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tv   Fast Money Halftime Report  CNBC  November 18, 2015 12:00pm-1:01pm EST

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anticipation. work days have been better than 3%. some people hoping that enterprise cloud as well. not to mention square and match. you working late tonight? is. >> yes, i will be. yes. it's such an indication of confidence. let's get over to headquarters. scott bhop ner and "the half." >> thanks. welcome to the halftime show. let's meet our starting line-up for today. steve weiss is here, along with john and pete and michael block of right now wroe trading partners along side as well. our game plan looks like this. calls of the day. one buy, one sell. as the street weighs in on two of the biggest companies on earth. apple and exxon. target ceo live. brian cornell is here in a cnbc exclusive today on his company's business plans and retail's recent woes.
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we begin with breaking news. the first public comments from the newest member of the federal reserve. the dallas president robert kaplan revealing for the very first time some clues on where he stands on interest rates. steve liesman following it all from d.c. steve, what do you have? >> scott, thanks very much. we are getting the first comments from the former harvard professor and goldman sachs banker turned dallas fed president, and the question we have going in is how much like the hawkish richard fisher is he who just left the dallas fetd presidency, and he is showing himself not to be too much like him. he says the fomc was prudent not to hike in the last two meetings. we went back and looked, and richard fisher several times last year had called for rate hikes, including when he had left office on the eve of the september meeting calling for rate hikes hen. kaplan saying it was prudent for the fed not to hike. he goes on to say appropriate monetary policy will remain accommodative for some time, and the lower funds rate is needed to achieve any desired level of accommodation given the underlying economy.
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he does say that a return to normal interest rates will be gradual, but accommodation doesn't necessarily mean zero rates and does talk about the costs to maintaining zero rates, including distorting investments and business decision says. let me give you his view on the economy. spending more time with his first speech here. he says u.s. consumer demand remains strong. he sees gdp growth between 2% and 2.5% through the end of 2016. growth, he says, will be sufficient to drive down the unemployment rate. that's important. unemployment is near the unemployment rate suggests the economy is near full employment. just a couple more things. his inflation forecast sees the fed hitting that 2% target in 2017. like other members of the fomc, including vice chair stan fisher, he sees the downward pressures on inflation running their course. in other words, running out and leveling off inflation in the next couple of months. the world will have to adjust, he says, to slower chinese growth over the long-term, and one curious thing that i don't
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quite understand. we'll have to quiz him on this when we have a chance. he says the fed needs to consider labor slack in foreign economies as well as the u.s. economy. that suggests a potentially dovish view on labor slack, but he doesn't really explain it, so certainly we have not a hawk in bob kaplan, but to the extent to which he is dovish, it doesn't seem all that dovish, but certainly not among the most dovish out there. >> right. prudent not to hike at the last two meetings. he says. the question is what does he think about the upcoming one in a few weeks? what's your guess, steve? do they go in december or not? what is the lease man indicator telling us today? >> i would have to check the liesman indicator. okay. i just did. it suggests they will go in sdult wherebying thaudz my take right now, and i don't -- i have said this for a long time now, scott. i don't think the bar is very high. it has to deliver a 2%, 2.5% growth rate. i think inflation has to be stable. we did see that in the last
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consumer price index report, and i think the unemployment rate has to be steady, and you don't have to have too many -- or too strong a jobs report in december for the fed to go. i think that's the default position, and my only astericks or cavat is some sort of widespread military action that would cause the fed to pause or a big disruption in the dollar-euro exchange. >> although you have lacquer saying we have overreacted to events. at the same time you have comments from deadly saying, look, if we hike, it's not going to be a surprise. we're telegraph it pretty well. >> it is absolutely the case. markets, business journalists, economists tend to overreact to these incidents. they have a pronounced affect on consumer confidence. they tend not to have a pronounced affect on macroeconomic growth indicators. we have relatively strong
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consumer demand. we've been running at 3% the past couple of years. we have job growth and we have low oil prices. all of that should be favorable for consumer demand and favorable consumer demand should mean decent u.s. growth. the question is how would the markets react to all of this? nuri ranini yesterday telling us it doesn't matter. it doesn't matter that they go in december or march. we'll talk about it on the other side. >> it looks more likely they're going to move next month, but in some sense it doesn't matter whether they move in december or march. the fed funds rate is going to be reaching between one and 125 between the end of next year regardless of whether the fed moves in december or march. that's not very important. >> so how is the market going to take it? >> it'sles difficult to consider how the market takes it immediately. you take a look at what happened with france, and i was with a bunch of guys on sunday. we all thought the market would be down about 1% globally.
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it wasn't. it was up, and it was up nicely. i have no idea. it doesn't matter, as he said, and rates around the world, they're actually low. we have germany issuing their two-year at the lowest they've ever issued. you've got low rates around the world. china will jump in eventually will real stimulus, so you can keep a lid on it, and i think the 25 bits is absolutely meaningless. what i'm looking for after is the rate of increases going forward. i still -- >> which even nuriel said it's going to be gradual if not very gradual. >> it shouldn't be in your investment equation at all, period. >> let's note a couple of things which we should highlight. first of all, the market is just off the highest levels of the day. the dow is up more than 120 points, and oil is worth noting as well. it's now dipped below $40 a barrel for the first time since august. some are suggesting maybe you have an attempt to divorce itself the moves between the stock market and what crude are doing because lately knee been in tan dem. crude goes lower. the market goes lower.
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crude goes higher and the like. we're not seeing that at least at this moment. pete. >> well, you are getting a nice move out of techno today, and obviously that didn't hurt that goldman sachs put apple on its conviction buy list. then you look across to the financials as well. the reaction today, look at something like bank of america. we've been talking about this, and obviously if the fed is going to move, we know it's going to affect the banks probably in a very positive way. at least we all think that they would. in terms of citi and bank of america and the jp morgan as of the world. you take a look at those sectors. they're performing very well. even the oih, even with the dip down, you take a look at the services names. they're reacting very nicely today as well. when you see this type of a market and you see the strength and the broad swath in which it's bringing different levels up, i think we're looking at a strong market. you look at the volatility index. it's pulled back off the 20 level, pulling back underneath that 50 day as well.
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dowlinged you'lling autos use that as your thesis on how you are going to develop your thesis as to where the market goes. >> do you agree? >> i broadly agree. the last five years have taught us anything, then it's that making portfolio decisions based on interest rate forecasts has been a really bad policy. i think that people should ignore them in the short-term. the one broad theme, i would mention, is that in historical periods of rising rates, value stocks have tended to do well relative to the overall market. living through a five ten-year period where growth has been dominating value. that's contrary to what has the moment wrum in the market recently. value has done well in periods of rising rates. >> you think that this is going to be the case this time, and that's the conversation we've been having for the last couple of weeks at minimum tooz whether values back in favor and whether it's lasting. we're not talking about a short-term deal where value comes back in favor and growth comes back and says, oh, i'm still here. >> these things are completely impossible to time. who knows when the value will
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return to form? all we know is that the periods of growth outperforming value historically have typically been pretty short-lived. the last one we saw that was as extreme as the one we're living through now was in the late 1990s, and we know that value did extremely well during the first part of the 2000s. i don't know when it will start, but it will probably be a secular change, not a wick trade. >> what i can tell you, what patrick is saying here, is if you look at a chart and the fed fund's target rate over the long-term, and you look at relative performance of large cap value stocks they map each other pretty well. this is a long game. that's a good thing. i'm still in that camp that says these guys are market dependent. they're afraid that they're going to upset the apple cart. i know ranini said 1.25.the end of 1026. that means five jumps up. i don't -- >> he thinks they go through times next year sfwloosh i this that i -- i don't think they go next year from where i'm sitting right now. i think everyone is still getting the lay of the land. >> you are telling me you don't think they go at all in 2016?
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>> no. i think inflation is worse -- >> you are way out like on gilligan's island. >> okay, well, a year ago i was saying -- everyone was saying they're going to raise in march, and i was saying they're not going to raise this year, so i'm in that camp now, and i'm happy to stay in that camp. call it gilligan's island. i'll hang out with ginger and mary ann. that's fine. i'll take my wife. analogies aside. in the long-term value will do well. >> give me sectors you would buy today. >> i think people will -- ibm is the quintessential value stock, and all is a nice way of saying crappy recent results and a pessimistic outlook from the overall market. the key with values is that markets tend to overreact at extremes. for a stock like ibm, it's had how many ever in declining revenue growth. had he tend to leave it overly cheap. should it be cheaper than amazon
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in the markets tend to overdo it at extremes. >> i don't know why you would think the market is overdoing it? every business is under massive seeming. i think it's actually been inefficient in not reacting to it sooner. >> yeah. >> what should a commodity -- >> so i use ibm as a representative example of the type of attitude investors have towards value stocks. will ibm do well? who knows if that individual one would -- will do well. i'm recommending a basket of value stocks. the point is it's extremely ease where i to build a narrative against ibm. >> right? >> just as you build the positive. buffett owns it. it has a yield. it's ten times earnings. it's easier to built a positive narrative over a stock that's come down 50%. than a negative. >> really? >> i think so. >> i think you could say this is the ultimate falling knife. >> we could have heard that three months ago, six months ago, nine months ago, two years
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ago. >> patrick, it's good to see you. doc, we'll get to you in a moment. >> no problem. >> to the latest in paris where police were involved in a raid and shoot-out early this morning. that left two dead and seven under arrest. michelle car russo cabrera live as well from there. michelle. >> scott, that raid happened on this street overnight right behind me about a block and a half away. this location is 1.2 kilometers away from the stadium of france where three suicide bombers detonated vests on friday night in the wave of attacks that killed 129 people here in paris. the raid began 4:20, 4:30 in the morning with "volley of gunfire that local residents said went on for at least 15 or 20 minutes. they heard explosions. when alwas said ask done, as you said, seven people arrested. at least two dead. the video from overnight was dramatic. we can see people in the street with guns. many members of the police
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through the streets as they raided the apartment. we are waiting to find out whether abdel hamid was in that apartment. he was in the alleged target of friday's attacks here in pair sxishgs we're also waiting to find out about anything we know about salah al islam. we think we may hear something at 1:00 p.m. eastern time. that's when the prosecutor will hold a news conference where perhaps we'll get more details on who was in the apartment, who is dead, who is alive, who is under arrest? one of the key events of the raid, a woman wearing a suicide vest detonated the bomb on her and killed both herself and the man who was in there. in the meantime, there's a new statement from isis in their magazine they put out, and listen to what they have said. the islamic state dispatched its brave knights to wage war in the homelands of the wicked crusaders, leaving pafr is and its residents shocked and awed. the eight knights brought paris down on its knees after years of french conceit in the face of islam. a nationwide state of emergency
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was declared as a result of the actions of eight men armed only with assault rifles and explosive belts." they are declare heing victory of what we have seen in paris over the last several days. scott, back to you. >> all right. thank you so much. michelle caruso cabrera from france. ahead on "the half" the pulse of retail. target ceo brian cornell joining us in an exclusive interview to make sense of the consumer and what to expect for the holiday season. plus, our calls of the day affect nearly $1 trillion worth of stock. is it time to buy apple and sell exxon? we have a mega cap debate brewing on this desk. you're watching cnbc first in business worldwide. when you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about.
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get up to three years interest-free financing! plus, choose a free gift with selected mattress sets! but hurry, sleep train's "thanksgifting" sale won't last! ♪ sleep train [train horn] ♪ your ticket to a better night's sleep ♪ >> we are back. shares of target are slumping today after quarterly results came out earlier. the retailer just the latest in a string of disappointing earnings that hit the sector pretty hard. cnbc's courtney reagan live in minneapolis with target's ceo brian cornell as a cnbc exclusive interview. courtney, take it away. >> thank you very much, scott. i am joined by brian cornell here in a target store not far from your headquarters in minneapolis. you reported earnings this morning. not goof numbers. now we want to look ahead to the holiday season. you know, very strong fourth quarter last year. can you top it this year? >> we feel really good about our plans for the holidays. now, i think it builds off the
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momentum we've seen throughout the year. we had great traffic growth again in the third quarter. we expect that to continue in the fourth quarter. we've spent a lot of time making sure we've had great plans in place where are i think we have a sensational marketing program. we're scleerl elevating the in store experience. you walk aron the store here today and you notice that, and we feel very good about our black friday deals, our ten days of deals, and the combination of what we're going to offer in store and on-line. we feel really good about our plans for the holidays. >> and you're starting some of these deals before black friday, your ten days of deals. is there any early traction -- >> a couple of things i'm really excited about. if you walk to the front of our store, we made a significant change from last year. we've created something that we call bull's-eye's playground, and the reaction from the guests have been sensational. high double digit growth rates in that section. it really tells us the guest is interested in what we offer. they're attracted our experience, and we've got a
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couple of other unique offers. we partnered with adel. we're featuring three exclusive tracks that we'll offer later this week, and we think that's going to drive enormous traffic into our stores before the holidays. we've got our game in place, and i also think the big difference this year versus last year we're in a much better position with thanksgiving. as we continue it to think about reinventing food, i think we're going to see a much stronger turnout in our target stores as our guests get ready for the holiday. >> another strategy has been on-line. your digital sales were up 20%. last quarter, though, they were up 30%, and your growth target is 40% for the year. is that growth target off the table now? >> well, our focus is on really making sure we're delivering a great experience. any time any way the guest wants to shop, and i know that most of our guests start with a digital device in their hand. making sure we've got the right digital offering and whether that brings them to the site or encourages them to come to the
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store. either way we win. we saw traffic growth in store and on-line last water. i feel good about our overall strategy with digital. i don't feel we significantly wrout perform the industry. i just saw the october e-commerce numbers for the u.s. last night up 8.6%. with that as a back drop, our 20% looks really strong. we've got to make sure we're growing share in that space. we're continuing to outpace the industry, which we are. we expect that to continue in the fourth quarter. >> speaking of growing in that space, you committed a billion dollars to your digital strategy this year. amazon is just a bohemath, and it's kind of a bad word in retail because everyone is trying to win that share that they've really been able to capture. is $1 billion enough for you to do it? >> well, we're putting $1 billion behind both technology and supply chain. it's to hashgs that, again, no matter how the guest wants to shop, we deliver a great experience. one of our big advantages versus amazon is we run 1,800 fantastic
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stores. with team members that take care of the guests. we recognize that as we think about the holiday season, while digital is really important, it looks like 90% or more of retail shopping will still take place in a physical store. we can't lose sight of that. we've got to make sure we play our game, and our strategy is about offering this on demand choice. anywhere you want to shop, if it's in store, we want to make sure it's a great experience. if it's on-line, we want to make it really easy. the combination is what really allows us to succeed going forward. >> and a big part of your strategy is your signature categories in which style is one of those, and apparel has been a big talker in the industry. both data is showing weak innocence apparel. what does that mean going forward? do you have to figure out a new strategy? >> i don't think we do. as i look at our competitors, and the apparel reports, i felt better and better about our third quarter apparel numbers. we grew almost 3%. it wasn't the 5% growth we had
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in the second quarter, but versus the industry, it's fair to say it was industry leading in many cases. when the guest was shopping for apparel, they were coming to target. it has been a unique weather pattern, and we're sitting here today in minneapolis. it's 60 degrees outside. when things cool down, we expect the guest is going to come and come to target for apparel this year, and we've continued to enhance that offering. we've had 1,400 stores with mannequins. we know our guests really like what we've done. we've invested to make sure we're improving the quality of our apparel offering, making sure we're on trend with great new items, and while 3% wasn't the number we were expecting, it was one of the best numbers in the industry. when they shop for apparel, they're clearly coming to us, and we're in a great position for the fourth quarter. >> scott has a question. scott, go ahead. >> i'm going to make sure mr. cornell hears what you have to ask. >> this is the first quarter since mr. cornell took over that
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target has not beaten on eps. not beaten on earnings. some are suggesting today that the "honeymoon" is over, and that's why the stock may be reacting as negatively as it is and i'm wonder if anything he thinks that investors are now going to be skrit nizing him and the company closer than they have in the past. >> so scott's question actually has to do with the eps and how this is the first quarter we believe since you have taken over that you haven't beaten on eps. some are wonder if anything the honeymoon is over and if investors are going to be very critical of that eps number going forward as it pertains to growth in the stock price. >> we laid out very clear plans, and we're delivering against those. we've hit our sales numbers, our profit numbers. we're growing traffic. in our eps, it was at the high end of our range for the quarter. we feel really good about it, and it was up 8.6% versus last year. we gave very clear guidance. we're delivering against that
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outlook. we're right on plan with the goals that we've set earlier this year that we talk about our financial conference in har. we're a slight bit ahead on a sales standpoint on a profit standpoint and on a traffic standpoint. we feel like we're delivering a story that's very consistent and our goal is to make sure we're very consistent, steady growth. we're still in the early stages of modernizing, transforming the company. i talked about this a lot. if it's a baseball game, you know, we're in the second inning. if it's a football game right now, we're in the first quarter. we've got a lot more work in front of us, but we're delivering very consistent steady performance. both from the sales standpoint, a profit standpoint, and a traffic standpoint, and we feel very good about where we sit today as we enter the fourth quarter. >> we wish you luck on that. thank you so much for doing this with us today. >> thanks for joining us. >> i'm going to toss it back to you. scott at headquarters. >> thank you so much, mr. cornell. thank you to you as well. let's kick this around.
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the street is largely coming out in defense of the stock today. beating rays, momentum builds as the top broad lines pick. that's cowan and oliver chen, frequent guests. the notes are fairly reflective of that kind of sentiment. is that the same sentiment you have, pete. >> i tell you what, i look at target now, and i think it's an oversold situation now today. will i buy it today? no. i like where the stock is trading right now. mr. cornell is -- he has laid out his plan, and you look at what their plan is. they're moving towards the digital, and that's what everybody is all talking about throughout the retail earnings season is digital doing well? we know they've got about 20% exposure to the apparel world. that's a bit of a headache because that is one of the slower areas. >> their slowdown in their on-line sales to 20% from 30. another reflek flexion of the amazon impact that companies like this cannot overcome. >> it probably has something to do with that and just the general competition i think throughout, scott, as everybody
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else all of a sudden tries to get into this on-line world as well. they initially had a 40% target. that's not going to get reached, and the cfo talked abouting that on the call today. >> there are a number of new ones that have sprung up jet, for instance. there are so many new on-line retailers in addition to the am sdmrons and other ones that have been taking volume from these guys. let's not dismiss what wal-mart just reported despite the fact that they warned us just over two weeks ago. they came out with a pretty robust report just a day ago. >> all right. coming up, a buy for apple. a sell for exxon. they are our calls of the day. they are next. (vo) what does the world run on? it runs on optimism. it's what sparks ideas. moves the world forward. invest with those who see the world as unstoppable. who have the curiosity to look beyond the expected
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>> another big corporation hack. >> cyber attack -- >> a message security breach reported.
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and of course, same-day delivery. are you next? [announcer] make sleep train your ticket to tempur-pedic. ♪ your ticket to a better night's sleep ♪ hello, everyone. i'm sue her air wra. here is your cnbc news update this hour. the islamic state group has claimed responsibility for the attacks in paris vowing in its on-line english language magazine to continue its attacks. the magazine also claimed it has killed a chinese and norwegian hostage. amateur video shows a man being arrested during that police raid in saint-denis this morning. they raided a building thought
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to include master minds of the attack. no word on his fate, but two people were killed and seven were arrested in that raid. the u.n. nuclear agency says iran has started cutting back on nuclear programs, which could have been engineered into making weapons. its report shows that iran has reduced the number of centrifuges it uses to enrich uranium. and the fbi says there is no evidence that threats made against a pair of air france flights late last night are credible. an air france plane en route had to make an emergency landing in las vegas while another en route from washington had to make an emergency landing in halifax, nova scotia. you are up-to-date. that's the news update this hour. scott, back to you. >> sue, thanks. two calls on two of the world's biggest market cap companies today. first up goldman sachs adding apple to its conviction buy list. let's kick this one around. they say the market used apple as a hardware stock. transactional model with limited recurring revenues. they say that it's going to switch.
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that you are going to get an installed base monotization, that have you to view apple as a service. >> i agree with them. i don't know who didn't feel that way. some people that come on want to focus on the hardware that they do sell, which is -- >> the stock performing -- >> -- i think they're not being properly priced, and carl comes on and says it's a no brainer. the no brainer part of this is the recurring revenue. it's going to be apple pay as that grows, but it's right now -- it's itunes, it's going to be movies and television shows delivered all the rest of that that is the recurring revenue side of this. they had a buy rating on the stock. everyone loves the stock. are they about to do a bond deal? you know, someone wants to be in
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the good favors. did i say it out loud? sorry. of course they're selling services here. the interesting thing is the stock has bought up crazy on a call like this, but if you read the note carefully, which apparently no one did, you look at it, and the analyst to his credit actually says, hey, look, you know, if you -- what you should do is there's going to be choppiness in the data because not everyone is going to listen to me, and you will have better opportunities to buy the stock. there's a bunch of seals using tir nose to buy the buy button because they can't read. that's the only explanation i can't think of. >> how do you follow that? >> first of all, recurring revenue stream has been part of apple. maybe not in terms of the soft sales like apple tv, but definitely in terms of the apple ecosystem having to have all the devices connected. secondly, i'm not willing to pay in advance for the recurring revenue for apple tv. apple radio hasn't worked that great. itunes was the first time they did that. i think the stock is inexpensive
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here. i still think believe it needs catalyst. >> i'm ready. >> it call is interesting. now, remember, a very esteemed powerhouse upgraded this stock several dollars higher. like a week and a half, two weeks ago. that was an interesting call after the stock had run. i wonder what the communications were like on that. anyway -- >> this is a downgrade to the format raymond james. >> yes. what we're looking at here is raymond james downgraded the stock. they've been neutral on the stock. here's the way i look. oil is up $40. if you look to take a shot at oil here, are you going to buy exxon? are you probably going to buy something that's higher beta, the kind of stocks that joe has loved historically. joe is not here, obviously, right now. you are going to buy the higher beta names. meanwhile, while stocks are in turmoil, this is an atm machine. everyone owns this. when i talk to buy side traders that trade this sector, they say this is like eating cardboard.
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talking about the stock. it's not interesting. not enough beta. >> they make the point that they have limited leverage. limited leverage to oil prices, acts as a hinderance during recoveries. even if oil recovers -- we said it's below 40 for the tifrt since august. even if it recovers and goes higher, they get less leverage out of that. you buy the stock today or no? >> no. i don't. in our portfolios for clients, we still hold the stock, but we have calls written from here until three months from now against this one. we were buying it, judge, at the end of august, and we said so, pounded the table here on the air that if are you getting in where rex tillerson got in, down at $6 a share, makes a heck of a lot of sense. up at 80, we said no, it doesn't. this is where you are overwriting. that's what you did and continue to do until it pulls back from here.
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>> great balance sheet. incredible liquidity. if are you playing beta, part of the note that really stood out to me, scott, was oil recovery. i think there are other names that would perform better than exxon. >> you are not argue with your brother, or are you? >> my argument, i like it here. i do like it here. i like it here, but we liked it obviously at 68 as well. we like it here -- i like it here at 80 as well because of the fortress balance sheet and the potential of what they could do with that money that's sitting on the sheets right now. >> gold just can't get a bid here. down nearly 10% in the last month, and also in the last 15 sessions. it's been negative for 12 of them. if goitd can't get a bid on everything that happened after paris and the ongoing situation that we're monitoring, when will it? >> the only thing that matters
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is the impending fed rate hike, and gold is going to see pressure until that occurs. however, once the fed rate hike does occur, i do see that a commodity dollar strength against commodity begins to ease. it can go higher from there. 10:35, 10:45 in gold it's aa long-term down side target i've been looking at, and i think that has to get achieved first. >> jim, how low can it go? >> i think the chart looks like that, and my lows are lower than bill's. i say 10.15 to 10 even. as we said last week, and i agree with bill, it's mostly a dollar story. when the euro we want below 107, that's another heap of pressure on the entire commodity complex and gold is feeling the brunt of it. i don't like it here at all. >> do we eliminate stop orders?
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plus, making money on how people spend money? the best ways to play the move to digital dollars. it's our motif of the month. you're watching cnbc first in business worldwide. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities.
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the lexus december to remember sales event is here. lease the 2016 es350 for $349 a month for 36 months and we'll make your first month's payment. see your lexus dealer. >> coming up at the top of the hour, stocks rallying for third straight sessions. the one etf to be long on right now. the one atf to be short on. home construction plunging to seven-month lows. a blip or a red flag? the real read on the american housing market and inside the fed's head. minutes of the last fed meeting sent across on power. it could be a real market mover. we're all over it with instant reaction and expert analysis. those things and more coming up at the top of the hour. scottie, back to you. >> all right, mandy, thanks. see you in just a bit. well, changes are happening at the new york stock exchange. trying to reduce volatility. bob pasani has more from the floor. what are we learning here? >> last night, scott, the nyse became the latest exchange to
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announce that they would no longer accepting stop orders beginning february 26, 2016. the nyse joins nasdaq and bats which also no longer accepts stop orders. it's an order to buy or sell a stock when it pass az certain point. say a stock is trading at $60, put in a stock order at $55. if the stock hits $55, that will become a market order and will sell at the market price hopefully close to $55. now, why is the nyse doing this had? this is the statement they issue. we expect our elimination to stop orders help raise awareness during volatile trading. here's the problem. when you get very rare events like wlapd on august 24th, that's the day the dow dropped 1,000 points in a few minutes and then it bounced back a few minutes later. it creates all sorts of stresses on the market system. stocks trade down big, and then they recover, and people aren't happy. let's take a look at an investor who had a stop order on that day. this is an example. take a stock that closed the day before at $60. our investor has a stop order at
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$55. if it hits $55, you sell. it opens at $54, so the stop order gets executed at $54. it works. nooif minutes later, though, the stock is trading at $58. this investor is not very happy. they had a stop order in to protect against the stock dropping, but they didn't expect it to bounce back a couple of minutes later. the problem is there's no orders that you could put in to protect against this type of very sudden market volatility. the only solution is foe trial investors to not put in stop orders and to pay more attention to what they have and when they might want to sell what they have or buy more if that's what they want. that's what the nyse is essentially trying to say here, scott. by the way, you can still put in stop orders with brokers. they'll still take them. they just won't execute on the exchanges. they might execute internally with that particular broker. i thinkest not surprising they're doing this, and treer toying to just address those days when the markets are really volatile, and you get people who are unhappy with orders that executed where they didn't really want them to execute. >> bob, thank you so much.
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bob pasani on the floor of the new york stock exchange. >> you say this thing all the time. i got stopped out. what's your reaction? >> ultimately the people that are stopping this stop order execution on the exchanges are saving the company's money. when you give a stop order out there, folks, you are wafkly opening up your wallet and encouraging someone to lift all the money that's left in that wallet out of it. i think it's a positive to address that this increases volatility and risk for the investor. you won't see any pros using a stop order of the sort that bob pasani just described. >> isn't that different than limited orders? >> yes. >> the difference is stop loss order turns to a market order, and they can execute anywhere. if you put in a stop limit order, it only ebbing cutes at that price. of course -- >> is that what you do? you just use your limit order now? >> never use stop loss because particularly in this environment where liquidity is at such a premium, and black box traders,
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they'll just come in and take it down and buy a lot of it from you and then sell it right back to you. >> that is the biggest issue. you just described it. the one thing we talk about on the show all the time and it's why i think it's so important to have knowledge of the opings woshld, quite frankly, is if you had a put order in place or a put in place, not an order, we talk about protection all the time, we talk about volatility and these swings in the volatility index. up to 20. back down to 14. those kind of moves that we're seeing. when are you in the 14s and you are low, go out and buy puts against your positions. you know where you are covered, and you have then have a comfort level. >> the latest motif of the month. the digital dollars trade and why you might want to ditch that paper money. as we head to break, take a look at the s&p sectors right now. decent day on the street. s&p up 14 points. two-thirds of a percent. led by health care and the financials. here at the td ameritrade trader group, they work all the time.
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it's gotten squarer. over the years. brighter. bigger. thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. we're back with a guest who has a strategy to take your money global. what motif are we looking at today. >> the digital dollars motif. that's are companies that provide technology and services to the electronic payment industry. so think of the car networks. these are mastercard, am ex, the
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processors, total system services are in there. the payment solutions companies, companies like pay pal, wex, and even infrastructure companies like ncrn and verifone. >> they've done really well. the basket has turned 17% over a year compared to 2.5%. i feel like you're missing a name in here though. you know which one i'm going to say. what name am i talking about? >> i'm guessing square. >> no, apple. >> okay. when we weight our motifs, we thematically weight them. we look at their exposure to digital payments so apple is relatively small. it didn't make the cull rigt ri now. >> it's funny, we were talking about an upgrade to conviction buy at goldman saks and apple pay factors into everything apple will do in the future. >> there's some interesting points. the tailwinds behind this motif
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are a couple things, one is the technology disruption hasn't happened. what they have done is reinforced the incumbents. everyone expected there to be a disruption in this market. secondly what's happening, we're seeing a lot of people rotate out of cyclicals into more of a defensive play and the third big thing that's driving this motif is china. they're opening up their markets in 2016 and that's what we've seen as driving. this is a $1.1 trillion business where the relative penetration rates are small. b to b is only 50% penetration. b to c is 70%. and peer to peer is only 30% penetration. big market, lots of room to grow. >> you said square. obviously that's a great one. i wasn't thinking of that because it's private. but when it goes public, do you add it in? >> we do. right away, the next rebalance and typically we wait six weeks before we bring it in. >> right, right. another recent ipo.
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>> go ahead, steven. >> you're talking about penetration, but that's really different than acceptance and usage, right? so those are in the vendors, et cetera. has -- as that adoption picks up that's going to ex plo he had this particular motif, right? >> we see a lot of motif driven by the underlying structural shifts as people move more and more to digital payments. it's remarkable the b to b space is 50% checks. apple pay, one of the things it's doing is making it more convenient, more accessible, these are the trends that will help but we're not seeing the disruption silicon valley likes to see in the underlying economics in the companies. >> interesting stuff. thanks. we'll tell you why go pro shares are falling today. set you up for the second half as well when we come back.
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so go pro shares, i want to show them to you right now. piper jaffray takes the price target down to 15 bucks. they say they've seen further price pressure on amazon, products popping up, zulily, groupon, rue la la, discounts where you otherwise wouldn't see them in the past. >> well, what we're see something a commodity product, we're seeing just consumer product that is ubiquitous. i'm not so sure anybody really needs it that's not very, very active because you've got your iphone so why carry another piece of equipment? that's the issue. plus the competition which we haven't seen come in yet will be coming in, and they haven't hit their targets and that's the most important thing. >> doc, you told it out of your halftime portfolio yesterday. >> yeah. i sold that.
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i sold best buy also yesterday out of the porltfolio. today i went in with jarden. luckily, looking at the disaster that is go pro today, i'm not going to be sending anything but coal to mr. woodman. >> how about lowe's? we shouldn't be surprised after what home depot did, right? >> no. if you look at the growth they put up, that's impressive. they beat on the earnings and the revenue. the interesting part is the fact that the way the stock popped initially, i thought we'd hold onto some of the gains. then it started to ease back. i thought that was a little surprising but what we heard from tjx, what really drove that, home goods, then home dep depot. not surprised to see the lowe's number as low as they were today. >> housing stayed strong. i keep looking for a hiccup in housing. you don't really get it. the trend is strong. the problem is everyone knows that already so you see the stocks like lowe's and depot, where to from here. that's why you get some of the performance like today.
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i'm certainly not looking to buy the sector here. >> the rails are interesting, too. you get more details on cp's offer for norfolk southern. pete, i know you have owned some of the rails in the past. >> only one i'm in right now is csx and that name was even thrown around for a little while. what you really wonder about is two things. one, how long would this process take? i heard on cnbc earlier today they talked about one to two years for this process, and the regulators. are the regulators actually going to let this go through, especially from what we heard earlier in the year about the airlines. is this something where they want to see consolidation? my guess would be no. >> weiss? >> i'd agree with that. i would think consolidation would be very, very tricky. we'd have to see what the breakup fees are in kcase they don't get antitrust profapprova. >> 30 seconds left. in one hour fed minutes. >> that's the most important news item today. >> what are you looking for? i'm looking for more i wouldn't say very hawkish but more language that will lead us to believe they're going to tighten
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when they meet on the 16th. >> i want to see if they telegraph anything specifically about december in these minutes. >> i think it's going to be one of those things that causes the markets to gyrate massively if it's against what we think right now we're thinking consensus is moving in december. >> good stuff. see you tomorrow. all of you as well. "power" begins right now. >> gentlemen, thank you very much. welcome to "power lunch." along with mandy drury, i'm tyler mathisen. stocks rallying yet again, the dow and nas tadaq up for a thir session. the dowmanaged a three-day win streak in a month. will that change? >> a terror raid rocking paris. two dead, several arrests. so how do you stop young people turning to terrorism? we speak with one serial entrepreneur who is using the power of the private sector to address the root economic causes

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