates. inflation is not. and their failure to change the krashth characterization of inflation tells me the odds of september may have been reduced with this statement. >> okay. so you're taking a little more of a dovish view there. there is a good debate here. this is what we've been reduced to figuring out singing words in fed statements. david, bob and steve, thank you. melissa, can we get a little "solid as a rock" going into the next break? >> why don't you chime in, brian. annika chankhan, do you think there was enough data between now around the september meeting for the fed to say, the inflation target we're within
range and all of the other categories that the fed needs to see outside of the job market? >> yeah. i'm going to take a different view. we still have a base case of a september hike. of course if you think about the language of solid labor market increase that's as big of a hint as we're going to get. of course the fed doesn't want to show its hand as it did in the 2013 taper tantrum. we don't want to see any volatility in the financial markets. >> so what other data points anika, are you looking for? do you think at this point it is a done deal? september's jobs report will come in likely in line with expectations, and therefore on the strong side. therefore the fed is on its path. >> so clearly we'll have two
more non-farm payroll reports. inflation will continue to play a very big role. we'll continue to see when we look at core inflation numbers that those numbers are gradually increasing. in fact if we look at the three-month annualized rate that's picking up which shows an upward trend. clearly we've already gotten a pulse of labor market conditions. we'll continue to look at that u6 number. it continues to trend downward. clearly tomorrow we get a pulse of overall economic activity from real gdp report and we think with benchmark revisions we get some upward momentum for that report showing a little bit better numbers that are more in line with gdi. and so we continue to see overall economic groetd is imwth is improving. >> are we overworried about a rate hike? we've not had a rate increase in more than nine years.
have we gotten a little spooked by the idea of a rate increase artificially? is another quarter point added to the fed funds going to hurt the u.s. economy? >> that is the question of the hour. it's just 25 basis points and i think it is important to put it in perspective. of course, the fed will still very much be accommodative. if we look at the fed's balance sheet, that continues to be at an unprecedented high level. so that means the fed is still going to be a accommodative. . i think what we should also be focusing on is when the fed will cease and start to gradually reduce its balance sheet holdings. >> anika khan always a pleasure to get your insight. from wells fargo. >> thank you. don't go anywhere america. we've got so much more to do today, including asking bond legend bill gross why he called the global financial markets a "shell game" today. we'll ask him about that the fed, what's next for markets and maybe even his shower.
we'll explain that last one when "power lunch" returns. no student's ever done the full hand raise in ap calc. but your stellar notebook gives you the gumption to reach for the sky. that's that new gear feeling. all hp ink buy one get one 50% off. office depot officemax. gear up for school. gear up for great. ♪a one, a two, a three percent cash back♪ next. there's gotta be a better way to find the right card. creditcards.com lets you compare hundreds of cards to find the one that's right for you. just search, compare, and apply at creditcards.com.
my name is jamir dixon and i'm a locate and mark fieldman for pg&e. most people in the community recognize the blue trucks as pg&e. my truck is something new... it's an 811 truck. when you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you don't hit them when you're digging. 811 is a free service. i'm passionate about it because every time i go on the street i think about my own kids. they're the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then i'll drive it every day of the week. together, we're building a better california. . welcome back to cnbc. to recap, the federal reserve, no change in interest rates. not giving as many clues as to whether or not we're going to
get an interest rate hike in september. though the one word everybody is focused on the "s" word -- solid. some taking that on a more hawkish tone steve leisman begs to differ, saying it still reads like a pretty dovish fed. this is the 53rd straight meeting where the federal reserve has made no change in interest rates. go all the way back to george w. bush's second term. wow. the dow 100 points to the up side. the dollar index also on the move as well. janus capital's bill gross criticized the global financial markets today, writing all global financial markets are a shell game now. artificial prices artificial manipulation, where's the real pea, meaning price. bill jones us now in a first on cnbc interview. before we get to your fed reaction pretty strong words from you. why did you call them a shell
game? >> well pretty obvious, brian. in a shell game the huckster chances the pea so the customer loses his or her money. i think this shem game has been taking place for a long time but certain will i more evidenced in china in terms of the market going down the market going back up. margin requirements being changed, et cetera, et cetera. stocks being delisted in terms of activity. we see the same thing basically in all central banks in terms of their interest rates, in terms of quantitative easing from the ecb. it's a manipulation. it may be a purposeful manipulation in terms of strengthening a real economy, but there's no doubt that the pea in this case the price of assets, i suppose, is sort of a question mark. ultimately when central banks stop manipulating markets, where that pea goes is i think up for grabs and probably the arrow points downward. >> but how does that make you
feel, bill? you are a professional investor you've been one of the best in the world for a long time. your job is to grow the wealth of janus' clients. if you see the market as a shell game how difficult is it every day to put your clients' money to work in that market? >> well, you don't play that game, brian. you move on to other games. that doesn't mean that you move on to other markets because the global financial markets are the market in which janus moves and in which other investment managers do as well. but you don't necessarily have to take positions in terms of risk and high yield interest spreads or high-yield bonds or currencies. you can move in if necessary in the opposite direction. instead of owning the dollar you can own the yen. instead of owning the euro you can own the mexican peso. et cetera et cetera. so there are choices and there
are interest rates and prices that are relatively high and some relatively low. so that's the opportunity. >> is this whole shell game though bill getting at brian's point, making it more difficult for you as a fixed income manager to invest? i'm taking a look at some of the data morningstar has about the janus global unconstrained funds. two consecutive months of outflows from the fund. your fund has lagged 64% of its peers according to morningstar. you've made some fantastic calls and you've come on this show to explain this on the german bund and the chinese stock market. but you yourself said you didn't invest alongside those calls. so what's going on at your fund and what's going on in the markets overall that might making it more difficult for you to keep investors in your fund? >> hey melissa, you're citing the past. in fact the janus unconstrained fund is beating 70% of its peers in category in which we're placed. and the rates over the past two, three, four five weeks have
moved up substantially in terms of prices. so we're doing great. we're doing well. we may have missed an opportunity in terms of the german bund but we've caught it in other areas in terms of derisking and so i'm well satisfied. >> melissa did mention the china market, bill. in fact on june 3rd you talked about the shenzhen index maybe be the short of a lifetime. not quite yet. you lamented the fact that you didn't take advantage of your own internal advice about germany. have you taken advantage of the collapse of china? >> well yes. the chinese market is a difficult one to play. i talked about the chinese market being a great short and the second trade of a lifetime. in fact i think it has despite the manipulation of the chinese authorities over the past several weeks and several months. but what you do if a market like that is declining and it
generates volatility in other markets and other risk markets is that you basically move in currency markets. you move against high-yield markets. that is, you don't own them or you short them and you take advantage of the increasing risk atmosphere that a declining chinese stock market portrays. so it is not necessary to short the chinese stock market. matter of favth,ct, it is very dangerous. what you do is look outside the chinese economy and move in those particular areas. gosh, let's be fair. the unconstrained fund is doing really well and it's hard to hear from you, melissa, the talk about outflows. the inflows are coming, believe me. >> i was just citing the data as of may and june because that's the most recent complete day that we have for those months. back to your call about the shell game one of the side effects of this central bank shell game is the high yield market. a lot of hedge fund managers
think there will be a hot money exit from the high-yield market. are you investing in that market or short rg the high-yield market yourself? is that one way to take advantage of this shell game that the central banks have created? >> yeah. i think so. we're certainly not seeing that today or yesterday. high-yield market has come back so to speak. but prior to that point, the liquidity in the high-yield market was certainly exposed in terms of its ill-liquidity. you can see that most obviously in etf space and in closed-in space in terms of closed-in high-yield funds. what i'm doing with janus unconstrained is certainly not owning high-yield bonds and in some cases, yes shorting what we call high-yield cdx, the index, so to speak. ultimately a high-yield spreads move higher than the price of that short moves higher as well. that's one of the things that's
benefiting janus unconstrained in the last few weeks and months. >> let's get to your shower. i think the viewers probably heard that. what the hell is he talking about? he use that as a metaphor for liquidity in the market. one of the things i see from some of the guys out there that i really trust, there is this increasing tone and a little bit of fear around the lack of liquidity in many of the financial markets. that's what you wrote about, a lock of liquidity. i've heard it from some others. explain in plain english what that means and what perhaps the growing risk is. when we have low liquidity, price swings tend to be more dramatic. >> well yes. let's face it the fact is that the credit markets, the financial markets, whether they're bonds, stocks or the shadow banking system in combination, basically in the u.s. alone is $100 trillion market. when investors want to get out of that particular market and
when many of those assets basically are in a rather confined space, they rush to the exit much like a fire in a theatre basically can cause a stampede. i'm not trying to be a scare amongmonger here and others have observed in the past two, three months, that areas of liquidity and even the treasury market move treasury priced by two, three 4/32nds toward a large trade. i think priced reflective of liquidity should be concerned going forward because the market today is yes, not your mother's oldsmobile your father's oldsmobile it is a different oldsmobile and basically you have to gauge the speed of that oldsmobile in terms of an exit
if you want to prosper. >> bill gross of janus capital, we'll leave it there, bill. thank you very much for joining us on this fed day. we'll talk to you again soon. thank you. up next -- one equity strategist explains why patience with stocks will pay off. we'll press him on hisahead. as we head to break, let's take a look at all 500 stocks in the s&p 500. there is a lot more green than red on your green. we are back right after this. here at the td ameritrade trader group, they work all the time. sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this.
i take prilosec otc each morning for my frequent heartburn. because it gives me... zero heartburn! prilosec otc. the number 1 doctor-recommended frequent heartburn medicine for 9 straight years. one pill each morning. 24 hours. zero heartburn. we live in a world of mobile technology, but it is not the device that is mobile, it is you. real madrid have about 450 million fans. we're trying to give them all the feeling of being at the stadium. the microsoft cloud gives us the scalability to communicate exactly the content that people want to see. it will help people connect to their passion of living real madrid.
hi. hi. hi. hello. hi. hi. hi. hi my name's josh. kelly. my name is raph. steve. my name is anne. tom. brian. krystal. and i am definitely not a robot. i'm one of the real live attorneys you can talk to through legalzoom. whether it's for your business or your personal life, don't let unanswered legal questions hold you up. because we're here. we're here we're here and we've got your back. legalzoom. legal help is here.
there are about five months left in the year so it kind of seems like a good time to us to see how some strategists year-end predictions are shaping up. a year-end s&p of 2,225? that's about 6% upside. julian, are you sticking with that relatively bullish call in the s&p 500, even post fed? >> we are. fed has basically not given us a ton more guidance. we know right hikes are going to come. we actually think that when they come, the surprise could be that the economy actually accelerates and obviously we think that will
be good for storks. >> we've made that point a few times on this program, there's evenly two things i am sure of. i will die at some point, hopefully later than sooner and the fed will raise rates. so. doesn't sound like to you as a strategist for stocks that you necessarily care that much about the timing of it. >> whether it's september or december is not quite as important. granted, if there is a rally in the market between now and then if it is a surprise and it does happen in september, that could jolt volatility a little bit. but ultimately the message from higher rates is the fact that the economy is on firm footing, that the rest of the world is on firm footing, and that is a positive for the -- >> have you done anything on the study of the correlation of oil? is a higher oil price a little bit good for the equity market? >> at this point it is good. earnings in the energy sector are down substantially. 60% to 65% year on year.
stability in the oil market would definitely be a positive for the s&p as a whole at this point. >> we'll leave it there. julian, thank you very much. do appreciate your time. 2,225 year end on the s&p. you can see all the wall street strategists, go to our market strategist survey page at "power lunch."cnbc.com. up next a cnbc exclusive howard lutnick. always outspoken. he joins us ahead. the oil market will close higher for the day, looks like. saudi arabia is saying production cuts could come at the end of the summer. we're headed live to the nymex when "power lunch" returns.
♪ whoa what are you doing? putting on a movie. i'm trying to watch the game here. look i need this right now ok? come on i don't want to watch that. too bad this is happening. fine, what if i just put up the x1 sports app right here. ah jeez it's so close. he just loves her so much. do it. come on. do it. come on! yes! awww, yes! that is what i'm talking about. baby. call and upgrade to get x1 today. ♪ hello, everyone. i'm sue herera. here's your cnbc news update at this hour. a university of cincinnati officer who shot a motorist during a traffic stop over a missing front license plate has been indicted on murder charges. the prosecutor announcing the grand jury indictment in the july 19th shooting of motorist samuel debose.
a new york man is in custody for allegedly attempting to support a terror organization. officials say the man previously traveled to turkey. he also posted several pro-isis related messages on his twitter account. the do zambian men apparently paid by an american hunter to kill a lion face poaching charges. a dentist who admitted his part in the killing of the lion says he believed it was a legal kill. garth brooks tops the forbes list of the highest paid country acts. raking in an annual $9 million in earnings. he resumed touring last year at 13 months off the road to help raise his young kids. i don't know if you'll get this reference, sue, but you could say the thunder rolls and apparently it rolls in rolls of $100 bills.
>> indeed it does. especially for garth. oil rising for the second straight day. it is a river of oil, if you will, because the inventory report came out and it was a bit of a surprise jackie deangelis. what do you see? >> that's right. actually they're calling it an oil slick down here. here's what happened that started the pop today into positive territory that got us to close at $48.79 today. numbers came down ever so slightly once again, so the market took that into account. we got the saudi headlines from a source telling dow jones that we could see saudi arabia production drop after the summer and hover around 10 million barrels a day towards the end of the year. remember saudi hit peak production in june 10.6 million barrels a day. the ceo of corps labs kind of called this. he said production is unstable. does this turn the tide?
we shall see. >> we shall see. jackie deangelis, thank you very much. little bit of a rare good day for oil. more now reaction to the federal reserve. diana diana, the fed failed to surprise, shall we say, but that one word "solid" is what everybody is going to focus on. what are you focused on and what are you looking forward to from the fed? >> the big focus is going to be on the fed minutes because that's where we're going to see how the debate is starting to split in terms of what are the international concerns where does china rank in their concerns and also more importantly how do we see the division within the fed in terms of views on inflation. there are some like john williams who is a voting member of the fed who's argued recently that low inflation isn't that splic surprising and it should be low for a while, though he said publicly he's confident it will move back up to 2% by 2016.
where the other end of the spectrum charlie evans, also a voting member on the federal reserve today, is saying inflation is too low, we need it higher before we even move. really yellen corralled the cats and said this is a meeting by meeting about decision now. you can't us to say we're going to do it right before the next meeting until we get right before the next meeting. >> probably with everything in life, if you wait for perfection you're probably going to be waiting forever. is the fed starting to get behind the 8-ball here? >> i don't think that's the case. i think by design they want to be a bit behind the curve. they want to make sure that the recovery is building momentum that rates are low for long enough that you have that stimulus to the economy given all the risks. there's still a lot of downside risks you could argue from abroad as well. to me the main takeaway is the fed is emphasizing the labor market. they changed the language in the first paragraph to note a meaningful improvement.
by throwing that little word in they indicate they don't need to see much more improvement. >> we jokingly solid it an ashford and simpson moment. with that "solid" comment. >> one governor at the fed mentioned 40 times in 12 paragraphs the word liquidity when she was talking about concerns. they'd like to get the process in by september so they have some time to allow the markets to adjust. they just don't know what the reaction is going to be. we've seen people out of the fed, wall street regime change is a pretty big way to refer to the first lift-off in rates in almost a decade.
i think there is some real concern about even though this is small in the context of things, it could have some dislocation effects in the short term. >> there are many money managers that have never ever managed money in a rising interest rate environment. there are financial advisors who have never advised their clients in a rising rate environment. that's why we focus so much on this fed. but is this economy strong enough to withstand or maybe, dare i say, benefit from an interest rate increase? not all bad news is it? >> it's not all bad news. think about the backdrop. why is the fed even talking about hiking rates. why are they talking about normalizing. it's because you've seen progress in the economy. the unemployment rate is at 5.3%. we've created in a net 12 million jobs since the recovery started is. it's not been a v-shaped recovery and we aren't going to see a v-shaped recovery. i key question is has there been enough improvement for the fed to start normalizing policy if a very slow and gradual process. i think what the data is
supporting and they're telling us yes, we're healing, making progress and perhaps that process can start. we're just like diane in the september camp and i think the data's been supportive of that. >> i think we can all agree that the markets are the nail and the fed is more than likely the hammer. diane, michelle, thank you very much. we do appreciate it. let us continue our fed day conversation by turning to this. yes, "trading nation." larry mcdonald is a macro strategist, boris schlossberg, a currency trader. larry, you are a little more vocal and outspoken than many about the federal reserve. your take on what they did or did not do today. >> brian, when you hold interest rates down for six years there is a price to pay for that. what the fed is witnessing now is they try to exit each time you have a dollar surge, and that has multiple side effects in the global economy especially on commodities.
the fed's 5-year five-year forward, inflation gauge, is below where it was during qe2 and qe3 and it is heading south. michelle, your previous guest, was talking about the labor market but we have a dual mandate. commodity demise is taking the inflation expectations much lower and that is forcing people to look out toward december. >> but what do we do about it larry? >> well -- >> how do we make money? >> go back to march. remember a year ago today, 75% of the street said we were going to hike in june. a year ago today. in march of this year the fed took a dovish turn. from march to june anything commodity based soared. anything from gold miners to all across the commodities spay was up substantially. and emerging markets were up substantially. brazilian stocks for example. up substantially. if you take the same playbook
for march that those the are the type of things that will do well when the fed is pushing things out. >> boris, is the dollar index still a great buy or has something changed actually maybe in favor of europe? >> no. long-term i still think the dollar is a strong buy. but i think this is much more of a political run than an economic issue. there is zero economic reason for why the fed needs to hike right now. we are at very low inflation rates. i think they're basically dangling the idea of an interesting rate hike because i don't think they really want to do it at this point. you talk about the labor market is strong but wages are not. this is the only thing that really matters is wage growth and there is very little wage growth going on out there. but i think the fed will hold and surprise a lot of analysts and hold to december before they actually move on the market. having said this it is still ultimately dollar positive. they are the only central bank aside from the bank of england that's considering tightening and i think ultimately that will be positive for the dollar.
>> thank you both very much. folks we do two additional segments every day. go to tradingnation.cnbc.com. it was the best of times, it was the worst of times, with all due respect of charles dickens, it is a chart of facebook and a chart of twitter. facebook up twitter down the exact same amount in the same time. looking at both stocks when "power lunch" returns. >> announcer: and now the latest from tradingnation.cnbc.com and a word from our sponsor.
revenue. big problem -- concern about consumer growth. and a down beat note on management. yelp needs help. the stock losing one-quarter of its value today. . company lost money while analysts expected a profit. down 25%. that's not a misprint. >> we will ecertain have a follow-up on "fast money." facebook set to report earnings after the bell today. the stock trading higher by nearly 23% year to date. guys jason, i'll start with you. on the back of google facebook got a boost. in short order the stock rose 10% with be now up 7% from when google reported based on essentially nothing. there was no fundamental change in the story between then and now. how much of the better than expect results -- how much of that is priced into the stock? >> well look. it was multiple stocks. you've had amazon move netflix
has moved. it is more of a function of investors just going more overweight growth. i can't say there was actually a specific change in expectations. look, channel checks for the quarter are good. they do suggest that the company should be able to beat consensus numbers as far as this is the easiest quarter for them on comps wise this year. usage slow to bid relative to the first quarter but still strong. no risk of cannibalization which is one of the things people worried about. they've made several announcements around product and around ads that we think will really help the back half of the year. >> so many other investors grapple with the valuation of a facebook. why do you choose a disney or a viacom in terms of multiples for comparisons to facebook? >> well people love to throw facebook into the tech category. it uses technology it develops technology, but really it is a
media company. it maybe social media, but media it is. so i think that's a fair comparison. it just turns out that you and i and anybody else who posts on those things they are the content creators, not professionals. so that is the risk. are we entrancing enough to come back day after day? i don't know. i don't know when that's going to stop. >> jason, what could be the tape-ones in the report after the bell tonight? what are some of the outstanding issues? could it be expenses are even greater than indicated in the previous quarter? >> i actually think people generally speekt lyly expect them to beat margins. that's one area they give guidance is expenses and they've beaten their expense guidance every quarter since they've become public. that's not really the risk. really it's the whisper game that goes on. right? if earnings are only 1% or 2% or revenue only 2% better than the street, is that enough? then it comes down to what they
say on the call. again, they announce changes with respect to the way they're going to price video ads, how they're going to only charge advertisers now for a click through a website versus licensed shares. we think on instagram. we think that will really help that ad platform scale. i think the bottom line here is, i actually agree it's a media company. and so if you look at the amount of time people are on their platform and the revenue per hour they generate they are 20% that twitter yahoo, and aol generate. and facebook is a massively undermonetized platform today because they've been focusing for the most part on user experience, and i really think we're only in the second or third inning of them developing the add products. >> thank you, kim and jason. >> all right. coming up next, howard lutnick
to talk earnings, the fed and much more. we'll be back with the dow up 130 points. you total your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had a liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. and for drivers with accident forgivness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $423.
whoa what are you doing? putting on a movie. i'm trying to watch the game here. look i need this right now ok? come on i don't want to watch that. too bad this is happening. fine, what if i just put up the x1 sports app right here. ah jeez it's so close. he just loves her so much. do it. come on. do it. come on! yes! awww, yes! that is what i'm talking about. baby. call and upgrade to get x1 today. ♪
you focus on making great burgers, or building the best houses in town. or becoming the next highly-unlikely dotcom superstar. and us, we'll be right there with you helping with the questions you need answered to get your brand new business started. we're legalzoom and we've already partnered with over a million new business owners to do just that. check us out today to see how you can become one of them. legalzoom. legal help is here.
you are looking at two airplane fuel gauges. can you spot the difference? no? you can't see that? alright, let's take a look. the one on the right just used 1% less fuel than the one on the left. now, to an airline a 1% difference could save enough fuel to power hundreds of flights around the world. hey, look at that. pyramids. so you see, two things that are exactly the same have never been more different. ge software. get connected. get insights. get optimized.
bgc partners hiring after reporting an increase. popping 8%. joining us on an exclusive is howard lutnick of cantor fitzgerald and bgc partners. great to see you. >> great to see you. >> strength in the quarter led by what? >> people are saying you know what else is out there that's going to continue to be strong for the rest of the year? >> so we bought gfi, which was a smaller company in our space and able to take 90 million of expense out of it. when you buy a company, you're going to take 90 million of expense out? obviously your numbers are going to do great. we have a huge real estate business. and loves low interest rates. that's what you use, .25%, we buy coffee. couple million bucks. you and i can have a quick starbucks with it. loves real estate. real estate numbers blowing off the charts. financial service business.
our revenues were up this quarter compared to last year. 58%. >> whether it be greece or the rise in interest rates. could they possibly impact what you see coming down the pipe? >> well you know our company. so we have a huge fixed income platform. and, you know quantitative easing makes everything kind of boring, right? interest rates get really low. not a lot of volatility, the government is buying stuff and not hedging. so we love these kind of change. we love china, greece, things that create volatility momentum. these are all great for our company. so our company we don't make money if the market goes up. we don't lose any when it goes down. we're all about volume. so as the fed. we're rooting for yellen. go do something. >> right. >> raising interest rates. greece's issues. these all help move the markets around, which is great for the company. >> you were making a bold prediction prior to coming on to air about the stock price. you think things are that good. where do you see your stock is
up 8% today? under $10. where is it going to be by the end of the year? >> two years ago, i said we'd be the best performing company, last year up 60%. this year, plenty of room to grow. i think at least another 25%. >> another 25% from here. you heard it here first on cnbc. i want to also ask you about what a lot of people are concerned about in the bond market. that's liquidity and the high yield market. do you see there's a potential for hot money exit so to speak out of the high-yield market because of a lack of liquidity. there are a lot of hedge funds betting on that. they're buying cds, suring high yield. it's not something that's playing out yet. but looking for that to happen. >> you've got the big money managers. black rock and big money managers. and they're getting bigger right? and the regulatory you know requirements for capital are making the banks relatively smaller. and that's why you're seeing this liquidity stress. so what's going to happen is these black rock just put out a
paper that says they're going to start doing business with brokers. so companies, we're the largest broker in the world. we're the liquidity for the wholesale markets of fixed income. that's where i think the world's going. >> thanks a lot for coming by. ryan, that does it for us. >> all right, melissa and howard. thank you very much. "closing bell" starts right now. hi and welcome to the "closing bell," everybody. i'm kelly evans of the new york stock exchange. >> no news is good news for u.s. stocks today apparently, stocks rallying after the fed showed no clear signs of raising interest rates any time soon. the industrial average had been up 80 plus points when the announcement came out at 2:00, it's now up 132. it's been a zigzagy kind of afternoon for the market here. >> we are near market highs of about 140 points on the session with an hour to go here. we've got an all-star roster of guests coming up to help you