Skip to main content

tv   Power Lunch  CNBC  October 7, 2015 1:00pm-3:01pm EDT

1:00 pm
>> kevin o'leary -- >> not only a client, he's the president. >> that's wrong. >> kevin, thank you. >> thank you. >> have a good time overseas. >> abbey road, i will be playing there for you guys. >> appreciate it. pete, john, and josh, thank you. "power lunch," awesome show, starts right now. brian, thank you very much. welcome, everybody to that awesome show, "power lunch." along with mandy drury, i'm tyler mathisen. welcome, everyone. stocks losing their big gains. despite that the major averages have been in rally mood over the past week. and believe it or not, month. >> so what is fueling it, ty, and is the rally for real? the s&p signaling a bullish sign. the stocks and sectors that could head much higher from here. >> one sector that is higher, home builders up 8% this year so far. is it too late to get in? what the number one rated home building analyst on the street
1:01 pm
says and the three, count them, stocks he likes. >> okay. well stocks well off their heigs this hour. the dow was up 173 points earlier on in trade. today's big ipo stumbling out of the gate. dom chu is on the floor with the juicy details. >> mandy, tyler, the big deal here is this ipo here for pure storage at post eight right behind me. it was supposed to be this barometer, if you will, of tech ipos and the appetite for that kind of investment or risk in this marketplace. it priced at 17 bucks a share, right in the midpoint of the range. they sold 25 million shares. so again this company wanted to see their stock go up out of the gate. however, what you're seeing up there on the chart is down 5.5%, near the lows so far today. it's traded in a range. it went as low as 16, as high as 17 at one point. as you can see on the bottom of the screen, this company is important for a lot of us
1:02 pm
viewers out there because it was one of the cnbc disrupter 50 companies from 2015. those companies that were -- were seen as possibly shaking up their industries. this is the first company from that cnbc disrupter 50 list to go public from that list in 2015. a total of eight companies over the past three years from the cnbc disrupter 50 list have gone public, including the likes of twitter, also etsy, some other big names there as well. so certainly ones to watch out for. remember, again, one of the first big tech ipos to come out since the market turmoil has happened. we know di ji cell pulled their ipo last night. also we did see a triple digit gain at one point on the dow. we've given a lot of it back. many traders attributing that to the more bearish inventory numbers, more inventories in crude oil building up, took down a little bit of the energy trade here. again, watch the industrials, watch the energy trade.
1:03 pm
it's a focus for a lot of traders down here, guys. back over to you. >> thank you very much. let's go up town, nasdaq, bertha coombs following the big movers there. >> the big movers were the small caps. the russell 2000 out performing and the reason why biotechs. positive headlines starting with pbm express scripps. they buy a lot of drugs and they have been trying to combat high prices. they're adding the new cholesterol drugs to their formulary. they were able to get a good price from amgen and sanofi. cvs officials are still studying the issue but biotechs leading the way. >> stocks have been struggling a little bit but it's been in rally mode. the major average is up 3% in the past one week alone. well, with all the global fears
1:04 pm
out there, why is the market rallying in? >> it's important to know that this rally extends overseas as well. take a look at european markets so far in october. you can see germany, france, spain all up about 3% to 8% in the month of october. asia joining in on the rally, stocks there trading at seven-week highs. speculation that japan will ease further has sent the nikkei higher by 8%. ubs global strategist says there's three reasons global markets are rallying in this month. first, there's a strong chance the ged fed is on hold until 20 after a disappointing jobs report. second reason is a pullback we're seeing in the u.s. dollar and the fears over a china slowdown easing at least for now. another factor fueling market gains is oil. currently on pace for its best week since its nearly 12% gain that it saw in the last week of august. it hasn't closed above $50 since
1:05 pm
july, so keep an oon eye on oil. the energy index now up 9.5% in the month of october. some of the big gainers there take a look at marathon oil. we have transocean all seeing double digit gains in the month of october. of course, the big question, mandy, is whether the rally in oil is sustainable and if so, if it's energy that continues to get a bid. >> thank you, seema. we have a news alert in the bond market with 10-year notes up for auction. rick santelli is at his usual post at the cme. what is the demand like? what did you give yesterday, a "c" for the 3s? >> yes. today it was a very solid takedown. we gave it an "a" minus, "a" as in apple. not really a 10-year. second reopening, an issue from a month -- two months ago. it's a nine year, ten month note. the yielded auction 2.066, which is basically where the offer side of the one issue market
1:06 pm
was. 207s were trading, lower yield, higher price. that's a plus. 62.2 were indirects. i have a database going back 12 years. i couldn't find a higher indirect, off the charts. bid to cover, 2.59, just a smidge light of the 2.67 10 option average and a smidge light on directs. so we give it an "a" minus and, of course, tomorrow's the last of $58 billion in supply with reopened 30s to the tune of $13 billion. tyler, mandy, back to you. >> all right, rick, thank you very much. oil with a bit of a gusher early, but now it's lower. let's look at west texas intermediate down 12 cents at $48.41. brent up 8 cents at $52 per barrel. >> what traders is saying is it was a violent jerk upward over the last few days. the session high this morning
1:07 pm
$49.71. but after that eia inventory report showing a build that was larger than expected, the numbers started to back off a little bit. inside that report we found out that production actually increased on a weekly basis in the u.s. by 76,000 barrels a day. traders were looking for another production decline because rigs have been coming offline. the numbers not seeming to fit together. we saw crude rally more than 7% in the last week alone. could we make $50? we could. there is potential there, and there is some support, but still those are 100 days, 200-day moving averages and they're tough to break and hold. traders are saying they expect us to move lower from here. >> 50 is the number to watch. to the health of the american housing market now, and the number of people applying for the mortgage in the last week soaring. i mean really soaring. big numbers. right, diana? what's behind it. >> big number, mandy.
1:08 pm
up over 25% last week. why? a big dip in interest rates after that horrible jobs report, but more so a rush to get in before new mortgage disclosure rules went into effect over the weekend. let's look at the numbers. refi volume up 24%. purchase volume up 27% week to week, and that puts purchase applications at the highest level in five years all according to the mortgage bankers association. low rates certainly helped, but the new mortgage rules which require lenders to give borrowers a full statement of all costs and details of the loan three days before close something a big change and it had a lot of lenders and real estate agents worried deals would either be delayed or could even fall through, so you had a lot of folks filing as fast as they could. we will likely see some give back next week. back to you. >> okay. thank you very much, diana. very much a fall outfit. fall is upon us. well, the home builders have been on a tear this iyear.
1:09 pm
is it too late to get in. the number one rated home builder on the street will be talking to us and he gives us the three stocks he likes. you're watching cnbc, first in business worldwide. do not change the channel. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done? (patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, (vo) go national. go like a pro. dentist appointment when my teeth are ready? ♪ can it tell the doctor how long you have to wear this thing? ♪ can it tell the flight attendant to please not wake me this time?
1:10 pm
♪ the answer is yes, it can. so, the question your customers are really asking is, can your business deliver? i'm a gas service rep for pg&e in san jose.. as a gas service rep we are basically the ambassador of the company. we make the most contact with the customers on a daily basis. i work hand-in-hand with crews to make sure our gas pipes are safe. my wife and i are both from san jose. my kids and their friends live in this community. every time i go to a customer's house,
1:11 pm
their children could be friends with my children so it's important to me. one of the most rewarding parts of this job is after you help a customer, seeing a smile on their face. together, we're building a better california. welcome back to "power lunch." i'm mandy drury. shares of american airlines flying high with the carrier being added to the dow transports at the end of the trading today replacing conway.
1:12 pm
citigroup out with new coverage of the retail sector making lululemon, tjx, tiffany and urban outfitters its topics. and pandora shares taking a hit. the music service is near a deal to buy ticketing agency ticket fly for about $450 million in cash and stock. despite today's drop pandora's shares are up 15% this year. >> thank you very much. let's look at the home builders. we mentioned them a moment ago. the sector up 8% this year. that's nice. will housing's run continue? institutional investor is out with his latest list of top analysts and steven east from evercore isi was named. congratulations on that honor. >> thank you, i appreciate it. we have a great team. >> let's talk a little bit broadly about the home builders. you like them, they're up this year. do you think the run can continue? >> i think it will continue, tyler. you just look at what's going on
1:13 pm
with the demographics and the job growth we're finally seeing in the household formation coming after it. while we may not be at an optimal level today or growing at the rate we need to, i think it's a long cycle, and i think we could see another five years from the housing market. >> you gave us four names. i'll ask you to talk about three of them beginning with dr horton which you have a buy rating on. why is it one of your choices? >> sure. i think dr horton, they're one of the largest builders. they do entry level extremely well. we do a lot of field research and what we've seen for over a year is entry level is a segment of the market coming back the strongest. we think from the large builders, horton does it better than anybody else. they have aggressively attacked it and you've seen it in their results, and we don't see any slowdown there. we think the millennials will drive that market for a long time, and they're the best positioned out there in our mind. >> it's been a slug ysh area, the first-time home buyers but
1:14 pm
from dr horton we move to the other end of the market, and that's toll brothers. >> absolutely. sort of a barbell approach here for me. and i think with toll brothers, i think what you have going on is they also have about 20% to 25% of their business that targets -- it's age targeted. they target the baby boomers. for about 18 to 24 months we've seen that segment really start to come back. we like what they're doing in new york with their high rise. we think that stock is really undervalued versus other bellwethers and i think what happens in '16 is all of these things start to come together. you're going to have some pretty strong margin improvement at a time when you have a fairly low stock price. >> give me 20 seconds each on your last two, mohawk and the bonus pick, masco. >> mohawk, i think it's the best name in the building products. great stewards of cash, serial acquirer, grow their earnings extremely well and they have done all of that with no help
1:15 pm
from their markets, quite frankly. and i think as remodeling starts to kick in over the next few years, that stock is going to be a big performer. it already has been but more. masco is interesting. new ceo in the past year. tremendous amount of change going on internally. i think that's a name that gets incrementally interesting as you go through 2016. >> are the red birds going to be able to do it stephen? you're there in the city? >> i would be crucified if i said no. i'm a lifelong cardinals fan, so absolutely they will do it. >> best baseball town in america. >> i completely agree. >> stephen east with evercore isi, thank you very much. >> the s&p 500 is down about 5% over the past two months, but today despite what you can see out there it's signaling a bullish sign for stocks. we'll tell you what exactly it is. plus -- >> up next "power pitch," a
1:16 pm
startup giving consumers their cash back. >> when you're owed money it automatically gets it to you. >> will the panel say jackpot. >> what are you doing from a proprietary basis that prevents others from replicating your processes. >> as an end consumer, how frequently am i going to get a check back? >> stay tuned to find out. [ 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.
1:17 pm
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. i've got two reasons to take that's why i take meta. meta is clinically proven to help lower cholesterol. try meta today.
1:18 pm
and for a tasty heart healthy snack, try a meta health bar.
1:19 pm
welcome back to "power lunch." i'm mandy drury. it's time now for the "power pitch" where two entrepreneurs have just 60 seconds to convince a panel of experts that their business has what it takes to be the next big thing. >> we're paribus and we get you money back from your online purchases right from the inbox. stores guarantee that if you buy something and it goes on sale later, you are entitled to a refund of the difference. >> the problem, no one ever files these claims. they're a huge hassle, and by our estimates americans are leaving $10 billion unclaimed every single year. >> so that's where we come in. parry bus detects when you're owed money and gets it for you. >> we track the prices of what you bought and when they fall communicates with the stores to get you the money back. and for this convenience it's 25% of what it saves you. >> we launched four months ago
1:20 pm
and have saved our members hundreds of thousands of dollars. >> our user base is doubling every month and we're now tracking $100 million of annual purchases. >> so do yourself a favor and join paribus today and get your money back. >> i'm mandy drury and you just saw eric and kareem's pitch. joining us is alisa syrett. she advises and invest this is over two dozen startups. from the bay area we have david wu focusing on consumer startups. the portfolio including ebay and groupdown. and nat burgess from seattle. great to see you all once again. eric and kareem welcome to the show. >> tell me a little bit about the back story of the name paribus. >> paribus is a term from
1:21 pm
economics. when a concept is complicated, you simplify it down. right now shop something very hard. there's coupons. paribus makes it easy. if you miss a better deal or sale, we'll reverse it and get you that money back automatically. >> retailers love solutions that bring consumers to their site to make a purchase. you guys are already too late for that. don't they just see you as a nuisance. >> we're solving a couple key problems. the abandoned shopping cart is huge. most consumers, they don't make the final purchase. with paribus, you have no more fears about finding a better deal. it keeps your loyalty. it cements when you get a few dollars back, you realize i'm going to shop at amazon or macy's every time because i trust the stores. >> another question to you. >> what are you doing from a proprietary basis that prevents others from replicating your processes. >> we've already filed a patent,
1:22 pm
and we're just in that process waiting for it to -- waiting to get the final results. >> david, a question to you. >> as an end consumer, how frequently am i going to get a check back and what is kind of the average size of the check? >> so if you're buying a lot, it's incredibly useful. the average check size is between $2 to $5 tends to be the average. we have seen rebate as lorge as $500. >> another question. >> what do you say to people who learn about you and say, it can't be that easy. i can't just sign up and get a check back. i probably have to fill out a form or do something more involved. >> it's as simple as signing up. we will pick up receipt this is the background and detect when you're owed money. the policies allow us to get that money back for you. it's yours. >> david? >> is the back end processes completely automated or do some cases require some touch from your company to fight for them? >> the e-mails that i send on your behave, those are automatically generated, automatically sent. when we get a response from the
1:23 pm
store, we extract the dollar amount saved there. there's very few corner cases. >> heard from eric and kareem had to say. we need to know if the panel is in or out? >> i signed up as a consumer and within days got $1 back which i thought was pretty cool. so i really love it. as an investor i do worry that some of the retailers might become defensive and so that could be problematic. but i think that these are really smart, good guys, and i'm betting they'll be able to adapt so i'm definitely in. >> david, what about you? >> i think that the brand name and when you go to the website the brand identity is still a little bit intellectual and dry. i think there's a lot of opportunity there. and i also agree that at scale this company is going to see more and more challenges from different tactics in different approaches by the merchants. but at the same time from the end consumer point of view, i can't think of a better way to earn goodwill than found money and i love the service. so i'm going to be in. >> what about you, nat? >> i do think there's going to
1:24 pm
be competition. pricing for you may go to zero but it's so hard to get consumerings to adopt this kind of thing and it works. i'm getting links back to my inbox, people inviting me to the service and that's hard to do. you have figured out a way to basically have consumers invite you into their inbox to gather data and long term i think that's going to have huge value so i'm definitely in. >> three ins, this is pretty rare, guys. what's your reaction? >> we're surprised and very exci excited. >> we're honored. >> thanks very much. and that is today's "power pitch." okay, guys. now wei want to hear from you. are you in or out on paribu cirque. tweet us. for more on the series go visit it's all up there. >> three yeses.
1:25 pm
>> it is rare. >> it is like getting all of the judges to turn their chairs. >> yes. >> here is a judge. judge santelli who will judge the bond market for us. take it away, buddy. >> well, i'll tell you, tyler, volume wasn't super heavy today going into the auction, but it was a stellar auction. look at intraday of 10s. you can't really see the auction results there. we maybe came off a basis point but it was still stellar. yesterday's high yield was just a whisker under 208. today a little over 208. traders say that's the pivot for the close. basically the stability of equities playing in promptly as to the direction of yields, and if you look at a 24-hour chart of the dollar index, sideways. tyler, mandy, back to you. >> rick, thank you very much. the s&p 500 down over 5% or about 5% over the past two months. today though signaling a bullish sign. we will tell you what it is and the stocks and sectors that
1:26 pm
could gain. plus, rotation nation, investors moving out of the leaders and into the laggards. where the money is flowing and the sectors you need to watch now. "rotation nation." 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. at ally bank no branches equals great rates. it's a fact. kind of like playing the boss equals the boss wins. wow!
1:27 pm
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.
1:28 pm
it's gotten squarer. over the years. brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv.
1:29 pm
hi, everyone. i'm sue herera. here is your cnbc news update for this hour. air strikes carried out by russian jets hitting a syrian city today according to the syrian revolutionary command council. the group posting a video online which they say shows the strike hitting buildings in that city. a new york medical examiner says a commercial pilot who died in flight earlier this week died of natural causes. 57-year-old michael johnston was flying an american airlines plane from phoenix to boston when he fell ill. his co-pilot landed the plane in syracuse. dramatic footage of a jewelry heist in england back in august. six men used picks, axes, and sle sledge hammers.
1:30 pm
they stole $45,000 worth of luxury watches. they were arrested by police and sentenced to a combined 37 years in prison. months after winning a national title, harvard's debate team lost to a group of new york inmates. the showdown took place at the eastern new york correctional facility which is a maximum security prison. the convicts can take courses from nearby baird college. they've also beaten teams from west point and vermont university. it's a great story. that's the news update at this hour. ty, back to you. >> i'm glad i'm not paying those students' bills, you know what i mean? >> absolutely. absolutely. but on the other hand, the inmates have a lot of free time on their hand. >> they have a lot of free time to bone up. as anyone would know, they can really debate and probably dissemble very effectively. >> i would thing so. i thought that was a great story. mandy? >> twitter soaring today. it's biggest shareholder just spoke with our andrew ross
1:31 pm
sorkin in san francisco and we're in luck because andrew joins us live. andrew? >> hey there. we did speak with ev williams. specifically asked him about jack dorsey and his appointment to run the company, but specifically we said to him, what was it about jack that put it over the top and the idea that he was going to run two different companies at the same time? listen to this. >> that was definitely, you know, something we took really seriously, and we did make that announcement that we were only considering full time people and we changed that decision later, and the reason we said it up front was we really felt it was important. we also didn't want people to think that it wasn't a real search. it was very much a real search, but ultimately we had to weigh many, many factors, and we wish jack could free up from square but i certainly understand why he couldn't at this time. >> how much of it was him campaigning for the job and how
1:32 pm
much of it was you trying to get him to take the job? >> jack did not campaign for the job at all. not one iota. his mantra throughout the process was, i want to find the best solution for twitter. >> we also talked to ev about the question about the prince investing in the company. he said he didn't know anything about that news. so there you have it from the "vanity fair" conference right here in san francisco this morning. >> thank you very much. twitter shares are currently up by just over 7%. andrew ross sorkin, thank you. let's look at gold prices right now as we're also watching the stock market climb back up. gold is currently moving to the upside. if we have the board i can show you the exact numbers. $1,148. we're up by a smidge, 2 bucks. as for silver, copper, palladium, and platinum, some of the other metals, it's mixed with palladium to the downside. >> thank you very much. the s&p 500 down about 5% over
1:33 pm
the past two months, but today a bullish sign. the index crossing its 50-day moving average. so what generally happens next? seema mody has been crunching the numbers with the help of our k kensho data team. >> it's often a sign stocks are gaining momentum. our partners at kensho say when it does a cross above this level, the stocks tend to do well. the s&p, the nasdaq, and the dow all positive 60% of the time one week after and a month later all major indices are positive 78% of the time. in terms of sectors, consumer dig discretionary tend to gain one month after. the s&p 500 breaks above this technical level. keep in mind it has been a winning sector so far this year. netflix and amazon, two leaders up better than 70%. we should point out it might be above the 50 dma but below the
1:34 pm
200-day moving average. >> interesting. so play the odds if you're of a mind. folks, mandy over to you. >> thank you very much for that. as i mentioned, stocks are trying to claw back some of the ground today but still we're not back at the highs of the day and the market is up 3% so far this month in october. so what's driving all of this? where do we go from here? joining us is john kerry, portfolio manager of the morningstar four star rated pioneer equity fund which celebrated its 25th anniversary and dave ellison from the hennessy large cap financial fund. quite a mouthful of titles there. john, where do we go from here? >> we're right at the beginning of earnings season. everybody is going to be watching to see what the results for companies for the third quarter were, and what expectations managements have for the rest of the year. i tend to think if earnings outside of energy and materials, some industrials related to energy and materials where no
1:35 pm
one is expecting good earnings, but if earnings outside of those areas are okay despite some of the headwinds from the stronger dollar and weaker international economies, we might be in good shape for a rally from here given how weak the market has been in general during the year and given some of the valuations that we're seeing. >> and certainly given how much the bar has been lowered for the earnings season, right, dave? do you think the q3 earnings season to be the trough for this cycle? >> i don't think so. i think the sort of i call it the three "c"s, currencies, commodities, and china, and those three things are really impacting the market and the outlook on what those things are going to do to the companies, and i don't think we really fully understand how bad that's going to be or how they're going to mitigate that. you've seen, for example, yum brands, they come out and report. china is not that good, the stock is down. i own stocks, not same-store sales, so you wouldn't
1:36 pm
necessarily want to be owning that stock two days ago or three days ago. the question is how bad is that going to be? and i think the hope is that it's not as bad as we hoped and it moves forward, but i think the challenge -- the challenges are ahead of us for a lot of these companies. >> so then, dave, so strong dollar, weak china will probably be the refrain we hear over and over again this earnings eason. how long do you think those two factors will be for companies and the overall market? >> well, i'm a financial guy, so having been through two big credit cycles, when these things start, they don't iend in a quarter. 2008 the world came to an end for financials and it was 2011 or '12 before it really got a lot better and started to reflect in the stocks prices. i assume it's going to take more than one quarter to resolve itself unless there's a miraculous recovery in oil or other things. maybe it will happen, but i think we're in for a cycle
1:37 pm
that's going to be more difficult than we've seen in a while that's unrelated to credit. it's interesting that for the first time in my career we're having problems in the world economy and it's not because the banks have messed it up. >> yeah. >> which is interesting. >> we're going it talk more about how the world economy is impacting, wagging us now other than -- rather than the other way around. dave, you're sticking with some of the domestic financials as your opportunities going into 2016. what about you, john? where are you putting your money? >> we, too, have been focusing on companies with greater emphasis on domestic operations, concerned about some of the international pressures on earnings right now from the strong dollar and softening economies in asia and still some question marks about europe, but we see still some pretty good business conditions here in the u.s. and again we're going to be watching the earnings very closely. the reports that companies make
1:38 pm
over the next few weeks will give us i think some good insight into where the economy is going and where the overall stock market may go. >> okay. john, dave, thank you very much for your time today. you can go to to see what john and dave say are the market risks. tyler and ron, over to you. >> all right. mandy, in her september press conference federal reserve chair janet yellen used the word china six times and the word global ten times. this led many to question whether the fed was correct in allowing global economies, troubled though they may be, to affect its decisions about u.s. interest rates. cnbc contributor ron insana has a new article up on the website and he's here to tell us his reaction to the fed's new global outlook. first we want to hear from you. should the fed factor in china when debating whether to raise rates? go to to weigh in. after that long introduction, welcome. nice of you to wait for me. >> my pleasure. >> doesn't it stand to reason
1:39 pm
that the fed would consider global things as it would impact the u.s. economy? >> as we've discussed before, tyler, this is not the first time the fed has looked at international developments and their impact on economic growth, on inflation expectations and the like. ben bernanke has reiterated that in the last couple days speaking here first with his book out about how the fed is taking it slow and it's a tough call on raising rates. when you look at what's going on overseas, it's been a drag on global growth. we keep seeing global growth estimates revised downwards, which includes the united states. we see turmoil in markets which is just beginning to resolve itself and this is not, as we discussed before, not an additional mandate for the fed. it's part and parcel of what they do. stable prices -- >> they have to analyze global trade, the strengthening dollar which is clearly crimping our exports. >> which we saw yesterday in the trade report. the lowest level since 2012 for exports, and, you know, in addition to that, there's this kind of misguided notion that the fed missed a window to raise
1:40 pm
rates. had they raised rates earlier or even had they raised rates in september, we just got a soft employment report, we got a downward revision in august. what would the fed have done post-fact if, indeed, rates m gone up and it looked like the economy was decelerating? it would be almost as if they'd have to start talking about unwinding what they had just done. >> the last thing you want is to have that kind of yo-yo effect where you go, well, now the economy is decelerating, which we've seen a deceleration potenti potentially. >> and in manufacturing. >> and if you raise rates into that headwind, are you going to turn around and go the other way? >> people are complaining about communication, which i understand. people are complaining about missing the window. i don't understand that. and they're complaining, you know, prospectively that the fed is somehow missing inflation, and yet there is absolutely no data on inflation that suggests it's accelerating. in a prior column of mine i wrote there's a break in this phillips curve orthodoxy. the motion that lower
1:41 pm
unemployment automatic produces to higher wage and general inflation, and i think that relationship is broken. certainly it's not like the 1970s. >> it's not a clear transmission mechanism because of all the other things going on in the global economy. >> global competition, the labor market. less uniizationization. >> let's look at our numbers over there. basically split, 51%, 49%. there you got it. >> i'm on the winning side for -- >> yankees lost. >> joe girardi should keep his job because he got then in the playoffs against all odds. >> now we turn to the mets. thanks, ron. for more on mr. insana's thoughts, go to >> insane insana. >> thank you. >> the fallout from volkswagen's emissions scandal continues. one u.s. car dealer saying it makes madoff look like the minor leagues. that story is straight ahead. you're watching "power lunch" on cnbc, first in business worldwide.
1:42 pm
proud of you, son. ge! a manufacturer. well that's why i dug this out for you. for more on mr. insana's you're watching "power lunch" on d he would have wanted you to have it. it meant a lot to him... yes, ge makes powerful machines. but i'll be writing the code that will allow those machines to share information with each other. i'll be changing the way the world works. (interrupting) you can't pick it up, can you? go ahead. he can't lift the hammer. it's okay though! you're going to change the world. for more on mr. insana's
1:43 pm
you're watching "power lunch" on . . i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you.
1:44 pm
welcome back to "power lunch." i'm mandy drury. twitter shares are higher. the saudi prince and his kingdom holding investment firm have increased their combined stake in the company to more than 5%. adobe moving lower. the software company cutting sits 2016 profit forecast in response to the negative effects of, guess what? a stronger dollar. speaking of adobe, starbucks have named former adobe -- as its first chief technology officer. starbucks shares right now however little changed. well, the fallout continues in the wake of the massive emissions scandal at volkswagen. now some car dealers in the
1:45 pm
united states are sounding off. cnbc's phil lebeau joins us now with more. what are they saying, phil? >> at least one is extremely upset, mandy. in fact, the commentary from steve caliper, who runs a vw dealership in central new jersey, flemmington, new jersey, he made no bones about it. he considers what happens with volkswagen and what happened major fraud. in fact, he said he wants some answers. he wants to sit down with volkswagen executives in part because to convey to them how upset his customers are about the diesel models they are driving that were rigged to beat emissions tests. >> our volkswagen diesel customers are upset. they're upset that the brand they invested in, the brand they counted on failed them. the simple question that evolves after what happened with the cheating on the diesel, the next question simple is, is my car safe? have they cheated on something else? what else did they not tell us? >> that's one of the primary
1:46 pm
questions that will be presented by congressional members to michael horn, the ceo of volkswagen of america. he will be testifying on capitol hill tomorrow. meanwhile, the ceo of volkswagen in germany out saying that the company will begin recalls of those impacted vehicles starting in january. no full details in terms of how people will be notified, what the fix will be, but the plan is to fix all of the impacted cars, more than 11 billion, by the end of 2016. that has given shares of volkswagen a bit of a bounce today, but over the last month, guys, these shashtires are stil down more than 30%. >> phil, thank you very much. let's get more reaction to this volkswagen news from former ceo of office depot and auto zone, steve odland. he's also a cnbc contributor. we talked about this the last time you were here, steve. this is maybe not an existential crisis for volkswagen but it's doggone close.
1:47 pm
they ha breached trust with customers. >> they have. the laws change in 2008. every other manufacturer of diesel engines switched. vw didn't. everybody on their board is anenian engineer. somebody should have sahow can do this without a diesel exhaust system and everybody else has to have one. 40 times the amount of emissions. this is as plain as the nose on your face. the thing that concerns me today is what they're talking about coming out of their board meeting with we've got to contain this, get through this financially. that's the wrong thing to be thinking about. when mary berra at gm looked at their crisis what she was talking about is, no, we don't have to contain it. we have to get it out. we have to get the evil out of our company and get it so it never happens again. that's what volkswagen should be talking about instead of containment. they ought to be talking about where did the crisis happen, not just ten but all through the system so it never happens again
1:48 pm
and that's how you regain trust. >> because it did feel to me just from what i have read that there's a corporate culture issue there that needs to be rooted out, diagnosed, and cloroxed. >> and it was a big mistake in my opinion to appoint a guy who was in the company. they had a chons to bring an outsider in. >> and yum brands, the numbers just didn't come through the way they thought. pizza hut in china a problem there. ongoing issues with kfc over there. >> it's all china, but, you know, they rode china for a decade, maybe a deck yade and a half as china was growing. their businesses are linked to the economies. they were overdeveloped in china. they have been the darling of all the restaurant industry because of china and now china is slowing and now they're the dogs. they say you ought to spin off china. why? this wasn't a surprise that china was going to slow some
1:49 pm
day. they ought to be taking a ride through this thing and outlast it. >> so they're in there for the long term. what do you do? do you cut locations? cut prices? what do you do to attract customers? >> well, they have to adapt to the chinese economy. they're still growing at 20% instead of 10%. they mismanaged a little bit the messaging. they have to deal with that and they have to deal with the analysts and the 5k9 vactivists are saying you have to spin off china. i think they shouldn't. they have to adapt to the chinese market and get through it. >> and quick thought on the $2.1 trillion that u.s. companies are keeping overseas. what would you do if you were the policymaker trying to think this one through? >> long term we have the highest tax rates in the world. you have to deal with the long-term fundamental corporate tax issue. short term you have to do a holiday. you have to bring that money back. all the numbers show the economists say it would have a $600 billion impact to the u.s. economy by bringing that back.
1:50 pm
how old you like a $600 billion stimulus to the u.s. economy. it's the cheapest way without adding to the debt. i would bring that money back and do a repatriation holiday right now. >> thanks for coming by. >> tax reform, please. investors are moving out of the leaders and finding opportunities in the laggards. where the money is flowing and the sectors you need to watch now. you're watching "power lunch" on cnbc, first in business worldwide. t the td ameritrade trader offices. ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this.
1:51 pm
1:52 pm
1:53 pm
welcome back to "power lunch." let's go immediately to sue herera with a news alert. >> thank you, ty. this concerns sepp blatter who apparently according to various reports from european news sources, including the bbc, has been provisionally suspended for 90 days. this follows the ethics committee meeting in europe and the swiss attorney general opening criminal proceedings against blatter last month. this is a provisional 90-day suspension. the ethics economy is going to continue to meet this week. they may make their final decision later this week. but this latest move follows a
1:54 pm
call from visa, coca-cola, mcdonald's, and inbev among others calling for blatter's resignation. he, meanwhile, hation called the investigation into his activities outrageous and has refused to resign. >> thank you very much, sue. the presidential candidates have been spending a lot of money on political ads hoping it will all lead to a burch in the polls. how much money are we talking about? the answer next. speaking of the candidates, in celebration of jaylen leno'sw show, chris christie reveals the story behind his first ride. >> my first ride was a 1971 chevy camaro, burnt orange with a black vinyl roof. 110,000 miles on it when i bought it. three on the floor. it was a great ride to have as a high school senior. >> jaylenow's garage premiering tonight on cnbc.
1:55 pm
when a moment turns romantic why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. i've got two reasons to take that's why i take meta.
1:56 pm
meta is clinically proven to help lower cholesterol. try meta today. and for a tasty heart healthy snack, try a meta health bar.
1:57 pm
here is what's ahead. forget conjunction junction, we're talking rotation nation. why the best spots for your money may be some of the homost hated right now. plus the most important economic indicator you have likely never heard of. and the massive jump in
1:58 pm
housing that has some of the bulls surprises and my one top strategist is throwing in the towel on the central bank jar. i'm calling it that because i don't want to owe a dollar. >> let's turn to presidential politics. the candidates upping their games and dollars on television advertising. eamon javers has the numbers. >> the presidential campaigns are starting to pour it on when it comes to tv ad spending, and nbc news has tallied up the totals. take a look at the figures here of total tv ad spending, and see if you can tell who is missing from this list. so far this year we're looking at jeb bush with $7.3 million. kasich with $5.4 million. rubio with $4.7 million in tv ad spending. also we've got hillary clinton down there at the bottom of the list here. she's at $4.6 million. just ahead of chris christie at $3.3 million and bobby jindal at $2.3 million. so hillary clinton not even breaking into the top three here
1:59 pm
just yet. the top three all being republicans. who is missing from that list? donald trump. he's leading in all of the republican polls that we've seen over the past couple of weeks. he hasn't spent a dime on tv advertising. he said in an interview with "the washington post" today, he said his original budget was $20 million through september, but he has spent nothing so far. he's now though is preparing his first tv ads with an ad firm new to politics entirely. he said he will likely spent over $20 million on paid media later this year, but he didn't spend that $20 million he had budgeted through september, guys. so a real mystery figure here, donald trump, not spending anything on tv advertising, going a totally different route than the traditional candidates. >> but he doesn't need to. >> seems to be working for him. >> he doesn't need to. >> that was his quote. he said all the news programs are all trump, trump, trump all the time. i would annoy people if the custome commercials were trump to. at some point he is self
2:00 pm
funding, he will start cranking out money and spending on tv but he hasn't had to do it yet. >> we host the next republican presidential debate in colorado and it's on october 28th, and as we've told you many, many, many times you should know by now it's a very big day because it is the same day as -- >> the central bank meeting. >> we're not giving you a buck for that jar, brian. >> that will do it, folks, for the first hour. thanks for joining us. >> over to you. >> every time somebody says the "f" word, fed, they owe a dollar. i have to throw a dollar. . it oil makes a big turn. i'm brian sullivan. melissa lee is at the nasdaq. so much more ahead but we've got to begin today with what may be a big shift in how the big money is investing. the leaders being sold, the laggards seem to be loved. look at the stats. here are the hottest etfs, sector etfs over the past month. the dow jones reit index up 9%. another real estate index up 7%.
2:01 pm
consumer staples up 6%, and the oil services etf up 4%. people seem to be selling what was hot, health care, the ibb biotech etf down 9% in the past month. and the ishares health care etf down 3%. it's happening with individual stock. case in point apple and go pro although they are certainly not alone. so let's talk about all this to kick off the show. we're going to get to health care in a moment but first let's talk about that big move we're seeing in the reits. diana olick is joining us now. diana, why have the reits been rocking? >> well, it's plain and simple, an interest rate play. reits are extremely attractive in a low-yield environment when investors are searching for yield because it's a high dividend paying stock. for the past several years they've been doing quite really, outperforming the markets. at the beginning of the year they started to underperform because everybody that you the fed was going to raise rates. come the end of the summer, it became clear come september they
2:02 pm
were not going to raise rates and then we get the horrible jobs report, they may punt to next year. suddenly investors are coming back into the reits again for that high-yield play. let's not down play the fundamentals on reits either. we have seen really good activity in the apartment market even though some folks thought it was overheating. we still have record high occupancy, record high rates, and continued demand. the office sector is coming back slowly with jobs and the warehouse and industrial sector doing very well. still retail a little bit lower. but you have very good fundamentals and you have a good interest rate play. put those together, that's why reits are going up. >> all right. thank you very much. now let's turn to the big uptick in the oil services etf. that is the oih. in fact, over the past week, it's up 14%. let's bring in pablo from raymond james. we also have matt maley. pavel, do you believe this turn
2:03 pm
in the oil stocks is for real and long lasting? >> well, yeah, it is for real, and we're going to see, of course, some choppiness, but in general, look, they were ov oversold. the energy weighting in the s&p 500 a week ago was at its lowest level in 11 years. that's just not healthy. so naturally we're seeing some short covering, clearly a squeeze going on. as oil is bouncing. and oil was oversold at the end of august, below 40 bucks. it's moved a lot since then, but to put it in perspective, it's still less than half of where it was -- >> but why do you say it's oversold with such confidence, pavel, when we saw inventories just keep going up? >> well, they were up this week. they were down last week. the reason oil is not sustainable below 50 bucks a barrel is because nobody makes money at those oil prices. it is not a sustainable level of investment in the oil and gas
2:04 pm
value chain. investment has to ramp up over time and that only will happen if commodity prices cooperate. >> i understand not everybody is making money at these levels, maybe nobody is. >> nobody. >> but they're not pumping because they want to. they're pumping because they have to. it's a garage sale for heavily indebted family. you have to sell it for what you can because you need the cash. >> well, they do, but they also have to drill to maintain production and ultimately grow. without growth in global oil supply, we get a shortfall and in several years if oil prices do not bounce higher, $60-plus, and investment recovers, non-opec oil supply in 2017-2018 will be falling off a cliff. it's going to be down next year no matter what. the question is, will it recover it 2017 and '18.
2:05 pm
>> thank you. matt, you think 51 bucks for wti crude oil is important to the overall market. why? >> well, a couple things. number one, on a technical basis, you know, it's funny, all the oil is rallies from just below $40 in august. it's been in a very tight range in the last five or six weeks. it's now at the top end of the range. so a lot of people are saying geez if we break above 50, that's great. it's true but $51, only a dollar higher, but it is key because it's where the 200-day moving average comes in. now, that's the level that oil rallied up to or that's the line that oil rallied up to in july, and then rolled back over and sold off 40%. now, i'm not saying a failure this time would take it down that much but it will provide a tough resistance back in july and so it could provide tough resistance this time. the reason it could be important if it can break above that, it
2:06 pm
will help us on two ends. number one, obviously these oil companies, especially the smaller ones, are so dependent on higher oil prices and they will have a tough time even staying in business if we don't sow a significant rise in oil. but also it should give some people, you know, there have been a lot of things earlier this week with imf lowered their estimates for global growth yet again, you know, if we can get oil to move back up a little bit it will give people a little more confidence that the continued slowing in the global economy may be stemming a little bit. >> on the macro markets though, matt, we've had a nice little rally. volume has been pretty good behind the last week or two so far. you have pointed that out to your clients and investors. are you convinced this little sort of mini rally we've had is for real? is there a chance the dow, which is down about 6% year-to-date will end 2015 higher? >> it certainly could. the thing is we're going to need -- we're definitely going
2:07 pm
to need more upside follow through. as strong as the rally has been, it's really just been a couple days. it's coming from an oversold condition. the other thing, too, is china has been closed the entire time this rally has been taking place. so when the chinese markets open back up, i would assume they'll open a little higher because hong kong and the rest of the world has bounced a little bit. if it can't sustain itself, that's going to be a problem. the thing is we still have the credit markets haven't bounced near as much as the stock market has. even though the yield has bounced off the 2% level, it wasn't bounced that much. we have credit spreads that have narrowed but they're near the wides that they were at in august. things like leveraged loans are at lowest levels in over a year. so the credit markets are telling us that there's not as much to be -- >> yeah. >> this maybe something more than a rally, just a short-term rally. >> ever since the patriots have been 3-0, you have been positive on stocks. that's not gone unnoticed.
2:08 pm
matt maley, thank you very much. appreciate it. >> thanks a lot. now let's turn to what investors have been selling lately. health care. a lot of that has to do with the big sell-off we've seen in biotech. the biotech etf, the ibb, is down more than 17% since august. let's bring in evercore's mark shonenbaum. >> i'd like to publicly congratulationoma, my prot ji who got number one in specialty pharma. >> congratulations to her as well. >> he's a him. at least i think so. >> how do we emerge from this rout, mark, because what fueled the optimism about biotech was not just the pipelines of a lot of these companies but the notion there would be a lot of acquisitions, ipos coming and that's basically hit a standstill at this point. >> yeah.
2:09 pm
so, look, you know, biotech -- at least my world of what we call their ra pew ticks, drugs and biologicals, things we take to treat for illnesses, we've been in a five year bull pun so let's have some perspective here. sectors cannot go up at that rate forever. it's mathematically impossible. i want to acknowledge that first of all. now if we get sort of the bottoms up or the details of the analysis, what caused the pause in the performance or a stop, we don't know, are concerns around drug pricing. there are two big top down issues. one is innovation and two is drug pricing, and hillary clinton's tweet about drug pricing has certainly raised the volume level on that issue as a risk. now, most of us don't believe there's much that hillary clinton nor any president could likely do in the next administration. that said, the noise levels impact stocks and compress pes, and that's probably an
2:10 pm
opportunity for long-term investors to take advantage of. when that noise level declines is difficult to predict but i think it will decline from the deafening levels we're at right now. if we look at innovation, innovation appears just fine. there are data out there that seem to suggest, if not prove, that r & d productivity in biotech and drug land has improved markedly over the last five or six years. will that continue forever? hard to know. but i'm optimistic. but in the end innovation will determine whether or not the sector is investable or not and i think most of us do not believe drug pricing will collapse. >> right. it won't collapse but it is a concern as you mentioned that is sort of having an impact at this point. i'm sure that you noticed along the way up, mark, that there are a lot of biotech investor tourists coming into the space. is it your sense that with this recent rout that those tourists have been shaken out of this trade and that right now the sector is in the hands of
2:11 pm
long-term investors because it feels like, you know, as there's more optimism and hype around biotech, that's when the volatility really increased. >> i think you nailed it, melissa. i call it biotourists. there are lots of journaligener who have told me i will never touch biotechs. i did, it i lost money, i will never go back. many have come back because they lost so much performance not being there. the upside capitulation if you will. some of those folks are simply repositioning going from an overweight to a neutral position. that's largely coming from the growth oriented generalist portfolios out there. i don't know if that's done. i suspect we're in the fifth or sixth inning of that being done, something like that. >> fifth or sixth inning. you have got two biotech specifically picks.
2:12 pm
you think they will each go up, what, more than 10%? >> so the stocks in biotech right now that i like are gilead. gilead trades at very, very low pe, about an 8 pe. there are risks but i think you're being compensated for those risks. also on the biotech side, if you have a longer term horizon, i think biogen makes a lot of sense. the downside -- the upsi upside/downside ratio is 2 to 1 in a five year period. i think pfizer and abvi look interesting. ab bvie was at $70 not too long ago. >> great to speak to you. thank you. brian? >> all right. much more "power lunch" coming up your way. we're breaking out our trusty old crystal ball to find out what might be in store for your money this earnings season.
2:13 pm
why two money managers are betting on couch potatoes and knee replacements for big money and we're getting you ready for a huge night of tv. jay leno coming to prime time with "jay leno's garage." we asked all kinds of people about their first car. we asked a guy who just got back from mars. matt damon about his first ride. >> my first ride was a salvage. it was an '89 acura integra ls. stick shift. i got the movie school ties when i was 20 years old and i used part of my salary to buy that used car in 1991. >> jay leno's garage, series premiere at 10:00 only on cnbc. more "sit" per roll.
2:14 pm
bounty is two times more absorbent. so one roll of bounty can last longer than those bargain brands. so you get more "life" per roll. bounty. the long-lasting quicker picker upper.
2:15 pm
i love working in the salinas area becauseriselda zendejas. i always wanted to do something where i could help people around me. so being a construction supervisor for pg&e gives me the opportunity to give a little bit back
2:16 pm
to my community. i have three boys. they're what keep me going every day. our friends, families live in the area. and it is important for all of us that we keep our community safe. together, we're building a better california. the dow transports leading today up by about 1.5%. among the winners avis, alaska air, and norfolk. >> monthly jobs report inflation data, even the weekly oil rig count, these are all numbers you should pay attention to, but did you know there was there another economic indicator that is just as important. morgan brennan is here to tell you why trucking is one to watch. >> truck something considered the canary in the coal mine. trucking tonnage is softening. the trucking association is
2:17 pm
concerned about high inventory levels that that could have a negative impact on volumes over the next months. we're coming into peak season which means volumes should be ratcheting up. as you can see in this chart, truck tonnage is a leading indicator of gdp and in recent weeks taking a look at this chart, tonnage has started trending down. that's potentially confirming that economic growth may be beginning to slow. it also points to a possible slowdown in trucking company earnings. chris weatherby at citigroup warning third and fourth quarter earnings are likely to be more challenged than the first half when they were increasing by double digit percentages for many companies. he's trimming estimates for westerner enterprises, knight transportation, arcbest and old dominion and this is after swift transportation lowered its full year outlook. trucking has been one of the bright spots in transports this year. at least from a data and earnings perspective. but a slowdown in the holiday season would be bad news for the
2:18 pm
sector and it also does not bode well for the economy. back over to you. >> morgan brennan, thank you. there's another indicator that might predict what's to come this earnings season. it's middle market lending. let's bring in lauren to tell us about the index. lawrence, what's a headline here in terms of what we should be expecting from publicly traded companies from this index? >> the middle market companies are continuing to grow thp marry more dynamic and resilient. the numbers we're getting from middle market are indicating slower growth from public companies. >> that's what investors have been expecting. they're expecting a picture out of earnings that would reinforce the notion that we're in a growing economy, albeit a slowly growing economy. >> absolutely. the middle market index numbers from earnings are the lowest they've been in two years. >> oh, really? lowest in two years? >> still positive, so the economy is growing but there's margin compression. >> no surprise health care is
2:19 pm
one of the top growers in terms of sectors on the index. health care is the best performer in our index. it's based on actual revenues, actual earnings from companies in our loan portfolio. their margin growth is holding up this quarter. >> one discrepancy is information technology. the s&p estimate is for a rise of 2.5% for earnings and the index is indicating negative 3.6%. why is there -- is it the types of companies in the middle market versus the publicly traded? >> i think so. the revenue growth in the middle market i.t. companies is still very strong. the companies in our portfolio are very focused on boosting growth, introducing new products. there is some employment cost pressures competing for software engineers with facebook and google, but most of it is focusing on future growth. >> i want to talk about cost pressures when it comes to margins.
2:20 pm
margin compression was a big theme and we're seeing that again for this quarter. what really stood out to me was the u.s. dollar. even the middle market is beginning to feel the impact of the u.s. dollar. are you finding that that's a bigger factor this quarter? >> pricing pressure or the loss of pricing power has been a continuing theme. margins have been down for a full year quarter after quarter. margins this quarter and the middle market, some of the best companies in the economy are down 25 basis points and in one quarter that's not so terrible but it adds up over time. >> lawrence, go the to leat to there. fast for giving us a preview. another analyst is hitting the brakes on tesla stock. we're going to talk about that and more in "straet talk." and as we head to break, let's look at some of the widely traded stocks. alcoa unchanged. pure storage down 5%. pet pet petro gas down.
2:21 pm
we're back after this. letting them use any atm nationwide for free. and, because every dollar matters, didn't nickel-and-dime its members with monthly fees. saving them more than three-hundred forty-five million dollars in one year. that would be a different kind of bank. that would be usaa bank. go online to find out more about our free usaa secure checking account today.
2:22 pm
we're going to talk about that
2:23 pm
all right. time for our daily segment "street talk." stock number one, morgan stanley. rbc capital markets upgrading morgan stanley. they say the wealth management group will remain an important
2:24 pm
source of earnings growth regardless of any interest rate hike in the future. they note their capital strength and expectations of more loan growth. they have a $39 target which implies about 18% upside. >> morgan stanley has been a laggard compared to its peers. so this will be an interesting call to watch. stock number two here, tesla. another day, more skepticism about the tesla model x. baird is downgrading the stock to a neutral cutting the price target to 282 from 335. the analyst is confident tesla will be able to ramp up x production but the timing is uncurrent. he said to keep some powder dry. >> it's got to be one of the only companies we talk about where the average price point of their product is over $100,000 a year and nobody talks about that. they only talk about we can't make enough of this. >> amazing. >> up next, holly frontier. deutsche bank upgrading this
2:25 pm
refiner to a buy from a hold. analyst todd ryan likes the solid, his word, free cash yield. in that same call they downgrade phillips 66 to a hold from a buy. they like phillips 66 long term but they're concerned about short-term choppiness. >> recent with the oil/equity rise we've seen the refiners sitting out. it's important to watch the spread. the difference between brent and wti. fourth stock, adobe. another disappointing guide after the close, but analysts sticking to the stock which is just a couple bucks away from the 52-week high. pacific crest is sticking with its $90 price target. even sees a path to a 100 bucks or more over time. jpmorgan also saying it would buy the pullbacks. >> and i know it's been a little choppy in the short term but this was a $30 stock just three years ago. they've really done well. you could say they've acted like an acrobat.
2:26 pm
finally fortress transportation -- >> i rolled my eyes in case you missed it. >> it was deserved. this is our under the radar name. it's not a stock, it's a fund. it invests in infrastructure projects. 40% of the fund is invested in aircraft leasing. they also own things like the jefferson oil terminal in texas. they have a $20 target. a dividend of 35%. the fund is below the ipo price. current yield 11% which is covered by cash flows from legacy assets. kind of an interesting under the radar name. i never heard of it before i got the research note this morning. >> i never heard of it either and i looked into it. you know what they also own? an aviation portfolio. they own airplanes. they just bought a couple $737 in september. they have something like four or five dozen assets. >> who doesn't?
2:27 pm
don't you? all right. >> must be nice in the sullivan household. >> it's a model. here we go. that's it for "street talk." the final oil trade set to cross for the day. we're headed live to the nymex for that. tonight we are premiering "jay leno's garage" and to celebrate we asked phil lebeau about his first ride. >> my first ride was an old rusted out honda civic. i bought it from a friend in springfield, missouri, and it cost me $500 and a case of budweiser beer. now, at the time i really wasn't thinking. i should have gotten the registration but i didn't, and as i drove back to college, i was pulled over by the cops. they wanted to know why i was driving an unregistered vehicle with no license plates. i didn't really have a good answer. they threw me in the jail cell. i had to sit there for about five or six hours until my friends came to bail me out. they could have gotten me out sooner but they thought it was funny to make me sit there
2:28 pm
longer. >> "jay leno's garage" premiere tonight at 10:00 only on cnbc.
2:29 pm
2:30 pm
hi, everyone. i'm sue herera. president obama apologizing to doctors without borders for the air strike that hit its
2:31 pm
medical clinic in afghanistan killing at least 22 people. the white house saying the hospital strike was nothing other than a terrible, tragic accident. the medical group has called it a war crime. police fired three times at a gunman who killed nine at an oregon community college last week and struck him once before he moved away and shot himself to death. that's according to the douglas county district attorney who said the officers were justified in using force. russia's defense minister meeting with vladimir putin updating him on russian strikes in syria. the devastating floods that ravaged south carolina have forced the university of south carolina to move its upcoming football game with lsu from columbia to baton rouge. it will take a financial hit of nearly $4 million in ticket sales by moving the game.
2:32 pm
but given the devastation down there, i don't think they have a choice. that's the cnbc news update this hour. brian, back to you. >> tough scene down there. sue, thank you very much. well, the bulls were in control in the oil pits today at least for a while. we got within a hair of 50 bucks a barrel and then we pulled back. >> hi, brian. that's right. we did see a reversal sending the day lower by 1.5%. $47.81 is where wti finished after a session high of $49.71. we saw a build in gasoline. refinery run rates going down. they're not using as much crude to turn into product. that is why we got the build that we saw today. having said that, we've seen some volatile moves in either direction. traders are now questioning if we saw a false breakout to test that $50 level. of course, we're going to have to watch and see where this goes, where the confidence is in the crude oil trade, but still
2:33 pm
with production rising in the u.s., rig counts going down, the fundamental numbers still don't make sense. back to you. >> jackie di ang lis, thank you. >> shares of sun edison sharply higher after announcing restructuring plans but the stock is getting hit hard over the past year. it's down more than 40%. the solar company also walking away from a deal to acquire latin american power. collin is a senior analyst with oppenheim. he has an outperform rating. you initiated coverage with an outperform on september 8th and the stock was at $12. even then with the stock higher from where it was now, you were pretty optimistic. on this conference call did they achieve the increased transparency and sort of the investor it's going to be okay that they needed to accomplish in order to get the stock moving? >> they addressed all the critical issue this is a coherent way walking through the concerns around liquidity.
2:34 pm
they managed down expectations for op ex and really the devil is in the details here on execution with any project-based business. the underlying assets are really investment grade assets. there's strong credits here underlying these things what really is at stake for investors now is trusting the management team and watching them execute on this opportunity here. >> looking back because it has been quite a ride for sun edison. it's down 74% from its july high through yesterday's close and that high was reached the day of the vivant solar deal precisely to the day. do you think that management has gotten that credibility back and what they did to lose investor trust. >> well, any sort of trust relationship once you have gone out of trust, it takes time to build it back and i think this was the first important step in doing that, putting together a coherent plan. providing more detail on the unlevered irrs of the underlying projects. now it's going to be executing on that plan and putting up the numbers over the next three or
2:35 pm
four quarters. y >> you make a point they have plenty of cash. $1.3 billion in cash in the third quarter of this year but they've also got a big debt payment, principle payment do in 2020, $1.2 billion. do you enough confidence and clarity to say in 2020 they will be able to make that number, make that payment. >> what we have seen in the solar industry is a change in fundamentals every 12 to 24 months. so the plan they put in front of us today would generate $500 million of cash flow on an annual basis with the cash they have on hand plus, you know, four years of cash, it looks like plenty of cash to service all of their debts. now, again, going back to my point before, they have to do all the work now and so it's going to be finishing these deals, finishing these projects on time and teselling them and monetizing them in the most effective way available. >> the price target is 18. that's a double from where the stock is here. is most of that going to be predicated on management's ability to regain investor confidence? >> we don't think so. i think there's a basic
2:36 pm
mispricing of the underlying assets. these are investment grade credits. if we look over the last three, four months, rtriple b to a are still trading around 5%. the solar assets have gone from trading at dividends of 4%, to 4.5% to 7% or 8% and that doesn't make sense to us. we think the private markets are pricing them at 6% plus at c. ompl d. and that these assets are going to get repriced in a more effective way over the next two, three quarters, and that will be reflected in the shares regardless of what manage get does. >> two to three quarters. thank you. >> with the mini rally we have had in the past few days, the s&p 500 has briefly moved back above a technical level, the 50-day moving average. that historically has been good for consumer staples stocks according to our data partner kensho, so are they good for
2:37 pm
your money. todd gordon and erin gibbs. since we're talking technicals, we'll talk with you. we busted above the 50-day moving average about a billion times in the last couple years. what do you make of this stat? >> i don't think it's that significant and for the record, i think the 50-day is at 96 so we're not quite there yet. if you look at the inte play between the s&p and the consumer staples, they have a good store value as the s&p moves lower. if you look back to the 2000 top, 2008, and today, interesting dynamic. as the sn is breaking the 200 day moving average, you see consumer staples make a push to a new high but if the market is going to roll over for good, staples will not be safe. they will roll over as well. happened in 2000. happened in 2008 and here we are again. the market is breaking down. we've had consumer staples outperform in 2015 as the market has dropped down here. if the market is going to
2:38 pm
recapture that 50-day, just above us, okay, fine, we can talk about it, but that's a big presumption. i don't think consumer staples are safe if we roll back over. >> there you go. erin, what sector would you favor right now? would it be as history says consumer staples? >> so we looked at this and basically over the past ten years whenever you get the cross, consumer staples, utilityinutilit utilityinutilitewutilit utilities and health care are the three best bets. looking at earnings and also expecting interest rates to rise, i really just stick with the health care at this point. i think that's your best bet. not only does that sector have the highest earnings growth, some of the more attractive valuations, but it basically outperforms at a similar level to what we see for consumer staples and utilities given this technical signal. >> all right, erin gibbs more in favor of health care. todd gordon, not exactly the biggest -- basically consumer
2:39 pm
staples are a nice story but nobody is that convicted on it. head to the website, tradingnati why one top economist threw in the towel on the federal reserve and melissa and i will do something we don't normally do. we will share some personal memories. not together, independently, but they're interesting. stick around for that. >> and now the latest from trading and a word from our sponsor.
2:40 pm
2:41 pm
2:42 pm
21 days until the next meeting of the fomc, but the minutes from the last meeting of the central bank are out in less than 24 hours. so lets pull out the central bank ball and see what was important to them. bring in steve liesman. any time you use the word fed, you owe a dollar for the team. but because this is your job i have decided to give you a bulk
2:43 pm
discount. ten fed mentions for the price of seven. >> i'll think about that. and now you're going to disrupt everything i will be saying. >> that's my goal. >> the minutes from the federal open market committee is they're a little dead on arrival in the sense they come before the week payroll numbers and those week payroll numbers generally took off the table according to most on wall street a rate hike in october. the first thing i will be looking for is what the fomc members say about the economic situation. just how worried were they? how worried were they about the inflation situation? in that context i will look at the staff report. we don't normally spend a lot of time there, but there will be two things this the staff report i will be looking for? how much were they preparing for a rate hike? some of the preparation sometimes gets into the fed staff report. >> there's one. >> that's two. i repeated it. the other thing is their international outlook and how
2:44 pm
much weak economics overseas plays into the inflation outlook in the u.s. that will show up i think in the fed staff report. >> let's also -- >> and will animate the thinking of thef omc members. >> let's bring in joe . what are you most interested in in the minutes of the fomc tomorrow? >> the last point, brian, all the things steve mentioned i will agree with. that's what you want to agree with. the international. how close they were to hiking rates and in particular how confident they are inflation will get back to 2%. the reason i changed is really many. it was a soft report, the employment number. two, the fact that gdp and i have been relatively bullish on growth, we will have a significant pull back on q3 activity on the back of weak net
2:45 pm
exports -- >> joe, joe. >> and the fed funds market not pricing a hike. >> i want to push back on the gdp number. are you cutting back domestic demand or is this a matter of exports and inventories? >> it is exports and inventories. the underlying consumption number should be pretty good. and what we basically have right now, steve, is an economy 70% of which the consumer is doing remarkably well -- >> so the weakness is a little overstated. >> exports aren't that big of a deal. >> it is a big deal. >> it is and is at any time -- >> manufacturing, it's jobs, it's good numbers -- >> here is the thing -- >> joe, i want to make sure people understand when we talk about going from 3.7 which was too high because of exports and inventories. >> 3.9. >> sorry. >> down to a number that worry you, 1, 1.5% range where a lot of people are, that that weakness is just as clearly overstated -- >> partly, steve, here is the thing, that's part of the story, but, remember, part of the q2 rebound is what happened in q1
2:46 pm
with the port strike. the weakness we're seeing in net exports in q3, given the fact that it's a function of both the stronger dollar and weaker overseever overseas activity is likely to persist. while you're right domestic demand should be good in the quarter, one has to wonder how long that will remain the case with overall income creation likely to slow. >> i want to make one point. all of this boils down to yada, yada, yada it's a 2% economy, right? >> yes. 2% but -- >> over the three quarters it's a 2% economy. >> here is the problem the fed has, the fed is trying to raise rates with a noticeable deceleration in job growth and gdp that going into the december meeting very well will have a one handle on it. that to me is a real communications problem. >> okay. and those minutes by the way cross 2:00 eastern time. >> on your show. >> on this fine program tomorrow. we'll look for a change of language. you owe two bucks, joe owes one
2:47 pm
and i owe one. >> but i only owe 70% of $2. >> you're right. a bulk discount for you. the next meeting of the central bank is on october 28th and that's a big day because that's also the day of the next republican presidential debate from boulder colorado, and it will be hosted by us visible on cnbc. the billionaire divorce battle finally comes to an end today. we'll tell you how much is at stake and your market check as we head to break shows all three major indices higher so far on the day. on the dow, merck, and j & j leading the way. and j & j leading the way.
2:48 pm
2:49 pm
2:50 pm
my first ride was a red toyota pickup truck, 1982 or 1983. not the cool jacked up kind. just a low car. it was a total piece of crap. it was a five-speed bench
2:51 pm
seating. but to be honest, i loved that car. i called her betsy in part just because it was a car. i was 16, didn't have a lot of money and it got me where i needed to go. betsy, if you're out there somewhere still cruising around, come home. ""jay leno's garage" only on cnbc. >> where did the name betsy come from? was it like a kindergarten crush? what's the real story behind the name betsy? >> no, because i thought that was a common name for like a cartoon cow? >> a cartoon cow. >> like heavens to betsy. the car was so sluggish. >> you named her after a cow? >> betsy's still cruising around. it never broke down on me. i terrified my friends. i used to have dirt roads and i would go at night and see how fast i would go. don't do that at home, ever. but anyway, what was your first car? >> what did you think it would be? >> my first limo by melissa lee.
2:52 pm
>> a 1987 chevy blazer. a used car that my father brought me for my very first job. it was ancient by the time i got it. and it had a patch of rough spots on the driver side door in the shape of the galapagos islands. i lived in boston, so when i was cold and really scared, i would go out there with a piece of steel wool and try to take the rust out and seal it back up. >> that's a solid car for the boston potholes. >> and the snow. four-wheel drive. >> that's fantastic. all right. cool stuff. the reason we're talking about this, folks, not because we're crazy. but "jay leno's garage" premieres tonight on cnbc. everyone's talk about their first cars. just minutes before they were due back in court, tell a judge they could not reach a divorce settlement. robert frank has all the details. and tell us what your first car
2:53 pm
was. >> i'll try. they settled on the courthouse steps. the biggest divorce trial of the year between ken griffin and anne diaz was scheduled to start at 9:30 this morning, the court announced a settlement and the divorce was finalized by the judge this morning. we do not know the terms. they're not likely to be released. the key is a prenup. the agreement would have left anne with $50 million compared with ken's $7 billion. she wanted the prenup thrown out because she said she signed it under duress a day before their wedding in 2003. she was also asking for a million dollars a month in child support. that included 24/7 use of a private jet, $500,000 vacations, and 60,000-month for staff. she disclosed that ken made $100 million a month last year, so he could afford to pay more. ken argued the prenup should be valid, but he had two incentives to settle this with a payout. first, he wanted to prevent more unwanted publicity around his personal life.
2:54 pm
and second, to prevent anne from getting custody of the kids. the two will have joint custody as part of this settlement. the evidence here is so far that this is not affecting ken griffin or citadel at all. in fact, brian and melissa, they are up 13% year to date. citadel and ken having a very good year despite what some people say could be a distraction. now it's over. >> i wonder if we did the my first car thing with their kids, it would be like my first car was a jet. >> my first car that came with a driver. >> thank you guys. >> the dow is gaining again, so how can you keep making money in this market? they're suggesting betting on impulsive shoppers with bad knees. we'll explain, next. o be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done?
2:55 pm
(patrick 2) that's the kind of control i like... ...and that's what they give me at national car rental. i can choose any car in the aisle i want- without having to ask anyone. who better to be the boss of you... (patrick 1)than me. i mean, (vo) go national. go like a pro. want bladder leak underwear that 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
2:56 pm
so wi got a job!ews? i'll be programming at ge. oh i got a job too, at zazzies. (friends gasp) the app where you put fruit hats on animals? i love that! guys, i'll be writing code that helps machines communicate. (interrupting) i just zazzied you. (phone vibrates) look at it! (friends giggle) i can do dogs, hamsters, guinea pigs... you name it. i'm going to transform the way the world works. (proudly) i programmed that hat. and i can do casaba melons.
2:57 pm
i'll be helping turbines power cities. i put a turbine on a cat. (friends ooh and ahh) i can make hospitals run more efficiently... this isn't a competition! look at this collapse in go-pro. the stock is not only at a 52-week low, but this is an all-time low in the stock. tonight at 5:00, is this trade so bad it's good? the low down on go pro. >> like michael jackson good. bad because i'm good. >> look forward to it. bad knees, couch potatoes and big oil. three places maybe you should
2:58 pm
invest. patrick, thank you both very much. what are same ome of the names stocks you like? >> more so than sectors, u.s. centric revenue screams. most of the missives you've seen have been from overseas. i really think concentrating on names, like for instance home shopping network, almost all of its revenues and earnings come from the u.s.-based sources, and the u.s. consumer is looking pretty good. i think it's been hit harder with that discretionary look. >> patrick, listen. bp, big oil has been slammed lately. are you kind of holding your nose on this one or do you really feel it's a fundamentally good story that's just underpriced? >> we think this is a
2:59 pm
fundamentally good story. when value investors have their opportunities. bp right now, north of a 7% yield looks very cheap. there's been analysis run that another company bought them, they'd be incredibly creative. so we think oil is going higher the next two to three years. you've got that kind of timeframe. we love the things that other people often hate. we see some great opportunities right now. that was sort of the fake joke that we made. >> we like self-help stories. this is the merger of zimmer and biomet earlier in the year. it took too long to close. the stock's at 94. i think it's been unduly damaged with the health care sector.
3:00 pm
we think there's a lot of upside. >> all right. guys, thank you. we appreciate it. >> thank you. >> all right. big show tonight with go pro. look forward to it. "the closing bell" starts right now. welcome to "the closing bell." i'm michelle caruso-cabrera in for kelly evans. >> welcome aboard. i'm bill griffeth. another wild day on wall street. tremendous volatility again and opening with a bang. stocks have been mounting a comeback again this afternoon. stick around to find out what happens this last hour of trade. >> constellation brands one of the big winners today.


info Stream Only

Uploaded by TV Archive on