tv Power Lunch CNBC January 4, 2016 1:00pm-3:01pm EST
for this market sell-off we're seeing which as we mentioned is off the worst levels, chinese stocks getting hammered. chinese stocks like 567adr's tr. >> that's 99 million investors. not one of them has more than a decade's worth of experience. it's not a professional market. >> good to see you again. "power" begins now. good afternoon, everyone, and welcome to the first new year's edition of "power lunch." happy new year sort of, i guess. stocks getting hammered today. that is anything but happy. the dow right now down 373 points off the lowest levels of the day, but the dow now tracking its worst first trading day of a year since 1932. i don't even remember that. nasdaq falling as you see there 2.5% at 4881 and the s&p 500 down 2% at 2,157. three big themes driving the drop, of course. let me go to this side.
china's big fall down 7%. they were just talking about it on fast. that was the big scare overnight. the shanghai composite down 7%. shenzhen in the southeastern part of the country down 8%. tensions between saudi arabia and iran, the two real regional powers in the middle east, are they now preparing for direct and open conflict? diplomatic relations severed between the two. other countries pulling back their diplomatic relations with iran. also today, puerto rico's governor only on "power lunch" in the wake of this week's missed payment on some obligations. mandy drury is at the new york stock exchange. melissa joins us from the nasdaq where we're down 2.5%. >> and the key point to know about today's session is the growth stocks, the real winners of 2015, those are the ones taking it on the chin in today's session, the first session of the new year. look at what's going on with the f.a.n.g. stocks. take a look at apple. this could be the turnaround of
the day. intraday it hit a low of $102. it's now almost $3 off of that low. earlier in the session we had not seen levels we saw 25today since the flash crash of august and the stock is down 17% in the past six months. for today it's a standout in terms of the reversal we're witnessing right now. mandy? >> thank you for that, melissa. there's a lot of red down here at the nyse. at least though as ty was saying we're off the lows of the day and the dow is coming back above the 17,000 mark. the s&p is back above 2,000 sitting just at 2,001 but i think it's important to keep in mind, bob, that just because you have a bad first trading day of the year, that does not foretell a weak full year. maybe if you have a bad january in its entirety, that maybe does tell that you could have a bad year. >> it doesn't foretell a bad year but this is help to those of us who are trying to figure out why we had such a big drop today, and i think there are a number of reasons and we need to -- i think tyler enunciated a few of them.
i would add a couple more. let's look at why the drop we had today. we had a poor 2015 close. there was no momentum at all for a nice santa claus rally and maybe a little follow through to that there is a lot of people who are trend followers. then we had the poor china pmi and reports that the insiders selling that was restricted is going to be expiring friday. i think that was a major cause for why china was down. then the saudi arabia/iran conflict. remember something, oil was up during the day and in the middle of the day reversed all the gains. we have a major geopolitical event and the oil market barely reacts. that was a major factor in the weakness in the midmorning thunderstorm warning. then we had the ism numbers. the u.s. data also missed here. put this all together and you have a lot of malaise and a lot of reason for people to simply degree degross. right across the board, it doesn't matter, everything is down 2% to 2.5%. financials, health care,
consumer discretionary, technology, energy not down as much, but it was a better performer earlier in the day when oil wasn't to the downside. elsewhere melissa was mentioning some of the tech names. a lot of people had hid out last year very successfully in consumer staple names. your johnson & johnson, altria, clorox had a very good year compared to the rest of the market. keep an eye on that. as for the s&p, remember where we were. we were basically 2,000 to 2,100 for a good part of the year after the big decline in august and september and part of october. what the market seems to be doing right now, it seems to be establishing a new potentially lower trading range, particularly if we break below the 2,000 area. retail, it's very interesting that some of the names, lululemon got raised at wells fargo and jeffrey, trading to the upside. these names had a terrible year overall. the one thing to watch today, let's watch the chinese stocks. you can trade them here.
remember, ashr is the mainland china etf. that has not moved down. they were halted down 7%. it's now trading down 9%. we'll have the head of that fund on with us at 2:00 to discuss where he thinks china is going. >> knowing that there's weakness in china is absolutely nothing new. it should have been digested and completely taken in by the market. it's a confluence of factors, a lot of other things happening on top of wahhab a very frustrating past 12 months for the markets for both the bulls and the bears. >> remember, the idea for the bulls now is that earnings would be improving in 2016 and even the global economy would be improving. to the extent this is not materializing, this happened in 2015 the same thing, the same fadeaway as 2015 came in and i think a lot of people might be saying are we going to have another flat year on the global economy slowdown? you throw all the factors i put in, you see you get the malaise.
>> we have a few traders on in a second to see whether or not this is a dip to buy, whether there's going to be more of a rout ahead. thank you very much, bob. we'll get back to you shortly. tyler, over to you. >> thank you very much. let's go to our breaking news desk and sue herera. >> thank you very much, ty. the justice department and the epa suing volkswagen in that emissions scandal. it's a civil suit filed against vex wagon for allegedly violating the clean air act by installing illegal devices to impair emissions control systems in some 600,000 vehicles. once again, it's a civil suit filed against volkswagen by the justice department and the epa over the emissions cheating scandal. right now volkswagen in an otherwise very down day is down almost 4%. ty, back to you. >> getting worse and worse for vw. thank you very much. a tech wreck is one of our big stories. the nasdaq among all the indexes that are down today across the globe. it is down about 2.5% right now. it was worse earlier. bertha coombs following the big movers at this hour. hi, bertha.
>> we are off the lows although do remember the nasdaq outperformed the overall market. it was positive last year, and so did biotechs and so these are some of the areas that you're seeing the biggest selling, particularly in the big tech names. not surprisingly being led lowest by the china names. j. j.d.com the biggest loser. all of it is adding to really bearish concerns on some marquee names that have already been under pressure. we're seeing some downgrades and some stocks that are really suffering like tesla today. it is down after december shipments were at the low end of expectations. yahoo! also suffering not just because of its exposure to alibaba but also concerns about where the leadership is going in this year. also take a look at pay pal getting cut to a sell. we do have a couple stocks that are bucking the trend, including
lululemon, gopro, and dollar tree. back to you. >> okay. thank you very much for that, bertha coombs joining us from the nasdaq. oil, as we mentioned, was rallying about 2% earlier. in fact, as much as 3% after saudi arabia cut diplomatic relations with iran. however, prices are now reversing course. you can see wti is currently down by half a percent at $36.87. let's get more, jackie deangelis joins us from the nymex. >> good afternoon to you. as bob mentioned, that reversal in oil that's causing a lot of chatter on the trading desks, also a lot of chatter within the commodity community as well. you mentioned the reversal we saw. we're trading under $37 a barrel right now. brent is trending and hugging around the flat line. geopolitical headlines sparked that rally early on. once the markets digested it they took a step back and said this world is awash in oil. there's plenty of supply to
offset potential crisis in the middle east. it comes to the movements and the fluctuations. then traders started to digest what we're seeing in the u.s. equity market as a result of what happened overnight in china as a well, and that's when we turned negative. so the question right now is do geopolitical headlines matter as much as they use to? will the conflict between saudi arabia and iran escalate in a way that will cause a problem? right now the guess is probably not. >> thank you very much. let's get more context into what this latest round of tensions, and, boy, there are some tensions, michelle caruso-cabrera, between saudi arabia and iran. what it all means for the global economy and the u.s. particularly. >> those big events jackie was high lalighting leading to a dramatic escalation in tensions between saudi arabia and iran. saudi arabia is the dominant sunni power, iran is the dominant shia power. while both of them are oil producers, the two have long been intense rivals and are already fighting proxy wars in syria and in yemen.
in syria iran is backing the leader of the country, bashar al assad. saudi arabia is backing rebels w0 awho are fighting to oust assad from power. in yemen saudi arabia is backing the sunni leadership of yemen. iran and saudi arabia aren't yet directly fighting off on the battlefield. there are concerns that could happen. however, they did face-off in the most recent opec meeting. both of them refusing to cut production. the iranians said, hey, we need the cash after years of not being able to sell oil due to sanctions. for the saudis, it's an attempt to hurt high-cost producers, at the same time they think it's a bonus that the iranians will make less money than planned. while the newest round of tensions come as a result of saudi arabia executing a prominent shia cleric over the weekend for his participation in protests against the government, middle east experts also say a key factor in saudi's aggressive stand is the u.s. changing foreign policy in the region, and saudi arabia questioning the
dependability of their most important ally, the united states. looming largest in their minds, the u.s. attempt to end sanctions against iran. that comes after the u.s. did not back long-time ally egyptian dictator hosni mubarak during the arab spring and the u.s. did not bomb syria as promised when syrian leader assad used chemical weapons on his people. whether or not those individual moves were good for the u.s. national interests in foreign policy, the saudis, tyler, see them as against their own national interests. >> you know, you mentioned at the top basically that it boils down here to a collision of the leading shia power in the region, iran, and the leading sunni power in the region, saudi arabia, colliding. is it that simple that this is a collision of the two sects within islam and what is the difference between the two? >> it's certainly one of the core issues, but certainly there's just the bigger issue of who is going to be a dominant power in the region.
the difference between shia and sunni is very simple. we're going to oversimplify it. who is the correct heir to mohammed, the founder of islam? who should have been the leader subsequent to him and who should be leading it now, and that's where they come down on. there's other differences as well but to keep it very simple, who is the correct heir to muhammad. >> thank you very much. let's go to dominic chu quickly for a market flash. >> tyler, michelle, we're looking at the domestic side of things. gunmaker smith and wesson and sturm ruger up between 2% and 5%. the stocks are moving higher on nuz president obama is proposing possibly new executive actions in a final big effort to reduce gun violence during his last year in office. today the president is meeting with attorney general loretta lynch to discuss his administration's options for tightening gun rules. the gun stocks have already had a huge boost from talk of gun control in the u.s. presidential election campaign. smith & wesson, sturm ruger have both made big gains over the
course of the last year. >> thank you slech for that, dom. 2016 kicking off with a massive sell-off around the globe. it was sparked by china but there are many other factors playing into this so the dow is currently off its worst levels of the day. when it was down by 2.3%, it was actually the first -- the worst first trading day of the year since 1932. the s&p is back above 2,000, but it's still off by about 2%. the nasdaq is down by 2.4% and same for the russell 2,000. taking a look at the etfs with the most chinese exposure, gxc, mchi, msci china, fxi, i shares china large cap. all of the names you can see there on the board are sharply lower by about 3% or so. so a disappointing 2015. 2016 off to a rocky start as well. where the experts expect the biggest gains this year. you're watching cnbc. we're down on the floor of the stock exchange with ty back at
resilient bull? mike santoli is here, dom chu is here, melissa, mandy, everybody is here. let's kick it off. what do the experts say such as they are experts? >> so let's set the stage for this whole conversation in that we are not expecting, when i say we, the market and it's strategists, are not expecting massive gains in stocks this year. >> no. >> if you look at the cnbc poll of market strategists, the median, so the center forecast, is just around 2,200 as you can see on the wall behind us here. now that at current levels means we'll probably have maybe a 10% -- >> that's a 10% gain on the s&p. >> exactly. if you look at the spectrum, usually we'd expect to see a much wider range. in this case here, the range is not wide. it's only a couple hundred points between the lowest and the highest. the lowest being 2,100, that's dave over at goldman sachs and bmo. that's a 5% increase where where we are. the high end of what we've seen,
2,300. that's john stolfutz at oppenheimer. it's interesting there are no forecasts out there we've tracked so far that are predicting losses, just modest gains in this whole environment. so as you talk about the bull/bear debate, this is what's happening and right now it's generally tilting more bullish. >> so santoli, what do the charts say about this in terms of what we've seen in the past? how do we line up after a fairly flat year? >> typically if you had one of these extended periods of flat action, this is about a year and a half. you go back to july of 2014, that's when we first hit 1990 on the s&p 500. now, historically these long, flat periods have usually resolved with a further gain but i will say that i think the street's orientation of saying let's not expect much out of this market just shows how last year beat everybody down. it was exhausted, grinding, more stocks down than up and even if we had a flat year on the s&p people don't feel like they're going to be rewarded for being a hero on january 4th and calling
for great things. i think what's interesting about that consensus target, dom, is that it's only about 3% above where we got in may at the all-time highs. essentially people have rolled forward their 2015 expectations. i honestly think it also says we are walking the line between bull and bear market. obviously, the weak internal action last year has a lot of people thinking we're just not sure if there's another source of strength that this bull market can summon, even if history says it usually does get you another leg higher. >> i call this a cat market because this cat has eaten a lot of hair balls over the last couple years. >> but is it going to cough them up? i'm wondering whether this is the phase where it gets coughed up. remember, 2015 was the third year of a presidential election cycle. typically that year has your best gains. the next year, the second best gains out of the four. so let's see what happens. flat year in 2015. not off to a very usauspicious start in 2016. at least so far. thanks, guys. >> thanks very much for that,
funds target, and the market calmed down quite a bit. they did an auction of $199 billion. it's down substantially from the $475 billion we saw right at the end of the year. that was attributed to people trying to get their books in shape for the end of the year and offloading some cash but now it's calmed down and what we're seeing is rights in i-cap, they make a market in the fed funds market, they say that the fed funds rate now is back up to the target range of 35 to 36. why are we telling you all this? because there was concern with trillions of dollars of excess reserves out in the economy, could the fed actually hit that fed funds rate, that new higher fed funds rate? there was concern at the end of last week as the fed funds rate crashed and over the weekend traded at 20, now it's back up and it appears the fed is able to hit that rate. stan fisher said over the weekend it had been a success, the fed's ability to hit that rate. at least for the moment for today we're back on track. a little bit more economic data,
we had weaker than expected construction spending, weaker than expected advanced report on the trade, and you can see that the fourth quarter rapid update, the cnbc tracking of all the tracking forecasts out there, fell 0.2%. now it's tracking 1.7% for the fourth quarter with a very wide range, so a lot of disagreement among economists over growth in the just completed fourth quarter from a half a point to 2.5 points and the actual for the third quarter was 2%. let me show you where some of the big houses on wall street are right now. you can see here bank of tokyo, mitsubishi, they're at the top end, 2.5%. credit suisse 2.3%. the atlanta fed followed by a lot of people very weak, weaker still, morgan stanley, 0.5%. guys what we're seeing here is that the fed is able to hit that range, 35, 36, but it's coming amid weaker than expected economic growth and, of course, as you guys are talking about all day, that concern about overseas global economic
outlook. back to you. >> thank you very much for that, steve liesman. all those concerns about the global economic outlook nefeedi into what is a shaky start for 2016. the dow posting its biggest first-day percentage loss in 84 years when it was down by 2.3%. now it's down by 2% but, you know, we're just talking a matter of points here. sitting at 17,062. we were below that 17,000 mark earlier on in the day. the s&p is holding onto 2000 right now. the nasdaq is off by 2.5%, and the russell 2,000, the small cap index, is down by 2.4%. there's some big moves in the currency markets as well. let's take a look at what dollar/yen is up to because yen does tend to be sort of a currency of choice in times of turmoil. dollar/yen is currently down, in other words the yen is gaining. it's sitting at 119. euro/collar is al euro/dollar is also down. the dollar is making a little bit of a comeback there. just below 99 for the dxy.
to the bond markets, let's find out what's happening on that side of the tracks with rick santelli at the cme. >> hi, mandy. steve mentioned gdp and atlanta gdp now at 0.7. i did the calculation, if they're correct that would mean the annual gdp for the u.s. would be under 2%, 1.8% to be exact if the 0.7% holds and we don't get a look at the first quarter gdp until the end of this month. sp intraday of 10 down 4 basis points. maybe a chart starting in october gives you a better look. certainly looks as though there's failure here. traders look at that chart and see lower rates as they do when they see the bund. remember, the rates seem to be tied at the hip. many times we see the moves exactly mirror images. just different scaling. bunds look as though the 45 to 48 level will be integral. dollar/yuan is the chart everybody is looking at the most
today. you see how the dollar is flying. and last we've talked a lot about the chinese stock market. look at a 20-year chart of the shanghai composite. certainly doesn't look like a chart you want to step out on and go into the buy camp, especially after the failure of these highs to measure up to old highs. mandy, back to you. >> thank you very much. over to ty. >> thanks, guys. talking about safe havens, investors have been rushing into safe haven trades today. let's look at gold which has been rallying in this stoget sell-off. there you see it up about 1.5% at $1,075.107$1,075.40. meantime, other safe haven trades picking up some cash as well. melissa? >> we're all over this major global market sell-off that started in china, spread to europe, now we're seeing it here in the u.s. market. stocks slumping to a three-month low. the s&p 500 well off of session lows but still down more than 2% at this hour.
trading right now just at the 2002 mark. we're tracking the tech at the nasdaq where we're off the session lows but still down by 2.5%. biotech, chinese internet stocks, those are stocks are getting hit very hard. coming up, the stocks that got left out in the cold in 2015 that could be poised to shine in 2016. "power" is back in two.
hello, everyone. i'm sue herera. gop presidential hopeful marco rubio campaigning in new hampshire criticizing president obama's potential executive action on guns saying it wouldn't have prevented any recent mass shootings. he vowed that as president he would override any of president obama's executive orders on firearms. president obama has approved missouri's request for federal funds for flood cleanup. the state's national guard will oversee the cleanup with the u.s. army corps of engineers. the mississippi river and most other waterways in the state flooded after receiving between 10 and 14 inches of rain. general motors investing $500 million in lyft. in return the automaker gets a
seat on lyft's board and access to the company's software. it also becomes a preferred vehicle provider to lyft. and the next power ball winner will have a chance to claim one of the game's ten biggest prizes this week. the jackpot grows to $400 million. lottery officials say no one claimed last week's $334 million prize, but buyer beware. the odds of winning are about 1 in 292 million. that's the news update this hour. back to you guys. but, mandy, if you're the one, it's your big day. >> someone has got to win, right? >> someone has to win. >> terrible odds. i think you're way more likely to die being eaten by a shark or stung by a bee but at the same time someone has got to win. >> that's right. >> good luck. thanks very much, sue. a big sell-off at the new york stock exchange but it's somewhat a day of reversals. for example you have oil which is currently to the downside. it was up by about 3% earlier on in trade and the markets have really reversed course.
they're coming off their lows. we're down by 357 points on the dow. we were down by well over 400 earlier on in trade. let's find out more on this with bob pisani. why are we getting this reversal? >> i think the important thing was we closed in europe and the market started lifting as soon as we closed in europe. we were down to 1990, 1989 or so just prior to the 11:30 close over in europe, and the volume lightened up. this happens not infrequently on europe, particularly on very big down days. the market has slowly lifted that you have. it's not a terrific rally but we are off the lows and more importantly over that psychologically important 2,000 level. let's look at the sectors and it's down 2% to 2.5% right across the board. this really hasn't changed that much. financials, health care, consumer discretionary, technology, all essentially down 2%. energy is now improving a little bit. it was a big outperformer and
then as oil dropped in the middle of the day, it also began giving up the ghost. was down 1.5%. as you can see energy is starting to improve right now and a lot of people were shocked. a major geopolitical event and the oil market barely reacts to that. i think that got a lot of people discouraged in the middle of the day. i want to emphasize besides the f.a.n.g. names, a lot of traders hung out in consumer names that held up well in 2015. johnson & johnson, ultra, and clorox. that's not happening today, those are down as much as the rest of the market. on financials, nothing is working here. they're talking about a big money center bank or regionals or even trust banks, all of them down equally today. >> quite a tumble out there. the vix is currently up by only about 3 to 2186. >> it was 23 and change but you're right, it's not in a complete panic mode but i pay attention when it's over 20. >> we do. thank you very much.
thank you very much for that, bob. with stocks tumbling on the first trading day of 2016, is it bad news for the rest of the year? with me is scott clemens, chief investment strategist at brown brothers private banking. also joe tannos. good to see you all. a bit of an unfortunate circumstance for the market. a lot of people highlight the fact you have a hired and aging bull out there, right? but is the bull ready to retire and hand over the reins to the bear or is it basically just a tired and aging bull? >> it's certainly an aging bull market. there's no expiration date on the market, but as we approach the seventh anniversary of the bottom of the market, earns have begun to wane thin, valuations are pretty lofty and that's a head wind, an obstacle for markets in 2016. i don't think what we're seeing today is the beginning of any sort of turn, we may have turned the page on the calendar. we haven't turned the page on the markets. this is still a market that's primed to overreact to news. that's what we're seeing. >> you were saying it's a ho-hum
2015, expect more of the same in 2016? >> sort of a groundhog day in 2016? >> can we make gains at the end of the year? >> we can but it will depend whether we get earnings growth in 2016. that's the real fuel. >> am i right in thinking though, joe, you think we could see a reacceleration of earnings in 2016 and if so, why? >> i think we can see a reacceleration of earnings heading into 2016. i want to temper expectations. we're not looking for a whole lot of multiple ex packspansion these levels. part of what really weighed down earnings growth in 2015 was what happened with oil prices, but as we know, heading into the first few months of this year, that should begin to fade. i think you are going to see a modest acceleration in earnings growth, probably somewhere in the midsingle digits and that's probably going to drive the bulk of returns in u.s. equities in 2016. >> why do you say the headwinds of oil prices should begin to fade? what gives you confidence that the bottom is in for oil? a lot of people we speak to
think that if you're pointing to the iran/saudi tensions, that's not necessarily something that will support oil prices longer term. >> you're absolutely right. i'm not saying we've necessarily hit a bottom. i think we're bumping along the bottom and getting closer to it but when we think about earnings for the s&p 500 or really any market, of course, we tend to look at year-over-year results. so looking at where earnings were about a year ago and looking at where they are today, looking at the price of oil a year ago reg tiff to where they are today, you're no longer going to continue to see that sharp deceleration. i think the other factor which has really weighed down earnings in the s&p 500 in 2015 was a strengthening dollar. of course, the magnitude of that strength is unlikely to be repeated in 2016. >> okay. thanks for clarifying. scott. thank you for joining us, also joe. you can go to powerlunch.cnbc.com to see joe's fed strategy this year. that is powerlunch.cnbc.com. melissa, over to you. >> mandy, as investors reach for stability in tw2015, a handful
big name stocks drove the market leaving behind companies that could be poised for a comeback. will 2016 be their chance to shine? steven denick low has nearly $10 billion under management. it's this notion of comeback and we'll use the housing sector as an example. why should we believe that there are some stocks that were left behind and deserve to outpmp in t in the coming year? >> if you look at home depot, fantastic company, fantastic management. grew earnings by 16% in 2015. the stock was up 30%. the multiple on home depot grew 2x the earnings. number one, investors were surrounding themselves with stability, mega cap companies, looking for confident growth. number two, it says the housing market in general in the u.s. is strong. so i take that theme and you look for companies that actually executed in 2015 and for whatever reason fell awry and the stocks didn't perform as
well. >> let's get to some of them. whirlpool is one. i see that there are a lot of headwinds for whirlpool, let's put it that way. they have a sizable business in latin america. the fed is hiking interest rates which is not beneficial in terms of the currency and also latin america is fairly weak in the economy because of the commodity cycle at this point. how does it overcome this in 2016? those issues don't seem to be getting any resolution in 2016. >> sure, thanks for that question. it's one of the biggest misperceptions. let's look at whirlpool in twitch. they actually grew earnings 7%. the stock was down 22%, okay? so the stock got cheaper. if you look at the latin america business, it's actually only 10% of their business now today. it's from a low level. if you look into 2016, if you assume brazil stays weak, if you assume that the u.s. continues to chug along and you said brazil was weak because of the commodity cycle, whirlpool uses steel, one of the largest doctor.
>> their inputs are lower. >> which is a great benefit to them. when i look into 2016 i actually see 15% to 20% growth for whirlpool to about $14 in earnings. the stock is at $143. this is a very, very cheap stock, under followed, under owned, and really will have a lot of catalysts going into 2016. >> let's get to sherwin-williams. people know their paints. 85% of their business is focused on the contractor which i would imagine is much better than depending on the person who is going to paint their fence on the weekend. their input costs were lower theoretically as oil and gas products were lower. did their margins improve? did they see any sort of traction? >> they say over 200 basis points of gross margin expansion. in the past sherwin-williams grew their earnings by 25%, the stock was flat. there was a perception they were going to beat and raise all year. they beat in the first quarter. second and third quarter they had weather issues but still put up 25% earnings growth rate.
in 2016 i expect in excess of 20% earnings growth. little sherwin-williams in all s&p 500 companies over the last 20 years, they have the second fastest dividend growth. they are a cash flow machine. they generate more free cash flow than net income. if you put 20%, 25% earnings growth in 2016, i don't think the stock is going to be flat again. >> we're out of time. last week is cste, the ticker. thank you. stephen denicholo. >> shares of yoga apparel maker lululemon nearing session ehigh. analysts at wells fargo upgraded the stock to an outperform from a prior market perform rating saying it was confident the company could reach profit margin goals. they are on track that are the biggest intraday percentage gain in about a month. downward dog, everything else,
yoga is in the news today because of lululemon. >> and so are those athleisure fashions that everybody seems to be wearing, men and women alike. >> i don't fit into yoga pants. >> i'd like to see that. no, that's too much information. let's look at the sectors making up the s&p 500. would you be surprised to learn all ten of the ten are negative on the day? there's utilities, the best of a bad lot. it down 0.75%. energy the same. as you move through them, the biggest loser, financials, health care, tech, and discretionary. "power lunch" will be right back with more on this dramatic global sell-off day.
welcome back, everybody. we're down here at the stock exchange where it's a bit of a rocky day out there for the markets. not just in the u.s. but globally. let's take a look at what's happening with the dow, the nasdaq and the s&p. all of them are down by about 2% or more. among the stocks having the biggest negative impact on the dow, goldman sachs, 3m and
boeing. a wild day for oil as well. tensions in the middle east but then global economic fears and worries about crude oversupply took over basically and oil has turned negative by 1%. one place that investors are putting their money today is gold. take a look at newmont mining. it is higher by 2% and the leveraged etf that is three times gold, ticker nugt or nugget, is currently higher by 8.5%. a very good day for bullion. over to you. >> listen up here, slowdown in china is bad news for luxury real estate markets around the world. of course, they've been relying on wealthy chinese buyers in many cases. robert frank joins us now to explain. hi, robert. >> tyler. the chinese rich have been a big driver of real estate prices around the world but now the china slowdown could redraw the map for luxury home sales
globally. price growth for luxury homes in the world's top cities will slow by more than half this year. the biggest losers will be those city that is relied most on the wealthy chinese buyers, hong kong will be the worst with prices down 5%. singapore will be down 3.3% and then there's paris which is a separate set of issues with terrorism and a slowdown in the euro. now, the u.s., they're going to remain strong according to this forecast. new york going to be up 5%, miami up 2%. chinese buyers not quite as important in these markets, and you have what i would call the china paradox. you have less wealth creation in china, but the already wealthy in china, they're going to want to put more money overseas for safety and better growth. brokers in the u.s. and australia saying they're continuing to see strong interest from chinese buyers and that explains the number one market for luxury real estate in 2016, sydney, australia. prices there expected to jump 10% this year. that is still slower than the 15% last year which just goes to
show what's bad for china could be good for real estate in these safety countries. >> this will make our face-to-face favorite aussie, mandy drury, happy. is there any restrictions on the chinese taking money out of the country? >> there are restrictions. those restrictions are going to be lifting gradually starting this year. so that's another force propelling money out of that country. it's going to make it easier for people to put large amounts of money overseas. >> all right. rock robert, thank you very much. >> tech stocks getting hit hard. the nasdaq is down by 2.4%. the bigger cap names, the national dak 100, doing even worse. down 2.5%. the popular etf that tracks the nasdaq 100, qqq, lower as well. the f.a.n.g. stocks down sharply. those were last year's winners. and, of course, china a big reason for the sell-off and shares of the chinese companies that trade here, alibaba, baidu,
jd.com all getting hit. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. at ally bank no branches equals great rates. it's a fact. kind of like ordering wine equals pretending to know wine. pinot noir, which means peanut of the night.
a major market sell-off on the very first trading day of 2016. the s&p earlier breaking below 2,000. financials, health care, and consumer discretionary the biggest sector drags. dupont is leading the decline in the dow. that stock is down more than 4% and chipotle the biggest loser on the s&p 500. and as always, if you missed any of the big stories over the past hour, you can go visit the site at powerlunch.cnbc.com. it is not just china and the middle east rattling the markets today. the default by puerto rico adding to the concerns. we'll have an exclusive interview with the governor of puerto rico. that is coming up. also as we head out, take a look at the small cap russell 2,000 and the dow utilitieutilities, t transports. the one doing the best out of the three is the dow utilities. "power" will be right back.
michael santator. gentlemen, thank you for joining us today. ashti eric, the russell 2,000 was down by 7.5% over the course of last year. not the best year overall for the index but where would you find opportunity for this year? >> well, at the hodges fund we really see small caps as being the best areas for individual stock selection and one reason is that they have less exposure to geopolitical uncertainty, foreign currency, commodity prices, and it's really the area of the market where you have wide dispersions across valuations and you can pick out companies with secular growth opportunities and really focus on individual businesses that are less sensitive to the overall macro environment. we also see m&a continuing in 2016 which we think will help support the multiples of a lot of smaller companies that could
be takeout candidates by larger companies. >> m a&a and which particular sectors of the small cap world? >> in financials we think there are some pockets that will do well and probably still some m&a in health care to take place. >> what about you, michael? why would you be sticking on the larger end of the capitalization scale? >> sure. at sylvan capital management, we manage large and small cap strategies but we like large a little better at the moment primarily due to the safety and the scarcity of growth. the longer we get into this recovery that started in 2009, the more difficult it becomes to really find companies who can continue to grow predictably and large cap companies, particularly the ones we invest in that have secular headwinds, that are taking market share and having some pricing power are doing well and continue to do well even in last year's returns where the market was generally flat. those stocks have outperformed.
we think large can continue to do that into 2016. >> in which particular names would you be putting your money, michael? >> we like disrupters across the board. right now we like vulcan materials, facebook, and under armor. they all different things going for them but they have secular trends in the wake, both advertisers and consumers are spending longer term. >> what about you, eric? which particular stocks do you have in the small cap world? >> one we like is eagle materials. they're a significant producer of cement as well as gypsum wallboard. the cement business is doing very well because of infrastructure, highway spending, and we see a continued recovery in residential housing being a nice tailwind for the wallboard business. they do have some exposure to energy and frac sand. we think that's priced in. the stock is down 40% from its highs. so we think it really represents a nice risk reward in here. we also like club korp, which is
an own er/operator of 158 different country clubs and 48 business alumni clubs and what we like about that business is there's a lot of reoccurring cash flow. it's not about the number of rounds of golf played, but memberships. and it trades about 7.5 times enterprise value to ebitda, just and you 3% dividend yield and we think that's one that should do very well this year, and then lastly i'll mention hilltop holdings. this is one of our favorites in the financial sector, and they made a transformational acquisition last year. they're now about a little over $12 billion in assets, and we think a lot of synergies from that acquisition will transpire here in 2016 and we see a lot of upside to earnings. it trades about 1.3 times book, and we think it should trade on the upper end of its peer group which would be closer to 1.5 to 2 times. >> so some ideas there from both of you.
thank you to eric marshall and michael santerterra. >> we're coming up on 2:00 p.m. stocks deep in the red but well off session lows. right now the dow is down by just about 353 points. remember, the dow had been down by more than 420 points at session lows. the s&p 500 is down by just under 20% and the nasdaq is down by 2.5%. here is the stat of the day, the dow is having its worst start to a trading year since 1932. let's bring in "fast money" traders brian kelly and jon najarian. brian, we'll start with you. is it china? we got a manufacturing number which really seemed to mess everything up globally. >> yes, absolutely. >> but the consumer is strong, so isn't that the part of the economy we care about in the u.s. as vefers? >> if you look at the economic numbers, the consumer has not contributed. our own pmi, manufacturing pmi was at 48, so you're not looking at that strong consumer. oil was supposed to do it. consumer has ended up saving
that. maybe in the back half of the year you start to get that tailwind, but it's not happening now. >> what are you trading today? >> i haven't traded a whole lot. i still remain long of tlt. i also think yields can go lower. they can get an inverted yield curve. i think the banks on the short side, they continue to be a short. i think they're very overvalued with the yield curve where it is and you know what's an interesting trade is gold as a safe haven. holding $1,050. as long as it holds $1,050, you will be safe. >> dr. j, going to bring you into the conversation. what are you trading? we're looking down the barrel at an inverted yield curve with a bid to tlt. do you think banks are also a short? >> they certainly have been thus far. brian is spot on on several of his points, not surprisingly. take a look at the drop you saw in goldman sachs today. i know it's a trading bank, investment bank, but look at what that one did and how aggressively people were getting out of it, melissa. where were they getting into? believe it or not they're
betting on a lot of people spending money at certain stores still but nonetheless gap stores, melissa, very strong activity there. l brands, victoria's secret, we saw all of those get significant bounces, even best buy. so it's clearly disconnected as far as the fear that hit was pretty widespread, but there were a number of pockets. those retailers i just named along with a couple health care or medical device companies that made significant moves after that initial sell-off. >> there were pockets. the pockets of extreme weakness in today's session seem to be the winners of 2015 and we keep talking about the f.a.n.g. stocks, fangbooks, netnetflix, alphabets of the world. do you buy people were taking the gains and that's why we're seeing the pressure on the sector? >> i think what you're seeing is that was a momentum trade and once that breaks they crack very
hard. you see these four stocks, everybody is in it. once the game changes, everybody runs for the door and you end up with these severe, severe corrections and i think it's got a lot more room to go. >> dr. j, what kind of options activity are you seeing in these particular stocks, any sort of positioning that would indicate people are going to take advantage of the sell-off in the f.a.n.g. names? >> some of those like netflix, they're seeing some aggressive selling and the exit is just one door and everybody is trying to get out of it right now all at once, and i disagree with the folks that are deciding to do that but nonetheless i can't -- like a salmon fighting upstream so i'm waiting like jim cramer said. i don't think you need to rush into that name. some of the others i mentioned earlier, i think people were definitely buying those early but netflix and the like, there were some put sellers that showed up as the stock was down a little over 7%, but it wasn't enough really to trigger on our screens a buy signal, so we're going to wait. we're going to hold off on some
of those f.a.n.g.s but i don't know what changes, melissa, from last thursday to today so aggressively i would want to be dumping out of these. >> thank you so much. "fast money" traders brian kelly and jon najarian. mandy, owe every to you. >> we're still here at the nyse. today's market sell-off is what we're focusing on. you saw chinese stocks taking a big hit following another round of weak manufacturing data. we saw the shanghai tumbling 7%. the shenzhen plunging more than 8%. bob pisani is joining us. bob, it's easy to blame china but it is certainly not the only thing causing today's weakness. >> it's not. but we want to focus on china because we have one of the big china etf experts here, he runs crane shares. what happened? was this all china pmi? what caused the 7% drop and still couldn't finish in china? >> the pmi was probably a minor contributor. we mainly are seeing that the ban on insiders sales is
expiring this friday. that's about $1 trillion rmb is going to be allowed to be sold for the first time. that's going to weigh on small c cap. >> and these people were prevented from selling several months ago and now they can do that. >> for the first time. >> you think retail investors might be trying to get ahead of this? >> very much front runer running knowing the potential for sales coming on friday. >> let me get to seema mody with breaking news. >> dow jones is reporting mary berra is being elevated to chairman and ceo which would many she would be ceo and chairman of general motors. gm is expected to announce her appointment monday afternoon. we're just going to take a look at shares of gm. slightly higher on this news -- excuse me, now slightly lower. we'll keep you updated on this developing story. >> thank you very much for that. do you have any comment on the stock of gm? >> i think the important thing
is marry barra is a respected person in the business and she's been very respected for years in this business. >> we'll keep on watching that story. >> let's move back to china here. you have a specific way you think people should be looking at china right now today's events notwithstanding? >> china's domestic consumption is the most unheralded story in capital markets globally. retail sales have grown at over 10% rate over eight months in a row. so we think investors have been very much overweight the part of china that's slowing, the export-driven manufacturing and industrial sector. >> so you -- the consumer is your story. >> domestic consumer. >> how do you play the consumer in china? >> we love the internet and e-commerce names. >> it's all well to be sanguine about this but if i hold one of the chinese etfs that's being decimated today, what am i supposed to think about that? do i just stick around and hope things get better? we've been trying to call the bottom of the chinese economy
for the longest time but the data keeps coming out soft. >> well, the domestic consumption numbers have been very robust. k-web which owns the internet and e-commerce names was up 20% last year. the industrial export driven etfs were down. where you've invested have determined your results and we love this domestic consumption story. we think it's early innings. >> kweb is primarily e-commerce. we're looking at it right now. you sort of want to go to the e-commerce side. you want to overweight the apples and nikes of the world and underweight the caterpill s caterpillars. that's the way to play the consumer in china? >> very much so. part of china does face the headwind of tepid global growth. part of china is doing very well. >> on the currency, we're all watching what's happening with the yuan and certainly last
august with the devaluation that sort of started off all that panic selling here. what do you expect to happen there? >> the great thing about the k-web names is they're u.s. dollar denominated. the weakness in the euro and the yen is what's causing it to devalue a little bit. >> thank you so much for that, bob as well. >> thank you. >> in the meantime, tyler, over to you. >> thank you very much. we're of course all over this new year's sell-off on wall street and there you see it in very vivid form. there are 30 stocks in the dow industrial, all 30 are in the red with sell-offs ranging from a third of a percent to almost 5%. there are some green arrows. some of the losing stocks of 2015, 3d systems, sun edison, gopro, fireeye. lululemon also a winner today.
thank you so much for joining us on a somewhat historic day where you had an important debt deadline and you have made all but a small portion of the payments due today. i'm just curious for your thoughts. you were able to make most of your commitments good today, but what will happen if there's no political action from congress in the intervening months between now and your next big due date which i believe is july 1st? >> well, we run out of cash. we have been able to do some payment due to the activation of a clause that we call a clawback. that means that we are not putting any more money into the accounts that are created to pay future debts. so that's why we're able to do some payments today. this crisis began in congress in 1996, so what we are asking for congress is to act, give us the tools to address this crisis. we are not asking, we do not want a bailout, we just want the
tools to solve this crisis. >> governor, you set the tone for i think what is the current debate now by saying last summer in an interview the $72 billion in overall debt that the island had at the time, i believe it's now $70 billion, was simply not payable. that said, you have managed to make the vast majority of your obligations in the intervening months as just acknowledged, and some people think that was nothing but political rhetoric. what do you say to those people? >> this is not political rhetoric, it's mathematic. it's very simple. we don't have money to pay, and every analysis -- i commissioned the first independent analysis of liquidity and ability to pay. it was ruled by dr. ann krueger, from the international monetary fund and it concludes what everybody concludes. we do not have the money to pay. i inherited this crisis and i am
trying to solve this crisis. i'm not running anymore. so for -- to be re-elected. it's not a political issue. it's mathematic and those that are arguing that are trying to drag this to a political arena are people just responding to particular interests, not the people of puerto rico and its creditors. >> so as of midnight tonight there would have been three defaults. two in the public financing corporation and granted the amount due is very small, about $1 million, and then another set of payments due attached to some rum sales tax tariffs. i'm just curious, are you prepared for a legal battle with some of the creditors involved in those names or other creditors in the coming months if you are to default on other bond issues? >> they have no parallel in
puerto rico history and the biggest debt that's going to default in the united states history. so being prepared, yes, we are trying to do our best. our department of justice is trying to anticipate any lawsuit that we will have, but it's to be 100% prepared will be very, very hard, but something very important, it will be very costly, that litigation. it will cost a lot for the commonwealth. it will cost a lot for our creditors, and every dollar that i need to use paying in lawsuit lawyers, it will be a dollar that i will not have available to pay creditors. so it will go against themselves. >> so one thing you have sought from the u.s. congress is the right to file for chapter 9 bankruptcy and paul ryan you said has promised some sort of congressional solution for puerto rico in the first
quarter. if you are able to file for chapter 9, how bill that work? you have 18 different debt issuers, will all of them go into the chapter 9, will some of them? and if so, which ones? >> first, what we need is a way to allow puerto rico to recirculate debt. should be through a process like bankruptcy process and take into account puerto rico was excluded without any reason from the bankruptcy code in 1984. there's no reason whatsoever in the congressional record, no one say why. so what we're asking is a way -- for a way, a legal frame that will benefit our creditors and will benefit puerto rico to restructure its debt. we do not want to go into bankruptcy. we prefer to solve this in any other way, but so far i think it's the only way, and creditors
and the commonwealth have proved that the best way to do it is this way. >> okay. governor, thank you so much for joining us from san juan. we really appreciate getting your view in this exclusive interview, and i'm toss it back to mandy and tyler. >> i'll take that, kate. thanks so much. >> my pleasure, thank you. >> let's get you caught up on stock movers in today's sell-off. mcdonald's getting an upgrade to a buy from neutral. mcdonald's shares are lower by just over a percent right now. pandora under some pressure following a downgrade to neutral from a buy at suntrust. the shartion aes are down 7.5%. pando pandora's increasing investments will weigh on profits. and tesla forecasts delivering 17,400 in the fourth quarter. that's at the lower end of the range. >> here is a look at the breadth of today's sell-off. it is as we are prone to say, a
sea of red on our s&p 500 heat map. what should you do to protect your profits in the new year? that would be about 9 to 1 in favor of the red stocks there. we've got some big money advice coming your way when "power lunch" returns right after this. me, too, but the eulogy that frank's daughter gave was beautiful. i just feel bad knowing they struggled to pay for the funeral, especially without life insurance. i wish they would've let us help. but, it did make me think, though. about what? well, that i could leave you in the same situation. i don't have life insurance, either. if something were to happen to me tomorrow, how are you pay for my funeral? or my other bills? nothing's gonna happen to you tomorrow. you don't know that. i made a promise to always take care of you kids. without life insurance, i'm not keeping it. besides, i already looked into it and between my budget and health, well ... you should call massmutual. they have a new policy called guaranteed acceptance life insurance.
i got covered with one call, and it was an affordable option for reliable coverage. what do you think, mom? i think it's time to make sure i keep that promise. if you're age 50-75, it's easier than ever to get reliable coverage at an affordable price. call massmutual today for guaranteed acceptance life insurance. with no medical questions or exams, you cannot be turned down. with one phone call, you can get coverage ranging from $2,000-$25,000, and premiums can start at less than $10 per month. guaranteed acceptance life insurance can help your loved ones cover expenses such as funeral costs, remaining medical expenses and credit card bills. we have several payment options, and benefits are paid quickly and directly to your beneficiaries. they can use it for any expense they choose. for more than 160 years, our policyowners have mattered most to us. massmutual's ratings are among the highest of any company in any industry. you can feel confident we can help you protect the people who matter most to you with guaranteed acceptance life insurance.
i'm melissa lee, a sharp sell-off in asia triggering big market declines in the u.s. as well as europe. the hang seng falling 2.5%. the shanghai falling nearly 7% and the shenzhen falling nearly 8% to kick off the new year. that comes on the back of weak manufacturing data from china. andy rothman is with matthews asia. he's been a long time china bull. great to have you with us. andy, what caught my eye in the notes i got from our segment producer is you think the dramatic fluctuations in the index don't reflect what's going on in the broader china market. the official pmi on january 1st showing shrinking of the manufacturing sector. how does the index not reflect what's going on in the economy which is a slowdown? >> the main point i want to make today is the sharp fall in the
shanghai composite index really doesn't reflect a sharp change in the chinese economy. those pmis you mentioned, one of them was up a fraction. the other was down a fraction. really not big news. we know, everybody knows, that manufacturing in china is weak. but it's not collapsing. we saw manufacturing wages rise 5% to 6% last year. but keep in mind that the biggest part of the economy in china is the services and consumption part and that part of the economy is doing really, really well. i think what happened in shanghai yesterday was two things. first, later this week we're going to see the lifting of a six-month ban that was put in place on the selling of shares by major shareholders and a lot of smaller shareholders decided today for some reason that was going to be their day to get out ahead of that. the second thing was today was the first day of implementation of a new circuit breaker and that made the situation worse as people worried about liquidity. so this really shouldn't be a sign that the chinese economy is worsening and that this is going to have an effect on global markets. >> in terms of the strength of the consumer because that's how
most of our viewers play china, it's through exposure of large multinationals here that sell to china, names like apple and nike, how does the depreciating yuan factor into this? doesn't that challenge the chinese consumer? in today's session we saw the yuan against the dollar at five-year lows. >> let's look at how much the yuan has moved. last year against the dollar it defaulted by 5.8%. balanced against a trade weighted basket of currencies, it appreciated by 1%. there was appreciation of even more than that. and very few chinese consumers actually spend much money on imported goods. i think the currency changes aren't going to have a big impact on the chinese consumer. in fact, with the depression against the dollar last year, we had incredibly strong double digit retail sales growth. at the same time though, multinationals are finding it harder.
you mentioned a couple companies that are really doing very well in china, apple and nike, but a lot of multinationals are finding it difficult in china now, not because the chinese consumer spending less, but because there's so much competition from chinese brands. >> andy, you seem to be making a strong distinction between the health of the chinese consumer economy, good, and the chinese factory or manufacturing economy, not so good but not terrible. my question is do the indexes in china overweight the wrong part of the economy? in other words, do they overly reflect the manufacturing and factory side of the economy at the, quote, expense of the consumer side of the economy? is that just something we need to bear in mind as sometimes naive american investors? >> really important point, tyler. thank you. the index in china, the main one we usually talk about, the shanghai composite, is terrible reflection of the chinese economy for two reasons. first, as you mentioned, it grossly overweights the old part
of the economy, especially those parts of the economy that have to do with construction related industries and we know that the growth rate of investment in infrastructure and property has passed its peak in china. the second problem in the index is it grossly overweights state owned enterprises whereas it's the privately owned companies that account for more than 80% of employment, all the new job creation, all the wealth creation. so those two mismatches are huge because the services sector, the consumer sector, and that's the biggest part of the economy, consumers and services, are very much underweighted by those indexes. so that's why i was saying before this is not a good reflection of what's happening in the chinese economy. >> all right. lots of good information, andy. thanks so much. andy rothman of matthews asia. and let's take a quick check on apple. we started off the 1:00 hour saying this could be the reversal of the day and that's exactly what we're seeing play out in shares of apple. as the nasdaq is still down
2.4%%, we are seeing apple try to swing into the green, up by 2 cents on the day. this is an interesting stock to watch going into the final hour and a half or so of trading. ty? >> melissa, crude oil making a big reversal as the final trades begin to cross for the session. let's get to jackie deangelis to set us up for the close. >> good afternoon, tyler. a volatile way to kick off the crude oil trade on the first trading day of the year alongside equities. a shift a little bit here in the psychology that is driving this trade. we're going to talk about it and what you can expect for the rest of the year, 2016, coming back on "power lunch."
hi, everybody. i'm sue herera. here is your cnbc news update. afghan authorities say at least 30 civilians including nine children were wounded in an attack on a foreign contractor compound in kabul. police said a truck packed with explosives drove up to the armored gates of the complex before being detonated. the taliban claims responsibility for that attack. the justice department and the environmental protection agency filing a civil complaint against volkswagen following the emissions cheating software in nearly 600,000 vehicles sold in the u.s. former president bill clinton campaigning for wife
hillary in new hampshire. it was his first solo appearance on the 2016 campaign trail since she announced her candidacy. he spoke at a rally before more than 700 people. and there's a new perfume inspired by russian president putin and it went on sale in moscow today. the fragrance for men called leaders number one comes in a sleek black class bottle featuring the profile of the leader. it sells for about $95. we'll leave it to your imagine nation as to what it might smell like. >> oh, my goodness, gracious. >> that's the update, ty. >> that is an update. i'm thinking of those pictures of putin bare chested on a horse and the old spice man bare chested on a horse. that's coming next. >> i think you're right. >> happy new year. welcome back. >> happy new year. >> it would make it very much like a perfume commercial with bare chested men walking around maybe on the beach. tyler, we're going to talk about what's happening here first of all with apple shares because like you just mentioned here, we
want to point out apple shares are now flirting with positive territory. they are just about flat on the session so far. they did take a peek at the green so far today but they were down about 3% at their lows today, so as people have stepped into this midafternoon market, tyler, they have been either covering shorts or nibbling on the fundamental buysi side at shares of apple. an interesting move when everything else seems to be very much in the red. >> hovering and nibbling. let's go to jackie deangelis at the nymex. >> we kicked it off in a volatile session. oil reversing, it's going to close negative under $37 a barrel. session high was $38.39. so we got that knee-jerk reaction to the geopolitical headlines. then the market digested it and still realized we're awash in oil and the oil that does flow through the strait of hormuz could be offset by what's in storage and what's coming out of other producing nations.
the question is do geopolitical headlines matter as much as they used to. these kind of things in the past would send oil up 5% and no one would bat an eyelash. it seems we're sighing a little bit of a shift in the psychology, a little bit of a sea change. traders don't think unless the tegess really escalate that we're going to see necessarily much more from this. in fact, they think that there's more downside ahead. melissa? >> jackie deangelis, thank you. raymond james lowering its wti forecast from $50 from $55. let's bring in pavel from raymond james. jackie was talking about a lot of traders down there at the nymex thinking that unless this escalates into war and there's an actual supply disruption there won't be an impact. is there also the other side of the risk and that would be that iran and/or saudi arabia actually increased their production of oil? >> well, saudi arabia is producing at an all-time high, and unless they have some
amazing trick up their sleeve, they're pretty close to full capacity as it stands. iran is an important question because, of course, the sanctions have not been lifted yet. i'm referring to the european oil embargo. we're expecting them to be lifted soon. after they're lifted iran is going to increase production, but i think that's been pretty much known going back to july of last year when the nuclear agreement was signed. so as far as production surprising to the upside, that's really not likely at all. if anything, you now, you can envision scenarios where p production surprises to the downside. the war with isis clearly not over by any means, it has not yet disrupted production in a big way, but you never know if we get into a ground war in the middle of syria and iraq, you could absolutely see some disruptions. >> so again, we mentioned that your firm lowered the price forecast to $50 purely as a
function of where we ended up starting 2016. does that change at all any of your estimates or your outlooks for any of the companies you cover, the $5 difference for the year? >> we're actually more bullish now than we were six months ago because we're starting the year in the low 30s. this is exactly the time when oil producers are setting their investment budgets. you can imagine how ugly those capital budgets are going to be with oil below 40 bucks. so what that means is the supply response heading towards the second half of the year is going to be more violent, steeper production declines than what we would have said six months ago so that sets us up for a bigger recovery in the back half and into 2017. in fact, we actually raised our 2017 number today to $75 for wti, close to a double from current levels. oil is probably not going to go much higher than that. that would be the peak of the next cycle, but we are
increasingly bullish on the 12-month outlook versus where we were just a few months ago. >> $75 in 2017. we'll see. pav thanks so much. brian will be live on the ground in houston tomorrow to see how the crude collapse is impacting everything from home builders to banks and restaurants and on wednesday brian is live in miami for the goldman sachs energy conference. he will be speaking exclusively with several energy ceos including marathon petroleum and diamondback energy so you will not want to miss that. let's talk about the next move for stocks with the "trading nation" team. boris sha loss burg is a macro strategist. ari wald is technical analyst at oppenheimer. boris, is this all about china? are we overblown at this point in terms of the sell-off? >> it is all about china today, but i think if 2015 was the year where you bought the dips in the s&p, i think 2016 is going to be the year where we sell the rallies almost all across the
board. i see headwinds from a bunch of different perspectives. china is clearly a big problem. you also have i think profit peak at this point. you have a strong u.s. dollar, and i think you have, of course, the unwind of the qe which has been positive. for all these reasons, even forget saudi arabia, forget iran, forget all the geopolitical risks we could be facing, i think it's going to be very difficult for stocks to muster a very strong year this year. every rally i think is going to be -- last three years has been a great time to sell puts. i think it will be a great time to sell calls. >> that's your overall view of the markets but in terms of sectors and stocks, where are you looking to? >> well, you know, i think defensive stocks still kind of outperform. i still like the consumer sector because i think that sector will probably be okay because the consumer itself is going to do well as wages begin to increase and there's going to be a little bit more of a spend. but other sectors i think are going to be in much bigger trouble.
i generally think there could be a pe con stroctitractio contrac further. >> ari, how do the charts line up in terms of bor ri saying it's going to be a sell the rallies kind of market and stick with the defensive names. >> i don't think the correction has fully run the course. today's response to the china data was magnified because there was a very weak technical setup going into it. a few concerns for us, one, i think the broken four-year uptrend we suffered over the summer still hasn't fully run its course. our work suggests there's still additional time needed to repair that damage. two, internal participation remains narrow. three, volume remains very distributed. bigger volume on down days and advancing days. it is typical to see a moderation in trend following the start of fed tightening, so put it all together, we still
see additional downside risk for the s&p 500 looking out into the first quarter. the level we're watching is 1900. that is the trend line connecting the lows from the prior two years. melissa, we think we're heading down there. >> so 100 points lower from here. ari, just quickly, it looks like we're seeing a pretty big pullback in the f.a.n.g. names, the leaders of twin. h 2015? >> does that make you more bearish? >> it does not make us more bearish. those are the names you want to buy on the correction. they continue to lead the way looking out the rest of the way. >> quote of the day is f.a.n.g. is dang. that was the best line i read. >> one day doesn't make a trend. i like that one. >> two sides to every market. for more "trading nation" head to tradingnation.cnbc.com. mandy? >> thanks very much for that, melissa. let's take a look at the s&p because we're down over 2.2% right now. we're really losing steam again with the s&p back below the 2,000 mark. the dow is currently sitting at
17,025 but it's down about 400 points. here are some of the big energy names and see how they're faring on the first day of trade in two 2016. all of them moving to the downside. we also saw crude finishing down after a really big pop earlier on in trade on geopolitical concerns of about 3% in morning trade but it's currently heading back down now. you're watching cnbc, first in business worldwide. this holiday season, get ready for mystery. what's in the trunk? nothing.
romance. 18 inch alloys. you remembered. family fun. everybody squeeze in. don't block anyone. and non-stop action. noooooooo! it's the event you don't want to miss. it's the season of audi sales event. get up to a $2,500 bonus for highly qualified lessees on select audi models. you ppremium like clockwork. month after month. year after year. then one night, you hydroplane into a ditch. yeah... surprise... your insurance company tells you to pay up again. why pay for insurance if you have to pay even more for using it? if you have liberty mutual deductible fund™, after a really big pop earlier sign up to immediately lower your deductible by $100. and keep lowering it $100 annually, until it's gone. then continue to earn that $100 every year. there's no limit to how much you can earn
isn't a one of them that is in the green on this day. the best of a bad lot, telecom off 1%. bringing up the rear, financials down nearly 3%. mandy zm. >> thanks a lot. let's bring in two traders and see what they think of all this. kenny polcari and matt. do you think it's just one-day wonder? >> i wish i could forecast that. we'll wait and see how china opens tomorrow. that will be the barometer of how we react. we've reacted significantly to that. while their circuit breakers are lower than theirs, we'll see how they open and go from there. >> it's clear today is not just about china. it's a whole confluence of factors. >> oil, manufacturing numbers in the u.s. we'll start with china because that will be the first thing we look at tomorrow morning. >> if you look at the where the vulnerabilities are, we've been talking about the weak internals and how the technicals are not looking good. >> right. as the year ended last year you
could feel that, that the market was just -- internally, it continues to be so today. there's no doubt the china story last night set the tone for the world. you saw as the sun rose in europe, you see what happened to the european markets, the concern they have. over here it's funny, the market is down 400 points. we've only traded 600 million down here. it's not a crazy, panicky day and i think that's key. people need to understand that. yes, we're down, down 2%. it's not pretty but it doesn't feel panicky and i think that's a key point because i actually think the market is looking for some stability. >> do you think this is a dip to buy or is it maybe just a little too early to go in, matt, what do you think? >> i'm not going to do my whole year based on today's move. i'm going to look for a move lower. we held 17,000 in the dow and that was kind of a psychological level. we could break through that and break through that significantly and that's when you probably want to be a better buyer. the way gold is acting brings some significance. is that a flight to safety? something with further traction? then the market will have further legs lower. >> on the s&p you have to look
for the 1950, 1975ish level because we broken all key technical supports. now the next level where it should find support is right in there. so i would be buying as we moved into that level but i would wait, maybe not today, tomorrow, don't forget, nonfarm payrolls on friday. the number is expected to be 200. what does the number really mean? i think there's room to allow the market to back off a bit. >> what is the number one concern you have four the market this year? >> as a trader i will look for something that has some reward to it and that might be oil. we saw today oil tried to rally, tried to rally aggressively in the morning, couldn't hold it, now we backed off again. we held support levels in oil at least for the near term. that could be something there's a reward for. >> on a broader picture, i'm absolutely looking at monetary policy and what the fed is going to start to do in light of everything now that's going on. >> one and done or more? >> no. one at the max i think. i thought it was two, now i'm
thinking it's one. >> matt, final word? >> we're going to watch shanghai tomorrow morning. i think that's going to be the barometer. >> thank you very much for joining us. kenny polcari and matt cheslock. melissa? >> thanks, mandy. let'sgate look at the dow as we head to the final hour of trading. it is down right now nearly 400 points, 2.25%. take a look at apple, barely negative. this could be the reversal of the day because the stock was down nearly 4% -- the stock is down nearly 4% on a one-year chart. it was down $3 intraday. is this a buying opportunity or does the stock have further to fall? we will debate that very question when "power lunch" comes back in two.
we're watching shares of smith & wesson right now up by more than 6%, right off of session highs. just getting headlines crossing regarding the president's meeting with attorney general lynch regarding gun control. he said he's going to roll out initiatives in the next several days. in anticipation of this anticipated action we did see the gun stocks rise in the past few sessions. as we get you sop more commenme comments, we'll bring them to you. meantime, checking on shares of apple, trading flat right now
after ending the year negative. is apple losing its mojo or is a rebound in shore. jairson ware is cio of albion financial. great to have you with us. jason, i'll start with you. you have the bearish view of the stock. you said 2015 the problem with apple is in 2014 apple saw an outsized return in anticipation of all the good stuff that was going to happen in twitch. what's going to happen in 2016? when will we start discounting what's going to happen in the future, especially when we don't really know what's in the pipeline? >> so we have a bullish view on apple and really the bullish view, there's three legs to the stool. one is the product cycle is still durable. the iphone 6 and iphone 6s we think there's a headroom to upgrade there in the developed markets, u.s. and europe, japan. meanwhile, if you look at what's happening in emerging markets, china is obviously the second largest market for apple. 85% of the installed base,
growth in the installed base for apple is coming from emerging markets like china, like indonesia, like india and growth has been spectacular. looking at 120% iphone growth.k opportunity to take share from android, given the bigger form factor of the iphone we're optimistic about continued gains there. in fact, the most recent quarter about 30% of the upgrades came from android which was a record. then finally if you look at what's going on with some of the other products that could be coming down the pipe we think the watch is probably underappreciated, we think apple tv as that comes out over the top in 2016 is certainly a reason to be bullish and, you know, the optionality on the auto market as well. that's the product cycle viewpoint. second we like the management team, the brand. >> right. >> we think johnny is underappreciated at apple. as long as he's still in the fold we think invasion looks gold and third valuation, stock is really cheap.
>> that's a long list of positives, jason. >> it is. >> in terms of your view of the stock, are any of those it -- i mean, i could have listed -- or jason could have listed almost all of those things at the beginning of 2015 and yet we still saw 4% decline in the stock. in your view are any one of those things on that list enough to give apple a positive year in 2016? >> listen, i totally agree with jason's points about the product cycle, but the key thing is that the apple stock is being driven by the iphone cycling and iphone shipments and we are not seeing that on a greater scale which is why the stock is under pressure. the key thing, the point you asked is what can kind of move things in 2016. yes, i mean, if any of the new product categories, jason mentioned he thinks the watch is underappreciated. we are not seeing a big uptick in watch at options, if that were to happen, if they were to see a great attacks of their services, music and other
services along with iphone, yes, that could move the stock but at this point we are not seeing signs of those. at this point what's weighing on the stock is data points on iphones in the near term and the unit volume seem to be below where people were expecting them. it's hard to go beyond one or two quarters on the products because we don't know what they are going to bring and what are the competing products going to be in the sideways and the willingness to upgrade. >> jason ware has 200,000 shares of apple and ibo has a negative rating on the stock. >> big down day for the markets. we will take a look at some of those fang stocks, all of the tech market leaders are off 3% or more, a amazon down 6.6%, facebook, amazon, netflix and alphabet used to be known as google that's why it's called the fangers, we will discuss how china's downturn dragging down u.s. shares straight ahead on "power lunch."
take a look at shares of tesla down about 7% after offering a delivery guidance for the last month, lower end of the estimates there. tonight on "fast money" at 5:00 we have analysts from credit suisse on what your tesla trade is for 2016. tesla down 7% right now. >> the u.s. markets selling off with the dow down as much as 450 points, the lows of the day now about 400. worst start to a year since 1932. i don't remember that.
>> i have some historical recollection. >> chinese stocks selling off overnight, they lost as much as 7%. let's bring in ron and larry. i warn you we may break away to take a play back from the white house where the president is meeting with his attorney general discussing gun control. should we be so worried about what's happening today, a single day, the first day of the year or does it merely point out some of the risks that that lie ahead for 2016. >> it's the way we closed the year last year. i think this will be the year of living dangerously, you have china, a led friendly fed, geopolitical risks between places like iran and saudi arabia. throw growth around the world. >> we will listen to president obama talking about his potential executive order regarding gun control. >> -- to my attorney general, fbi director, deputy director and the atf and personnel in my white house to work together to see what more we could do to
prevent the scourge of gun violence in this country. i think everybody here is all too familiar with the statistics. we have tens of thousands of people every single year who are killed by guns, we have suicides that are committed by firearms at a rate that far exceeds other countries, we have a frequency of mass shootings that far exceeds other countries in frequency. and although it is my strong belief that for us to get our complete arms around the problem congress needs to act, what i asked my team to do is to see what more we could do to strengthen our enforcement and prevent guns from falling into the wrong hands. to make sure that criminals,
people who are mentally unstable, those who could pose a danger to themselves or others are less likely to get a gun. i have just received back a report from attorney general lynch, director comey as well as deputy director brandon about some of the ideas and initiatives that they think can make a difference and the good news is that these are not only recommendations that are well within my legal authority and the executive branch, but they are also ones that the overwhelming majority of the american people, including gun owners, support and believe in. so over the next several days we will be rolling out these initiatives. we will be making sure that people have a very clear understanding of what can make a difference and what we can do. although we have to be very clear that this is not going to
solve every violent crime in this country, it's not going to prevent every mass shooting, it's not going to keep every gun out of the hands of a criminal, it will potentially save lives in this country and spare families the pain and the extraordinary loss that they have suffered as a consequence of a firearm being in the hands of the wrong people. i'm also confident that the recommendations that are being made by my team here are ones that are entirely consistent with the second amendment and people's lawful right to bear arms. we've been very careful recognizing that although we have a strong tradition of gun ownership in this country that even those who possess firearms for hunting, for self-protection
and for other legitimate reasons want to make sure that the wrong people don't have them for the wrong reasons. so i want to say how much i appreciate the outstanding work that the team has done, many of them worked over the holidays to get this set of recommendations to me and i'm looking forward to speaking to the american people over the next several days in more detail about them. okay. thank you very much, everyone. thank you, guys. >> so there you have president obama having met with attorney general loretta lynch describing what he intends to do in terms of an executive order over the next few days in advance of his state of the union address next week. what the president is talking about is a use of executive authority to broaden the definition of who is considered in the gun business. what depends on this is who is regulated under -- by