tv Power Lunch CNBC October 27, 2015 1:00pm-3:01pm EDT
i think gilead does well as well tonight. >> gilead, twitter, april snl. >> i agree. gilead. gilead is the best one. >> i don't think twitter matters on the numbers. i think people are going to give them a pass on the management team. gilead, m & a, we'll hear about. that thanks for watching. "power" begins now. >> thanks very much. we appreciate you joining us here for "power lunch". mandy is off today. say sar sarah eisen joining me in just a moment. talks now of a merger that would bring together the nation's second and third largest drug chains. a massive recall from general motors. more than a million cars affected m have been recalled before. check out the nasdaq 100. a percentage point away from record highs.
did you know there are only really five stops powering that index now? we'll tell you about that and more. first, let's check in with sarah. welcome, sarah. >> thank you. it's good to see you and be with you as always. we have to begin with that potential deal between walgreens and rite aid. the pharmacy chain stocks all moving right now. this is just talks. advanced deal talks according to the "wall street journal." >> supposedly they're in talks right now. it had a noticeable infect on rite aid. i want to point out here, put up rite aid intraday here. $6.24. rite aid at $6.24 just about 40 minutes or so ago. and we immediately got halted. and you can see the jump up after the halt came off to $8.51. what's important is walgreens even moved up on this. sometimes the alleged acquirer moves down. that's not the case.
you can see that moved up as well. and here's a surprise. even cvs moved to the upside. you would think this would not be necessarily great news for the competition. even cvs moved up on this. the managers all have different relationships. put up some. it looks like there are bets being made already. i know express scripts has the rite aid business. i think there is concern they may lose the business. so a lot of services and alliance that's could shift around or go away if this deal goes ahead. we've been weak throughout the day. there are two important reasons why we're weak. energy is down. oil is trading to the loaned of the recent trading rates in the low 40s. and we see the transports and
the industrials and the material names weak because we had some earnings reports today where generally the revenue numbers have been very light for some of the big multinational companies that have come out. put up a couple of them. we had cummins. they beat on the bottom line. top line was noticeably light. dupont also top line noticeably on the light side. let me put up what dupont said. it is emblematic of what is occurring. they affirm the earnings. that's why the stock is trading up right now, sarah. they did say because the revenues are weak, they're taking a fresh look at their cost structure and their capital allocation. that's a fancy way of saying they're going to look at jobs out there. that is the concern. they're going to be spending less capital allocation. look at this currency impact. >> this is a big one. >> 72 cents. the company is going to make $285 on the year. that means that -- their earn was have been 25% higher had you had a neutral dollar. this goes to what you and i have
been talking about for weeks now and months. the strong dollar is a very major part of it. i do want to note, orders for a lot of the companies were down. so it's not just the dollar but the dollar is a major factor in why we're getting revenue. >> virtually any company doing any sort of business overseas is feeling the impact and getting hurt by it. big theme. we'll check back with you later. gm shares are taking a hit this hour. the automaker announcing a massive recall this morning. we're talking over a million cars. gm shares down a little less than 2%. the cars were actually recalled before. phil lebeau joins us with the detaflzd details of a recall of a recall. >> that's getting a lot of attention. let's run down the numbers. it is a massive recall. 1.4 million vehicles, most of them sold in the united states. built between 1997 and 2004. the cars can catch fire when oil
due to heartbreaking gets on the exhaust man i fold when it gets hot. there are 19 injuries reported. what's really getting a lot of attention is the fact that 1300 of these vehicles were recalled for similar issue in the past. they were fixed. and yet they caught fire. gm says it is working on a remedy. the company is aware of post repair fires in some vehicles but no crashes or fatalities. take a look at shares of general motors. over the last seven weeks, this stock had a heck of a run leading up to the earnings. today, under pressure down roughly 1%. >> and raising the pay at factories. i want to mention while we have you, ford out with earnings. you've been talking to management. the stock is taking a beating. it was interesting given the strong results by general motors. >> right. they missed by a penny. they came in at 45 cents a share. the estimate was for 46. most of that is because there is some analysts who had the tax rate at 32%. it came in at 33%.
revenue actually came in stronger than expected at $38.5 billion. but when you look at ford, the real question out there is what's going to be happening with margins in north america, particularly when you look at the remainder of this year. they expect margins close to 9%. they're promising strong sales in the fourth quarter. >> it will be a little bit less than what we saw in the second and the third quarter. that's going to be driven by seasonal factors around costs which we normally see go up in the fourth quarter. but at the end of the day, we'll have a very strong fourth quarter. >> shares of ford under pressure, down more than 4% for most of the session today. sarah, a lot of people have been putting out notes today saying in north america, business is extremely strong. you look at what's going on over in asia, china, they came in with a profit of $20 million, well below the expectation of
$177 billion profit. another factor behind ford being under pressure today. >> thanks very much for rounding out the auto news. >> the s&p 500 nearly 50% through earnings season. which companies are winning? which are losing? which are in china? a. head of apple's results later today? seema knows. >> $170 billion of s&p 500 sales come from china. that's why it's such a big part of the earnings story this season, especially given the economic weakness. the question is which companies are winning and which ones are losing? more are losing. take a look at this screen. caterpillar suffering from the drop. construction and money activity in china, wynne resort is seeing decline in casino. and burberry is dropping. it's not all bad news.
nike seeing impressive 30% jump in sales. underarmor was positive. general electric is also upbeat. that suggests you can make money in the country if you focus a bit more on the consumer. mcdonald's, another example posting strong same-store sales growth due in part to the business in china. now our attention does turn to apple. apple made about 30%st total sales in the country last quarter. question is, can it continue to increase market share when it is dealing from heightened competition from a lot of the big chinese players including chow ming. >> thank you very much. so will they or won't they this time around, who's they? that will be the fed. the policymakers who kick off a two day meeting on interest rates today. the latest round of economic data have been sort of weakish. so what is the biggest threat to the economy right now? what are the chances of a recession over the next 12 months? steve liesman is here with the exclusive results of our cnbc
fed survey. >> tyler, thank you. the chances of recession are rising. that is obviously playing a role in the thinking act the federal reserve probably not hiking this week. take a look at our cnbc survey here. 22% average probability of recession in the next 12 months. that is the highest level we've had in two years. you can see it's up four surveys in a row from the all time low, but go back here, you have to go back two years to the debate to december 2012, january 2013 to see another time when it was this high which is 28%. there is that line i was looking for. you can see here it's given off false signals in the past. it's been higher. 28.5% and the worry is certainly. there you can see what's been happening to the forecast for gdp. the year over year percent change is coming down. 2.3% for the rest of this year. just 2.6% next year.
it's important to look back over here and see the hopes had been for a 3% year in 2016. and nearly 3% for this year. that's going away. the biggest threats to the u.s. recovery have nothing to do with the united states. 41% say the biggest threat to the u.s. recovery is global economic weakness. in the number two position, geopolitical risks, 13%. you have to get to the number three spot to find a legitimate u.s. domestic concern and that is slow wage growth. then there say bunch of others that are all in the 8% category. regulatory policies, deflation and higher interest rates. well back in number four there, tyler. so ultimate lit concerns right now are overseas. but they're concerned enough that they're more worried than they have been about recession, probably keeping the fed on the table for this month. >> steve liesman, thank you very much. >> let's get a market flash. >> fairchild coming off an earlier spike. this on a bloomberg news report
saying that st micro is mulling a bid for fairchild. and they're europe's biggest chipmaker. that stock is down by 3%. so again, these chip stocks huge focus over the past quarter or so. now get something more tension on the heels of the headlines. back to you. >> a lot of deal chatter out there this afternoon. thank you. also a lot of earnings today. pfizer, ups, coach among some of the bigger name. the three stocks moving big this hour. we'll take you behind the numbers. what investors need to know to trade these stocks. plus, the next gop presidential debate tomorrow live only on cnbc from colorado. where the candidates stand on america's student debt crisis. that will be a big theme. you're watching cnbc. first in business worldwide. big day?
ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.
welcome back to "power lunch." alibaba is up and beating earnings estimates to day. mobile revenue trip frlg a year ago. spirit airlines getting whacked despite beating on the top and bottom line. downgrading the airline to perform. and a mixed picture for due ponlt. the chemical giant beating on the bottom line but revenue shy
of estimates. getting killed, tyler, by the strong dollar. >> big day of earnings. we have it covered right now. pfizer, ups and courtney reagan on coach. take it away. >> it was a beat and raise for pfizer. they beat on a couple of their big drugs, the breast cancer drug. and also the big pneumonia vaccine beating expectations. also with pfizer, a lot to talk about business development. will we split themselves in half? the company is considering the split if that would unlock more value. as for m & a, they're looking for innovative business and notes that valuations have come down but expectations of what buyers would seek in terms prices haven't actually come down. finally, the ceo of pfizer coming out strongly on the issue of drug prices joining merck's ceo saying they're different than other companies in the industry. they focus on innovation.
they think public policy is squarely on the side of innovation. >> thank you very much. morgan? u.p.s.? how did they do? >> mixed results. earning dz beat. here's why the stock is down. stocks down about 3%. profit and domestic segment fell 1.6%. that was lower fuel surcharge revenue. ground volume declined. and analysts saying there needs to be better growth in domestic. but executives who also mentioned that on the call that the u.s. economy has been stopped in the past quarter, they reiterated full year earnings forecast. they expect that to come in the higher end of previously stated guidance. which brings us to peak season. we also have the holiday forecast from ups. they're expecting to deliver record 630 million packages, that is 10% more than last year. december 22nd is expected to be the busiest day.
60% of the shipments will go to residential addresses. executing, tyler, on the deliveries which tend to cost more than going to businesses is going to be something to watch closely. we need to do that cost efficiently to drive profit avs two really kind of tough seasons. >> you're too young to remember the movie "the graduate." you probably remember the line where he was given the career advice, plastics. i wish someone gave me the advice of cardboard boxes and be able to sell cardboard boxes to ups and amazon and fedex. >> i think you did all right, tyler. >> a lot more money in cardboard. how about in leather goods? >> coach is going through a trance formation. it's a little rocky. at least it looks like there are signs that things are starting to resonate more with consumers. here's a rundown of the first quarter results. better than expect the profit. the slowest revenue decline in nine quarters. and the key north american comps are down 9.5%.
it's the smallest decline in two years and better than expected plus improvement from the prior quarter. now the ceo mentioned continued momentum and that is leaving some analysts to consider that might be a soft reit rags of the company's goal to return to positive come pz by fiscal year end. we'll see if they can do it. coach cut back on discounts and promotions that will improve margins and it hopes to preserve its luxury or premium positioning as a result. the broader issue is the slowing growth in the handbag category. even coach says that the handbag and accessory category overall grew at a low single digit pace during the quarter. that compares to mid single digits last year, high single digits in the years prior. it was a category facing interesting headwinds and coach itself is trying to reinvent itself in style and pricing. >> thank you very much. thank you as well. let's go to sarah. >> we're counting down to the next gop presidential debate tomorrow night on cnbc.
live from colorado, where the candidates stand on america's trillion dollar student debt crisis. plus, check out the nasdaq 100. it's up 10% this year and about 1% or so away from record highs. the five stocks powering the index now. we're back in two minutes. but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... ...in our experience. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence. if ynow's the time to get your ducks in a row. to learn about medicare, and the options you have. you see, medicare doesn't cover everything - only about 80% of your part b medical expenses.
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but did you know there are only a handful of stocks that are fueling those gains? dominick chu is here with the names and more. >> the nasdaq composite and the nasdaq 100, the largest cap of the stocks, if we talk about what is happening overall with the nasdaq composite, we're still maybe 4% away from the record high levels as you can see here. but also if you take a look at just the biggest cap stocks within the nasdaq 100, they're the ones that are going to drive the gains. they're the biggest stocks out there. they're only about less than 2% away from the record highs. so take a look at these. the biggest impact on the nasdaq in terms of the composite and the 100 are the largest weighted stocks. it makes sense. theret most valuable. apple, most valuable company in the world. google, microsoft, amazon, facebook, you can see the weightings there. these stocks when they move have a disproportionate impact on what is happening with the nasdaq 100 and composite. as for which ones are really starting to kind of do well and contribute to the gains, apple,
it's been an underperformer in many people's eyes. it's up 5%. it is contributing positively. but alphabet, look at that. 37%. a huge weighting there. microsoft, up 17%. amazon and facebook, these stocks are holding everything up higher despite the fact that many stocks on the technology and the biotechnology side are still weighing things down. and that's the real story here for a lot of etf investors. if you own that nasdaq 100 etf -- >> it's qqq. >> basically ten stocks are driving most of those gains in that particular area. >> when you look at a stock the size of alphabet and you say they have added a third again to their value this year, that is massive scale. and amazon almost doubling. >> remember last week when you had microsoft, amazon and alphabet adding close to $100 billion in market cap after the earnings reports, you start to see y again, as etf investor if,
you're invested in that qqq, a lot of those gains are driven by just these handful of stocks. and it's important to keep in mind. as traders talk about the number of stocks near 52 week lows that's increasing, it will be interrogatory see how that plays out. >> these are the big dogs that wag the tail. >> sarah? the next republican presidential debate tomorrow right here on cnbc live from colorado. if the republicans are going to address millennials to night, they have to talk about student loan debt. more than 40 million americans have student loan debt totaling $1.2 trillion. and one in five of those loans are actually in default. our sharon epperson joins us live from boulder to talk about the candidates' positions on this key issue. sharon? >> it's not just millennial that's care about student loan debt. it's their families, babyboomers who took out loans to go back to work or to try to get a new job and a lot of the candidates are taking the stage tomorrow night
are going to be asked about this. we're looking at various candidates from senator marco rubio who has been the most outspoken when it comes to student loan reforms. student loan payments were once the single highest expenditure in his personal budget. in congress, he sponsored three bills aimed at student loan reform. none of them made it through congress. he is advocating a change in repayment plans for debt ridden students. we'll hear about that, perhaps. we're going to hope to hear from donald trump who criticized the government for making money off student loans, calling the federal student loan program a profit center for the government. currently the federal student loan program which provides some 90% of all student loans is expected to generate $135 billion in profits for the government in the next ten years. and then on the other side of the argument, there is dr. ben carson who stated his belief in personal responsibility whether it comes to paying for college. he's not advocating for any legislation to make higher education more affordable.
and then finally, chris christie, he proposes refocusing student federal aid to the most needing students providing income share agreements and that's where students can agree to pay for some percentage of the future income in exchange for financing. i'm sure we'll hear about that and much more tomorrow night on this debate. definitely student loan debt when you're at the university of colorado boulder is definitely a big issue that a lot of people care about around the country and right here as well. >> i didn't realize they have the candidates have such different positions and ideas about it. sharon, thank you very much. we'll watch out for that important issue. sharon epperson in boulder. tomorrow's debate on cnbc and also happens to be on fed day and that important fed decision coming in "power lunch" 2:00 p.m. eastern tomorrow. >> what the fed does, of course, affects the bond market in a big way. let's check on it now. a day ahead of the fed with rick
santelli. hi, rick. rick, it's me. let's bring in rick anyway. why not? let's look at the bonds. there you go. look at the ten year note. it's at 2% right now. just a hair above it and the spread there going up to 2.8% for the 30-year bond. prices up to day. yields down just a bit. and that, folks, is your nonsantelli bond report. >> i thought did you a good job standing in for rick there. commodities crushed this year. most of the focus is on oil. take a look at natural gas. prices sinking to new lows. down 25% this year, down 40% in the past 12 months. one of the big nat gas places is duke energy. feeling the pain. that stock down double digits in 2015. fwha but that company striking a big deal this week in the space. duke energy ceo will be joining us on power lunch.
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i had, everyone. here is your cnbc news update. ash carter says the u.s. plans to step up its attacks against isis militants in iraq and syria. he said it is possible that could escalate american action on the ground. he made the comments at a hearing before the senate arms services committee. israeli soldiers firing several rounds of tear gas at a protest rally staged by palestinians in the west bank city of hebron. earlier in the day fighting broke out between israeli security forces and palestinian protesters. a soebing study, caring for a person with dementia costs more in the patient's last five years of life than health care costs associated with other diseases such as cancer and heart disease. >> and president obama welcoming the u.s. women's national soccer team to the white house this morning. the team is being honored for winning the 2015 fifa world cup last summer. he talked about how much it meant to girls and boys around
the country to see the team win the world cup. you're up to date. that's the news update this hour. back to you, sarah. >> thank you very much. taking a look at the markets. stocks are off session highs. the fl federal reserve kicks off a two day meeting. what will propel the market higher or lower? earnings or the fed? joining us to discuss this market action, quincey crosby at prudential financial. quincey, stocks are down. the dow is down 54. s&p 500 is down .5% s that important that we're able to hold the gains of recent weeks and the month of october which is quite strong? >> yeah. absolutely. especially after that really dramatic run up. it's amazing the market was flat yesterday. today it is kind of flat. you would expect a bit of a pullback anyway. a little bit of a consolidation until we get through earnings and hear what the fed has to say. so it's a pretty good sign. but the market as you pointed out earlier, there's not a lot
of breadth in this market. that's what we need. we need to see broader participation on the upside. >> bob, you're positive on the markets. i'm looking at the sectors you like. you are positive because of earnings or are you positive because you think the fed is just going to push out the interest rate increase even longer? >> i think it's the latter. i think what you're seeing is a market that continues to trade on cheap money environment. i think this lasts the next three to six months then we can possibly run into some headwinds going into next year. first of all, we've had gentleman pavenlt we'japan and the ecb talking about or lowering interest rates, putting more additional money into the money supply. i think that's what's going to continue to fuel this rally. i think there's going to be a lot of portfolio managers that are underperforming and they have to get into the stocks and the market is going to move higher into year end. >> if it is fed driven, not expecting any major change in policy tomorrow, we'll get a
statement tomorrow. and then december get a news conference. what are the clues are you looking for for the fed and does this bull market, does this rally want to hear good or bad things about the economy? >> i think ultimately for the market you do want to hear good things. you know, we've had nearly 80 stimulus moves by central banks since the beginning of the year. that has absolutely underpinned the markets. but when all is said and done, you need have growth. you need top line revenue growth. and if we get that or guidance toward that, that ultimately is what's going to be propelling the market. but before that, liquidity, you can't fight every central bank around the world. >> absolutely. it was that forecast that helped lead to this big rally. thanks for talking about earnings and the fed. >> thank you. >> be sure to go to powerlunch.cnbc.com to see how quincey and bob are playing global easing. that is the theme we've been talking about. now let's get more on that
potential deal between walgreens and rite aid. the pharmacy chain stocks moving big right now, especially rite aid. absolutely surging. up 37%. bertha combs has more. >> these days it seems if it's health care, there is consolidation going on. dow jones industrial average reporting the two drugstore chains are in advanced talks to merge. both companies have officially declined to comment on that report. rite aid shares spiking on the news. rite aid is the lagger among the big three drugstore chains. itself has integrated a pharmacy benefit management firm in june, digesting now that acquisition. the company said that acquisition represent az milestone as they try to devere milestone. they want to be a acquisition target. rite aid would add regional exposure according to our analysts.
that would help them compete with cvs which recently acquired target's retail pharmacy business. that gives target much greater exposure in the pacific northwest. adding incremental earnings for walgreens if they did tie up with rite aid. walgreens would get more exposure, cvs now dominates. that the tie-up would have implications for suppliers and others as well. shares are higher. they say they could see more business from the consolidation. he thinks this could post some potential risk to the earnings stream, given that rite aid is the second largest customer. so they might lose out in this deal. you can see mckesson shares are lower. express scripts were lower. some thought they might have been in walgreens sights. very intriguing, sayer yachlt. >> thank you very much. i'll pick it up from there. let's take a look at natural
gas. it is down 26% this year and trading at a three year low as we head into the winter heating season. duke energy announcing its plans yesterday to buy piedmont for $4.9 billion. piedmont up 35% on the news. the bet on natural gas comes at a time when the industry is enjoying low costs and booming demand. with us now is duke energy's ceo. miss good, welcome. good to have you with us. >> thank you. it's my pleasure to be here. >> i think a lot of observers see the strategic thing behind the deal. i think some of those same observers wonder why you paid a 40% premium and why you think that premium is justified in a world where natural gas is trading at a three year low. >> so we're really excited about the combination of duke energy and piedmont natural gas. as you mentioned, it's a strategic acquisition for duke. we think it's an extraordinary asset right in our backyard.
as we think about our industry, the consolidation and the importance of natural gas not only to deliver to customers but to generate power is extraordinarily important. so we believe this is a fair price for a great asset. >> we should point out that one of the other deals in this area earlier today -- earlier this year is when they bout agl. they were at 38% z this deal suggest that duke energy is going to be a radically different company five years from now, ten years from now, than it is today in terms of what fuels you use to generate power? >> so we've been on a path of modernizing our generation's sources for some time. as we transition from coal to natural gas, duke has a very diverse set of resources including natural gas and nuclear renewable energy. and we think that trance formation is going to tivenlt we look at natural gas as being the
backbone of the energy infrastructure in the u.s. it will become increasingly important as a source of generation and really for great benefits for our customers. >> can you comment on the sharp slide we've been seeing in natural gas? tyler mentioned that prices are are near multiyear lows. taking especially hard just in the last 48 hours or so. is this a short term move, do you think? what's your outlook? >> you know, natural gas discovery in the u.s. is probably been one of the greatest technological innovations that impacted our industry. and the great supply source that we have has put us in a position where we have stable prices of natural gas and even declining as you mentioned. our customers at duke energy have benefited from those low prices in a period that really fueled economic growth in our regions. >> so to sarah's question, do you think this is a long term trough in prices or something that is more trans itorytransit?
>> we see natural gas being reasonably priced for a long time. there is always volatility in natural gas prices as a commodity. but when we look at the prices in the range of $350 to $450 to 5, we think it's a very competitive fuel source for a long period of time. and i think as you look at the discovery of shale and the puretive production that we've had seven, eight years, there's been demonstrated technology that says we can harvest the gas, explore the gas and deliver it in a very price competitive way. >> so as you're talking about these trends, it sounds like what you're talking about is resetting a price, bigger themes, bigger picture changes in the shale industry. do you expect more consolidation? how do you expect this competitive landscape to shape up over the next year or two? >> certainly in my industry, the utility industry, the case for consolidation remains. we have a lot of modernization of infrastructure to undertake throughout the u.s.
we have the clean power plant setting targets over the next 15 years. and as we look at those capital expenditures, to be able to consolidate in a way that balances lower prices for customers with the need to make investment is what we're trying to accomplish. >> lynn, thank you for your time, lynn good, we appreciate it. just one more day until the republican debate out in boulder, colorado. it is only right here on cnbc. just ahead, what the major candidates say about an issue on all of our minds, almost all the time. taxes. then we'll talk to a member of colorado's small business community, owner of the largest contract craft beer brewing company west of the mississippi and what he wants to hear from the republicans campaigning for president. he wants to hear more beer, come on. you're watching cnbc, first in business worldwide.
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welcome back to "power lunch," transportation stocks are p 3% to the down side. the worst day since late august. all 20 members of the dow transportation index are in the red. jet blue is still the biggest definer today although off of the worst levels today. rail stocks also leading transportation stocks to the down side. 3% lower after that sales miss from the earnings report earlier this morning. all of this, remember, despite the fact that we have oil hitting the multiweek lows at this point. the transportation stocks certainly a focus for a lot of investors that look towards them as a possible leading indicator for the rest of the market and the economy. >> thank you, dom. >> the next republican presidential debate tomorrow on cnbc. so how do the candidates intend to fix the u.s. tax system? key issue that affects us all. john harwood takes a look at the most vocal candidates' ideas on
taxes. john? >> no issue more important to wall street and main street than taxes in this debate video. i break down the major differences. >> if you start with a proposition thaefr republican wants to cut taxes, you stlee are two camps of this tax cut argument, use the current system and just reduce the rates. that's easier to accomplish politically. the other camp said, no, we're going to get rid of the irs and the current tax code and have a new simple flat tax. people in that camp include ted cruz, the senator from texas. simple flat tax. rand paul, also proposes a different kind of flat tax. mike huckabee wants to get rid of the irs and replace it with a national sales tax. on the other side, you've got people who are willing to accept some of the boundaries of the current system. marco rubio wants to take the top rate down to 35%. get rid of capital gains taxes. donald trump says i'll go further down to 25%.
the limitation there is how much can you cut without mablgiking deficit too big? >> and one more candidate in the incremental camp, chris christie. he also wants to cut rates like jeb bush. guys? >> the one thing they can agree on, lower taxes. thank you very much, john harwood. we'll see a lot more of you over the next few hours and days. you'll hear from all of the gop candidate on this issue, the third republican debate only on cnbc. coverage begins at 5:00 p.m. eastern time. you will not want to miss it. tyler? >> all right. sayer yashgs the debate takes place out in colorado. it is a hot bed of entrepreneurial activity including the craft beer business which added nearly $2 billion in revenue and 6,000 jobs in the state's economy last year. matthew oesterman is sooeb of sleeping giant brewing, a
start-up formed nine months ago with no employees. it is now the number one contract brewer west of the mississippi making autumn beers. that is a fast start-up mr. oesterman. thank you for coming in and joining us today. continue gd luck you to. a lot of small business people like yourself are concerned about whether government broadly is helping or hurting entrepreneurs like you. what would you say? >> well, first of all, thank you for having me, tyler. it's an interesting question. i think government is doing all it can. there is certainly a lot to be improved. lately we're in a period of stagnant gdp growth and i think one thing that we would look to hear from the candidates is what they can do to spur that on with some creative ideas as well as -- >> what could government do to
help your business specifically? either state, local, or federal. >> the two things near and dear to me is dealing with corporate tax rates and health care reform. something that i think i would like to provide for our employees as health care. yet in colorado alone next year, health care premiums are set continue to crease 32% and it simply too expensive for 9-month-old company right now. >> you have how many employees now and so if i understand correctly, you would not be required to pay a tax penalty if you don't offer health care to your employees. >> yeah. that's right. we're completing a hiring round right now. that will take us to 17 employees. it's something i discuss with all the guys before we begin. it is something that i would truly like to have in place
yesterday. but it's just, you know, cost prohibitive at the moment. >> yeah. >> if you goat a point of growth where you have to add employees and hopefully you do, do you think that woim tee your desire to hire the incremental ploy ae or not? >> absolutely f we get to that point and not able to afford it yet, it would be a big -- the impact would be severe. we would be ham strung with whether or not we can continue to grow. >> you'd hesitate to add that incremental employee if it meant you would then have to provide or face a tax penalty for not providing health insurance to your entire workforce. matthew, thank you very much for your time to dafrment continued good luck. sounds like you're off to a great start. matthew oesterman is the head of sleeping giant brewing company. if i ever get out there, i'll
join you. >> sarah? >> please do. >> the dow is down 56 points. april sl flattish ahead of the eerngs announcement after the bell. the highly anticipated earnings announcement of the season. we're talking about one apple share holder that he would like to hear this afternoon from the tech giant and why he is staying bullish on apple. that's all ahead on "power lunch."
let's take a look at this hour's "power points." walgreens in talks to buy rite aid. shares of rite aid jumping more than 30% on that news. and fairchild semiconductor off the highs right now. it surged earlier on a report that st micro is mulling a bid for the chipmaker. and transports are on track for the worst day since late august, down, folks, about 3%. you'd like to find out more about these or any of the other stories over the past hour, go visit our site.
>> what does your kitchen say about you? one of the largest home build serz betting the ability to customize your kitchen to fit your personality is going to be a big driver of home sales. that story and more straight ahead on "power lunch." big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift?
welcome back to cnbc everybody. on a busy "newsday," we have news breaking. ibm saeg the sec is investigating it over how it recognized revenue on certain transactions. that is pretty much all we know right now. that headline enough to send the dow component down 3%. ibm is off $4.72 to $138.97. the headline, just one line, we're making calls and certainly we'll have more in the next hour, ibm sail the sec is looking at it for the way they recognized revenue in certain transactions. we have this potential rite aid stuff and apple after the bell. going get busy. >> it is already a busy day. some days are hot, some days not. this is a hot one. brian, thank you. we'll be back in just a second. let's go to dominick chu who i believe has more on the story brian just mentioned. >> what we have now, again, the headline crossing that the
sec -- first of all, ibm learned in august that the sec was looking at certain aspects of how revenue recognition happened at the company related to transactions in the u.s., uk and ireland. we do now have a statement officially from an ibm spokesperson again from this particular transaction. they do say, again that, in august of 2015 ibm learned that sec is conducting an investigation relating to revenue recognition with respect to the accounting treatment of certain transactions in the u.s., uk and ireland. ibm has a rigorous and disciplined process for the preparation of its financial statements and the reporting of revenues. we are confident that results and information we report have been appropriate and consistent with generally accepted accounting principles, however, ibm is cooperating fully with the sec in this matter. again, a statement officially from ibm and their spokes people saying that they are cooperating with the investigation and they have rigorous standards for the reporting of any revenues and
revenue recognition. >> for people who do not know that term of art, revenue recognition, in a phrase or, two dom, what does it mean? >> it means it's basically about when they actually say that a revenue or a sale has been generated. when they match it up. so certain expenses, perhaps, or when they say a transaction has been done. so there are some nuances about accounting with regard to when companies actually say that when they sold a product or service or sold the anticipation of a product our service when they actually booked that as a sale item. so revenue recognition in layman's terms is when a company says that they've actually made a sale, made a transaction and when they report it in their financial statements. in this case here, ibm says that they've done everything with regard toim pounding standards and generally accounting principles and they have a rigorous standard for how they disclose this information. >> dominick, as we watch the stock over your shoulder there, down 3% at this hour.
thank you very much for joining us this the first hour of "pouwer lunch." it is going to be a busy second hour. >> thank you both very much. it is 2:00 on wall street. noon in ft. collins, colorado. the dow is down 60 to ibm. the dow was already down. ibm pulling the dow down further. oil falls again. quo have a multibillion dollar deal in retail. the news of which broke less than an hour ago. hi, everybody. i'm brian sullivan. courtney reagan, you picked a great day to join "power lunch." we're glad courtney is here. we start with the potential for a multibillion dollar deal in the pharmacy space. dow jones industrial average reporting walgreens boots alliance close to a deal to buy rite aid. that would be a $10 billion deal if it happens. of course, retail is courtney's space. on the news line, john ransom from raymond james. this is a single source story at the moment. do you think it's going to
happen? >> we have been skeptical. certainly the market thinks it's going to happen. i'm not willing to second-guess the market on something like this. >> if it happened, it would obviously be great for rite aid shareholders. this was a sub-1 stock. would it be great for walgreens? >> that's hard to say without knowing a couple things. one would be the synergies and, two, the divestitures. what we have found under this administration is deals take ba a bit longer to close. and the divestiture hurdle is tougher. rite aid is in the well. we assume that they could use this in a well. that is another thing to put in the mix that we're not sure about at the moment. >> i want to follow up on brian's question there. why does walgreens boots alliance want rite aid and one of your notes you point out that scripts growth detecelerated ana
number of other issues. so is this a good deal for a walgreens boots alliance shareholder? do they want rite aid? >> i think you would probably need -- to put it in perspective, they have $1.5 million and i think you need $500 million of synergies over time to make this something that is attractive to walgreens shareholders. the question you raise, one thing is that rite aid has already remade 2,000 stores under the wellness plus brand. so what does walgreens do? do they remake the remade stores? there is another 2600 stores that have not been remade and some of them will have to be die ve vest -- divested. and eye mediocre drugstore in a bad location is not worth much. those are the questions you would have to get through to make a determination as to whether or not this is a great deal for walgreens or not.
>> all right. john, we're going to leave it there. we have a lot of news going on. watching rite aid soar. that stock is up nearly 40%. cvs is out there hanging potentially as well. john, thank you very much. do appreciate it. >> also today, crude oil continuing its downward spiral as natural gas tries hard to recover. let's get the investment impact on stocks and look at a really interesting way to profit both ways off falling natural gas prices. we'll get to that in a second. spencer joyce, a nat gas analyst. you say that shares of exxon are still worth our viewers money. one of the few stocks you like in the space. why? >> thanks for having us on. actually our focus is more towards the gas utilities space which actually benefits from falling natural gas prices. it's counterintuitive.
gas utilities actually pass through the cost of gas in a spread. so natural gas is cheaper. there is a rise in demand for gas at the surface. >> okay. all right. stewart, if i address that question to spencer, i screwed up. which happens. spencer, you're there. you like xon. please tell me that's correct. >> hi. thanks for having me on, brian. i do like xom. i think it is the best of breed in the upstream space. looks to generate a lot of free cash flow next year even with crude oil prices being stuck in a pretty significant prolonged malaise. they are somewhat distinct in that fashion from a lot of other upstream companies that are going to be free cash flowing negative in 2016. >> okay. you also, there's a couple other names you like in the space as well k you give us the names,
please? >> sure. in a similar vain, eog resources and oxidental. they both look to be cash flow positive. i think this is a year when 2016 is a year when you have a lot of hedges, roll off that had been protecting the small er companis in the oil and gas space. next year is going to be a much more difficult year for them for realized prices. i think the ones that, you know, have -- that have weaker free cash flow profiles typically also have more debt on the balance sheet. you're going to have more distressed sales and companies like an eog or an oxy might be able to pick off assets at distressed values. >> stewart, i'm going to say good-bye you to. thank you very much. you like xom and eog. we have to go to dominick chu who has more breaking news. >> what's going on in this
tuesday? so much of this happening right now. we want to call your attention to what is happening with star wood hotels. hot. those shares spiking up to about 7% on heavier than average volume. this on the heels of a dow jones story coming out that multiple chinese bidders may be looking to put a bid in to possibly take over starwood hotels an resorts. this is cording to a person -- people familiar with the matter. also watching some of the ripple effects coming as a result of these particular headlines. it's not just again what is happening with starwood. also, if you look at hilton shares, also look at hyatt shares and marriott shares, some of the big hotel operators are all moving to their best levels today again on the heels of this story coming from dow jones that multiple chinese companies are looking to get approval from the chinese government to possibly make a bid for starwood hotels and resorts. so no news-news yet.
this is according to a source reporting. but still we're watching the entire industry move higher on this bit of news. we'll bring you more details as they become available to us here. but still a big breaking "newsday" now augmented by possibly more deal talk of a cross border transaction in hospitality and lee tour. starwood is the parent of weston and that sort of thing. >> ihg also turning positive on this news. dom chu, thank you very much. before we get now to spencer, i want to recap the day we've had so far. i mean last 15 minutes. let's just quickly recap all that happened in the last 20 minutes or so. number one, "wall street journal" is reporting that we could have a deal for rite aid that walgreens may be look og to buy rite aid for $10 billion. ibm headlines crossing there, they are being investigated by the sec over issues of potential revenue recognition problems. now we've got reports that starwood hotels may be looking to get bought by a consortium or
one chinese corporation. you're welcome. now let's get back to spencer joyce. he is a top analyst from star mine. he covers companies that may benefit from these lower nat gas prices. spencer, let's get back. here's the thesis we talked about in our morning show meeting. number one, consumers are going to save on utility bills, right? we know that. most power plants are natural gas fired. those prices are lower. rates should go down. but also, are there any stocks of utilities that our viewers can buy that may go up that you like, meaning, our viewers and listeners could make money on both sides of the lower natural gas trade? >> yeah. absolutely. our top pick in this space in the gas utility space is atmos energy. we expect this stock to do well as cuffs utility bills go down and therefore there is increased demand for molecule delivery. with atmos, the conversation
starts us with with their texas pipeline segment which is granted at nearly 12% roe. we really view that as a best in class asset. near term, xbekt our analysts day in new york could be a near term catalyst. >> okay. you also like wgl and laclade. those are more traditional utilities. at least lg? >> absolutely. perhaps one of the most traditional utilities out there. it was actually a member of the original dow 12 back in the late 1800s. the company has come quite a ways since then. it remains true to their gas contribution core and should be able to expand operations as u positive when client bills go down and increased demand for service. wgl, they're in the washington, d.c., area. we like from a demographic standpoint. and also benefits from some of the secular growth drivers for gas demand including l & g export there along the atlantic
coast. they have an agreement to supply gas to that facility. >> you know, with the last question, spencer, when you look at utility, listen, no offense to your space, they're considered to be boring. that could be a good thing if a volatile market. how do they benefit from lower gas prices? if their input costs go down, they're recollected on what they're allowed to charge. so their margins don't move in the exact same amount as the decline in the input costs, i suspect. >> right. as you mentioned, gas utilities are regulated. that means the capital that they invest earns the return base ond what the government or public utility commissions allow them. when there's increased demand for service which in our view correspondence directly with declining cost and service, then we see room for our utilities to put capital into the ground. their regulators will allow them to earn return on and thus grow. i know bhengsed the l & g export. cng is a motor fuel.
it is also a growth driver. and some of our companies are latching on to larger midstream projects. >> we're going to leave it. there spencer joyce. thank you. appreciate that. >> likes ato, lg and wgo. okay. so we hear a lot about how much people are saving on low gas prices and perhaps now lower heating costs this winter as well. courtney reagan, listen, you're our retail expert. you follow it closely. there's a lot of extra money floating around. how come it hasn't seemed to help retailers more so far? >> i think folks are spending the money. they're not spending it all at one time or all in one place. it sort of gets doled out over dribs and drabs. i think areas that you're seeing more spending aren't traditional retail locations. you're not necessarily going and buying that new sweater at macy's, maybe some are. there is really a lot of growth in the restaurant sector. look at the same-store sales for restaurants far, far outpacing traditional retail same-store
sales. we talk a lot about how experience is replacing things. it's true. over time you see we're spending more on sporting events and memberships to different types of clubs, vacations. look at how all the airlines are doing and every single seat is full. we're traveling for work and leisure. actually companies all over put out a hand about handbags and he says, look, we might see moderation in that category. some women are looking to spend more on consumer electronics. so it's coming out in different places in retail. but we are eventually getting around to spending that money. it takes us some time to adapt. >> all right. courtney reagan, thank you. a big story. thank you very much. here's what is ahead for the rest of "power lunch" f we didn't have enough going on already. congress close to a budget deal. what does that mean for your money? we're going to ask pimco's political expert. plus, will 48 million iphones sold be enough? apple reporting after the bell. we'll have a full preview and
more on the retail rodeo that includes drones at walmart, christmas forecasts and one retailer doing the unthinkable, saying that it will close the stores on black friday. more on who that retail hero is coming up. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ hi watson. annabelle, your birthday is tomorrow. 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.
we learned in a filing today that as of august, by the way, ibm had learned it was the subject of an sec investigation. let's bring in our guest to react to this breaking news. your initial reaction, especially of the fact that we learned in the filing that ibm has known since august. >> it is surprising when you have a leading company with this issue that is concerning to shareholders and investors in general. over time ibm's revenue was increasing and their accounts receivable was increasing, the allowance for doubtful accounts was also decreasing. >> what does that tell you? >> that tells me that they are kind of using the reserves to increase earnings per share which is one thing can you do with some of your reserves like the account reserve, warranty
reserves, things like. that but in tech companies in general. it's tricky when you sell both software and service onz a subscription basis and hardware on a lease basis and you have -- you have booking revenue that is partially unearned and earned and how you capture that earned and unearned revenue. there are a lot of variables. they show consistent growth and sometimes they try to make up with some type of financial maneuvering that could take them -- i'm not saying that anybody did anything criminal but takes them to a gray area. >> by him caibm and said we aret that we did everything correct.
that sen tirely possible here. just because they noted it does not mean that it's going to become a long term issue. it could. it could not either, correct? >> well, but the biggest issue, gap accounting is -- can be subjectively implied. there are no hard and fast rules. they're guidelines. there is a way you can subjectively apply them. if you apply them in a way that the sec decides you get them in a wrong way, you could have a problem. >> i'm going to jump into one more question. you are disappointed we didn't learn about there in august? when ibm says it knew? >> i think companies have an obligation to put that information out. i don't know why they withheld unless they had a good reason why they did it. >> thanks for jumping on the phone so quickly. we appreciate it. >> the big day is almost here.
the next republican presidential debate will happen right here on cnbc tomorrow at 8:00 p.m. eastern time. coverage though starts at 5:00 p.m. it will be live. phil lebeau is at a factory that recently laid off 150 employees. they're promising to create jobs. how are they going to do that? >> you know, courtney, we're at ideal industries in colorado springs. the last plant in the u.s. that makes ratcheting wrenches. we thought this would be a good place to look at this question of whether or not someone who is elected president can change trade policies so dramatically that it forces manufacturers to ultimately bring the plants back to the u.s. this is what donald trump is promising. >> i'll bring back our jobs from china, from mexico, from japan, from so many places. i'll bring back the jobs and the
money. here is reality. they have 2,000 employees. they're spread across 16 plants in the u.s. they're in the process of eliminating 150 jobs at this plant in colorado springs in part to stay more competitive with their global competitors. they're going to reinvest in technology. the ceo said the idea of forcing them to bring production into the u.s., he's not buying it. >> i think it's hard to believe can you force people back here. it comes down to customer as ford the price of your product. that's really what it comes down to. >> and staying competitive globally is the reason why we've not seen as many manufacturing jobs return since the great recession and everything bottomed out. yes, we've seen 600,000 come back. but we're nowhere close to where we were before the recession.
you talk to anybody in manufacturing, they're reinvesting to stay competitive but the idea forcing companies to bring production back here, it's a nice sounding idea but one that in reality really doesn't happen very often. >> all right. phil lebeau, thank you very much. now let's get back down to washington, d.c. with, another news alert. this time with hampton pierson. >> the housing representative moved on a transportation bill that number one will keep funding going for current projects. but also gives the railroad industry, if you will, some relief as far as implemention pcc or positive train control. this was on a voice phone. they approved the bill to keep the federal funds flowing for road and bridge construction projects into late november. also, specifically, they included a measure to give rail operators until at least december 31st, 2018, in other
words, a three year extension to implement advance safety technology known as positive train control. ptc. so a tlooe tli year extension on ptc for the railroads plus at least a few more weeks to figure out an overall big transportation bill. back to you. >> all right. hampton with our seventh piece of breaking news this hour. if we make it to ten, the 11th is free. let's get there. this next story, breaking news, congress gets something done. that would be cynical. congressional leaders reached a tentative budget deal with the white house that would set government funding levels for the next two years and extend the debt limit through 2017. does it matter for your money? let's hear from pimco's political expert who is -- first of all, do you have any breaking news? >> not yet. >> libby, thank you very much. tell us about this alleged supposed budget deal. >> right. there's a lot going on in congress. you heard about the highway bill. we have speaker boehner leaving on friday. and then we have the november
3rd debt ceiling deadline. we knew congress was going to act. speaker boehner was going to try to raise the debt ceiling through a clean bill. it became clear tend of last week he may not have the votes to do that. he went back to the drawing table with the white house, with congressional leaders and they hammered out the budget deal that was announced yesterday. this is an unequivocally good deal, right? it extends -- >> is it? >> we would argue yes. it extends the debt ceiling to march of 2017. it dramatically reduces the chances of a government shutdown by, as you said, establishing top line spending levels. and it actually increases fiscal spending for both 2016 and 2017. en that is a pretty big inflection point. it is more of a head wind for the economy and now it's actually could be a marginal tail wind. so really positive news coming from them. >> i keep thinking about the paper cartoon, i'm just a bill.
what is the prognosis? the deal will come tomorrow. they'll put it up for a voluntary. it looks like boehner and pelosi will be able to travel together, a coalition to get to that 218 number. that is the magic number you need to get to pass a bill in the house. the senate looks like it will be able to pass the bill after three days which is -- >> so the house is the challenge? >> the house is the big test. >> the senate is likely? >> yes. >> and then we know the white house is supportive. >> exactly. it looks like sort of from preliminary indications that the house will likely pass the bill. maybe close but looks like it will get to. that. >> is it a goodwill? a good deal? >> i think it's a very good deal for the most part. you have not only increase in fiscal spending, but you also really decrease some of the policy uncertainty which is good for the economy and it also takes a big question mark off the table for the fed as well
when they are looking to increase the policy. >> so boehner maybe can go out with a chest bump. >> he definitely can. i should say we shouldn't extrapolate. this is not ushering in a new way of doing business in washington. you're still going to see partisan stand-offs but this is the best deal we could have gone. >> thank you for being so patient during the breaking news. apple expected to report iphone sales of about 48 million units when they report their quarterly numbers after the bell. here's the question that you care about. will that be enough to get the stock going again or is there something else you need to pay attention to? we're going get a full apple preview coming up.
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call now, request your free decision guide and start gathering the information you need to help you keep rolling with confidence. go long™. ♪ get ready. apple is reporting earnings after the bell. let's find out what the keys are for a shareholder. channing smith is with capital advisors. they own 180,000 shares of apple. it is all about the iphone number or is there something else that you are concerned about? >> we wouldn't focus on the iphone today. it is very hard to get a good view of what the sales and demand are going to be.
we have to wait until the next quarter to see. that we're focusing on three things, gross margins, china and the management expectations for the holiday. gross margins should continue the upward trajectory. we'll see economies kick in from the 6 and 6s models. users are starting to go to the higher storage devices. they went from 16 gigabyte to 64 to 128. and with that is about a $100 price increase. most of that falls to the bottom line. i have two daughters that like frozen. i'm going to have to upgrade my storage, that's going to follow their bottom line. i think china, if you look at china, that's a big concern for users. that's its growth of the company. back in august, i know this has been beaten to death, tim cook basically alied fears that demand very strong for the first two months of the quarter. we that i was a good sign. if you look at alibaba, very strong retail growth in china.
that's going to be a driver, we think. china is much stronger than people think. keep in mind, you have about 50 million users going to 4-g technology. this is going to be a great setup for growth. >> assuming they can afford it? >> that's true. incomes are going up. >> the real estate is going on this doesn't collapse f you don't care about 48 million iphones sold, you care about gross margin, is there a gross margin number, sort of, you know, aligned with what you're watching? >> right. i think what you have to realize is apple is moving away from a growth story and moving more toward a margin story. we're looking at 40 to 41. we think we'll get there in the coming quarters. we still think that iphone demand will be strong. we're not in the camp that sees a decline. we see very flat line growth over the next two quarters. as we move into the spring as everyone knows, everyone starts looking for that p 7 launch and then investors start piling in in front of that. >> bottom line, anything under
40 on the gross margin line would make you sad? >> you know, i think it's going to take a little bit of time to get. there i think we'll see that in the christmas quarter. the setup is very good here. there's a lot of cash on that balance sheet. look for manageme in. t to lay one up on the fairway. 74 to 75 million in the christmas quarter. we think they're going to exceed thandedly in the court. there is not any big competing products. last year you had the go pro. you have the ipad pro which is going to be probably a hot item. the iphone will be a hot item. so with less competitive products out there, we think iphone and apple products will be the go-to products during the holiday. >> a real pleasure to you have on. good luck with the numbers tonight. good luck with your daughter's "frozen" addiction. they just need to let it go. i'm sorry. we're going to let you go. >> the final oil trades cross right now. let's go to the nymex. >> after spending most of the day under $43, we did rebound a little bit going into the close.
$43.20 was the sell. about a 2% loss on the day after a close yesterday under $44. momentum now seems to be to the down side. we'll get the api numbers later tonight. we'll get the department of energy inventory numbers tomorrow. that can move this trade around. back to you. >> thank you very much. on deck, one stock an analyst says you have to sell and why the price target is 25% below the current price, that name in "street talk" coming up next. ♪
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iran has been invited to participate for the first time in international talks over syria's future. that's according to u.s. officials. iran has yet to reply. the next diplomatic round of talks starts thursday in vienna. a civil rights investigation has been opened into the circumstances surrounding a violent incident at a south carolina school yesterday. the video as you see shows the school officer ben fields talking to a female student in the classroom before slamming her on to the ground while she was sitting at her desk.
he drags her to the front of the classroom to arrest her. fields has been placed on leave. the national transportation safety board says the recall system for faulty tires is broken and is calling for change. it says manufacturers have no way of contacting owners and that only one in five recalled tires are actually removed through the recall process. it's calling for mandatory registration of new tires. and police made an unusual discovery to say the least when they stopped a hearse speeding on a russian motor way. half a ton of caviar was stashed inside, some of which was hidden in a coffin. there was no body in the casket, however. that is the cnbc news update at this hour. brian, back to you. >> somewhere there is a fish missing. we need to get to the bottom of this. >> very many missing. >> the bottom of a deep lake. >> no yolk. >> all right. thank you very much. there's a lot of breaking news that happened in the last hour. here's a quick recap of everything that has happened in the past 60 minutes.
number one, ibm saying that they learned the sec is investigating them for possible issues on revenue recognition. that stock is down 3.5%. "the wall street journal" reporting that chinese firms may be looking to bid for all or part of starwood hotels, hot. that stock certainly is. it is up exactly 10%. also according to dow jones, walgreens may be near a deal to buy rite aid. that could be a $10 billion deal to create by far the biggest pharmacy chain in america. rite aid shares are up that, is not a misprint, 40.5% right now. walgreens, actually, up as well. all right. moving on to something we do every day. we dig through wall street research so you don't have to. it is called "street talk." it is to this camera, not that one. the first stock is a food company. starting coverage of the positive and a $60 target. it's about 35% upside. they say despite already outperforming for the year,
mond mon mondaleeze should perform. >> next up, capital markets says sell the stock. that's a rare call, sell. target of $15 from 18%. that is 25% below this morning's call. >> finally, doing three names today due to time. under the radar name, store capital, stor is the ticker. arizona-based reet. wonderlic securities starting coverage of the buy. a $25.50 target. you have the dividend as well. he likes the fact that stores base is different than many competitors. a middle market ten ent. one of the highest rates of return in the reet business. >> dividend yield, you go after it when you look into the reet names. i'm sure you talked about the tenants in your fine retail coverage. street talk down. now for our other daily segment, "trading nation," how can we not
trade crude oil? it continues the slide. foyl oil was down. it looked like it was going to come back up. do you believe oil will go below $40 a barrel? >> yeah, i don't think it's going to stop there, really. i think that $37, $38 area. this bear market is starting to accelerate. inventories are weighing in on prices. 100 million barrels, that is way bost five year moving average. you start looking at u.s. production. it was $9.6 million barrels. we cut down to nine. that's been cut in half as well. those are typical things that are very bullish. but the reality is you look at foreign imports of oil, those have dropped dramatically here over the last couple of weeks. it's a difference we on 600,000, oil plois prices will go the path of least resistance.
>> stacy, is there a smart way to trade oil now via options? >> there are a couple things i would highlight fuchlt look at crude options, they're basically implying that moves plus or minus 2 1/2% can move twice a week. if you look over a year ago, this was less likely to happen almost once a month. so this is a continued high volatility environment. looking at a couple different ways where are the options actually setting up? the truth, is yes, you can still see down side here. there are different ways that you can position and hedge your crude oil protection. uso is an etf can you look at. you have oil, another etf that looks at crude that has options. one thing they would say, although oil can clearly go lower, the one thing the options are saying is that the larger moves, we're talking moves 15, 20%, they are slightly favored to be more to the upside than the down side. at the end of the day, yes, we're still seeing more volatility probably being priced
in. yes, question go lower. but if it's a notable size move, it's likely to be to the up side than down side. >> especially because we're in the last contang number paris. thank you very much. i appreciate that. phil street, we appreciate. that for more "trading nation" go, to our website. >> tomorrow is the big republican debate here on cnbc. the candidates have a very unhappy group of voteors to deal with. we'll explain coming up on "power lunch."
something different in the politics. welcome inside the coors event center. this is where the debate is going to happen tomorrow night. they're checking the mikes, checking the lecterns and the stage and lighting, making sure everything is trod go tomorrow night. but when you talk about the context of this debate is going to happen and that's when you got to talk about these unhappy voters and exact wla these guys are going to be facing and one woman are going to be facing in terms of the leelectorate tomorw night as you look at the stage and how everything is set tomorrow. go back to the poll numbers. what you see is that every single one of the presidential candidates, democrat and republican, is upside down in the measure of whether or not the voters are satisfied with them as a candidate for president or not satisfied. that's exactly the opposite of where these guys want to be. it's exactly the opposite of what every winning presidential candidate since 1996 had. if you take a look at the numbers, bernie sanders, satisfied, 43%. unsatisfied, pessimistic, 50%. underwater by seven.
ben carson, 42% to 50%, underwater by 8%. hillary clinton, 43% to 56%, uncertain pessimistic that, is underwater of 13%. it's the same for all the candidates on down the list. and that is the big problem they're going to have on this stage tomorrow night. >> all right. amen, again that, debate is 8:00 on cnbc. thank you. >> outside of that, back to business. wow, ferrari crashing not a car, the stock. ferrari ipo did a lot of hoopla last week at $60 a share, look at them right now. that stock is down 5.3%, nearly $3 a share. ferrari is about $8 below the ipo price. >> interesting. why is walmart experimenting with drones? why is one retailer telling its employees to take off on black friday? all that plus the latest holiday shopping forecast coming up.
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first we got the economic or holiday based sales forecast now it's the surveys, what shoppers say they'll do. more than 4,000 the shoppers say what they will do. more than 4,000 consumer surveyed, it's bullish and a selfish group saying they plan to spend 1.5 more on the holidays but the biggest increase is self-gifting. they say they plan to spend 33% more on holiday furnishings and décor, more on nongift clothing. outpacing showrooming. checking out items in storing, buying on line. >> you say self gifting. >> self gifty. >> we have selfie but now we also have self gifting. >> it's the best thing to do on black friday. >> first person to take a selfie while self gifting will get an autographed something. >> that's a good challenge. let's bring in some reaction
from the retail headlines. jan, let's talk about the holiday forecast. >> i'm a little more bullish, the forecasts run from 2.8% to 5.5, 5.6%. if you wash out all the noise they average 3.7%. there's always a lot of noise in the forecast. >> that's not bad. >> i'm more at 4.5 which would be eighth tenths of a percent higher. i'm the internal optimist, perhaps that falls into my natural personality. >> isn't it people spend more than they say they are going to. you are survey people, they say i'm going to spend $1,000 and they spend $1,500. >> this is the year where more people have said i'm going to spend more versus spend less than ever since the recession. the gap is wider. that makes you think they may spend more than they have told people already or that people are projecting. the other thing that happens is wlau just said, self gifting. when people have more money they
are willing to buy for themselves. the number one gift request this year hapts to be a card and so -- >> lameest gift ever. >> that's very much like self gifting. >> i know. >> let's talk about walmart drones. walmart wants to -- is asking the faa if they can have some permission to use drones for a variety of reasons, one of them is deliveries. >> i think it's because they're so darn much fun. if you had a big company an own a lot of drones, fly them around, wouldn't it be great fun? >> everybody is look at drones, trying to figure out how to do last mile delivery, but it will not be in my investing life sometime thyme that we solve that with drones, we will solve it with ups, usps, fedex, uber, some name i don't know yet or haven't heard of yet, it won't be through drones. we will deliver some things through drones because every pizza company in america, walmart, amazon are looking at them, getting waivers. they are giving 2,020 waivers so
people can experiment with them. >> i bet you by bee gun sales trace perfectly with drone sales. that would be hard to resist. i love this next story. >> rei. the outdoor clothing store basically and tents and everything saying that they are going to close their doors on black friday. their theme is opt outside. using it for a marketing thing, too, are they going to be an outlier? do you think other stores will do this. >> sn. >> they're going to be a one off. nobody is ever going to close on black friday other than these guys. why are they doing it? because they can, they are a co-op and they can say we are the authentic outdoors, told our people could go have fun kind of company. other people would cost them like 15 cents a share if they closed on black friday. that's not going to happen. nobody else is closing on black friday. thanksgiving, that's different. those are hard sales to get anywhere. they're costly sales to get, you have to staff and run your store, you don't get that much
inter achblngts you may see a trend away from thanksgiving sales at some point. >> courtney always surprises us on black friday, that's like you are somewhere at 2:00 in the morning. >> my super bowl. >> 2:00 in the morning, we never know where you are going to go. you are not going to be at a rei. >> not on black friday. >> we will all be at a prime mart. >> thank you seven, dan. we will talk to you many times in holiday season. >> shares of twitter up more than 20% in the past month. is this bounce back for real? we will get results from twitter today and tell what you to look for coming up next on "power lunch." (cole) alright, now that we have merged with cableworld,
we are so excited to hear your big ideas on how we're going to take on directv. so over to you. (newhart) thank you. full disclosure. we forgot to come up with ideas. (cw exec) yeah, we got messed up last night. you're lucky we're even here. (newhart) but, we did bring breakfast. (jmh) bagels? (newhart) nope. (woman) oh my goodness. (newhart) peel and eat shrimp. (cole) not how i would have gone but it's good, it's innovative. and that's what we want here. (vo) get rid of cable and switch to directv. call 1-800-directv.
all right. let's show you shares of ferrari, again, race is the ipo, the stock is down 5 3rs. we're not just showing you the price because it gives me the community toount to eat crow for all of you. it opened at 60, it ipoed at 52. when i said it was 8 bucks from its ipo not the technical price but the opening price, i appreciate all of you correcting me on at which timer >> speaking of twitter, twitter moving high by 2% ahead of their earnings report. with revenue estimated at $559 million. could twitter be posed for a turn around. jim, what are the one or two things you will be watching most closely on twitter after the bell? >> sure. thanks, brian. 3 q is all about buying time.
if it's jack dorsey i have two objectives, the first one is so successfully change from conversation from mau to total audience. twitter flight they talked about 1 billion users, that's users that view twitter content on and off platform. i want to be able to monetize against that audience and communicate that with investors. the second thing is back that up and buy time through monetization. a lot of tail winds in the immediate short term through pricing tail winds from premium formats like video, the election cycle and the seasonality of 4 q. if they can deliver on the revenue side with a decent outlook for 4 q and successfully change that conversation on how i can apply that same monetization against a billion users that i'm doing against 300 million right now that can make for a pretty compelling story. >> it's funny. we talk about what at which timer is going to do, the one big thing may be to paraphrase apple, james, do you think they could surprise us? do you expect any kind of a
surprise announcement perhaps on a new product, new revenue opportunity? >> i don't expect a surprise announcement as far as new products or opportunities are concerned, but i do think what they can do is provide better clarity into their most recent product like moments and how they expect to cure rate content on behalf of users and what that potentially looks like down the road and how you can monetize against that. if you can just -- all they have to do really is just paint that vision because they've reset the expectations on user growth, we know they're very low, we know they have the monetization levers near term. if they can show how you can take that against a billion people on and off platform i think that is all the market needs to see to keep the recent rally going higher. >> all right. jim, we're going to let you get to work. not too long before that twitter numbers cross. thank you. >> courtney reagan, i want to thank you for being on power learning. how did you like it? >> it was fun. >> did you wear ohio state red just to spite me?
>> maybe. maybe not. >> go red hawks. miami university was a -- miami was a city. >> before miami was a state. that's right. >> courtney reagan, thank you very much. >> we have got goth the dow down 65 points, busy last hour, "closing bell" starts right now points, busy last hour, "closing bell" starts right now. welcome to the "closing bell," i'm kelly evans at the new york stock exchange and i'm andrew ross sorkin sitting in for bill griffeth. ibm shares falling after the sec reveals they are looking at how they account for transactions. >> walgreens is on the verge of buying the vie val drugstore chain, right aid shares up 42 1% but can it get past regulators. >> and investors are gearing up for another earnings barrage after the bell,