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tv   Power Lunch  CNBC  October 9, 2015 1:00pm-3:01pm EDT

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have to say about growth through acquisition, growing industrial and health care businesses, growing the oil services businesses, some big divestitures coming from the baker hughes deal. let's see if they talk anything about that. >> have a great wieekend. >> you, too, judge. >> "power lunch" begins right now. scott, gentlemen, thank you very much. and welcome to "power lunch," everybody. along with sara eisen, i'm tyler mathisen. mandy has the day off. we're all at the nyse today. >> how lucky is this? >> i don't think we've ever stood this close together ever. >> it's been a huge week for equities, the dow on pace for its best weekly gain since february. the s&p on track for its biggest gain of 2015, so will the rally keep on trucking? >> and we've got a great mystery chart for you. check this one out. it's a sector, and it's up more than 7% this year despite the recent volatility. how high analysts believe this
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group could go from here. >> and can you believe it? check out oil and gold over the past month. gold up 5%, oil up 12%. is the commodities crush finally coming to an end? we'll look at that. >> but we start with the stock market. earnings season front and center for investors. the big banks kicking it all off. dominic chu is here with what investors need to know ahead of next week. >> we have a big week, 33 s&p 500 companies or thereabouts will report next week. let's take a look at the expectations because they're not very good. overall look at the s&p 500 year-to-date. down 2.5% we'll call it. 2.5%, and then over the course of this time we want to make sure earnings could be a catalyst. on average according to thomson reuters, if all analyst estimates come to fruition we could see an earnings decline of around 4.5% over the same quarter last year. the best performers in terms of earnings growth anticipated to
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be telecom stocks. they're a small sector, nonetheless 11% gain. consumer discretionary, retail side of things, also an 11% gains. as for the two that will hold things back, materials. a 17% forecasted decline in earnings, and then energy stocks, of course, we know the story down 64%. these are the sectors to keep an eye on. as for which stocks are going to be huge, take a look at the calendar because on tuesday dow components like johnson & johnson, jpmorgan chase, intel. wednesday, a lot of big financials, bank of america, blackrock, citi and goldman on thursday. ge on friday. a lot of dow components, 33 s&p 500 members, it's going to be a busy week and a lot of guys are expecting at least a little bit of movement around the stocks around earnings. >> you bet. it is going to be a busy week, and we will be all over it. a monster week this week for oil. west texas crude and brent up about 10% this week alone.
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prices now climbing to the highest levels since july, close to the best weekly gain since 2009, but will oil keep on going? jackie deangelis speaking with traders at the nymex. what are you finding? >> that really is the question. where do we go from here? you take out the crystal ball and let me know what you think. on the bullish side, russia, syria, iran, it's a messy situation in the middle east. it could increase in terms of the tension over there. having said that, saudi arabia is on the other side of this. are they preparing a counter offensive here? that's a question to consider. and can saudi arabia talk to russia about oil if they're at odds over the issue in syria? having said that, the sentiment on the floor today is not to be short oil going into the weekend. the bearish case here, goldman sachs rei was rating it thinks oil will stay lower longer and we are seeing production decline this is the united states but they're slow, they're painfully slow. having said that, u.s. inventories expected to build
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over the next few weeks. this is a seasonal pattern we see, and refinery run rates are down. refineries are using less crude to make product right now. so with that and global growth concerns on the table as well, this could go either way. back to you. >> all right, jackie. thank you very much. stocks, the three major averages now just a little negative as you see right there. there's the s&p off about 1 point. if the dow closes higher it will be up for a sixth straight session, the longest winning streak of the year. let's get to trading action. mary thompson is here on the floor. >> it's an interesting session. we have moderate volume, big week. we have a mixed picture in large part because energy which has been the top performing sector this week is lagging, and it was higher earlier in the session and then turned lower. let's look at a chart of the s&p 500 because as tyler said, it is lower now. it hit resistance at 2020. there we go. there's the s&p. at 2020 earlier in the session, and since then it has been lower. technical resistance there, a
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rejection and the s&p has turned lower. energy, of course, as i mentioned, a laggard today. industrials, the second best performing sector on an up week continue to move higher in large part because of the strength we are seeing in airlines today. airlines getting a boost from the very positive forecast that was issued by united airlines despite the continued gains in oil with oil above $50 a peril. take a look at the airlines. they are all higher. delta the worst performer up 2.5%. all of this is translating into further gains for the dow transportation average which is having its best week since 2012. >> a lot of indexes having very good weeks. >> and holding the gains. >> dominic chu, news alert. >> baker hughes north american rig counts out. in terms of u.s. oil rigs, with he have that count now down nine to 605 rigs. again, u.s. oil rigs down nine this week to 605.
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total u.s. rigs down 14 to 795. as for the same time last year, the u.s. rig count is now down 1,135 rigs from the same time last year. oil rigs are down 1,004. of that 1,0004 lower for oil rigs than last year and canadian oil rigs up one to 180 total. another decline, this time down nine for u.s. oil rigs to 605 total. sara, back over to you. >> wti holding on to its gains. thank you, dom. to the dysfunction in washington, d.c. the race to assume the third most powerful position in the country, yes, i guess it is, thrown into disarray after house majority leader kevin mccarthy dropped out. so where do we stand on this question right now? chief washington correspondent john harwood joins us with the latest. >> we stand in the same place as yesterday. the race will go on for a while. republicans got together this morning. they do not have a consensus candidate yet. paul ryan is the one that most
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members are leaning on trying to get into this race. they think he can get the 218 votes he needs to be elected house speaker on the floor. he continues to resist. and the underlying problem isn't the identity of the individual who is the speaker, it's being willing and getting the resistant bloc of conservatives in the house to be willing to compromise and do the things that a governing party has to do to govern. charlie dent, a moderate from pennsylvania, made that point this morning. >> the big are chger challenge do we change the underlying political dynamic that got us in this position in the first place. no matter who we put in the chair has to figure out a way to change the political dynamic. that's the harder question. anyone who is thinking about becoming the next speaker understands that instinctively. >> the example is paul ryan should he take over the speakership is going to be faced with the obligation given the
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fact we have a democratic president, we have significant number of democrats in the senate who can require compromise and concessions. paul ryan made a deal with patty murray on the budget a couple years ago. conservatives didn't like that deal. they still like paul ryan, but they have to get used to more deals like that, and that's what charlie dent was referring to, guys. >> talk to me a little bit about the possibility. it does sound as though paul ryan right now is the person who could probably attract more than 218 votes. he would be in a very strong position, would he not, to say to both factions within the republican caucus, if you want me to do this, you follow me, it's my way or the highway with you guys. he has some negotiating power, doesn't he? >> well, he does. and if he can do that, that would be a huge service to the republican party, but the faction we're talking about has not yet shown the discipline, the maturity to play with others
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and to figure out how to govern, so paul ryan's ability to even extract that concession would be severely tested. as i said, if he can do it, it's more than john boehner could do, it's more than kevin mccarthy could have done. >> john, thank you very much. cnbc will host the next republican presidential debate. it is in colorado on october 28th, the same day as the next fed meeting. much mo talk about, your money, your vote. >> the emerging markets slow down and the anemic recovery a big focus for those gathering in lima, peru for the imf world bank annual meeting. geoff cutmore is live in lima for us. geoff? >> reporter: i think the challenge at this meeting is for the markets to work their way through the series of down beat comments we're getting on the economy. the latest to add to these, the german finance minister saying
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that the emerging market risk potentially could drive german growth rates lower. they think they'll get 1.8% gdp growth this year, but he's acknowledging that china and other emerging markets could potentially drive that rate of growth into a slower phase here. before that we had jack lew -- >> geoff, we're going to have to cut you off because we have some breaking news here. fed headline. steve liesman on the floor with details from chicago fed president charlie evans. >> speaking in milwaukee, wisconsin. charlie evans says it will be appropriate for the funds rate to be below 1% at the end of 2016. doesn't say exactly when he would want the fed to hike rates but he favors a liftoff, he says, later than his colleagues and he wants more confidence that inflation will rise before hiking and the aren is because he's concerned about china, the stronger dollar and the commodity downdraft and he thinks the inflation headwinds won't ease until 2016.
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as you know, i got to talk earlier today with bill dudley, and the question people want to know is what is it going to take to hike rates and the answer is actually pretty simple. what it's going to take, is for the committee consensus forecast to come true. what is the forecast? the job market will improve and inflation will stop falling. under those circumstances, says bill dudley, in our exclusive interview, he would be in the camp of those who would hike rates. >> based on my forecast, yes, i am, but it's a forecast and we're going get a lot of data between now and december, so what -- it's not a commitment. so if i say i think it's likely this year it doesn't mean i'm committing to doing it this year, it's based on my expectation of how the economy is likely to evolve. there's a risk the economy involv evolves in a way i don't expect. >> dudley's big concern, china and emerging market economies dragging down u.s. inflation.
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less concern though about the affect on u.s. growth. he was willing to look past the recent weakness in the job market. an interesting bit of sound from him here. >> it was definitely weaker, but at the same time if you get 150,000 jobs a month that's sufficient to push the unemployment rate down over time. it's important not to overweight one payroll employment report. >> last bit is he added the current market volatility around fed policy pretty much to be expected given how tied policy is to the data. on the possibility of a government shut down, he said, look, i think cooler heads are going to prevail but it's crazy to think about not paying the government's debts. >> when he said there will be a lot of data between now and december, i heard that as saying definitively october is off the table. >> even though he would not say specifically -- >> were you like a literature mageer? >> we try to take it apart.
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>> he was definitely less high on october, but, look, there are the two jobs reports and i would think that two jobs reports could really wipe out one weak one which is what we had. >> steve, thank you very much. steve liesman. commodities crush, is it finally coming to an end? plus, a big week for stocks and a number of sectors are on the move. dominic chu is on that story for us. >> tyler this, sector here, the mystery chart, is the best performing sector in the s&p year-to-date. it's the fourth biggest sector in the s&p. we'll have that and more coming up after the break so keep it right here on "power lunch."
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welcome back to "power lunch." walmart is naming bret bigs the company's new cfo after the former cfo announced he would retire. that stock is up 3% this week. pacific crest beginning coverage on three big media stocks. 21st century fox being initiated with an overrate weighting while cbs and viacom initiated sector come or hold. >> there's currently no licensed vaccine or cure for ebola. that stock is down 9%. before the break we showed you our mystery chart, a sector up 7% despite the volatility
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over the last three months and that sector is consumer discretionary. which stocks are taking that group higher and can the run continue into the end of the year in dominic chu takes a look. >> seasonably strong, that's what a lot of people say about the stock market, but certainly for a lot of retail names investors are focusing because it's the holiday season coming up. if you look at the s&p 500 versus the consumer discretionary sector overall, you can see the orange line, consumer discretionary, if you look at the winners, they're not just retail. names like netflix, up 136%. people buy their online dreaming products. amazon.com, up 74% and under armour making athletic apparel we all buy, up 50% here. as for the stocks that have been dragging things down, you have wynn resorts down 50%. we know about the china -- macao
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angle there. and michael kors on the fashion side down. very much about those individual stocks. coming up in the 2:00 p.m. hour we'll have another mystery chart. this is the second best performing sector in 2015 so stay tuned. that's still ahead. back over to you. >> good tease, dominic chu. we'll stick with this consumer discretionary theme. how should you play the sector in andrew berkeley is a managing director with oppenheimer. i understand you like consumer discretionary but the point from what dom showed us is not all consumer discretionary is created equally. look at gap september numbers disappointed. where are you seeing opportunity in this group. >> completely agree. it's a very differentiated sector from autos, housing, retailers in there, but the general driver of the sector performance all year is underlying consumption and the u.s. consumer is benefiting really from three big macro trends, lower commodity energy
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prices, a stronger dollar, which is really not hurting them, most sales for consumer are more domestic, and the seasonally strong q4 will be a good opportunity. we brought a couple ideas from retailing, restaurants, and also one from the more specialty retail as well. >> can you name some names for us? >> sure. we maintain a list here at oppenheimer we call triple play. the idea is outperform rated by our fundamental analysts. amazon, which has been a leader in that group, would fit that profile very well. turned into more of an earnings story, earnings revision story this year as they have been delivering. pure play on e-commerce and cloud storage. so we'd stick with that one. in the restaurant space we like chipotle. very tied to employment growth, so stronger employment is good for restaurant stocks. and the third one we have is you will thaulta. a good pure play on growth and a specialty niche play.
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>> i guess the pushback on the whole idea, andrew, is that job growth is slowing. we saw that in the last two months of the employment data, especially that revision downward for august, and wage growth has not really picked up in any meaningful way. so why does this group continue to be a standout for you? also the cheaper gas savings, we haven't seen them get spent like we were expecting either. >> it's a typically an early cycle play but the difference between this cycle and most business cycles, it's been an elongated cycle. the longer the fed keeps rates low, it will keep the retailers and consumers doing well. the other point is on a relative basis compared so some of the internationally exposed companies that have a lot of dollar exposure, these are good relative plays as well. if you look at where the consumer's basket is, two-thirds of spend something in essentials, housing, autos. gas is offset by things like
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restaurants, movies, short-term items. >> on the plus side we did see good earnings from pepsi and nike so far. >> it's going to be the earnings leader in q3 up about 10%. >> andrew burkly, thank you for joining us from oppenheimer. >> thanks very much. check out gold and oil over the past month. they've been rallying, old up 5%, oil up 12%. is the commodities crush finally coming to an end? morgan brennan taking a look. morgan? >> well, that is the big question and it is certainly fueling quite the debate. we're going to drill down into the latest data on the commodity complex when "power lunch" returns. stay tuned.
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and the next great idea could be yours. welcome back to "power lunch." i'm tyler mathisen. you know, commodities have been crushed this year. it's been an ongoing story but some have been rallying lately. gold and oil both coming back over the past month, so is the commodities crushing -- crush coming to an end? >> commodities have been getting crushed but we've see a rally this we're. glencore will cut a third of its zinc production. they are the world's largest zinc miner. zinc jumped 10% on the london metals exchange earlier today. it was the highest one-day gain in five years. nickel and copper also rallying, each gaining a 3% on the lme.
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some analysti beginning to say supply corrections may be beginning to manifest. we have seen headlines around output continuing to be cut. alcoa reporting disappointing earnings but lowering its outlook and forecasting a supply deficit in 2016. executives there saying there's been no outflow of primary metal from china which has been flooding the global market. aluminum prices a laggard this week. they're down 1%, but certainly another metal to watch. and from a broader commodity complex perspective, pimco now arguing the worst is likely over as producers cut output and capital expenditures though the investment firm warns excess inventory levels could prevent a bigger price prebound. >> gold has had a pretty good week. in fact, gold had a good day as well, up another percent or
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$12.20. we've seen a weaker dollar this week on the idea that the federal reserve liftoff or first interest rate hike is going to be pushed back even farther. that hurts the dollar and it helps gold. you're seeing it across the mes precious metal space as well with silver higher. but the real stand out of the day which morgan mentioned was zinc having its best day ever. >> who would have zinced? california dropping coal. the country's two biggest pension funds there forced to divest their coal assets. what this move may mean for the sector and will other states follow california's lead? stocks, well, they're pretty steady right now. but the dow is on pace for its best weekly gain since february. s&p on track for its biggest weekly numbers of all year. we'll tell you about the stocks that are leading the big comeback after this.
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hi, everybody. i'm sue herera. defense secretary ashton carter holding a news conference in london. he described russia's strategy in syria as fundamentally flawed and one that will only inflame
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the country's civil war. people in south carolina's low country are preparing for the worst after days of flooding across the state. some of the worst flooding is still expected to be in georgetown near the coast as floodwaters make their way to the ocean. republican presidential hopeful ted cruz campaigning in new hampshire this morning. he's reported raising over $12 million in the third quarter of this year bringing his total to $26 million since announcing he's running for president. that's second only to ben carson among gop candidates who have reported so far. and yahoo! is banning employees from playing in fantasy sports contests. the move comes as fantasy site companies have faced scrutiny over how much internal data its employees have access to. an estimated 56.8 million people are playing fantasy sports this year. you're up to date. that's the cnbc news update this hour. back to you guys down at the ny nyse. >> thank you very much, sue herera. want to show you what's happening with the major stock market indices.
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we're negative on the dour and the s&p just barely though. really small moves, fractionally higher on the nasdaq which is masking what has been a very strong week overall for stocks. >> very good week for stocks. and it's interesting the dow just turning negative. it has been up most of the session but what we're seeing today is a change in leadership. energy was among the best -- it is the best performing sector this week taking a breather today as some investors take some money off the table. so energy is lagging. materials though and industrials continue to lead. let's take a look at some of the dow movers in today's session. goldman sachs lower ahead of its earnings report next thursday. intel and exxonmobil also weaker. apple one of the few winners among the dow 30. the week's best performers, dupont, ge taking a breather today, but it has been up throughout the week on the news nelson peltz taking a $2.5 billion stake in the company
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urging the can. to take on some more debt in order to buy back more stock. chevron strong this week because of the strength we've seen in energy stocks and the strength in oil which is above 50 a barrel. the week's best performer among the s&p 500 members is freepo freeport-mcmor freeport-mcmoran. up over 20% in a week where carl icahn got a couple board seats and the company is considering spinning off or selling its energy business. again today a little weaker as investors lock in gains. today the gap is one of the weaker performers. coming out with disappointing same-store sales and announcing the kre tiff director of banana republic which is seeing poor same-store sales is leaving the company. >> didn't they just lose the head of old navy who is going over to ralph lauren. >> yes. >> old navy has been the bright spot. >> more bad news for the gap today. >> lots of activist stories this
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week. >> lots of action in the market this week with the ge stuff and everything else. mary, thanks very much. let's go uptown and check in at nasdaq with bertha coombs. >> uptown they say october is often the time when we put in bottoms. today we're seeing the strength in large cap technology, although it's down today. when you take a look at chip stocks, they are among the worst performers today. they're among the best performers this week. the philadelphia semi-conductor index is up about 4% or so. biotechs, again, a different story. today they're fractionally higher, but the nasdaq biotech index is actually the loser for the week down about 2.5% as pricing issues and regulatory risks continue to weigh on sentiment when it comes to that sector. tesla shares have come off their lows but they're getting hit on a downgrade over at bark clays to underweight. the analyst there not seeing the model x driving much in terms of new sales volume but that's not
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stopping elon musk from throwing a little shade on apple's ambitions to make an electric car. saying apple is tesla's graveyard saying the analysts who can't make it at tesla go there to bury their careers. ouch. >> fighting words. it has been a solid week for stocks. the dow on pace for its best weekly gain since back in february. s&p 500 on track for its biggest weekly gain since last december. so what's leading the rally? dominic chu knows. he's back with more. dom? >> so mary mentioned those energy stocks. they have been some of the standouts both to the up and down side. but if you talk about the s&p 500 we say tracking for the best week since the week ending december 19th, so you got to go back to last year to find something as good as what we've seen. the s&p gained 3.5% just so far this week here. so the s&p 500 on a year-to-date basis down 2.5%. as for energy stocks, xle, the ticker of the etf, one of the main ones that tracks the energy
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sector, tracking for its best week since the week ending december 19th going all the way back to late last year when it gained nearly 9%. the energy select spdr etf moving higher as well. if you look at one more sector to watch or industry group or market cap, check out the russell 2000. tracking for its best week since the week ending october 31st, so you got to go back further into the fall of last year. the russell back then gained 5%, but still small company stocks are showing a bit of a sign that maybe they have some life ahead of them. energy stocks as well. we'll weight to see whether they can hold the momentum as we head towards this all-important fourth quarter. back over to you guys. >> thank you very much, dom, for setting that up for us. the market gearing up for a slew of earnings and ipos next week. what should investors be focused on? joining us for strategy tips here nancy tangler chief investment officer of heartland
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financial and hugh johnson, chairman and ci o at hugh johnson advisers. what strikes me is the market was brushing off disappointing news from alcoa, disappointing news from gap, and seems very focused on the fed and this idea that it's pushing out its interest rate liftoff next week. do we switch that, do we turn back to the corporate story with earnings kicking into full gear? >> yeah, i think so, and i think so primarily because really the key to the whole market is, yes, in time the fed is going to start to raise interest rates. there's going to put a little downward pressure on price earnings ratio. that's built in. the real question is what's going to happen to earnings not so much in the third quarter but what's going to happen to earnings as we look to 2016. that's why we're going to focus to earnings. we're going to look for some guidance on 2016. believe me, we have such a low growth rate of earnings, it's going to be negative in the third quarter, but trying to make the case for anything but low single digit earnings growth in 2016 is very difficult, and
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if you can't do that, you cannot make the case for a very significant, i'm talking about real significant 10% rise in stock prices. so earnings, earnings, earnings, that's going to be the key. >> and it sounds like guidance will be the key. nancy, what are you looking for in terms of earnings and at some point are expectations so low going into this period we could see some nice surprises? >> i do, sara. i think this market has digested a lot of shocks. we've all forgotten about greece at this point, china, the dollar, oil, and this fickle fed. so we're in a position where value stocks have underperformed growth stocks by over a percent. in my 30-plus year, i don't remember, there may have been, but i don't remember a period like that. so we're looking at guidance certainly but we're looking at valuation. and there are a lot of attractive companies with dividend growth potential that i think are once in a five year, not once in a generation, but
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once in a five year opportunity. >> i want to talk about the opportunity in large biotech and pharma, nancy, because this has been a sector that's been beaten up, it hasn't joined with the weak rally. how do valuations look in the group to you and when would you start looking to pick some up? >> so we've started to pick away at some of the large biotechs, amgen and gilead. you know, i was investing when we were faced with the daunting hillary care and the political pressure on drug prices in the early '90s, and that was a great opportunity to buy pharma. so when you look from a valuation standpoint, amgen, gilead, merck really interesting times to be taking a look at companies that are paying above market yields and are also trading at below market pes. amgen at 13 times next year's earnings. that's compelling. so we're beginning to pick away at those stocks. >> all right. thanks for the tips, guys.
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interesting conversation. good to see you both and be sure to go to powerlunch.cnbc.com right now so see why hugh says now is the time to invest in big oil. they both like some beaten up sector approximates. >> you start to think about 2016 and the comparisons year-over-year in energy, materials will start to look a little better. who knows. maybe the market is already seeing that. california dropping coal. first state in the nation to divest its coal assets in the pension funds out there. what does it mean for the sector? speaking of sectors, health care the biggest gainer today. energy the biggest loser. "power" returns in two minutes.
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wells fargo to overweight from neutral citing more share buy backs, an attractive dividend yield. and the california coastal commission has approved a $100 million expansion of seaworld's killer whale tanks. additionally the commission has banned the company from breeding any killer whales in captivity. it's very controversial. check out orange juice futures and prices right now. prices actually spiking higher as you can see. up almost 5%. the usda says florida's orange crop will be down 17% from last season partly due to severe disease of the fruit. prices are down 16% this year though. good news i guess if you're buying orange juice, tyler. >> thank you very much. after yesterday's bombshell decision by kevin mccarthy to withdraw his name for the position of speaker of the house, the question on everybody's mind is, who will be the next speaker and can anyone unitthe divided house?
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joining me now from washington is congressman scott garrett, republican from my state of new jersey, a member of the house finance committee and a founding member of the freedom caucus. congressman, welcome, good to have you here. thank you for breaking away from the business of the house. >> sure. >> i'd like to get you to react to something your colleague darrell issa said on cnbc about the drafting of paul ryan for speaker. have a listen. >> when they float paul ryan's name, i think all of us get excited paul could bring us together, but candidly paul hasn't yet said he'll do it. a lot of people are still urging him, and hopefully this morning we'll find out. >> if mr. ryan agreed to run for speaker, would you support him, would the freedom caucus likely support him? >> as of right now i have not heard any word from paul easterly way except perhaps he wants to go back and talk to his family about it, and i'm really encouraged by the fact that the media is paying so much attention to what we've done over the last 12 hours.
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the real focus and the real frustration we've had in the house and your point was well taken when you said operations in the house continue on today despite the fact we have this uncertainty is the real uncertainty across the capitol in the senate where for the last 12 months we sent bills over there and harry reid has blocked them and i think that's where a lot of frustration comes in the house and a lot of this churning comes. if we could get a lot of financial services bills that languish over there and the appropriations bill that languish in the senate because they won't move on them, i think a lot of this would go away. >> but let me come back to the question, congressman, and that is if mr. ryan does decide that he is willing to put his name in to consideration, is he the kind of candidate that the freedom caucus, liberty caucus, and you could support? >> yeah, i really can't speak for other members of any of the other caucuses, but -- and it's probably really premature because sometimes when you speak in favor of one candidate, then all of a sudden he either gets
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support or loses support, so i don't think that's a good thing to do for him or for anyone else at this point. let him decide what he wants to do, and let john boehner pick a new assume date, if you will, for our election so we can put this all behind us. the other portion that no one is really talking about here is as far as the rules of the house. we just want to move things along as far as the rules and move our bills and get to the business of the day. >> congressman garrett, thank you very much for being with us today. we appreciate your time as always. breaking news that we want to get to. we want to remind you also the next republican debate, your money, your vote, october 28th on cnbc. david faber has some breaking news on dell. >> thank you very much. of course, we've been following the potential acquisition of emc by dell and did want to update viewers on new information that i have received. namely, the consideration that dell would pay for emc. they continue to negotiate at this point, of course, and in
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fact dell is very much involved in trying to get the financing for said dell together in the credit markets. what we can expect to see should the deal be announced in the near term would be a payment of cash to shareholders and a tracking stock of vm ware. that's an important component of this potential deal. 81% of vm ware is owned by emc and sources familiar with the situation say dell would pay crash and a tracking stock, the a stock that would track the performance of vm ware 90% of which trades but which would be controlled by dell in any deal. that together with cash i am told would add up to what a believed to be at least a deal worth $30 a share or more for emc. i have not been able to pinpoint the exactly price and it will move around based on the value of vm ware which has 19% that trades publicly. the other 81% currently owned by emc, but vm ware would be
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controlled by dell and it would potentially benefit from being part of the larger dell/emc as well and a private company. as i said, dell is currently in the midst of trying to put together an enormous financing package for this deal. as i reported yesterday, it would include both high yield and potentially an investment grade secured offering of investment grade bonds as well. many banks involved in that effort, tyler. they are going to be working through the weekend, and we may see a deal as soon as early next week. perhaps not monday, but perhaps in that time frame of let's call it early next week under which dell would buy emc and pay cash and a tracking stock of vm ware to those shareholders who would at some point have to vote on it. it would take some time to get that deal approved but that's where we stand right now. >> as you can see, emc is popping 3% on the new you just reporting. faber moves stocks again. california becoming the first state in the nation to
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divest from coal. hampton pearson has the story live from washington for us today. hampton? >> hi, sara. make no mistake about it, this is a landmark move by california with big implications for investors. now, environmentalists are claiming it's the first time pension funds here in the u.s. will be divested because of climate change. opponents say, however, lawmakers micromanaging state pension fund board investment decision is not good public policy. but yesterday california governor jerry brown signed into law a measure that requires california's two largest pension funds to divest their investments in coal companies by july of 2017. coal investment estimates by calpe calpers, the state investment fund, come in at $100 million but those two funds have combined assets totally $475 billion and, yes, coal has been taking its lumps in the commodities markets.
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the dow jones coal index is down more than 50% in the last six months. now, the head of the pension fund in california says now that the governor signed the bill, they will begin talks with major coal companies about their portfolio holdings. statement from calpers reads in part, quoting now, climate change represents risk and opportunities for a long-term investor like calpers. there is a coal divestiture movement worldwide. new york and massachusetts are considering similar bills and norway recently voted to reduce its coal investments in part of the country's $880 billion sovereign wealth fund. >> thank you, hampton pearson. rick santelli has been tracking the action at the cme group as always. >> what a fascinating story. i'm sorry, i have to dangle with that coal story. it isn't do what you're getting
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rid of, it's what you're going to go to. is natural gas the bridge fuel? have they waited too long? these are going to be big questions. as for the question of the 10 year note yield, the one day tells you everything you need to know. ly unchanged after volatility to the upside in rates, the downside in price. it you look it at a two-day, holding onto the gains. crb best since the end of july and the minutes to the last fed meeting which left a way different impression than we all had on the actual day of the meeting on the 17th. and to both those issues, you could see them expressed in a two-day dollar index. it's definitely under some pressure even with ten-years stabilizing. that's a biggie. a lot of that is tied on the fed and it's also going to put the ball in europe's court if they want to weaken the currency in the environment of a weaker dollar. it shows the dollar index is vulnerable here as its toying with the bottom of recent
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ranges. sara, tyler, back to you. >> here we go again with weakening currencies. we just talked about the d dysfunction in washington. is it changing your investment strategies? we'll ask two money managers. you're watching "power lunch" on cnbc, first in business worldwide.
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at ally bank no branches equals great rates. it's a fact. kind of like ordering wine sara, tyler, back to you. pinot noir, which means peanut of the night. 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. 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!
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i'll show you where we are on the dow. down five points. not a lot of movement. set to turn in its best week in months. in terms of the leaders, we have apple, united hale, a ed healthd technologies. intel, exxon, and goldman sax are the big drags. intel down 1.5%. industrials are the leading sector in general right now. >> thank you very much, sara. halloween just around the corner, and that is good news for one man who has turned his halloween franken fruit, yes, franken fruit, into a booge success. who other than jane wells to cover this story in l.a. jane? >> tyler, these are pumpkin steins. they're pumpkins grown into
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molds and you're probably thinking why hasn't somebody already done that? how hard can it be? turns out it's very hard. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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or the freedom to choose what doctor you want to see. so if you have medicare parts a and b, consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, these let you choose any doctor who accepts medicare patients. you're not stuck in a network, because there aren't any. plus, these plans help cover some of the part b medical expenses medicare doesn't pay. so why wait? call now to request your free decision guide and find the aarp medicare supplement plan that works for you. like all medicare supplement plans, you'll be able to stay with the doctor or specialist you trust, or look for someone new - as long as they accept medicare patients. but unlike other plans, these are the only ones of their kind endorsed by aarp. rates are competitive. so call today.
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and learn more about choosing the doctor's you'd like to see. go long. 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? ♪ the answer is yes, it can. so, the question your customers are really asking is, can your business deliver? i'm melissa lee. on "power lunch," the three things happening right now that
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could point to the start of the great comeback. also ahead, the one stock one analyst says can grow, get this, more than 130%. we'll name names. and can you guess today's mystery chart? it's not a stock, it's a sector and one of the best performing sector this is year. we have the answer top of the hour but first back over to sara. >> it's not consumer discretionary. >> we did that one. >> just in time for halloween, franken fruit is coming to sam's club. who else but jane wells has this story for us. >> these are real pumpkins. they're called pumpkinsteins. they were grown inside a mold, and if you're thinking what took so long? well, it's really hard. listen. >> it's taken about 4 1/2 years. a lot of trial and error. you know, this isn't like a regular part where if you make a mistake you just go and remachine it. if you try something and it doesn't work, you have to wait until next season.
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>> that was farmer tony last year when we first met him and he started selling his pumpkinsteins for $100 a piece to specialty chains along with edible watermelons in the shapes of cubes and hearts. they were such a hit he got a deal with sam's club and while he had to lower his price to under $30, orders have grown from 5,000 pumpkinsteins last year to 90,000 giving him money and leverage to create new products. >> right now we've got a two-piece mold, so you can do three-dimensional things but only with a two-dimensional mold. in other words, if you have something that's got a negative reli relief, a nose that's going to curl under, you obviously can't pull that mold off. well, i have come up with a four-piece mold, so now i can do almost literally anything. >> what a fantastic country we have. he's even making more money for other farmers by leasing out his
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molds for $14 a pumpkin so he can get enough demand. later on "closing bell" what this heat wave does to a pumpkin in a mold. back to you. >> that is -- plastic surgery for pumpkins in california, jane. >> of course. >> very appropriate. >> only there. jane, that is fantastic. i love that. >> they're nicely chiseled. >> been waiting my whole life for pumpkinsteins. >> you look good out there, jane. >> he has been called the steve jobs of the sports world for his brilliant leadership of the world's most valuable sports club. monday manchester united legend sir alex ferguson in studio right here one-on-one on "power lunch." you won't want to miss that interview. that is monday on "power lunch." i am really looking forward to that one. >> that's a good one. >> nice to be with you. have a good weekend. >> come back more often. >> i get to stick around and spend the next hour with melissa lee for the second hour of "power."
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>> my pleasure. welcome to "power lunch." i'm melissa lee. brian sullivan has the day off. tyler will rejoin in a moment. take a check of the markets with two hours left in the session and the week. stocks, oil, and emerging markets all in the green right now and all higher on the week, and that got us thinking, could this be the start of the great comeback? the dow rallying back above 17,000. oil is on track for its best week since august, and we are seeing a big turnaround in the emerging world. the best team of reporters on the planet is in place to break it down. let's start off with mary thompson on the floor of the new york stock exchange. >> the dow is lower but it's been a strong week for the blue chip component. if it turns things around, it would be the sixth straight day of gains for the dow industrials. this week would be its best week since 2000 or its longest streak since 2013 and the best weekly gain for the dow since february of this year. keep in mind, that depends where we end the session today. of course, this week also marked
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its first close above that 17,000 level since august. so what's driving it? well, these are the week's best performers, dupont saying its ceo will be retiring, and even as the company said it would have weak irthan expected earnings for the year, investors like the news there could be a transition in management. it's stock up over 14% this week. ge another strong performer and another stock that investor nelson peltz has a stake in. he also owns a stake in dupont. he took a $2.5 billion stake in ge this week and take a look at where ge ended the week or is ending the week, up 10%. that on news of peltz's investment. and chevron is up over 9.5%. that's a reflection of the gains we've seen in the oil markets. oil trading now below $50 a barrel but it's been a strong week for oil and that's the reason we've seen gains in chevron. melissa, back to you. >> the energy sector up more than 7% this week. mary, thank you. no coincidence oil is on track
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to have one of its best weeks in two months. let's get to jackie at the nymex. >> good afternoon to you, melissa. >> on track for a gain of a little less than 10%. oil prices turned negative after touching a high of $50.92. what drove us higher was concerned about geopolitical issues, russia, air strikes in syria, iran's involvement there, what will saudi arabia do, how will it react? these are all the kinds of psychological things that make traders nervous, and they tend to bid up oil. having said that, we've made this assault on the $50 mark several times. we haven't been able to close over $50 so that's when it's going to be paramount, when we actually do. we'll continue to watch for that. we're trading at $49 and change right now. we got the rig count numbers out earlier. nine oil rigs came off in the u.s. last week. this is the sixth week of declines that we've seen, but production still not coming off in a meaningful way. so having said that, there's still a bearish case out there.
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back to you. >> all right, jackie thank you very much. so the question is where does oil go from here? bill is senior market strategist at ir trader. there's the question, where does it go from here? >> right now we're looking at the market at the $50 level. it failed to close out 3w06 there. this move has been about a week and a half in the making. $47.20 was a key area technically. and then from there we're looking at comments that russia wants to sit down with opec and non-opec producers. this is something that kind of flew under the radar last week a little bit, but this is actually building up to next week's opec monthly report and iea monthly report. these are going to be crucial and we're looking at this as a buy the rumor, sell the fact type of move. we're getting that buy into this and ultimately we think it will be a great sell opportunity afterwards because a lot of fundamentals, especially if nothing has changed yet, a lot of fundamentals remain bearish.
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>> a sell opportunity afterwards. take me out four, five, six months from now. where do you see prices then and what is the derivative implication for oil companies? >> right now we've been saying that the bottom is in, and we still think the bottom is in. a consolidation, even support at $47, if the market holds $47 on any pullback, it could really set up for a move back up to $55, in the mid-$50s before year end. >> bill, thank you very much. bill baruch, we appreciate it. melissa. >> our next guest says this is the biggest investment opportunity in our time oil market. ted is a strategy officer. great to have you with us. you think the gains we've seen so far are temporary and yet you're saying that 2016 we're going to see a turnaround what will be the catalyst for that sustained turnaround in oil
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prices? >> the sustained turnaround is going to be driven by the fact that this is putting more money into consumers' possibilities. it will take time to occur but we should look at the gdp numbers as they continue to come out. and production is going to start declining. oil companies are dramatically can you g cutting their capital spending programs and opec is under pressure to get oil prices higher because of the political issues they face on the domestic economies. >> we have seen oil stocks advance quite sharply this week. the likes of an exxonmobil up 4%. schlumberger up more than 7%. are these gains made in advance of that anticipated 2016 turnaround, sustained turnaround in oil, or is that also fleeting gains for the sector? >> well, there's always going to be near-term volatility based on whatever is going on in the markets on the day, but longer term, these are really gains, and people who have a medium to long-term perspective should be involved in these stocks. >> you like the integrateds?
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>> i definitely like the integrateds. i like exxon. it's a company i've been involved with ever since i started my career decades ago and, you know, it's always done well. probably the best run oil company out there among the integrateds. then i also like chevron. they have a really good dividend, indicated they're going to keep their dividend. they might have some delays here or there in some of the projects, but overall they're going to continue to do well. so the integrateds are a good, safe investment. >> investment opportunity of a lifetime. ted, thanks for your time. appreciate it. >> thank you. the emerging markets also having a solid week with the emerging markets etf, the eem, up more than 6%. let's get to seema mody with more on this breakout. >> a cup you wiouple factors cog to the rebound. first, reduced expectations of a fed rate hike following the september jobs report. that's pushing the dollar lower. good for the emerging markets, particularly those with high dollar denominated debt. the rebound in oil and metals
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markets even as a positive for commodity exposed economies like russia and brazil. both indexes up 3% to 6.5% this week. the third reason is the lack of negative news out of china, which has been closed for most of the week due to a holiday, but that changes next week when we get a read of chinese bank lending, balance of trade, and inflation. analysts say if the data disappoints, it could bring the whole emerging pack down with it. barring developments out of china, a chief strategist says there's value in selectively increasing risk exposure in emerging markets. keep an eye on this pack. >> thank you. let's bring in mark, ceo of morgan creek capital management. mark, great to have you with us, and you say you're aware of a turning point for emerging markets. why is that? is it because the fed will remain on hold longer? >> i think that's the primary point, which is that takes some of the pressure off em currencies and it also gives people some comfort that, you
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know, the slowdown is probably not as great as people thought with the china data coming out. >> let's be real though, mark. i mean, if we're talking december 2015 versus march of 2016 is that enough time? when you're talking about healing emerging markets, aren't we really talking about a commodity turnaround effectively? >> well, yes and no, right? there's certain countries like china and india which actually benefit from low oil prices. we think part of the reason we're so excited about china and india long term is a lower commodity price deck. oil at more normal prices in the $40 to $50 range are very supportive for china. now, that hurts places like russia and brazil which are more export dominated, but they've taken a lot of pain already. the brazilian currency down 40% this year before the last week when it turned around. so you have to look at -- emerging markets aren't a homogeneous thing. they're very, very different markets. >> sure. so where are the opportunities right now then? it sounds like you may be a fan
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of dipping your toe in a beaten down russia or brazil? >> we came out earlier this year with a list of ten surprises, and one of the things we talked about was a lot of the emerging markets were going to take matters into their own hands and their central banks were going to cut rates and create a more stimulative environment. you have seen that in china, you've seen it in india. the china market, although it had the big bubble and drop, is still up over the last year. the india market is looking better lately. even the ruble has stabilized a little bit. so we think, as you said, selectively picking spots where you can find very, very cheap assets, russian assets are really cheap. it was one of our top ten surprises that it would be one of the best performing markets of the year. it's up 20% year-to-date. who would have thought. >> yeah, who would have thought. great call. thanks for your time. appreciate it. >> thank you. we have much more coming your way on "power lunch," including the one chart that shows that now could be your last great chance to lock in your mortgage. plus, we've got a mystery chart,
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a good one for you. can you name it? it's not a stock, it's a sector and it's been holding strong so far this year. first, should the political dysfunction change how you invest? we'll debate that when "power lunch" returns. plus, we've got a mystery chart,
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my name is griselda zendejas. i love working in the salinas area because 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 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. welcome back to "power lunch," everybody. thanks for joining us. i'm tyler mathisen. the drama continues down in d.c. who will be the next speaker of
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the house? who knows. but whoever it is will certainly have to deal with something that has been hanging over the market for the past five years at least. we're talking about the debt ceiling. eamon javers is in our washington newsroom with more. eamon? >> hig tyler. we'll hit the debt ceiling by november 5th. it sets up another big political battle in washington, d.c. i have been covering this for years and sometimes it feels like covering the 100 years war. this is all part of the same fight over the debt ceiling. it began back in 2010 when republicans took the house of representatives. the first piece we saw was on may 16th, 2011, treasury began the extraordinary measures to keep the government funded. then you saw that year on august 2nd, there was a deal reached on the deadline to raise the debt ceiling and set the sequester. that sequester was supposed to be the worst possible case
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scenario that everybody wanted to avoid. well what happened? ultimately we got the sequester anyway. the next thing that happened after the august 2nd deadline, august 5th, 2011, the s&p downgraded u.s. debt, and then on august 8th, global stock markets crashed. the dow was down more than 200 points as a result of that. fast forward to 2013. they ended up kicking the can to that year. in 2013 on march the 1st, no new deal was reached, so we saw the sequester go into effect. that cut spending, and by october the united states government went into a partial shutdown because they were unable to come to a deal. by october 16th they reached a deal that reopened the government, extended the debt ceiling and february 11th of 2014 congress managed to suspend the debt ceiling until 2015. that is why we are where we are. this is a political fight that has been happening since 2010, and all of those years of covering all of these debt
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ceiling crises have been leading up to this moment. it's unclear exactly where we're going to go in november but i wanted to get you the context to see how the markets have been reacteding to this over the years. wall street has been paying attention, but it is a long-running battle. >> very long. eamon, thanks so much for that. eamon javers. should the threat of hitting the debt ceiling change the way you invest? let's bring in larry mcdonald and charlie babinskow. larry, you say we're actually already seeing the impact of this dysfunction in the markets. >> yes. if you look at the short-term debt maturities on t-bills maturing between now, melissa, and the end of the year, we're seeing a spike in yields two, three basis points. on short-term maturities that's substantial.
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we're definitely seeing risk being priced in. >> charlie how do you use this dysfunction or do you just put blinders on. >> i hate to be argumentative but an increase in yields of two basis points is not a spiking. the market is telling you there's no stance we'll have a substantive problem. this is like the batman series at the end of every episode is a cliff-hanger but he always gets through alive. we'll get through it like we always have. we'll have an attempt at reducing spending. i am a bundler for marco rubio so i have an iron in the fight but we are going to get through this. >> larry, i don't want to pit you guys against each other, but why shouldn't charlie pay attention to this beyond the small spike in rates we're seeing. >> two or three basis points is an enormous move in a short-term maturity. you have to know a few things about bonds and that's very important. but more importantly, i think i would agree with charlie on this. what's happened in the last 24
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hours with the -- mr. mccarthy stepping aside and boehner extending his stay, that increases the chances, and korgd to our partner, that increases the chances of a debt ceiling deal, that means boehner will be around to work something out. the other key date a december 11th, the budget deal, and there's not a lot of time. so i see an increase in risk for the budget and a decrease in risk for the debt ceiling. >> at the very least, charlie, should we expect more volatility going into this year and what does that do for that, you know, the fourth quarter rally that everybody is expecting? >> yeah, this is just not going to end up being what drives markets in the fourth quarter. what's going to drive markets is the jooutlook for global growth which is volatile and changing political environment around health care. health care have bes been a ver stable area. now hillary clinton has been talking about her concerns with
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drug pricing, and that sector is now getting revisited. so, yes, it will be volatile around global growth and changes in policies towards health care but not around basis points in short-term fund pentagon. >> how are you nave yatiigating political waters for health care? we don't really know how it's going to result and yet we are seeing the impact sharply particularly in biotech but really across the sector when you look at hospitals or insurers or even the pharmacy benefit managers, and i know you do like cvs. >> yeah. this is what we're debating internally at ariel. first of all, the betting services would say mrs. clinton still has a 40%, 45% chance of being our next president, and if you go back in the history and why hillary care didn't come to fruition, it was because of opposition from the pharmaceutical industry that was very effective in blocking that. so there's a sense among some people that she has not forgotten that and really would use a presidency to come down very hard on the biotech stocks
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and on the pharma industry. >> we'll leave it there. thank you so much for joining us. have a great weekend larry and charlie. washington, wall street, and your money front and center at the next gop debate on cnbc. be sure to catch the republican presidential candidates square off live from boulder, colorado, that's wednesday, october 28th, only on cnbc. ty? >> all right, melissa. still ahead, the one stock that one analyst says has 130% upside in it. we'll name that name in "street talk" ahead. as we head to the break, take a look at some of the stocks that might be in your portfolio. you're watching "power lunch" on cnbc, first in business worldwide.
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might be in your portfolio.
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time now for street talk. the analyst recommendations on the stocks you need to know about. tyler, are you ready? >> i'm so set. >> first stock, tesla. certainly a rough week for tesla capped off by a downgrade today. barclays cutting it to underweight. $180 price target. morgan stanley price cut earlier this week. four reasons to sell the analyst says, the x boost, the shares, the margins, 2015 guidance delivers and tesla energy
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upside, that could be limited. for the week tesla is down 10%. >> stock number two, sun edison. jpmorgan raising the price target to $21 from $19. that doesn't sound like much but here is the catch here, it implies a more than 130% upside. j.p. citing a higher than previously estimated value for the devco business. the stock's overweight rating remains unchanged. >> saying it in french doesn't make the stock decline feel je better. the stock was in the 30s in august. third stock here gap. mkm is downgrading to neutral after disappointing september sells after the bell yesterday. the price target goes to $29 from $40. ouch. the old navy miss goes beyond the old weather excuse and the drag from banana republic will be more severe and last longer than expected. >> a lot of turmoil at that company. number four, edward life
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sciences. cowan initiating coverage with an outperform rating. $185 price target. >> finally our last stock, eli lilly. credit suisse raising the price target to $85 based on a survey it conducted citing growing awareness of doctors of the new drug for diabetes. that does it for us for "street talk." let's take another look at the mystery chart for today. this has been a real stumper. all you guys on twitter haven't guessed much. keep on tweeting. the best performing sector up 26%. that's a good hint. the answer is coming up. and aoil is headed lower. the crude close is up next when
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"power lunch" returns. (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, you...us. (vo) go national. go like a pro.
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here at td ameritrade, they work 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.
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i'm sue herera-here is your cnbc news update this hour. another school shooting to report. texas southern university is now
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on lockdown and classes canceled after two people were shot, one fatally at a student housing complex. a possible suspect has been detained. police and emergency vehicles are on the scene. by a 261-159 vote, the house has approved a bill to lift a 40-year-old u.s. ban on crude oil exports but it's not enough to override an expected white house veto which called the measure unnecessary and argued a decision to end the ban should be made by the commerce secretary. a petition to revive the u.s. export/import bank drew 218 signatures enough to force a vote on october 26th, but it's likely to stall in the senate where mitch mcconnell is opposed. at least ten palestinian tolders were injured in bethlehem.
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that has been where a lot of those clashes have taken place. that is the cnbc news update this hour. back to you, ty. >> thank you very much, sue. big gains for oil this week. sort of losing a little steam today trading about to close now. jackie deangelis is at nymex. >> hi, tyler. slight gains on the day but a near 10% pop on the week, fairly significant here. another assault on that $50 mark. $50.92 was the intraday high. bearish fundamentals persist. the rig counts did decline but traders want to see meaningful production declines as well. expect inventories to probably build next week. refinery run rates are going to stay low. also, growth concerns globally, those persist as well, but don't discount the impact that geopolitical events, tensions in the middle east, can have on oil prices. they took us over $50 a couple times this week. traders think it could happen again. back to you. >> jackie deangelis, thank you. big weeks ahead with data due out, ipos to watch and a slew of earnings. look at the number of banks
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reporting including jpmorgan, bank of america, wells fargo and ci citi. jm morgan kicking off the big bank results. will it set the results. let's bring in jason gold peber. great to have you with us. since the start of 2015 there has been a continuous lowering of expectations for a lot of the bank this is your coverage universe primarily because the fed expectations of a rate hike -- those expectations have been pushed out. is it all about the fed and when they're going to raise rates? is that going to be the key to unlock bank performance? >> it has certainly been a big theme throughout the year. at first everybody thought june, then september, now people are questioning december and perhaps march. the banks followed interest rates. additionally this quarter you have headwinds in terms of fixed income trading underwriting revenues falling off during the third quarter as market
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volatility picked up globally. away from that there are positives, good loan growth, solid expense controls, and the group continues to build capital. you have some downside protection to such time when the fed does eventually raise interest rates. >> do you think there's a shoe to drop, jason, out there in the sector? we're hearing about glencore, for instance, and the concerns about its credit. we don't know exactly who holds that debt, who is on the other side of the trade. i'm wondering if you think any of theba banks in your universe have exposure to that. >> if you look at the capital, the liquidity and how improved the balance sheets are is relative to six, seven, eight years ago, it's all quite manageable. there could be losses, but if you look loan losses are running at half their historical averages, and, you know, it's quite manageable. >> jason, big banks or regional
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banks, which do you like better? >> clearly it's going to be a challenging capital markets quarter but looking out over the next 12 months we'd favor the bigger guys. the regulatory environment is getting a little bit easier as the banks put recent local woes behind them, the negative headlines should dissipate, and plus not as reliant on the whole interest rate trade which has been a challenge over the first part of the year and the valuations are a lot of cheaper. a lot of big banks are trading almost near book value, jpmorgan, citigroup, goldman sachs are trading at attractive valuations in our view. >> i with is the earnings report that will set the tone? >> j.pmorgan going tuesday nigh will set the tone. they go tuesday. wednesday you'll have wells fargo and bank of america, so you really start off with some of the biggest banks and we expect the other ones to show similar general trends. >> jason, going to leave it there. thanks for your time. >> thank you. >> jason goldberg. let's get to dom chu for a
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market flash. >> united airlines is leading an airline rally for the most part. the airline raised its profit margin forecast for the third quarter. now, the increase stems in part from a new credit card graeme for frequent flyers which will provide the airline with some extra revenue dollars. the xal, one of the etfs that tracks it, also up big seeing year 3% gains. now, to put it all in perspective, if you remember, oil prices are fractionally higher at this point. they have been coming down for at least a little bit this afternoon. still though, we're watching oil prices, airline stocks on the rise here. melissa, some interesting moves in terms of the transportation sector. it's been hot as of the last couple weeks. >> it has. dom, thank you. some of the most closely watched names this earnings season will be in the energy sector. three are expected to move more than 20% in the next month. consol, chesapeake and transocean. stacy and phillip.
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stacy, first to you, what do you make of the big moves here, the big expected moves i should say? >> right. so melissa, looking at energy as a whole, yes, absolutely the market is pricing in increased volatility or increased risk premium in the energy sector. in terms of what we've seen for flows, we've definitely seen more protective in nature, not bearish, but protection given some of the recent rallies in the etf level and single stock level. two things influencing the volatility level, one is oil itself. if you look at the options market, we could see moves of 2.5% on a single day at least twice a week. compare that to a year ago where the expectation was for that to happen once a month. now, you mention earnings. this is definitely also a contributor but only on some stocks, not all of them. rig, for example, or looking at a schlumberger, for example, those are pricing in moves typical to what we've seen over the last four quarters. but take a name like weatherford, that implied move is closer to 9 to 10% versus what it's been historically
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which is closer 4% to 5%. oil and then energy on some specific -- the earnings on some specific stocks. >> phillip, given the anticipated volatility, volatility goes up and down, how are you looking at oil right now? >> like stacey says, it plays a big immarket. crude came up to $50. we saw oil prices move 10% higher this week. as well as natural gas at three-year lows. all this volatility wreaks havoc on these particular companies. we've seen deteriorating net income levels, operating cash standard to dwindle. if you see oil prices break out to the upside on that weaker dollar, some of these increased geopolitical risks, you will see oil prices move up, and just that impact right on the bottom line of those companies. >> what's a key level here, phillip? a lot of people were making $51 to be a big one because that's a 200-day moving average. is that one you're watching? >> yeah, absolutely. i mean, if we could jump above that, you will start to see the crb index, which is a basket for
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all the commodities start to rise up. then you'll start to see money managers flow into not only crude oil, unleaded gas, crude oil, natural gas, they will start to flow into the sector. it could be a big benefit for some of these companies having earnings coming out. >> thank you. for more "trading nation" head to trading nation.cnbc.com. you probably got your fancy new card with the chip in the middle, but the fbi says those cards could still get hacked. wait until you hear who uber is blaming for the big breach it had earlier this year. it's a real soap opera. you're watching cnbc, first in business worldwide.
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cards could still get hacked.
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it has been barely a week since the new credit cards with
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chips in them became the new standard, and the fbi said last night that those cards are still vulnerable to fraud. eamon javers is back with that story. hi, eamon. >> follow along with me here if you would because this is a classic tale of how this town works. it involves the fbi, the bankers association, and the national retail federation. a classic washington power battle. so last night the fbi put out an alert to consumers warning them that the credit cards that are enhanced security that went into place on october 1st were still vulnerable to fraud, quote, unquote. here is the alert and what they said is although the new cards will provide greater security than traditional magnetic strip cards they are still vulnerable to fraud. well, what we saw was an immediate reaction from the bankers association which called the fbi to raise questions about this alert. their argument was the alert just didn't make any sense. it was urging consumers to do something they couldn't do. the retailers, however, were thrilled. they said we think the fbi is right on the mark.
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the banks in the u.s. have chose ton implement less protection. this is a big fight over the retailers and the banks over how secure our credit cards will be. the retailers want to go to chip and pin. the banks want to go to chip and signature which is what they imple geted back on october 1st. here is where it gets kind of interesting. just within the last few minutes, we have confirmed with the fbi that they have pulled the alert they put out last night to consumers. the link, if you go to the website where that alert was, is now dead. that alert is now inoperative. the fbi telling us they are not yet prepared to tell us why they pulled that alert or what they're going to put up in its place. so it's not clear where this debate is going to land ultimately, but what we do know is the fbi has pulled an alert that was subject to a heated exchange between the bankers association and the retail federation over credit card security, tyler. >> all right. so we're trying to figure that one out. let me ask a couple questions.
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what are the distinctions between the two modalities you described. and number two, when i used my chip enhanced cards, some places have chip readers but others are the same old read the magnetic stripe reader and that doesn't seem like any improvement in safety at all. >> that's right. the retailers have been going through a big push to get those readers to the store front so when you use your magnetic card it's now a chip enhanced card and that's being read at the point of sale. so the difference is one is called a chip and signature. the card that you got is likely like most cards in the united states now the chip card and you have to sign the receipt for the purchase that you make. the higher standard that the retailers would like to see is called chip and pin just like on your debit card. you put in your card and then you have to type in a secret pin code. they argue that's enhanced level of security. the bankers say, no, that's not necessary, possibly that that's too expensive as well to
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implement, but ultimately this is a fight over who is going to set the security standard in this country and then also who is going to pay in terms of liability when data breaches happen. the fbi stepped right into the middle of this huge multimillion dollar fight last night, and now it appears they're temporarily drawing from the fight. it's going to be curious to see where they come down by the end of the day today. >> in terms of the fight the thing to remember is the retailers are now on the hook for fraud, correct? >> right. a lot of the liability burden shifted to the retailers if they don't put in place the new high-tech readers on their end. the liability goes to them. this is the hot potato, who pays for the cost of the data breaches. it's not the consumers. there would be riots in the streets if they were. traditionally it has been the banks but under the new legislation a lot of liability is pushed off to the retailers. that's why it was an ongoing battle. when the fbi stepped into it, a
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lot of eyebrows were raised about the fbi's tone in this. it semds they were taking sides with the retail federation. the retailers put out a press release trumpeting that this morning. now the fbi has withdrawn the alert and we're in the middle of an only in washington type of battle. >> they really stepped into it. an investigation is ongoing into a big data breach that happened to uber earlier in year and now some fingers are pointing to you uber's biggest rival. >> they suffered a data breach impacting 50,000 drivers and according to reports investigators may have found evidence that lyft's chief technology officer chris lambert may have been involved. the breach had gone undetected for four months by uber. it wasn't disclosed to the public until february of 2015. in a statement to cnbc, lyft denied the involvement of any of its employees saying, quote, uber allowed log in credentials for their driver database to be
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publicly accessible on get hub for months before and after a data breach in may of 2014. we investigated this matter long ago and there are no facts or evidence that any lyft employee, including chris, downloaded the uber driver information or database or had anything to do with uber's may 2014 data breach. uber declined to comment. the two companies are at odds in the ride hailing wars with lyft which is much smaller with $2.5 billion valuation joining forces with uber's biggest chinese rival several weeks ago. uber much bigger, valued at $51. very juicy if true. >> last chance to get your guess this is about our mystery chart. it's not a stock, it's a sector. it's held up better than most this year. we'll tell you what it is and ask an expert if it is worth your money still. that and more when "power lunch" returns on cnbc.
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this is about our mystery chart.
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welcome back to "power lunch." i'm tyler mathisen. time to reveal our mystery chart of the hour. here is what we've told you. it's not a stock.
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it's a sector. and it's a sector that has held up pretty doggone well this year. here to reveal the answer, vanna white, no, dom chu. >> significantly less attractive than vanna white. but thevanna. that mystery chart is the sector that's the sixth biggest in the s&p 500. the consumer staples sector. up 1.7% so far year to date, outperforming the overall s&p. as for the stocks that are really helping to power the way higher, you can see the out performance here, the orange sliding consumer staples, the s&p the white line there. a tobacco company that just really came on the heels of whatever happened with their deal with lorilar. monster bev rench all up 42% here. also as for the ones that are dragging things down on the flip side of the story, keurig, green mountain, whole foods and
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johnson nutrition, those stocks down pretty big as well. consumer staples wants to focus on there. some of these guys do have rather decent sized dividend payments. phillip morris, altria hitting record highs. >> what's the best way to make money in consumer staples? david katz, always great to speak you. you don't expect outperformance from here but aren't willing to go stock picks. >> we look at pe, this is a slow growth group, the companies can grow from 6 to 10%, you don't want to overpay for them. a lot of the things that have done best are above 25 times earnings. we would look at those as a source of funds. the few that you have not done as well, companies like proctor & gamble, pepsi has done okay but still has a lot more left, under 20 times earnings, cvs 19 1/2 times earnings. we get you get the same stability but you have more upside. if you are bullish on the market
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we do think you want to go to other sectors, if you are bearish this will be a little more protective, but don't rely on the things is that worked best up to now. >> are you invested in any of thieves picks, david? >> yes, we have proctor & gamble, we have been buying a lot more down here, it has been one of the biggest laggards in the dow and in this sector. it has a ceo change, we think they're on their way to getting their act together. that's one we put new money into. we also have cvs which has done well for us over time, we think it's ready for the next leg snup for true safety you will look for telecoms, why is that? >> the staples have done well. the ones that have not done well verizon and at&t, they are selling at 12 times earnings, we think they have the same type of economic stability that you get from the consumer staples, but you are getting them a much more attractive price. we think that's going to be the next leg of areas that do well.
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if the market does poorly they should be a lot for protective. even more protective than some of these consumer staples. >> you like financials. why? >> we think financials are doing quite well even in an exceptionally low interest rate environment. they ultimately will raise rates. when that happens the financials are due for a significant leg up. we think the time to buy them is when everybody has decided interest rates are never going up. we think you have a lot of good opportunities here, they've done well for the last two years, they have take an breather, buy into that brooert. we like a jpmorgan, is that want is the most interest rate sensitive company, down from 35 to 28. if you ever anything long tharn a six month time raise is that want is a great trade. >> david, great to see you. thanks a lot. >> melissa, could it soon get more expensive to buy a house? it couldn't get any more expensive. we will tell you why mortgage rates to be on the rise when "power lunch" continues.
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this stock is a real stand out in today's session, united continental shares are up almost 7%. it had a positive investor update, raise a three quarter raise project outlook. we will talk about that tonight especially given the rise that we have seen in oil, if oil is expected to recover what does that do not airline trade? we will talk about that 5:00 on "fast money." two stocks making big moves today, first super micro computer it's a server
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technology company, weakness in europe as well as asia, the stock is down 15%. moving the other direction is helen of troy which makes a variety of home and personal care products, vidal sassoon, dr. shols, the stock is rising, up 6%. it is up more than 50% so far this year, ty. >> mortgage rates historically very low, the ten-year bond, government bond, yielding 2.1%, mortgage rates in that ten year tend to move in tandem. will mortgage rates see a bit of a spike later this year? let's bring in diana olick to discuss. >> ty, they are already slightly higher than they were one week ago. you will remember mortgage rates took a dive last week after that disappointing september jobs report and that sparked monumental jump in mortgage applications both refinance and purchase of 25% at the start of one of the biggest sale weekends for housing long and foster's annual open house, lots of home
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builders holding columbus day sales rates moving higher again. i'm not talking big time, but higher than last week and then you had new york fed president william dudley telling steve liesman is rate hike still not out of the question for 2015, also downplayed the weak jobs report saying you can't go by just one month. what affect will that have on home buyers out this weekend. >> i have been talking to real estate agents and they tell me they expect to see good crowds this weekend. there is still very tight inventory on the market and prices are certainly higher, but they are seeing very strong demand. several surveys in the last few weeks, in fact, have actually showed renewed consumer confidence in housing. while these small interest rate moves don't move the needle that much on a monthly payment, the prospects of rates rising in general does tend to get those on the fence off the fence and into a house. back to you. >> historically, diana, isn't this time of year from october through the end of the year,
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maybe even into sort of super bowl time, isn't it a slow time for mortgage rates, a downtime traditionally? >> it is a very slow time. so this is kind of the last hoorah, the columbus day sale is the end of the big spring and summer markets as people start to head for inside. you do tend to have more first time buyers out in the fall and that's why agents are trying to draw them in before we see rates go any higher. >> all right, thanks very much. diana olick reporting. >> let's get to dom chu for a market flash. >> airlines before, the transports overall briefly rising 1%, continuing to hold above that 50-day average price, the sector up 5% for the week tracking for the best week since october of last year. back then transports gained 5%, still very big move for transportation stocks. >> it's interesting it's on a day when oil is actually -- well, it's been up this week, so the transports moving up as well. well, folks, that will bring us to the close of "power lunch."
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thanks for watching. melissa, always good to be with us. >> that was fun, tile letter. don't go anywhere because our friends over at the "closing bell" are ready to take over right now. welcome to the "closing bell," i'm michelle caruso-cabrera in for kelly evans at the new york stock exchange today. >> and i'm bill griffeth. oil big story this week. our friends at "power lunch" were talking about the commodity is up 9% this week alone. we're wondering if this is a sign of a bottom in crude, maybe even in commodities at some point. >> maybe it's finally turned. some say cash is king. we have a hedge fund manager who says investors should stop sitting on the sidelines with their cash and start looking at companies with strong cash flows. get it? she will explain coming up. >> and she has a name, a good example of one, too. >> i thought -- yeah, she has a name. >> she mass a name but she has a name of a company, too, that she thinks has good cash flow and therefore is a

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