tv Power Lunch CNBC September 24, 2015 1:00pm-3:01pm EDT
do you think chair yellen does anything significant tonight to move markets? >> i think sometimes the ones to make are the ones you don't make. the next week is a classic example of that. sit on your hands, do nothing, and wait. >> good stuff. that does it for us. markets are clearly the story again and "power lunch" picks it up now. indeed we do, scott. thank you very much. welcome, everybody, to "power lunch." along with mandy drury, i'm tyler mathisen. a sell-off on the street at this hour. the three major averages back in correction territory. >> materials, health care, and industrials are leading the declines. those dividend-paying utilities however are holding up the best out of the bunch. >> so what's driving the drop? >> and let's start talking about it right now. let's get the trading action from the floor of the stock
exchange. bob pisani, we're down but not as down as we were before. >> not as down as an hour and a half ago and that's when the european markets closed. look at the s&p 500. they don't put out a press release saying where europeans were selling, we're not selling anymore. you can see we're moving down a little bit but we've rallied since then. global slowdown is the issue. the volume is again very moderate. this is a buyers strike. they are indifferent to buying any stocks at all. there's not selling panic going on. it's a qualitative difference. it's no consolation, the market is crummy, 3 to 1 declining to advancing stocks, but qualitatively different feel. that global slowdown in the industrial names, big global industries, caterpillar announcing job cuts, but united tech, cummins. for the last week since the fed meeting all the materials and global industrials have been under pressure. new lows.
these are 52-week lows. international paper, even the fertilizers, mosaic company andc f industries sitting at new 52-week lows. the only bright spot is a moderate rally in oil. it's helped a little bit. you would have thought companies like exxon and chevron would have been in the green as oil moved into positive territory, usually does happen. that is not happening today, but, again, only modest declines in the big energy names. meantime, i'm watching for a turnaround in any sense of buying latin america. you know what a disaster it's been in brazil. heavy volume on a moderate volume day in chile, brazil, mexico. these are all etfs you can buy. i don't know when brazil is going to bottom. heavy volume on a day when it was even positive a little earlier in the day. meantime, just a quick note on the credit markets are under a little bit of pressure today and a lot of talk about high yield. modest declines in the big high yield etfs.
keeping an eye on the markets going into the close. guys, back to you. >> the brazilian real has been slaughtered. and the australian dollar that i watch very closely is down over 20% from its 52-week high. bear market territory. thank you very much. lets head up to times square where we find bertha koomcoombs. >> we have the nasdaq still well off the july lows but today back in correction territory, back in negative territory for the year. tech, small caps are really what's weighing on the market today and that small cap drag is really being weighed down by biotechs. they're continuing to feel the fallout from this week's uproar over specialty drug pricing and the big cap biotechs like gilead maker of sovaldi, they're among the biggest losers today sending the sector near bear market
territory down 20% from the july high. monster beverage though among those stocks today that are bucking the trend. they're few and star between. goldman sachs upgrading the stock. analysts saying monster could use its investment from coca-co coca-cola for a buy back. go pro getting some love. taking a look at some ads. they're quite spectacular. also chinese stocks interestingly, baidu bucking the trend. a news alert in the bond market. 7 year notes up for auction. let's get to rick santelli at the cme. you gave the 2 years a "c," yesterday the 5 years a "b" i think. what about today? are we seeing continued improvement or not? >> yeah, "b" as in boy on this auction as well, mandy, which means, you know, another above average showing post-fed.
that would make sense. $29 billion in 7 years. finishing 90 billion of supply on the week. the dutch auction 1.813. exactly where the bid side of the one issued market was. 2.51 bid to cover. 62.6 for indirects. that's big. that's the best since december of 2010. we're just a little light at 8.9 on direct versus 10 auction average of 12%. so as i said, "b" as in boy. supply is out of the way. normally you get a little rally when that happens but considering how weak stocks are, a lot of that rally has already occurred. back to you. >> thank you very much. let's get a check on oil right now. prices hanging onto some gains. west texas crude up 9 cents at $44.57. brent is higher by twice that amount or 18 cents at $47.93. jackie deangelis follows it for
us at nynenynex. >> why we're moving in the opposite direction of the equity market today? well, a lot of it has to do with the dollar. a weaker dollar as we're anticipating what we're going to hear from janet yellen tonight. this is an expression of the same volatility we've seen over the last few weeks, even months. we had two days of selling pressure, so you see some traders getting into the trade here and buying the dip. having said that the new range is this $42 to $47 range. we're stuck in there. with respect to the fundamentals, there was some negative information in the eia report yesterday. crude down almost 5% in one week but still logging a 17% gain for the last month or so while opinions are split, traders still tell me for the most part they don't think that three handle was the bottom and we could go lower from here. >> thank you very much. dominic chu new. >> the health care sector which has been for the past few years a big market leader is crossing
into negative territory on a year to day basis. it's also the second worst performing sector so far today down more than 1%, about a quarter of a percent just for the year. so just going negative. some of the names leading the sector downward, endodown more than 6%. tenet health care 5% to the downside. aetna also moving to the downside here. so a number of these health care stocks, mandy, which have been such a focus for the bulls for the past few years are now starting to show some signs of weakness. back over to you. >> thank you very much, dom. the three people to watch today. you have china's leader heading to washington, d.c. for a face-to-face meeting with president obama. you have pope francis speaking before the u.s. congress earlier to a rapt audience, and also he's now headed to new york. and then you have fed chair janet yellen getting ready to speak about inflation and what else? fed policy. it is her first speech since her news conference last week when the committee decided to hold on hiking interest rates. so will we get any new clues from her today?
let's bring in steve liesman. waltz onto the podium. we want to know what yellen has to say today but i'm wondering, so many asset classes are down since she spoke last thursday. i wonder if she had any idea she would have that much ever an fact on the market? >> i think almost certainly the federal reserve doesn't want to see markets go down, certainly not this much, as a result of its policy or its pronouncements, but when the words inflation and monetary policy are in the title of the speech, it says pay attention. i want to go through the kind of possibilities of what -- >> okay. you come behind me. >> in the great inflation debate going on, will yellen be dovish when it comes to inflation tonight or come over to this side and be hawkish on inflation? that's what we're going to be watching for. let's go through some fomc members and what they have said about inflation and their confidence that we're moving back to the 2% target. over here on the extreme dovish side we have the outgoing president of the minneapolis
federal reserve. he said it's going to take some time. by my estimation, more than a few years to get back to target. he's confident we'll hit 2%, just not in the next several years. he's on the dovish side of holding. coming here more to the center we have guys like lockhart, a confirmed centrist, but he says i have gotten comfortable enough on the inflation question to take a first step in one of the coming meetings. over my shoulder over here to the hawkish side, jim bullard says we're about as close to our inflation goal variableses in 50 or 60 years. jeff lacker from richmond, he says this is likely to be transitory so i remain confident that inflation will move back to the fomc's 2% objective bringing us back to janet yellen and this question of will she be hawkish or dovish. i want to tell you what she said last time in the -- back this way, nice job, what she said last time in the press conference.
in light of the recent developments, we want to take a little bit more time to evaluate the likely impacts on the united states. it's kind of in the center. the question is does she give us any more clarity on this issue of inflation -- >> that's a lot of fed communication. arguably overcommunication, this new era of let's communicate and be transparent but does it confuse us at the end of the day? does it make the fed less credibilicredi credib credible? >> i don't think so. i have no trouble processing the general notions. you have disinflationary impulses in the economy. weakening economies in china. a down graft this commodity prices and the question becomes how much of a concern is it for the united states and there's different points of view. there's different points of view in the market and they're reflected at the federal reserve. i guess i would be more concerned if they all had the same attitude. it tells me there's a robust debate going on. we don't have to guess about it. we're adults and we side whichever way we want.
the question is where does chair yellen stand on it? >> thanks. >> one of the biggest home builders out with earnings. plus diesel deception. vw taking major steps to contain its emissions cheating crisis. and questions being raised about another german auto giant. as we head out a look at some of the most widely held stocks. jpmorgan down 1.5%. you are watching cnbc, first in business worldwide. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.
hi mi'm raph. tom. 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, we're here, and we've got your back. legalzoom. legal help is here. at ally bank no branches equals great rates. it's a fact. kind of like ordering wine equals pretending to know wine. pinot noir, which means peanut of the night.
i'm a senior field technician for pg&e here in san jose. pg&e is using new technology to improve our system, replacing pipelines throughout the city of san jose, to provide safe and reliable services. raising a family here in the city of san jose has been a wonderful experience. my oldest son now works for pg&e. when i do get a chance, an opportunity to work with him, it's always a pleasure. i love my job and i care about the work i do. i know how hard our crews work for our customers. i want them to know that they do have a safe and reliable system. together, we're building a better california.
welcome back to "power lunch." take a look at shares of diamond foods moving up 6%. the move is on reports being circulated the company may be working with investment bankers to possibly find a buyer. this according to deal reporter. that article speculates perhaps some of the big consumer staples companies could be interested in purchasing the company. however, remember, these are just reports right now citing sources. so some traders are a little skeptical, but diamond foods, the company behind pop secret popcorn, now the official popcorn of disneyland and disney world. >> walmart wants to get price cuts from suppliers that make goods in china reports the retailer that wants to share in the benefit generated from china's devaluation of the yuan. lock hooed -- accenture
beating earnings estimates despite the impact of currency fluctuations but the consulting company came out with its latest outlook and that fell sort of wall street expectations. the stock is currently down by 0.8%. a new read on housing and strong numbers on home sales. diana olick is live in washington. hi, diana. >> hi, ty. very strong sales of newly built homes jumped 5.7% in august and that's from an upwardly revised figure, so sales are now nearly 22% higher than they were one year ago, and, remember, this number is based on contracts signed in august, and that's when mortgage rates had moved slightly higher. we're at an annualized rate of 552,000 for the year and that's the highest since the start of 2008. but a little perspective. historically single-family home sales should be closer to about 1 million and maybe more given all the pent up demand we have now. so the median price of a new home sold, $292,700 which is
only $1,000 more than a year ago. so it's kind of welcome news that builders are easing off on the big price gains. the strong pace though amid pretty weak housing starts has left us with the lowest supply in at least a year. just 4.7 months' supply and that's not helping since existing home supplies are incredibly low right now as well. this follows an earnings beat by kb homes in q3. mandy? >> thank you very much. shares of volkswagen are down but not as much as they have been in the past few days. a new ceo is expected to be named tomorrow and names involved in the emissions scandal expected to be released. phil below has been following the story closely and what is the latest on that? >> we're getting a little more clarity about who will be the new ceo of volkswagen. let me bring you up to speed in terms of where this scandal stands in terms of the number of diesel engines worldwide that may have been rigged by
volkswagen. remember, 482,000 according to the epa rigged in the u.s. to beat clean air emissions tests. now the german transport minister is saying that volkswagen has admitted to rigging engines in europe as well. no number was given, and there's no explanation yet from volkswagen whether or not that is, in fact, true, but that's the report according to the german transport minister. meanwhile, volkswagen plans to name those responsible, at least some of those responsible for the scandal tomorrow after a board meeting. at that meeting this gentleman, matthias muller is expected to be the named the new ceo of volkswagen. he comes with a long track record at volkswagen. he's been in charge of the porsche division since 2010. they've had record profits, record profit margins in term of profit margin per vehicle and he's been with the company 31 years. also has strong support not only with the board but with the
labor unions and that's a big component of the ownership stake within that company. one other note, when you look at the impact of this scandal and what it's doing to business at vw dealerships, new information within the last hour, true car estimates that vw september u.s. sales fell 5.2%, but here is what's really startling. vw is the only major brand according to true car that saw sales drop in the month of september. take a look at shares of volkswagen. we should also point out true car is saying september sales for the industry expected to come in at a pace of 17.7 million, very strong month with the exception of volkswagen where true car says sales were down. >> do you think people who are looking for vw, do you think there will be any bargains out there? >> i wouldn't be surprised. if you throw enough money on the hood of anything you can eventually sell it. but there's a stop sell order on 25% of what they sell in the u.s. they have the vehicles sitting on the lot. they can't sell them.
they are stuck with those vehicles and that's why we're seeing a drop in september sales. >> okay. thank you very much, phil. we've also got a really big interview coming up on "power lunch" in the next hour where you can meet the man who uncovered vw's deception. he's going to be joining us at 2:40 p.m. eastern only on "power." should be really interesting. >> mandy, a sell-off on the street. the dow back in correction territory. caterpillar playing a big role in the dow's weakness today. there you see it. the 30th of the dow 30 down 6%. are we going to see a bigger slide from here? as we head out, some of the most active stocks on the nyse at this hour. "power" returns in two minutes. slide from here?
♪ ♪ (under loud music) this is the place. ♪ ♪ sustainable tea tree eir boil and kale...ade from you, my friend, recognize when a trend has reached critical mass. yes, when others focus on one thing, you see what's coming next. you see opportunity. that's what a type e* does. and so it begins. with e*trade's investing insights center, you can spot trends before they become trendy. e*trade. opportunity is everywhere.
hi, everybody. i'm sue herera with news concerning yale and specifically its endowment and its investment returns. they have just released it. yale's investment return came in at 11.5% for its endowment. the endowment value increased several billion dollars to $25.6 billion. you may recall that the other ivy leaguer to have reported its investment returns was yale which came in earlier last week at $11.5 million. the return basically was the worst -- $5.8 million rather, the worst in three years for harvard. yale came in at $11.5 million. in terms of where they are investing their money, foreign
equities produced a return of better than 17%, domestic equities 12.3%. both of those besting the annual composite bench mark on those. excuse me because i'm reading through a complicated return. they had leveraged buyouts, 16% of that investment endowment. so, ty, you're up to date on where they're putting their money and what the investment return was. >> yale beats harvard. ya >> yale, 11.5% in terms of its endowment return. >> thank you very much. let's take you through that sell-off on the street but we are off the lows of the day. the dow off 220 points. i believe 28 out of the 30 dow stocks are negative. s&p down 1.25% at 1915. and nasdaq is at 4686, so that's down about 1.4%.
brian sullivan joins us live now from nantucket where some of the world's top money managers and investing minds are meeting. brian, what's the occasion? who is there, and what are they saying? >> well, it's kind of like speaking of the ivy covered northeast, yale, harvard, and nantucket. this is the nantucket project, it's political, business, and creative leaders. a good way to describe it would be a mini davos, if you will. this is the fifth year they've done it here. you have all kinds of really interesting folks over the next couple days going to be trying to solve problems, give talks, maybe kind of like a ted talks thing, but we're here because certainly the focus has gone global. a little island off the coast of massachusetts, but all the talk is of the world, china, brazil, and, of course, now europe. coming up at the top of the 2:00 eastern hour we have a great lineup of guests from the nantucket prodetective. we have bob diamond, barry
sternlicht. we'll ask him if he's going to invest around the world and what he is concerned about globally. and then joe quinlan, what should their clients do. it's obviously, tyler, kind of a nervous time. the markets down. in fact, if we ended today, this would be the third worst year for the dow since all the way back in 1977. maybe the last time yale beat harvard on the football field. i don't know. but we're here at the nantucket project live for new a few minutes. this is a very difficult assignment. >> it looks really difficult there. beautiful day for it, brian. we'll check back with you at the top of the hour. jo let's get the bond trading action on the back of the 7 year note auction. rick santelli is there at thec me. hi, rick. >> hi, tyler. today's weakness in equitying playing out big time in the fixed income market. the above-average 7-year note auction didn't change much as you look at the chart of that, and it hardly was noticed in terms of the 1:00 eastern wrap. keep in mind as it trades at 178
it's off a handful of basis points on the day. let's look at a 10-year starting in august. you see that big spike where we tested some lower yields there? that's august 25th. that's where we're comping to. open the chart up to an s&p for one year. you see on that same day we had a big drop in s&ps. it's about 48 points below where we're trading but we're 75 points below where we closed on thursday fed day. so that's what traders are watching. the euro versus dollar garnered some strength early in a coverage rate associated with the carry trade. tyler, mandy, back to you. >> thanks very much. we have a big sell-off on the street with the s&p 500 in connection territory off 10% from its most recent high. why some on the street are still bullish about stocks heading into the end of the year and the sectors they're banking on. take a look at the big board. only three winners in the nasdaq 100 this hour. monster beverage, j.j jd, and
netflix. awe believe active management can protect capital long term. active management can tap global insights. active management can take calculated risks. active management can seek to outperform. because active investment management isn't reactive. it's active. that's the power of active management. alaska. finally. the search for brown bears begins. denali highway. low on gas. pit stop. fill up. double points. yep, that's cold.
hello once again, everyone. i'm sue herera. pope francis delivering a speech to about 400 people at st. patrick's church in downtown washington, d.c. he called for charity and compassion towards the homeless and the least fortunate. saudi arabia's interior ministry says that the crush of muslim pilgrims that killed more than 700 people outside mecca appears to have been caused by two waves of pilgrims moving in opposite directions colliding at an intersection. he says there's no indication that authorities are to blame for that event. the u.s. military releasing video of an air strike on an isis car bomb factory. three strikes near mosul destroying two bomb making facilities. and scientists the model of the mona lisa is likely a nun. she was the wife of a silk merchant who is believed to have
sat for di vinci. we became a nun after her husband died and she died in 1954 -- 1542 rather. bone fragments counseleder crown found in a crypt were carbon dated and they apparently much. more tests are needed to be 100% sure but at this point the mystery may be solved. back to you guy approximates. >> that mysterious smile may be no longer such a mistraysterymy. >> investors piling into gold in this market sell-off. gold prices are closing right now. currently around a three-week high up by 2% at $1,153. jackie deangelis joins us at the nymex. >> the close over $1,150 was very key technically speaking. it's a risk off day. investors are piling into the commodity. dollar weakness today as well and more dollar weakness expected depending what we hear
from janet yellen tonight. we had weak u.s. data. traders tell me while we were thinking we might get a rate hike this year, they're less likely to think yellen is going to pull the trigger. they even like it at these levels. >> i should mention because we didn't show the platinum board but that's sitting near a 6 1/2 year low because of fears about demand from the auto sector in the wake of the vw emissions scandal. dominic chu, market flash. >> gold brycprices up mean gold mining stocks are also rising on the heels of that. newmont mining, goldcorp around barrick gold. gold mine errs moving with gold prices. >> let's give you a market check at 32 minutes past the hour. the dow is down 221 points. nasdaq off about 68 and the s&p
500 down roughly 24 points or about 1.25%. bob pisani we go to the new york stock exchange, bertha coombs at nasdaq. bob, take it away. >> let's look at the s&p 500. weak at the open. we rallied a little bit after the european close and we're weakening again in the middle of the day, not far from the lows of the day. while we've been talking about global industrials, the health care group is pretty weak as well. it's a little unusual to see this when you start seeing some of the hospitals and the hmos down 3% or 4%. they general have been winners throughout the year. one of the few bright spots are energy as oil moved into positive territory. some of the oil stocks mostly have been negative but are moving into positive territory. not as much of a reaction as you might have thought. i've struggled to explain what it's like to have 2% down every day and it really adds up over time. united technology is hitting a two-year low. this stock was $110 two months
ago. it's $85 today. it had a $120 billion market cap in july. it's got a roughly $80 billion market cap. this is a stunning decline. we're not talking aboutx yz nobody company. this is united technologies. every day i have been reporting 1% declines and it's a little bit tough, mandy and tyler, to indicate over time the cumulative effect of this. it's really quite serious in the last two months and that's why people are starting to look for a bottom here. these companies obviously have a lot of value right now but nobody seems interested in owning them. i want to manufacture siemphasi buyers' strike. >> a percent a day takes the money away, bob. >> exactly. >> it really does. let's move uptown and check on tech stocks. bertha coombs is at nasdaq. >> let's continue on that health care theme. that's among the worst sectors today and really it's about the biotechs which are on pace to be down five straight weeks. this week really saw a sea change in investor sentiment.
concerns about the backlash over pricing are growing. on a day when overall trading volume is fairly light, the nasdaq biotech index, the ibb, has traded well above its average daily volume. the big biotext are among the biggest drag. just about at bear market territory. the big caps overall are lower except for about a handful of stocks. apple is on pace for second weekly decline ahead of the launch of the new iphone 6s and 6s plus tomorrow. microsoft not getting any traction off its deal with biaiu baidu. netflix among one of the few gainers today as is go pro on that deal with facebook for 360 vr which looks really cool on your phone. amazon as you can see is lower today. some others bucking the trend, coca-cola bottles shares at a new high. the independent coke bottler up
on news of a new initiative from coca-cola to consolidate its bottlers and dunn foods off the highs of the day. reports they have hired credit suisse to report a sale of the company. activision also off its highs. among the few that hit a new 52-week high. >> thank you very much. with the major averages back in correction territory, what should investors do? joining us are steve and darren. gentlemen, thank you very much for joining us. steve, you're expecting a year-end rally. i hear a lot of people expecting a year-end rally but where is it going to come from? originally we were thinking we'd get a second half rally. hasn't happened yet. why year end? >> well, we just have to have things get less worse in china, mandy. i think that's what it really comes down to. everyone is blaming the fed for the last pull back but the fed is uncertainly about china as is everybody else. our view is china is going to
soft land. we think they have enough fire power to effect that. i think that's also the fed's view and our expectation is as we get through the fourth quarter we'll start seeing signs of things getting less worse there and hence, you know, kind of soft landing scenario and i think the earnings reports this quarter will also be healthy enough. so, you know, we're -- >> healthy enough based on what because at this stage in certain sectors the expectations are coming down. >> expectations are very low. we continue to not like sectors exposed to china either through the industrial complex or the materials commodities, energy complex. i think you'll probably see a washout in those earnings forecast. going into the fourth quarter we'll start lapping 12 months, the weakness in oil and the strength in the dollar so that will start to help and should also start to feed through to
the consumer space which we think things are -- look at the housing numbers today as another example of that. >> what about do you, darren? do you agree or disagree with what steve has laid out? >> i agree with a lot of it. i don't think we'll see a strong rally into the year. what we're seeing right now is a negative sentiment dip. the vix spiked to 50, it's above average. bearish sentiment is at the 2011 level. so there's a lot of negativity in the market right now and you get a couple positive data feeds and the market doesn't do much, a couple negative and the market goes down. we need a catalyst and i think there's buyers out there waiting as bob pisani said. they're waiting. we're not entering the market right now. >> i want to ask you because i know you like europe. the german dax has been slammed. volkswagen certainly not helping sentiment either. is germany a buy now that it's come off so much? >> i think so. i think it's 14 times earnings or less in the eurozone and what happened at volkswagen is a
company-specific issue. you look at spillover in bmw. doesn't make sense. europe still looks attractive. >> thank you very much. let's get to julia boorstin for a news alert. >> thanks so much. at the oculus developer conference happening right now, the company, which is owned by facebook announcing some key things. first, that it's launching its gearv r with samsung, the lower cost virtual reality head set. the price tag is $99. it will go on sale starting in november. slashing the price in half, making virtual reality content much more accessible. the company announcing some key content partnerships saying that a new netflix app will be launching today and that partnerships with hulu and vimeo are coming soon. a lot of this content that's been shot in 2-d will not show up like a full 3-d experience because it's not been shot in 3-d, but it's a key step forward to getting more virtual reality immersive content onto that
oculus platform and to sort of push forward the adoption of that virtual reality. big partnerships announced, netflix, hulu, vimeo as the company moves forward to the sale of that head set. >> thanks, julia. >> vex wagvw's ceo has resigned. simon hobbs looks at how the company has handled the crisis. seema mody on how important volkswagen is to germany's broader economy. simon, this crisis had been going on for a while i gather behind closed doors. what do we know about that and how do you handicap how they've handled it so far? >> you have to understand that vw has failed twice. it failed in its ennearing and failed to keep the regulators on board in this country. on friday when they came out with that accusation that they'd misled regulators, it was a free for all. that's why you have lost $24 billion on the stock and all the other regulators around the
world will dove tail behind them. their job was to prevent the regulator from doing that in negotiations and they have failed to do that. here is a time line i have constructed from german ministers and great work from reuters. the decision to rig was made prior to 2007, almost nine years ago. it was in may of 2014 that u.s. regulators were alerted to what was going on by the icct which mentioned it to the epa and also the california air resources board. if we can go back to that graphic, it was then in april of this year that vw started issuing some recalls in california. the regulator says this was one of the fixes they were offering at the time but it clearly didn't work. in other words, there is at least a six-month period, there is more likely a one-year period in which vw was talking to the regulators on the west coast and it didn't work. whatever they offered, vw couldn't get out of its hole and
then their band jacked by that announcement on friday. it's no surprise to me the head of vw usa is out because that is one of the critical failures here. one wonders if it's a similar arrogance you got from jpmorgan and jamie dimon when they belittled what was going on, they didn't meet the regulators halfway and the result was they were stung very badly. that's what regulators do if you push them into a corner. >> temp pest in a teapot was the phrase mr. dimon used back then. >> much bigger than that. >> what you're saying is negotiations had begun between vw and u.s. regulators -- >> we know because they were issuing recalls to try to effectively buy off the regulator in may -- in april of this year, in april of 2015. so for at least six months they've been in that conversation trying to sort it out. more likely it's a year. check the time line. this was no surprise to the german government it would appear. a lot of governments behind
closed doors knew that this was going on and this was the conversation, but because they couldn't close the deal with the regulator, it broke public and then all hell has let loose when everybody else goes the german opposition is accusing angela merkel of knowing back in the spring. all the cats are out in the bag. >> and herding cats is one difficult thing. thank you very much. now to seema mody who has been taking a look at how important volkswagen is to germany's economy which has not been growing all that fast but the auto industry more broadly is extremely important in germany and this may be trickling over to overer other automakers as well. >> that's the big concern, right? i just got off the phone with the chief economist at ing who said that the volkswagen crisis could have a bigger impact on the german economy than the greek crisis and that's because, as you point out, cars are so important to the germans.
volkswagen the biggest german carmaker with more than 270,000 jobs in its home country. if we look at the suppliers, autos the largest industrial sector in german. according to the german trade investment group employing 275,000 people. but autos also germany's biggest export bringing in $225 billion in 2014. that's a 7% rise from the prior year and that accounts for about one-fifth of germany's total exports. autos make up 3% of german gdp. some economists say it won't be tibl meet i was 1.8% growth forecast. let's bring it back to the stock market because the german stock market is now in bear market territory. it's now down 22% from its recent high. we should point out it's not just the auto players that have
been selling off. a lot of those export oriented companies that rely on china have also been underperforming. in addition to that, germany dealing with a very fragile european economic story. so a lot is going on. they have a lot on their plate. >> nice to have you back. >> thank you. good to be here. >> big interview coming up in the next hour of "power lunch." you will meet with the man who did uncover that vw deception. he will join us at 2:40 on "power lunch." stocks selling off strong here. the dow industrials off their lows of the day, down just a smidge under 200 points. the s&p 500 at 1917. just off a little more than 1%. the nasdaq down 1.33%. sliding further into the red for september, also touching lowest levels of the month today before they move back a little bit. we'll be back in two minutes. 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.
boeing has struck a deal to sell 300 jets to china and open a plant in that country that would work on part of the production process for its 737 workhorse yet. ralph lauren has been upgraded to buy by citi. new initiatives could drive topline growth. and coca-cola announcing a new product design system designed to streamline the supply process for its bottlers. the major averages are back in correction territory. what are the key levels to watch headed into the close? let's bring in ben willis with princeton securities and tim anderson, managing director with tjm investments. ben, we were chatting earlier this week, you were saying we're going to go lower before we go higher. >> absolutely. that's -- again, i also mentioned the biotechs. that's a structural change in the market. the ibb has now traded below its august 24th lows. for all those looking for a
retest of those lows, you're witnessing it right now and that's a conversation that hillary clinton started, and i think that's going to reverberate for a long time. >> tim, bob pisani has been saying it's not so much heavy pressure but a lack of buying interest. is that what you're seeing as well? >> we don't have real heavy volume. we're focused on the 1920 level in the s&p 500. that's a level where a couple hours before the close on august 25th we broke and it set off just massive selling, almost like stop loss selling from some very, very large mutual funds. it's also very significant today that the nasdaq today for the first time is negative year-to-date joining all of the other major market averages. there's also a death cross setting up for the nasdaq probably within the next three to five days, and it's just got the buyers off on the sidelines right now waiting to see what
level we might bounce off of. >> on the s&p what would be the next level then to the downside? >> well, certainly the august 25th low was 1867. that was also the intraday low the day before. some people would think that those were almost aberrational lows because a lot of stocks opened on the 24th and the 25th at levels that were really out of range with where they should have, but nonetheless, those are the levels, and we're very likely going to test those levels on the broader averages. as ben mentioned, we've gone through them on the biotechs. >> thanks very much for your input. >> thank you. nike is also trading lower right now with the sports apparelmaker set to report its earnings after the bell today. the company has been facing pretty strong competition from under armour. is the stock a buy, a hold, or a sell right now? our analysts will weigh in, and they're back in two.
it's time for the "your business" entrepreneur of the week. james reinhardt's san francisco based company thread up has removed the difficulty of buying and selling your clothes by picking them up and selling them for you. technology is at the heart of the new trends. for more watch "your business" sunday morning at 7:30 on msnbc. selling 18 homes? easy. building them all in four and a half months? now that was a leap. i was calling in every favor i could, to track down enough lumber to get the job done. and i knew i could rely on american express to help me buy those building materials. there are always going to be unknowns. you just have to be ready for them. another step on the journey... will you be ready when growth presents itself? realize your buying power at open.com
major averages back in correction territory all off 10% or more from their most recent 52-week highs. caterpillar, boeing, goldman sachs leading the dow lower. the bright spots though in the market are jd.com, micron, staples, monster beverage, and netflix. they, folks, are all higher on this down day. if you missed any of the big stories this past hour, go visit our website why don't you at powerlunch.cnbc.com. mandy? >> in honor of the nbc series "heroes reborn," we decided to look at some of the stocks that have made super hero comebacks. dominick chew perhaps is the best person to be on that story. no lycra right there, dom. >> there's a lot of stocks that have risen from the ashes. we'll tell you a few of them in honor of "heroes reborn" on nbc tonight. keep it right here.
because active investment management isn't reactive. it's active. that's the power of active management. you totalled 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 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 forgiveness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $509. for a free quote today,call liberty mutual insurance at
the next hour. we'll kick it off with bob diamond, we also have barry sternlicht. we'll ask him if he's still going to allocate money around the world and joe quinlan of bank of america will give us down home advice on where you put your money safely. big market day, a lot of big market guesses. we'll see new two minutes. in honor of the return of the nbc "heroes reborn," we decided to look at some stocks that have been reborn. our oun stock super hero dom chu is here with that story. >> america loves a comeback story, right? and the market has tons of examples of these companies that were given up on for maybe not for dead but they managed to rise up. take a look at some of these. you have facebook shares. the world's big social media company after that botched opening ipo trade. investors quickly soured on the shares, sold them down 17 handle on those shares but then they have been buying up assets like
instagram for photo sharing, whatsapp. skeptics argue facebook has to show it can actually make money and get some kind of a meaningful return on the billions it spent on those acquisitions. then starbucks coffee, the giant here sits near record highs. it got there after a stock that dropped really halved it's market value. howard schultz, the founder, came back, the company tried to turn things around. shares have rallied thanks to growth in china, new menu items. the challenge is whether the initiatives can keep growth at the coffee roaster hot. and what about best buy? best buy was one of those companies that was basically perhaps a not so beneficiary of that move here but, still, jury may be out. there are some interesting moves for some of the stock. overall interesting to see that.
these are a handful of names that have kind of come back, maybe not from the dead. >> you're always a super hero to us, dom. >> thank you very much. juke see the "heroes reborn" premiere at 8:00/7:00 central. >> that will do it for the first hour. brian, take it away from nantucket. thank you very much, guys. we appreciate it. it's 2:00 on wall street and 2:00 on nantucket island. a gathering of creative, business, and thought leaders but a lot of talk now is on the economy given what is going on around the world and that is why we are here. welcome everybody. i'm brian sullivan. melissa is at the nasdaq. the dow is down 180 points. oil is not moving too much, gold up nearly 22 bucks an ounce. we've got a big lineup ahead for you all from nantucket but right now let's go down to the new york stock exchange and bob pisani to get you caught up on another down day for the dow.
bob? >> that's exactly right, brian. we're off the lows. let's look at the s&p 500 particularly after the european close the markets moved to the upside a little bit. you can see the trend is still down. the trend has been down for the entire quarter. take a look at the markets in the middle of the day. we have four new highs, 337 new lows at the nyse. it's about 2,500 stocks that matter. 3 to 1 declining to advancing. volume is not heavy. buyers strike, not sellers' panic. the global slowdown story. what happened is caterpillar announced layoffs and they're down noticeably, but every day these big industrials are down 1%. you know what the cumulative effect of that is? look at what the big names have looked like on the quarter. eaton down 24%. everything these big names, all down 20%. these are huge global industrial companies. this has been a really difficult almost devastating quarter and going down 1% doesn't describe
it. you have to look at the quarter to see what's going on. we've been in a down trend since the fed meeting. janet yellen will be speaking tonight. people are hopeful she might say something. the s&p down 3%. copper and oil also in a down trend as well. brian, just in the last five days we're talking about. back to you. >> yeah, big market day could be a big market night with the fed chair speaking later this evening. bob pisani thank you very much. bob diamond, current founder and ceo of atlas merchant capital operating in africa joining us with the nantucket project which you had a hand in starting. thank you for having cnbc here as well. i want to get to your investments and what you're doing in africa but we have to talk about the global economy. you're a ceo that operated all over the world. three months ago things seemed a little sanguine. all of a sudden you have china, now germany, now brazil. how concerned are you? >> so i think there are many stories going on, but i think
one of the key things is that there are real pockets of strong economic growth. you mentioned africa. we'll start with africa. i just came back interest a week in zambia. there are a number of economies in africa that are going to be affected by the commodity cycle, nigeria, mozambique are two of them. mozambique may not hit their goal of 7% or 8% economic growth but it will probably be 5% or 6%. >> but that's not enough -- if china slows the whole continent of africa will not be enough to bring it up. >> they will not be immune to the commodity cycle or a slow down in china but there's strong economic growth that's more than the natural resources sector and that's the key. you have mentioned another area of continued strong growth which is india. i think here in the u.s. growth will continue to probably surprise us a bit on the upside. so there are headwinds, certainly in the commodities cycle and certainly in the correction or slowdown in china,
but there are also some pockets of growth. >> really are two schools and very macro schools of thought out there. first school, the world slows down we suffer because the world has slowed because it's a global economy. school number two, the world slows down, we still do okay and attract capital because we're a couple years ahead of the rest of the world in the financial cycle. which one are you in? >> i hate to say it's a hybrid because you gave me the two but i think this china, for example, we've seen 20 years of very strong economic growth. we have a correction. how strong will that correction be or how deep will that correction be? i'm not sure we know yet. i think a lot of it depends on the quality of the policy response. but i think it's a correction. it's not a change in direction for china as an economy in the world and i think that's the perspective we have to take it in. >> you don't view this as a longer term secular problem for china? >> no. i see this as a correction.
>> imagine if there was one state that was about half the u.s. economy. that's sort of how germany is in europe. i'm exaggerating a bit but they are the economic engine of europe, and they have done well and kind of kept europe afloat. you have this vw problem now. maybe a vw problem. some people are suggesting this could slow germany down which would slow europe down. do you buy into that? >> the issue is more serious than that, brian, for continental europe and particularly the eurozone. germany has absolutely been a star performer. if there's something like this situation that slows it down, i think it will be quite serious for europe. monetary policy and what governor draghi has done over the last three or four or five years has had a positive impact, but fiscal policy has not. labor reform, capital markets reform, banking reform. there's serious things need to be done -- >> we've seen none of that. >> none of it. 80% to 85% of the corporate
loans are still on the balance sheets of the banks in europe. in the u.s. it's 10%, 15%, something like that. when there's a big drop in the oil price, the u.s. banks don't stop lending. >> do you see the potential for a multiyear qe-like scenario for europe as well? >> absolutely. i think they're fighting hard with monetary policy and that will need to continue, but if we're going to believe that this is more than a correction fueled by monetary policy, if we can see long-term secular growth come back to continental europe, it's going to take fiscal reform and serious reform around the labor markets, banks, and particularly capital markets. >> our viewers and listeners are probably thinking i've learned a lot but what do i do? where is the best place to invest in the world right now? >> sub-saharan africa? >> is it really? that's where atlas operates. it's been the region of the future, always has, always will be. they say that tongue in cheek.
have things really changed? >> my partner is here with me. this is one of the things that atlas is doing, it's not the only thing, but i must say when i look across sub-saharan africa and the story of africa rising, it's not immune to the commodity cycle as we talked about, but the growth in discretionary income, the growth in the number of democracies, the fact that in nigeria this year, it was the first peaceful transition of power by election in the history of the country. the fact that the agricultural sector in nigeria is significantly larger than the resources sector. there are a lot of reasons to be very positive in the medium and long term for sub-saharan africa and we remain very, very positive. >> bob diamond, atlas merchant capital, we appreciate you having us here. >> thank you for coming. >> i will send it back to you in new york. >> thanks. shares of caterpillar the biggest drag on the dow falling
by more than 6% hitting a new low in today's session. the company says it will cut up to 10,000 jobs over the next three years. eli lusgarden is senior analyst. great to speak with you. first question i want to ask you is about that dividend, a juicing 4.67%. is that in jeopardy? >> well, it isn't in the immediate term in jeopardy. caterpillar just raised it. they have plenty of cash flow. the debt is 35%, not a big deal and the cut backs will generate cash because of inventory reduction but ts going to be something in the vicinity of a 70%, 75% payout based on where the numbers are going so that's pretty high. it's probably held for a while and we hope this is a trough coming next year and that's sort of the key. >> they've made some pretty deep cuts and if you take a look at all of the amount of factory capacity they've taken offline, it has been sizable over the past couple years. at the same time you look how stocks in the mining industry
are faring, glencorp made keep cuts. freeport-mcmoran, it seems like the sector will face deep cuts ahead. does that inevitably mean caterpillar will also feel some more pain? >> that's what's going on right now. this cut was not a total surprise because investors and we've been saying we're not sure you've done enough because of the structural decline in commodities, not just the cyclical decline. this is an acceptance there's a major structural change particularly in mining, particularly in coal, the most hated commodity around, and, therefore, you have to take down facilities, overhead to a new norm nal which is going to be far lower. coal production deeps declining. haven't had a coal plant ordered in four years in this country. that tells you that you have to structurally change. that's what they're doing and that's one of the major focuses and combine it with oil and gas problems, you have cuts that have to be done and that's what caterpillar is doing right now. >> eli, are you comfortable with
saying what the new normal is? you make a good point that the coal industry it faces plenty of political hurdles. there aren't any new coal fire plants on order. in the mining industry there are structural changes going on. it sounds like we won't ever see the peak shipment numbers like we saw in the 2012-2013 time frame. what is the new normal? and that's a long-winded way of asking can you buy the stock here? >> not yet because we don't know how bad things are getting and for how long. but we don't know what the new normal is but we do know that mining trucks and we used to ship 500 to 700 units a year. we're now basically at 400 industry wide, 300 to 400. there is an ultimate replacement cycle because things do wear out and there is an ultimate need of coal production because you can't change the structural production of electricity so quickly and probably will not so coal will always be a part of
it, just at a much lower level. just to feed that you get coal production going down substantially but we're probably closer to the bottom than anything else and you just have to restructure your operations. not to think of 1500 units but back to 500 units a year. it's a big drop. >>s that. eli, thanks for your time. appreciate it. eli lust nbs guagarden of longb. you have heard about the pope's visit. we have more on china's president xi coming up. lots of red on the heat map with the s&p 500 down by just under a% right now. much more on the sell-off coming up on "power lunch." d out there. no one surface... no one speed... no one way of driving on each and every road. but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in...
...and the road you're on. the 2016 c-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. sometimes they just drop in. always obvious. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. eli, thanks for your time. up on "power lunch."
the drought is affecting all of us. at pg&e we've definitely put a focus on helping our agricultural customers through the drought. when they do an energy efficiency project and save that money they feel it right in their pocket book. it's exciting to help a customer with an energy efficiency project because not only are they saving energy but they are saving water. we have a lot of projects at pg&e
that can help them with that and that's extremely important while we're in a drought. it's a win for the customer and it's a win for california. together, we're building a better california. three stocks that need to be on your radar today, cisco systems, scholastic, and general motors. cisco forming a joint venture with a china servermaker. scholastic posting a loss of about $50 million. although the third quarter generally is the weakest quarter for that company. and general motors no real news here, but that stock continues its slide down about 7% over just a week. you can see that all the problems with volkswagen and now maybe bmw are starting to hit some of the other automakers as well. back to you. >> all right, brian. china's president xi jinping is on a jam packed schedule on his visit to the united states. he touring the boeing factory
and met with executives from tim cook to jim bezos. joining us is peter balm and steve odeland. great to have you with us. steve, i want to start with you. you point out ts a very delicate dance we have to do with president xi because they have a lot of our debt and they sell us a lot of cheap goods and provide us cheap labor and at the same time they steal our intellectual property. >> all that is right. you know, it's a very complex relationship because they're business partners. they provide cheap goods, cheap labor for our manufacturers, but on the other hand they're lousy trading partners. they don't buy much of our goods in return. on one hand their allies providing a counterweight to russia in the middle east, but at the same time they're geopolitical foes. they're building out these islands in the south china sea, putting their warships off our
coast. and then they want to be great business partners but they steal our stuff. they account for a third of the world's hacking. they account for 70% of all intellectual property theft. so i think we in the united states need to get tough on china and we need to say enough. you guys want to be adults in the world, you want to be world leaders. well, you need to stand up for the rule of law and you need to stop stealing our stuff and act as true business partners. >> yeah, and that's going to be a tough thing to do, to actually -- this has been going on for years. cyber security -- cyber attack could be construed as an act of war when it comes to stealing intellectual property or getting into the pentagon or other government systems. do you business this china though. your greatest concern is what at this point? >> well, after the currency devaluation about a month and a half ago, obviously we went to our suppliers asking for repatriation of funds. at this minute what scares me more than anything is the amount of debt that's floating around
there. a lot of our suppliers can't seem to get bank or nontraditional financing. i'm afraid i'll wake up one morning and, hey, the guy that owned the factory was in debt for speculating on the stock market or the real estate market or there's a lack of demand. europe was always china's largest trading partner. over the last year and a half, the dollar was pegged to the rnb, but the euro declined almost 20%. so from a chinese export standpoint, your biggest customer was in recession and, oh, by the way, they got a 20% price increase. and that's probably a big reason why they started a devaluation move. >> when you're talking about the debt floating around, you mean in the shadow banking system. >> i think in total. there's the shadow banking. let's be intuitive about it. if there are miles and miles of real estate unoccupied, somebody is carrying that debt. if there are buildings of
briges, roads, tunnels by municipalities, who is carrying that debt? you add onto that factory debt, individual consumer debt from speculating in the real estate, speculating in the stock market, and some day there has to be a reckoning on all that. >> steve, you're a former ceo of office depot. in an environment like this, is that a country you want to do business in? yes, it has long-term growth potential but as its facing growing pains into a mature, developed economy, there's a lot of uncertainty as we've seen really unfoal in the past few weeks. >> well, you know, and peter is right about the debt situation and the shadow economy, but the bigger debt issue is the u.s. debt. china is our banker and as a former ceo, i knew the power that our bankers had over our company, you know, with the covenants and everything. why do you think china owns $1.2 trillion worth of our debt? it's in order to have some modicum of control over what we do and how we act in the united states. so i think we have to interact with china. they are the second largest
economy. we are the first. we need them, they need us. we need to be friends but we need to do this -- >> do we need them more than they need us? >> it's hard to know. long term they need us a lot but the point is that we need to get harder on them and we need to demand that they act accordingly. you know, that they act as adults in the world. >> we have to leave it there. i'm sure we'll be speaking about this lots in the future, peter and steve. our thanks to you. it's been a rough week for biotech stocks since hillary clinton's comments on monday. down 9% so far this week and the slide continues today. down 2.8%. biog biogen, amgen, celgene all down. you're watching cnbc, first in business worldwide.
hi my name 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, we're here, and we've got your back. legalzoom. legal help is here. welcome back here. let's hit street talk. every day we look at five analyst calls on wall street that you need to know about. a little different, i'm going to bang through my three, melissa will get to her two. let's start with a stock that seems appropriate given we're on nantucket.
ralph lauren. they did cut their target a little bit from 134 to 125 but the stock is around $1.09 and change so significant upside. stock number two is entergy. ubs says sell. they cut them to a sell from a neutral. they're concerned about the valuation of the wholesale commodity business. sliced a target from 73 to 59. stock three is always the under the radar name, nimble storage. san jose based maker of data storage for things like sequel server, oracle, et cetera. longbow upping it to in a buy from neutral. they like the growth trajectory. their target is $32. 30% higher than where the stock is right now. >> all right. the fourth stock we're watching, twitter. citi moving them to a neutral
high risk rating from plain old neutral cutting the price target by 7 bucks to $30. analysis suggests consensus forecast bax in a 45% improvement in monetization in the u.s. which may prove difficult. you see twitter there off of the lows for the day but down 2.8%. and fifth stock here last one, marriott. suntrust is upgrading this to a buy raising the price target to 92 bucks. the analyst hearkens back to 1998. remember then when lodging stocks sold off? marriott outperformed. dominating new room openings. also cash flow and the balance sheet support share repurchases and less need for cap ex. that stock is eking a gain in today's session, bri. >> all right. well, you kind of talked about hotels there. coming up after the break, we're going to speak with a man from nantucket that knows a little bit about the hotel business. barry sternlicht, tens if not
hundreds of billions of dollars in investment around the world. hotels, you name it. has all this global concern made him rethink some investments. barry sternlicht is your guest after the break. we'll see you back in two minutes. it's intelligent enough to warn of danger from virtually anywhere. it's been smashed, dropped and driven. it's perceptive enough to detect other vehicles on the road. it's been shaken, rattled and pummeled. it's innovative enough to brake by itself, park itself and help you steer. it's been in the rain... the cold... and dragged through the mud. introducing the all-new mercedes-benz gle. it's where brains meet brawn.
hello, everyone. i'm sue her hara. the iran president says his country is planning to implement the recent nuclear deal in the best possible manner. he made the comment at the tehran airport before heading to new york for his speech before the u.n. general assembly next week. hudson city bank corp will pay $33 million to settle civil charges alleging it wrongly discriminated against black and hispanic home buyers. it's the largest red lining settlement in u.s. history. the centers for disease control report 1 in 10 pregnant women admit to drinking alcohol. the cdc saying a third of those women who drink during pregnancy engage in binge drinking. alcohol use during pregnancy can cause birth defects.
a japanese man broke his own record as the oldest spet tiff sprinter one day after turning 105 years old. he ran the 100 meters in 42.22 seconds. but that, believe it or not, fell short of his personal best of 34.10 seconds when he was a mere 103 years old. god bless him. makes you feel like a sloth. that's the cnbc news update this hour. back to you guys. >> he can smoke me. >> totally. me, too. >> i didn't think i was young until now. he could outrun me. good for him. that's fantastic. i hope i live that long. sue, thank you very much. >> exactly. thanks. >> let's get now to the oil close here. not a big move for oil. it is thursday. tomorrow, of course, at 1:00 eastern, that's when you get the rig count number. that's been moving the market just a little bit. we want to see less production. right now we'll end up maybe a quarter to $44.75 or so but oil
still remaining very low and, in fact, i don't know, there was a story in "the journal" that a bunch of oil strategists see oil maybe staying below 60 bucks a barrel for longer. not exactly what the oil and gas firms want to hear. all right time now for our other daily segment called "trading nations" because traders trade better together. today's nation is going global. we're going to talk about the next possible dow component to face china or global-related problems. today's disaster du jour obviously is caterpillar. ari wald, erin gibbs of s&p capital iq. when you look at earnings and possible revisions and forecasts, is there one other dow stock that makes you particularly nervous? >> yeah. so the one i'm nervous about is 3m. they just barely eked out a beat on q2 estimates but they've revised their guidance down significantly already twice both in july and august. they're really struggling with
slowing revenue growth and they've had higher operating costs. they're also just not growing as fast as a lot of their peers, so i think when we see some of the other companies report 3m may look even less attractive and even though the stock has really been beating unfor tp for the px months, valuations have come down, it's trading at a higher valuation in the s&p 500. i think this could see potential for further downside during q3 reporting. >> okay. not a name we've talked about from a nervous perspective much, erin. thank you very much. ari wald, when you look at the charts, is it 3m or maybe a different dow component that has you concerned? >> 3m would be on the list. we're seeing dow stocks break down one by one. the one we think could be next to go is american express, ticker axp. actually had its breakdown q1, earlier this year it broke a year long top.
after several months it's been moving sideways. now seeing a resumption of the down trend. broke below $76 support. we see downside risk to $69. i would note the stock is also -- screens negatively based on trends and earnings revisions. also under perform rated fundamentally at oppenheimer. has got a lot going against it. we recommend selling. >> all right. ari wald of oppenheimer worried about american express. erin gibbs concerned about 3m. two names that are both going to be on the watch list. we'll post those notes up on the wall. thank you very much. so much to do from our new york to nantucket connection. still to come here, we're waiting on barry sternlicht. we have bank of america strategist joe quinlan with advice for your money in these turbulent times. a lot of big market movers are here on nantucket which is why
because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. for my frequent heartburnmorning because you can't beat zero heartburn! ahhh the sweet taste of victory! prilosec otc. one pill each morning. 24 hours. zero heartburn. (vo) wit runs on optimism.un on? it's what sparks ideas. moves the world forward. invest with those who see the world as unstoppable. who have the curiosity to look beyond the expected and the conviction to be in it for the long term. oppenheimerfunds believes that's the right way to invest... ...in this big, bold, beautiful world.
right now you know the volkswagen emissions scandal has rocked the world. what you may not know is that this now multibillion dollar scandal was uncovered by a small team of researchers at west virginia university doing emissions testing. daniel carter's interim director. his team of four other researchers as well are the ones that uncovered this incredible problem and daniel carter, we welcome you to cnbc and "power lunch." thank you very much for joining us. when did you know -- >> thank you for having me. >> -- that you had -- sure thing. when did you know that you had something? when did you look at the results and think, my god, they're
cheating? >> when we saw results that were higher than we expected, our first response was what have we done wrong? so we went back and double, triple checked ourselves. it wasn't until we saw the same vehicle perform on california air resources board chassis dine mom ter which is the same kind of environment the vehicle was certified under, we saw the large differences in numbers, that's when we knew that the vehicle was exhibiting off-cycle emission behavior. >> once you realized you were not wrong, once you realized that your machines were not miscalibrated, did you realize that the only possible explanation therefore could be that there was something illicit or bad, for lack of a better word, on these cars? >> we knew at that time that there was something causing the vehicle to operate in what would
be referred to as off-cycle emission performance. we reported those findings publicly, and then that was the end of our job. usually something of this nature happens, the manufacturer does a voluntary recall, and the situation goes, you know, largely under everyone's radar. it's between the manufacturer and the regulatory agency. >> daniel, this is phil lebeau. i'm curious because you were part of the group that worked on uncovering the defeat devices on caterpillar trucks back in '98. you're familiar with this. give people some perspective on how sophisticated this software is in the volkswagen vehicles. in other words, this is not just something that could, you know, quickly be put in. there's some complexity here, correct? >> correct. i guess i should back up briefly. the 1998 consent decrees between the department of justice and the six settling heavy duty
engine manufacturers, that was actually the. em manufacturers coming to us and after the fact we helped them develop this technology called nu submissions testing and helped verify that their post consent decree vehicles were in compliance actually. but onto the control strategies, you know, the strategies that manage the engine and that's very closely related to those strategies that are used to manage the after treatment devices, it's a very complex system and it's a trade-off between fuel economy, durability, and warranty issues and emissions performance and as we see greenhouse gases enter into the picture now, the greenhouse gas requirements and the emissions requirements are now starting to go hand in hand. so it becomes even more complex. >> based on, daniel, what you know about what was done to the cars, in your expert opinion, is it possible that a small group of engineers at volkswagen could
have created this and installed this on this many cars or do you believe that this is something that was really a wide-scale effort? we're trying to understand if volkswagen might use the so-called rogue employee excuse, if you think that would be something that would be valid? >> i can't comment as to what the size of the group would be. all i can comment is that we tested the two vehicles that were in noncompliance and that now there's been admission that there was noncompliance. >> daniel, phil lebeau again, when these vehicles are brought into compliance, how much will it impact either the fuel economy or the performance of those vehicles given what you've seen where they are to bring them into compliance? how much would that impact what those vehicles are doing out on the road? >> that's something that's not terribly difficult to estimate, but it's not something that you can kind of shoot from the hip.
in fact, mark, our ph.d. student who was involved with the testing, he's defending his ph.d. tomorrow. we're actually working on a paper from this data. we've had to drag this data out now and now there's some interest and we're looking at what we believe is an estimate of fuel economy penalty associated with the performance, basically comparing the fuel economy numbers of when the vehicle was operating on the chassis dino and when the vehicle was operating in the field, comparing those two numbers. we're working on publishing a paper about that. >> i'll follow up with phil's question then, daniel. rather than sort of pin you to an exact number, if you owned one of these diesel cars in question, if that was your daily driver, under your estimation of the reduction of power and fuel economy, would you return the car or would it not be enough that you would say, okay, i can live with that? >> for my experience in developing these systems, i would not be selling the car.
you know, i believe this is a system that is governed by thermodynamics and chemistry and i have been involved with this for years in the development. sometimes it's not even a fuel economy -- or actually a fuel consumption issue. it's just a phasing of fuel injection timing. >> daniel carder, west virginia university, candle, daniel, it pleasure to have you on. very insightful. >> thank you. >> look at where we stand on the stock market. we've cut our losses, paring our loss this is half with the dow now off session lows by 160 points. we've got the widely held stocks though still in the red as we enter the final hour of trading. shortly cisco systems, wells fargo down almost a percent, gilead along with by knbiotechs the worst of it. stick around. we're going to talk nike. take a look at the one-year performance of nike. it's been a real outperformer.
up more than 40%. is there more room to the upside even after earnings tonight? we'll debate that. "power lunch" back in two. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all.
session highs 4717 is the level. the s&p 500 is 20 points off of its session lows and the dow industrials are down by about 0.7%. take a look at the real standout over at the nasdaq and that is netflix. netflix is higher by 3.5%. meantime, we're watching nike very closely, set to report earnings after the closing bell. the stock is trading lower today by just about a half a percent on the session. 13 buys on the stock, 7 holds, no sells on the stock. we still manage to find a bull and a bear for this debate. let's bring in now paul swinen and laurent. great to have you both with us. sorry if i butchered our name. l law rent, you're the bull. i think the number one concern is nike and china. you have done channel checks with distributors as well as manufacturers over in asia. what have you found? >> sure. i continue to be a bull on nike
long term. i wouldn't necessarily chase it into the quarter, but i think if there's any weakness in the name, i would be a buyer of the name and then particularly on china, there are some channel checks. two key retailers out of china. you see a little weakness with regards to the same-store sales comps for sports wear. so i think those are two key indicators. we're hoping to see continued double digit growth in china but ts importa it is important to look at the health of retail this china. >> paul, i'm curious, you're not worried about china either. so why do you have a hold rating on the stock? >> yeah, and one of the things is not only has nike got a lot of momentum in china but they were bad in china a few years ago and now they're getting a lift as there's been some pent up demand. also i see people in the middle class going to more -- what we would call aspirational or normal middle class goods as opposed to the ultra wealthy
being the growth area in china. i'm just worried about the comparisons. in other words, you have 20-plus percent growth in europe and china. basketball growing high teen this is the united states. this is a market where nike already has 90%, 95% of the market. so you can't be that high of a valuation with those high rates of growth quarter over quarter, year-over-year. >> and laurent, you made reference to it. disney was the media stock that could do no wrong. everybody loved disney just like everybody loves nike. set up well into earnings in terms of its outperformance versus its peers and then disney said one little thing that made the sector sell off. how are you feeling into this quarter? >> i feel that if there's any weakness into the stock tomorrow, i think it's an opportunity to buy the name. i think one of the key catalysts
going forward is next month we'll have nike investor day. it's going to be i think a big show. i think they're going to talk about a lot of interesting things about automation for the footwear and apparel supply chain. we're going hear about digital, hear about footwear. so if you see any weakness in the name, i would be buyers tomorrow of the name. >> paul, what sort of multiple, what sort of price would make you a buyer? >> yeah, well, nike has been a fabulous story in a lot of different ways. it's one of the most capital efficient companies in my whole coverage universe. they make 28% return on capital. but right now the multiple is about 31, 32 times trailing earnings, and yet under armour is trading at 100 times trailing, but that doesn't mean if you're growing at 15% on the bottom line, maybe a little bit more with a stock buyback, 28%, 30%, or 30 times earnings is still rich for that. i think the stock is more worth about 23, 24 times earnings.
yeah, the earnings will come up over time but you need a little more weakness than just a 5% sell-off to make this be attractive to long-term vemp investors. >> investors. >> all right, guys. thanks so much for your time and thoughts. of course, just a reminder nike earnings are due out at 4:15. tonight on "fast money" we have full coverage of the earnings as well as a conference call which does kick off at 5:00 as well. brian. >> thank you very much. coming up from nantucket more interviews, berry stern lick, joe quinlan, we are waiting for them to come out of the tent. reminders, we also have more interviews on our website if you go to "power lunch".cnbc.com. earlier today we had the opportunity to speak with gordon gun former own err of the cleveland cavaliers, spending plls to fight blindness. check that out on our website.
the dow well off its lows, we are down 88%. live on nantucket right after this. the e-class has 11 intelligent driver-assist systems. it recognizes pedestrians and alerts you. warns you about incoming cross-traffic. cameras and radar detect dangers you don't. and it can even stop by itself. so in this crash test, one thing's missing: a crash. the 2016 e-class. see your authorized dealer for exceptional offers through mercedes-benz financial services.
of europe out of an auto trade publication earlier today which suggested that one of the models, the diesel model that is popular in europe that is built by bmw exceeded emissions standards in europe and was there -- exceeded those standards because the emissions software within the vehicle had been manipulated or essentially rigged. that publication, auto build, was widely quoted throughout the day despite bmw denying that it rigs its software in the emissions for its vehicles in europe. now auto build is walking back from that story saying that it was not clear in its story and it should have been cleared that it is not suggesting that there was manipulation of the emissions software in that bmw model. auto build does say that it believes that that bmw model in europe, the x 3, the diesel version, does exceed emissions standards, however, it does step
back from the story earlier today. it is no longer saying that bmw manipulates the emissions of its vehicles. by the way, guys, melissa and brian, all day long bmw has been emphatic in telling us and many other news outlets it does not manipulate or rig the emissions of its vehicles in europe. having said that, we saw what happened to bmw shares all day today and earlier stood in european trading. once again auto build stepping back from that story and saying bmw does not rig emissions software. >> and walking back is a nice way to put it, phil. this is -- if that's accurate this is wrong, it's a retract n retraction. >> sure. >> they probably owe bmw an apology, but it's not just bmw the company. they helped drag down the entire dax. >> what was bmw down, more than 67% today. this got a lot of attention.
early in morning i woke up and people were saying, here we go. the diesel emission contagion is spreading to other auto makers in europe even though bmw was saying all day long there's no proof here, we don't do that. having said that investors were quick to sell those shares today. >> i was looking over my europe to take a look at the efw. here in the united states we're still open, if there's any sort of a release in german shares overall. as we start picking apart the story in terms of the business impact here in the united states who are the greatest candidates to gain a share that volkswagen had in north america? would it be the ev and hydrogen fuel cell car makers. >> that's essentially what volkswagen was selling here, clean diesel. >> right. it's such a small market share, melissa, is it could go in a different of directions, those who drive high braids. look at the biggest markets
right now for diesel sales of volkswagen vehicles in america. you're looking at the two coasts and really you're personally looking at california. that's where a lot of the early adopters are, those who really are very vocal about driving a diesel vehicle because it's clean burning. so in that market toyota is exceptionally strong, the prius is exceptionally strong, but all hybrids do well in california. my guess is you will see a little bit of that potential business that always is with volkswagen. if it splinters away it's probably going to splinter to some of those hybrid models in addition to some of the other diesel models that are out there right now. >> this great stat that rich peterson over at s & b capital e-mailed me, tesla has been trading well over the past week. of the global auto makers tesla is the only one that has posted a gain since last industry when the vw scandal broke. phil lebeau, our thanks to you
as always. >> final check on the market, ben willis with princeton securities group. we have certainly seen a turn around in the markets here. what are you sensing as we enter the final hour? >> what i'm hearing from the trader blogs is the fact that we did not cross into a death cross, actually created some buying opportunity. i also believe part of the bmw story in rebuttal is part of it. there have been several major impacts for this market, first starting with the biotech sector and having that impact and really repricing an entire area that was the leadership for the last several years for the united states marketplace but then you had what was going on with volkswagen and the da x which again is the european leader and their dow jones industrial down 8%? two days, that is a major psychological impact for investors that were saying this was a safe place to be. so we had, in fact, been seeing
a buy strike. the buy orders we had at princeton were not chasing anything, we were staying on the bid side. we still have the buy orders there are but they are away from the market now. we had a little bit of a bounce but the buying that we were seeing was very cautious and willing to wait because they think they're going to get another chance to buy them again. >> do you think yellen is going to say anything this evening in her remarks that could impact the markets? >> god, i hope so i truly believe it was a mace i can that they missed an opportunity, they've missed it several times. they basically admitted that they are beholden to situations that they have no control of and no mandate to. they will have to be some explanation down the way, whether it's going to be in a public forum in a speech or whether it's going to be rand paul calling for an investigation. somewhere someone has got to answer for this, what i believe history will prove is a big mistake. >> ben willis of princeton securities on the floor of the new york stock exchange. as we are seeing the markets
turn around it is important to known that the ivb is just off of the session lows. it's 20% of the healthcare which has been a leader in this market. great stuff from nantucket. >> it's been a crazy market day. you have janet yellen speaking tonight at 5:00 p.m. eastern time. you will watch the futures after the overall cash market closes. could be a wild evening as well. will she walk back interest rate expectation as soon as a lot more to do here on cnbc. thanks for watching, everybody. "closing bell" starts right now. >> yes, hi, and welcome to the "closing bell" i'm kelly evans. >> and i'm bill griffeth. it must be important because we're already sitting at the set at post 9 at the new york stock exchange. the dow has come back. we could be positive any moment here, we've come back from a 260 point decline earlier in this session. who knows, maybe it's on hopes that janet