tv Closing Bell CNBC January 5, 2016 3:00pm-5:01pm EST
economics 101, melissa. >> looking forward to your great stuff coming from miami tomorrow on "power lunch." i will see everybody 5:00 "fast money." thanks for watching. the "closing bell" starts right now. hi, everybody, welcome to the "closing bell." i'm kelly evans down here at the new york stock exchange. >> and i'm bill griffeth. investors being taken on another wild ride today. the dow is down just 4 points but you see the volatility of the day. the dow was down 110 points at the lows, it rallied into the green for the second time, but where are we going to end up, that's the big question, you will have to stick around to find out at the end of this hour, we had a wild ride yesterday. >> that's right. the biggest drag on the dow today is walt disney. mik i don't remembery down grading the stock from neutral to a buy saying fears of cord cutting and espn will out yeah "star wars" blockbuster.
december turned in another blockbuster month for auto sales making 2015 the best year ever for cars sold. we will get insight from former gm vice chair bob lutz, he he will join us shortly. there's one area he is concerned about for the new year. marissa mayer is reportedly facing new pressure to sell the company's core business before its value declines further but are there any real suit? let's get to the breaking news on auto sales for the fourth quarter and all of 2015. phil lebeau, they looked pretty good, didn't they. >> very good. they are not as strong as many were expecting for december, but for all of 2015 total sales in the united states hit a new all time high of 17.47 million. that's about 700,000 more than the previous high set back in 2000 at 17.4 million.
by the way, when you compare 2015 versus 2014, it's roughly an increase of about 5% in terms of total vehicles sold. what about december? it did come in a little lighter than some were expecting, a sales pace of 17.3 million. i wouldn't call it a huge miss, but it is light of what the estimates were of pace of between 17.8 and 17.9 million. when you look at the major auto makers here is their percentage increase, year over year or december of last year versus december of 2014, most of the gains were between 5 and 12%, but we should point out with the exception of general motors the auto makers their gains were all light of expectation, again, coming in between 5 and 12%. that said for all of 2015 look at the brands that set a new all time high for total vehicle sales in the u.s. honda, hyundai, bmw, mercedes, audi. those are five of the brands and the auto makers who had all time
highs for all of 2015 and when you look at annual sales growth look how far the industry has come compared to when it bottomed out back in 2009, back then when sales were at about 10 million people were saying it would be great if we could get up to 14 million in annual sales or 15 million. now you see it at almost 17.5 million and yet when you compare the shares of gm, ford, toyota versus the s&p 500 over the last five years generally speaking people are not been moving towards the auto stocks. that is in large part because there have been a number of factors, one-time factors, and then overall concern about whether or not we are at the top of the market. that has made a lot of people say, do you know what, i like the growth that we're seeing in terms of vehicle sales but i'm not crazy about the investment in an auto stock at this point. but again, we had a record high for sales last year in the u.s., 17.47 million. guys, back to you. >> all right. phil, thank you very much. phil lebeau in las vegas getting
ready for the consumer electronics show that gets under way tomorrow. let's talk more about 2015's record year in terms of auto sales. joining us once again cnbc contributor bob lutz, former vice chair at general motors mr. car himself. >> food to be here. >> can they continue this kind of sales pa is in 2016 do you think? >> first of all, let me tell you about december. i think it wasn't a disappointment to the companies. the analysts generally overestimated what the month would be because they thought everybody was going to have a major incentive blow out, but it's been a very strong month. a lot of the company, general motors in particular, cut way back on daily rental sales and has record levels of -- well, in recent times record levels of retail share, which is what really matters, but, yes, i do think it will continue. we have a stable economy.
i don't think the rate increase is going to hurt. everybody has new products, gasoline prices are low, which of course favors trucks and crossovers, which are the strength of the domestic industry. >> right. >> general motors is adding capacity at the arlington plant which makes the suburban, yukon and cadillac escalade and so forth. unless we have some sort of political upheaval it will be a very good 2016. >> that said, bob, you know, it is more of ending the year on a whimper than a bang for sure. general motors shares down 2% yesterday, down another 3% right now. the stocks to phil's point the field numbers are extraordinary relative to expectations five years ago, share prices not so much. >> but, look, general motors alone reduced daily rental sales in december by 50,000 units and resales are up. as long as retail demand is really good you don't have to put vehicles into daily rental.
what the analysts and you folks have to learn to do is look at retail sales versus daily rental sales. a lot of times sales look good, but when you check into them you find they have sold a bunch of cars to daily rental companies. >> we remember that back during the last sales. >> exactly. >> there was a lot of talk about this is just channel stuffing. i guess real quick as well on this december issue is it possible there was a shortage of supply again for some of these names or do you think this was a fall off in demand? >> definitely not a falloff in demand because as i said before, retail sales are up, but a lot of people cut back on daily rentals and i think that's good discipline because the companies make more money on retail sales than they do on daily rentals. >> before we let you go you said you don't think the rise in rates this year will hurt, but yet you are concerned about the quality of loans being issued these days. >> yes. >> we talked about the last time
you were here. why wouldn't that hurt if you've got a number of loans that, you know, are -- i'm not going to say they're more likely to default, but they would be hurt, more vulnerable to higher rates than ordinary. >> yeah, that is a concern of mine and a lot of people tell me don't worry about it, we vet this credit carefully and so forth, but for some companies up to 40% of car loans are now being written to subprime lenders. i mean, people whose credit scores are too low to where you would give them a car loan. when you've got, you know, literally millions of those people out there that by the credit rating agencies are not considered really credit worthy, it sort of triggers memories of the housing bubble in '08 with the subprime mortgages. i hope that's not going to happen, but, you know, that is my one worry is that those
chickens could come home to roost. >> all right, bob, good to see you. thanks again for joining us. >> thank you. >> bob lutz. >> let's get to our "closing bell" exchange, with us today tom fross, kenny polcari is at post 9 and rick santelli joins us from chicago. kenny p., we are not getting a bit of a bounce from yesterday's big selloff, although you could maybe argue we got that in the last hour yesterday. >> we did, but the market still feels heavy here. it doesn't feel panicky and people should understand that, it just continues to feel heavy. >> we've broken support, it's looking for stability, it's trying to find it, it's trying to stabilize around the 1990 level to see if it finds real support there, but i'm not yet convinced that it's ready to start to move higher consiste consistently. i think we will churn for a while longer and i wouldn't be surprised you see it test lower to see if the buyers are there. >> we heard rick people echoing
your point about bond not moving lower. what else do you see percolating here as we kick off the year in the bond market. >> i think you need to give investors a reason to buy. i like kenny's description of the market but i think what the market needs, if it's going to go higher and build a footing unlike last year is to the better data. tomorrow is a case in point. we are definitely slipping into a recession in manufacturing and the refrain i hear everywhere is, manufacturing, small piece of the economy, it's all about the service sector. well, as i recall nonmanufacturing ism last month for november was the lowest read in 19 months. it was 55.9, the lowest since april of 2014. so i think tomorrow is a good place to start to see if there's a foundation to be built on being long equities, both on the adp report and on the service sector.
>> tom fross, yesterday we were all thinking about china and the factory numbers and the manufacturing problems that they are having over there and impact it had on the stock market among other things. today we are not talking about that, but it hasn't gone away, has it? >> no, it hasn't gone away. obviously is means a lot what's going on in china because if their factory output orders continue to decline that could mean there could be a global slow down. we don't see that being the case. we think this is deja vu all over again. what we continue to hear yesterday is the world's second largest economy is falt ring, how is that going to affect the united states? >> i look back to the '90s. japan along with russia, their economies were sinking, the u.s. economy was doing better than it ever had done. right now the u.s. economy still strong, not as strong as we'd like to see it be, no doubt about it, but we are still the nicest house on a really nasty block. the fed is accommodative which is huge, stocks are not
overpriced. you add those two factors together we can continue to tell our clients now is not a time that you want to dive into fixed income at low rates. we like where equities are priced. >> you would advocate a buy and hold strategy for the s&p 500, is that right? >> no. well, that's a great question, chilly. no, we are definitely on a micro level right now. we think now is the time for good stock picking not a broad based investment strategy. we think if you are an investor and think as an investor you've got some really, really great opportunities right now, if you are a trader you're being whip sawed in this market. look at the hedge funds that got killed last year they were traders. if you think like an investor right now you've got really great opportunities. >> that's not point, it's a risky strategy. if you're advocating people do that in 2016 they should be aware. >> think of some of the sectors they were picking like energy thinking that energy was going to bounce like it didn't.
we still are very diversified, telling our clients stay diversified, we're thinking now is not the time that you want to get conservative. there is some really great purchases out there. we don't think you will look back in 2018 and think 2016 was a selling opportunity. >> all right. before we let you go there, kenny p., what do you want to see in the last 45 minutes of trading or so? yesterday we had that big rally, come back, if you will. what do you expect today? >> i clearly would like -- listen, early indications it is to buy on the bell. i'd like to see the market close at least where it closed last night or higher, that would give you a sense of more stability. if we have this kind of selloff going into the bell then i'd once again be a little concerned over what tomorrow is going to bring. my sense is it feels like it's going to close right in here, maybe a tad higher and i think that's a positive. >> as rick said so much depends on the rest of the data this week. thank you all. appreciate it. a little more than 45 minutes to go here. remember, we had a terrible day yesterday. interestingly enough we're
consolidating, we haven't snapped back at all from that, the dow is down a further 18 points, the s&p only up 1 and nasdaq down 13. >> disney is the laggard today in the dow. is disney's magic disappearing? the analyst who just downgraded the company explains his concerns about the media giant's future. a former u.s. ambassador to saudi arabia weighs in on the growing tension between that country and iran and it's potential to send the global economy into a tailspin.
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welcome back. with the boarder market trying to turn positive here. the dow jones industrials down 5 points and the weakest component is apple falling. a report saying apple is reducing the output of its iphone 6 and 6 plus devices by 30% between january and march, that's relatively testify to its original plans, the sharing down 2.3%. inventories of the two models are piling up in china, japan and elsewhere as we've heard from other analysts reports and media reports in the last couple of months. we will have much more on this story in the next hour of the show. we have media stocks to tell
but what have been that have been on the move today, dream works expanding its partnership with netflix. among the projects in development, a reimagining of voltron and a new series called troll hunters. shares -- i have no idea if that means anything to do with twitter, you never know. shares of dream works up 3% while netflix is down 2% after outperforming every stock on the s&p last year. as you've heard disney is lower after mci don't remembery down x-rayed the stock from neutral to outperform. analysts say the "star wars" movie has been a major success but calls disney's valuation too high. he is more concerned about the cord cutting concerns over at espn and lack of major new catalysts aside from a new park coming in shanghai. >> let's bring in the analyst behind that move. >> that would be tim nolan. good to see you, tim.
happy new year. >> thanks. same to you. >> the good news is "star wars," the bad news is espn. is it that simple? >> just about. we saw a few catalysts for disney a few months ago that we thought would support the shares, one was the return of football to espn in the fall, secondly was the "star wars" film, not the box office but consumer merchandise which i think will be a huge number and the shanghai park opening in march. we have had two of the three catalysts that we thought would be supporting the shares come and go, "star wars" being mostly gone, shares are sagging and i think at 18 times it's a relatively high price. >> tim, a lot of people will go, wait a minute, we're hearing these headlines how great the movie has done and there might be more to come, they might also do quite well. why is it that those marginal subscriber losses for espn matter so much for this condition? >> let me put this this way, i've been surprised that "star wars" did not serve as more of a
support to disney. it did support the stock in november/december in anticipation of the movie coming out, but the stock started falling before the film actually hit the screens and it doesn't seem to be helping it. even though we may be on the track for the biggest box office film ever, it looks well clear of $2 billion as it opens in china this weekend, so i think it's easily on course to be the third if not second or first highest gross st grossing film of all time. i think investors are very concerned about espn and the cord cutting issues. i'm a bit less bearish on the impact of this overall and i think disney perhaps could put espn over the top if it chose to, but i don't think it wants to do that. i don't think it sees a need to do that and i don't think the commission of that would be as good and that's what investors are mostly concerned about is the overall economics of a declining bundle are more difficult for all of these tv networks than they have ever been. >> let's talk about what they should do about that.
we obviously understand the problem that they face with the cord cutting by people who are just not interested in sports, so what should disney do about this espn problem do you think? >> it's not so easy. they've got a lot of sports rights fixed for many, many years, i think the next big contract to come up will be the nfl which is in 2022 or so. so they've got a lot of big sports lesion locked in at high prices for a long time and you've got a traditional bundle which evidently fell for espn by 7% over the last couple of years. so you've got a falling fixed -- you've got a falling top line and a stable cost line. the way to make things work is obviously to cut costs, to work on improving advertising, which by the way i'm quite optimistic on for the industry over the longer terms that a better ratings measurement system can lead to more advertising on properties like espn, but the question is will they put more
of their espn properties on to skinny bundles that probably is not good enough to offset the general bundle decline and the ultimate question is might they go direct to consumer over the top with espn. they may make out okay on that over time but i don't think they're ready to take that step yet. >> just to go back to your point today that seems to be contributing to the shares being lower you say espn more at risk for cord cutting than other cable networks due to on demand streaming luring nonsports fans away from that traditional bundle. i guess the argument is if you are not just one of these households that's interested in sports that that's the problem ironically for espn? >> ironically, yeah. ironically is exactly the way to put it. until very recently until a year or two ago espn was seen as the savior of the traditional bundle. now it is seen as perhaps of the most at risk networks. i don't know if that's true or not. if it's true that it's fall be $7 million from a base of 99
million that is faster than the declines at most other networks. skinny bundles don't seem to be helping that, they might be hurting that, because espn is by far the most expensive network in the bundle. it's at least double the next most expensive. if you are not a sports fan and realize that you just want your serialized dramas you can get that on netflix you don't need espn. >> we're about to get more clarity on whether people are about to pay up on it. >> thank you for joining us. >> thank you. we've got 40 minutes left, a little less than that, the dow is down 44 points, you heard kenny polcari say there's talk maybe we will see buy imbalances as we head toward the close, i don't know if it will be nearly as strong yesterday, it was $2.5 billion to buy on the close. >> markets are drifting lower
now, dow is down 45 mints, a little under 40 minutes to go. up next a former u.s. ambassador to saudi arabia weighs in on the simmering conflict between saudi and iran and whether it could spill over to the global economy. also president obama's newly announced gun control measures spark a surge in gun stocks and gun sales. we will have that story still to come on "closing bell."
but first solar is, it's shining after goldman sachs upgraded the stock to buy from neutral. the firm raised solar equipment makers price target to $100 a share from 60, you see it's at $71 right now, goldman considers first solar one of its top ideas overall for 2016 calling its balance sheet best in class. >> from the new kid to the old, crude oil lower as the dollar strengthens and concerns about china linger. jackie deangelis is keeping an eye on things. >> crude closed at $35.97 near session lows, it was about a 2% drop on the day lower. we saw brent crude also seeing a little bit of a drop but now managing to keep that premium. as you mentioned definitely some pressure from the dollar, no one was focused on the dollar because so many things were happening yesterday but it's crept up to that $99 level again and that is making traders a little nervous when it comes to crude. also the equity markets tk to struggle a little bit, traders
are concerned about that and as you mentioned what is happening in asia as well. tensions in the middle east not posing an imminent threat at the moment, all of these are bearish factors. the api will come out with its inventory report this afternoon setting us up for the department of energy tomorrow. some traders were looking for a draw down of a million barrels but plats send out a note and they're looking for a build of 3 million barrels. that is another bearish sign when it comes to crude oil. lower for longer continues to be that theme and also the volatility really continues from here as well. kelly. >> thanks, jackie. our jackie dee ang nis at the nymex here. laets talk about the big picture. >> joining us we're pleased to welcome back robert jordan the former u.s. ambassador to saudi arabia. he is currently diplomate in residence at smu and the author of the book "desert diplomate inside saudi arabia following
seven." mr. ambassador, good to see you again. happy new year. >> good to be back. >> a seemingly naive question to begin, how worried should we be right now between these tensions that started up again over the weekend between saudi arabia and iran? >> right now i'd put it at a four or five on a scale of ten. it is worrisome, but not fran c frantic. a lot depends on how the parties play their hands going forward. you know, we had some seemingly insignificant events that kicked off world war i in 1914, the zimmerman telegram and assassination of the arch duke ferdinand. a lot depends on how people react to these provocative events. my guess is cooler heads will prevail and we will see a continued bitter animosity between saudi arabia and iran, but not likely a hot war. there are certainly cascading effects that could occur that could be really devastating.
>> i wonder to what extent the u.s. is almost encouraging some of what we're seeing here. not intentionally but just through its actions lately. some are saying saudi arabia is trying to act out because it thinks somebody has to check iran's influence in the region and we didn't go ahead with those sanctions on that reversal last week. is that contributing to what we're seeing here, this harsher, tougher stance that saudi arabia appears to be taking? >> i think it absolutely is contributing and it goes back at least as far as the demise of mubarak in egypt. the americans embracing the muslim brotherhood which for the saudis was like embraces al qaeda, the red line in syria, the iran nuclear deal. at each turn the saudis see a weaker america, indecisive american and one that they can't really count on. they say if the americans will do this to mubarak would they do this to us.
i think they are extremely concerned and now are trying to strike out in their own way and it certainly has some missteps involved, but i think they're trying to take the initiative and show they are going to be the leaders in the middle east and fill this vacuum. >> we know that they've already taken an action now by cutting the price of oil that they charge in europe, which used to be a huge market for iran as they get ready to come back to that market once again. i mean, that's not going to help relations. it may help saudi arabia with their market share, even though they can't afford to do that right now, but what do you make of that development? >> i think if we think we have seen a price war up to now we haven't seen anything yet. i think the saudis will keep the pedal to the metal partly to punish iran and any of their collaborators perhaps even including russian. >> the u.s. has said they do not want to be a need yater between these two countries. russia has said they will step in. do you think they will? >> i think they'd like to step
in but i'm not sure they have much credibility with the saudis. they have been coddling assad in syria, they have been an ally of iran, i don't see how they have the kpeblt to be much of an honest broker. i think turkey might be able to play a role here, they are certainly closer to the saudis and if anyone would be respected by the saudis right now i think it would be turkey. >> all right. mr. ambassador, always good to see you, thank you for your thoughts today. >> thank you. enjoyed it. >> i'm thinking, bill, what he just said if we think we've seen a price war we haven't seen anything yet. tell that to the already concerned oil market. brian in houston trying to gauge the impact even as the price continues to be under pressure. going to be tough. >> yes. let's get to our cnbc news update with sue herrera. >> hi, bill and kelly, an emotional president announcing new steps at reducing gun violence using his executive order to expand background checks and strengthen enforcement of firearms laws.
>> the gun lobby may be holding congress hostage right now but they cannot hold america hostage. we do not have to accept this carnage at the price of freedom. >> he did not sway gop presidential candidate ted ruz who is campaigning in iowa. he said president obama's executive orders aren't worth the paper they are printed on. and he told iowa voters he would overturn them saying, his pen has got an eraser. coming up in the next hour of "closing bell" larry hayat joins us, he is owner of the hayat gun shop in north carolina, it's america's largest gun shop with 7,000 firearms. tonya couch appearing in an l.a. courtroom this morning, she agreed to be sent to texas to face charges she helped her son flee to mexico, it is unclear, though, when she will be sent to the lone star state. and british actress and humanitarian actress vanessa red grave is in greece as an
advocate for refugees. me was accompanied by the embassy minister. that is the cnbc news update at this hour. back to you kelly and bill. >> thank you. >> less than half an hour to go here. market bouncing around, the dow down 10 points at the moment, the s&p higher by 3, the nasdaq which had the worst session of anyone yesterday down 2%, down 7 points. >> we have a leading trader joining us to tell us what he sees watching in the final and most important half hour of the day, a couple charts, we will see what mark newton thinks is going to happen for the s&p and dollar going forward. >> plus the "wall street journal's" hong kong bureau chief is here and he will weigh in on china and if yesterday's drubing sets the stage for more to come this year. king me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series.
shares of spirit airlines rising after abruptly replacing it's ceo. robert fornaro has been named its new ceo effective immediately. he was appointed to spirit's board last may and was air tran's ceo from 2007 until its sale to southwest in 2007. spirit today up of% all of a sudden. >> turning our attention to the
broader market and that u.s. dollar, the pesky dollar. mark, let's start with the s&p 500, what are you watching? >> there is a couple things that are of interest in the s&p. the trend hasn't shown sufficient damage to think its breaking down. you look at a trend since last year, we still have a series of lows that have been hit in last december. we've tested these levels but haven't broken it and that's important. sentiment has gotten pessimistic in the last few days, you look at things like the daily sentiment index, things like the equity put to call, i would also mention brett is in much better shape than mid-december so with regards to advanced decline, stocks hitting new lows were less than what we saw in mid-december. >> you see more positives in a market that otherwise has people worried. >> i agree. we are still in a bullish time. i think it makes sense until you see more signs of breaking down to position on the long side, we
still probably can move up to new highs. >> the u.s. dollar cited as some of the reasons there has been trouble in the brood market. >> i think the dollar will move higher in the near term. if you look at charts of the dollar since last spring we hit this level near 100.5, we've pulled back, if you look now we have just gotten over this left near mid-december highs, i think a move up to 100.5 is likely. now it's moving higher against the euro. a lot of people will say the euro is going to parody and you will have concern from the fed thinking can they afford to hike rates any further as the dollar escalates and that's going to be a drag on earnings as well. technically dollar still very much in good shape. i think it will move higher into the spring. >> thank you, mark. >> thank you. >> we have 20 minutes left. if we have buy imbalance coming we are not seeing it yet.
the dow still down 10 points. we've been down, we've been up and down again. some blame china, others the fed. we will look at both of those when we come back. also yahoo's ceo marissa mayer is feeling heat after shuttering its streaming service. some shareholders want yahoo sold as soon as possible. look at that coming up as well. stay tuned.
so, okay, what do you think? the fed or china? seema mody joins us with the results of a cnbc survey on what investors think could have the greater impact on markets this year. >> take it away. >> investors have been in this heated debate over what will impact markets in 2016. in a cnbc poll, 71% of our respondents said china growth worries will be the larger impact, only 29% said fed tightening. now, strategists at charles schwab agree saying the fed rate hike is already baked in. there is still a lot of uncertainty attached to the china story, collateral when it comes to its economic decline. capital outflow also a concern, we haven't seen a lot of money
flow out of the country at a rapid pace and lastly the currency, further devaluation in the yuan falling to a five year low against the dollar. while china deals with a number of challenges, richard fisher said china not to blame for the recent market volatility. listen in. >> we front-loaded at the federal reserve an enormous rally in order to accomplish a wealth effect. i wouldn't be surprised at what's happening. i wouldn't blame it on china, we are always looking for excuses. china is going through a transition, it will take a while to effect itself but what's new there? there is no new news there. >> investors will be confronted with more china data around inflation, trade as well as capital outflows. in the near term china could potentially be a bigger focus for investors. joining us to talk more about the china concerns is ken brown, the "wall street journal's" hong kong bureau chief. good to have you here at this point. >> thank you. >> so no news out of china.
that's what richard fisher said. >> growing pains? >> a little more complicated than that. so, you know, chinese government has propped up this market for the last six months, right, got it going. any hint that that's going to end is freaking people out. so there was this deadline on friday, companies over the summer were banned from selling shares, company that owned shares in china, that deadline was going to be friday so people got worried about that. the chinese government didn't roll over a loan to a big government bank that was a sense they were pulling back on stimulus. there's little things. when there is a sense that the chinese government is pulling back the market falls apart. >> which tells you something. we didn't actually learn anything about the government's ability to prop up the market other than basically shutting it down, going after all kinds of investors amounting to a witch-hunt that didn't amount to much. what is it that people are looking for from the government when it comes to shoring up confidence in the market or the economy? >> it's really unclear now. i mean, at the beginning of 2014 if you looked at all the
rhetoric out of beijing it was reform, reform, we're going to open up the capital account, stock market will have new ipo rules. you look at the beginning of this year, beginning of 2015 and beginning of 2016 much more cautious, we want stability, we need to be careful. it's not clear what kind of reforms we will get but they need to do big reforms otherwise the economy will keep slowing down. >> there is a learning curve on their part. they are figuring out rhetoric can rattle the markets which is not what they want to happen. by the same token their interventions are having an impact. do you think -- they are already rethigs the deadline on the sale by insiders. what about the circuit breakers they put into place yesterday? >> well, you know, the circuit breakers are kind of normal circuit breakers, similar to what people have in the rest of the world, it's just the market is different because it's all individual investors and they all trade fast. you can see after that first cutoff when they suspended trading for 15 minutes when they
opened up again it was a disaster. it was only open for a little while and then they shut it down again. this is a different market than -- >> they are used to dealing with. >> right. these circuit breakers work differently. >> we have also heard people in the last couple of days say, look, even if the market is mess, don't pay attention to it, it's not the same as china's underlying economy. what is the situation in terms of how quickly the country is growing at the moment? >> we don't know the numbers. the numbers out of china are always a little sketchy so it's not clear. they inflated that bubble in the stock market last year to help prop up the economy. there is a ton of debt there, they wanted people to have ipos, rights offering so they could raise equity capital. that plan blew up. they've left with this dead laden economy, they are trying to go through reform, things are slowing down, all the stimulus measures aren't working. they're struggling, revaluing the currency, hopefully that will help but it's not working for them. >> back to richard fisher's contention, though. we talked about this last august
when you were here visiting during that previous crisis that they were going through, it is still a communist government trying to get used to a capitalist economy and market, more importantly, a market that doesn't listen to them the way it should, right? >> yeah, it is this weird situation. they like the idea of a market and they like the idea of a free floating krinsy and they like all these ideas. >> as long as the market is going up. >> in practice they want to control it. you have the worst of both worlds. you have the market goes in the direction they don't want, they intervene in a crazy way, the market freaks out. it's been a real mess. it's not really clear which way it will go. the chinese government has clamped down tiert on things like dissent, they've gone after brokers, hedge funds. it's been a surprise. people who are long-term market veterans getting hauled in to be questioned in very odd circumstances disappearing, that's a scary thing. >> finally because this is the one thing people are kind of
watching for. is devaluation of the currency the last lever they have to pull? there they do it in a significant way? >> they've been doing it slowly. that 6.5 level was a crucial level and freaked people out but i think they are going to do it. it's an export driven economy. the dollar has been so strong and pulled that up, there is a reasonable way to do it slowly, i think they want to do it slowly and you will see it over of the next year, the market is expecting it. >> well, we will see again, hopefully during quieter times, but you never know. >> yes. thank you. >> ken brown of course the hong kong bureau chief for the "wall street journal." don't miss steve liesman's exclusive with stanley fisher, that comes up tomorrow. 8:30 a.m. eastern time right here on cnbc. that should be fun. we only have 11 minutes to go in the trading session ngts the dow is higher by a point, s&p 4 points, the nasdaq still
under water after yesterday's big decline by 8 points. >> art cashin was signaling it's $200 million to buy going into the close. nothing like we saw yesterday. as yesterday's historic selloff indicated 2016 may be a year for the record books. mary ann bar tell of merrill lynch wealth management believes this year is likely to be a turning point in global economic history, nothing less. she will tell us why when we come back. it's a fact. kind of like reunions equal blatant lying. the company is actually doing really well on, on social media. oh that's interesting. i - i started social media. oh! it was my...baby.
okay. we've got about 8 minutes left in the trading session. joining us is mary app bar tell from merrill lynch wealth management. we are here to discuss how you believe the coming here is likely to be a turning point in economic history. >> that a great line? i love that. it's really no secret. the fed had liftoff and the market is starting to price in that the fed over time will raise rates while we have the rest of the world primarily lowering rates. not just lowering rates. a good portion still interest rates. this is the big divide. we're calling it the twilight zone, moving into a new dimension. >> what does that mean for
investors? >> kelly, the markets have done phenomenally well since the lows of '08, '09, we are starting to see divergences in the market. markets will not go up 20, 30% year after year. certainly last year for some investors it was disappointing if you didn't own the right pockets of the market. we're warning investors that returns are normalizing, you need to be more selective. go up the quality lard both in fixed income and on the equity side. >> if you didn't own four particular stocks last year you didn't do well, fang. >> fang. >> would you buy fang now? is that the quality you're talking about? >> no, the quality that we're talking about are large cap companies that have great balance sheets, good cash flow and are raising their dividends. now, that's not to say that fang is bad. fang is part of the digital era and we are very big at merrill lynch on the transforming world and we're moving into the
digital era, a lot of technology, but we really because we're moving into what we're calling episodic periods within the marketplace, we certainly saw that in august as china started to devalue their currency, we certainly saw that again with china in the beginning of the year. >> right. >> that investors needs to anticipate more volatility and for returns to normalize more in like the mid single digits and to think about quality on equities and fixed income. >> all right. i got it. >> you got it. >> we look forward to this epic year in 2016. >> it's certainly i'm sure going to be very exciting. >> mary ann, thanks for joining us. we're coming back with the closing countdown in just a moment. >> after the bell gun stocks are soaring as an emotional president obama outlined new measures for gun control. we will track the stocks and get reaction to those new rules and the owner of the one of the country's largest gun stores. you're watching cnbc, first in business worldwide.
all right. at the took my clock away, i have to look over here, we have a little less than three minutes to go, bob pisani joining me for the closing countdown. we want to look back to the chinese stock market. yesterday we looked at the chinese market and saw the selloff, today it has come -- overnight it stabilized. so our market did the same, although we had a pretty volatile day. if we show you today's market for the dow, all over the map,
bob pisani. we had minor amount of buying pressure coming into the close here, we're finishing the day just fractionally higher here. >> it doesn't help oil didn't cooperate at all today. we weakened going into the european close, once again, this is its second day in a row. it's the thing we discussed yesterday with rick santelli, a lot of the selling pressure looks like it's coming from abroad. >> disappointing for wall street, no santa claus rally for a second year in a row. >> i was hoping for a 40 point rally in the s&p in the last hour, i've held off noting t today is the last day for the santa claus rally. traditionally there is a rally. >> it runs until the epiphany, is that right? >> last five days of the trading year -- last year in the first two of this year, normally good for a 1.4% gain over the last 50 years. this year ain't making it, down 2.3%, the santa claus rally. by the way, last year was down
3% as well. it's been a long time since we have had two years back to back where the so-called santa claus rally is not working. now we get to the january effect, other silly wall street -- >> we are off to a roaring start there as well. >> that's not working, either. basically things are not exactly going in the traditional way so far in 2016. >> as we reprice risk getting ready for whatever the federal reserve will do this year. you think about it, five years of a rally, a lot of it because of the liquidity provided by the federal reserve, they will start to nudge the punch bowl, you have to know they will be repricing risk. >> a bigger concern for me is profit margins. we had record profit margins, 10.5% last year, started coming down towards the end of the year, maybe 10.1%, that's one of the main costs of the whole market, that and a the federal reserve liquidity, that's what i will be watching. next week we will start talking about profit as well as guidance
from the first quarter and those profit margins had better stay above 10%. >> ford city realty is ringing the closing bell and over at the nasdaq it's paypal holdings. here is the second hour of the "closing bell" with kelly evans and company. see you tomorrow. thank you, bill. welcome to the "closing bell," everybody, i'm kelly evans. let's take a look at these markets, we had a horrible session yesterday, today where is the snab back? the dow adds maybe call it ten points on the close, the s&p up four, the nasdaq continues to be in the red shedding another 11 points, that's good for a quarter of 1% as the tech heavy index continues to struggle. joining today's panel today we have our own mike santoli and kate kelly. for more on the market action david seaburg. kate, you are trying to pull a marissa mayer on us, we appreciate you joining us here in the closing weeks of your pregnancy. quite seriously --
>> i can reach the doctor on quick dial if i need to. >> you're surrounded by hospitals around here. ia being one of the stories, this is a stock market today of stories, it wasn't the overall movers. what do you think, though, should we be worried we didn't see a sharper snap back today? >> i don't think we can read too much into two days obviously or one day. i would say in terms of sentiment and stories, as you say, there seems to be a lot of fear and loathing in the investor community, of those that i have talked to of 2016, the feeling that obviously the fed has moved, we may have seen the end or close to it of the multi-year rally in equities, but nobody knows quite what to do. i mean, look, there was a lot of excuse making in 2015 and right now i'm in the process of compiling hedge fund results that were pretty dreadful across the board, i will also look at winners tomorrow. those that did well did one of two things and a probably sound like a broken record, good old fashioned stock ticking in consumers and techs, consumer
shorting was one of the winning strategies of 2015 and some of the high momentum trades, the trading shops i'm thinking of a point 72, citadel that is in and out of a lot of names, they don't have to stay for long but they can if they like the fundamentals, those guys playing a volume game with a lot of leverage seem to do a bit better. >> we heard leverage was up a bit in the final weeks of last year, but speaking of those final weeks, no santa claus rally, now the hangover, significant this is happening two years in a row? >> i don't think it's significant. the last time it happened i think was '92, '93 in the middle of a bull market, it is not necessarily telling about the full year. i do think, though, it tells you we are in a cautious tape. i think last year did grind a lot of people down, today's action was just a lot of offsetting things, you have last year's winners still being sold, amazon, netflix, all those, at the same time the broad list of stocks held up okay, more winners than losers again today.
it seems like you have having that reversion trade and safety stability stuff, the dividend etf, dby up more than half a percent, utilities, staples working, so that to me tells you it's caution. nobody thinks this market will run away on the upside, whether that's correct that's how they're behaving, companies aren't actively buying back a bunch of stock in december. >> stock picking is one of the strategies that can work even though it's risky. i was pooping it last year asking if it wasn't too risky in this environment. if you didn't pick facebook, netflix, you could have gotten creamed. >> you have to essentially tailor your time horizon to those stock picks. i was noting today these great company stock pickers, picked disney, american express, apple, goldman sachs, best of breed, all down 1, 2% today just generalized fears their advantages might have been dulled a little bit. >> what do you think is going on
here. >> i agree. i think there's little bit of a pause. there is a lot of concerns about what's going to happen obviously with the energy tape. we will see a lot of companies that are going to go bankrupt, that will not have their borrowing bases extended and that's going to create a tremendous amount of fear. we talked about it last week on your show. i also believe you're probably going to see some redemptions from hedge funds, that could cause some fear. i think we're set up for a little bit of a fear effect going into the first quarter here or in the first quarter that could lag for a little while. when i look at some of the winners, they're winning for a reason, they have growth opportunities or growth prospects that outshine everything else in the marketplace, the divergence will be so much wired, the haves and have notes of performance -- i think it's going to be so much wired than we have ever seen, kelly. again, focusing on growthy names, focusing on the winners, we heard about a purge or a move out of the fang stocks, a rotation out of the fang stocks into value, there wasn't a
rotation out of growth into value. you can't -- >> i was taking profits off the table. >> absolutely profits off the table. >> to get back to two of your earlier points which i thought were good, one on the redemptions which if they start to happen they could have a snowball effect on the markets and henl funds. also on energy. this borrowing base reduction, the banks tightening the credit screws probably will happen in the second quarter, an april/may type event. >> right. >> that said it raises interesting questions for energy investors. last year there was a huge story line of raising capital to invest in distressed energy because after all we had wti in the 30s or 40s, things were looking dressed, people thought the borrowing base discussions would get real. in the fall quarter and they did, but, you know, we had a fairly flat plateau type of year with flat prices in commodities and a lot of these companies have hung in. we've seen some bankruptcies, but it still remains a little too early. i know for the big energy companies that want to make acquisitions they're waiting for
the bottom and nobody quite knows that i had talked to in commodity land where that bottom will be, yet i still hear a lot about new hedge funds opening to raise money for energy investments, be it credit, be it stocks, be it, you know, in the futures market. not saying there won't be good opportunities there but it's really hard to say when and i think a lot of people lost money last year waiting for that moment that never came. >> no doubt. i mean, that's a perfect -- that's a great question, kate. right now the idea is stay short of the debt. there is no doubt we will continue to see a push lower in the equities. you know, look, it's going to be probably i think roughly six weeks from now we will get a tell of a company called swift energy that's waiting to have their borrowing base extended if it doesn't get extended it's going to be bankrupt. when that goes bankrupt that's going to be the first to fall of a lot of companies and we are probably looking for a 2017 setup at the tail end of this year. i think you can really comfortably jump in six months from now in some of these
equities that are the higher quality names that you know will be around for quite some time setting up for 2017. >> let's go back here, take a look at what's happening with the growth backdrop. we have key economic reports coming up this week, the question is can they be a catalyst for this market? let's bring in michael faroli. he just lowered his fourth quarter gdp forecast or estimate i should say to 1% yesterday. mike, great to have you back. 1% is pretty bad, pretty bad number. then we have the auto sales that was a disappointment might weigh further on it. how does that set us up for 2016. >> i think some of the things that held us back in the fourth quarter are one-time factors that don't like they will persist on into 2016. we are not wildly optimistic about 2016 but we do think it will be better than 1%. we have 2.25 for the first quarter and for the year as a whole. some of the things that held us back i think in the fourth quarter, particularly the drag from inventories should be kind of a one off.
so things -- you know, look, the way i'd put it, we have had in this expansion a couple quarters where we have gotten 1% or less, you know, more than a half dozen and i don't think it's, you know, culture panic, it's just one of those things, i think. >> one of the other more unusual things that's happening is to have almost a manufacturing recession while the expansion persists. would you call it that? would you go that far and how worried are you about what's happening in the manufacturing space? >> certainly manufacturing is bearing the brunt of the global slow down and how that's impacted the global economy. over the course of the last six months we have seen some of the other sectors of the economy step up, particularly consumer spending. we had a little bit of a pull back in auto sales but overall consumers have been from the second quarter on been doing fairly well. it does look like there is some light at the end of the tunnel for manufacturers after, you know, pretty rough six months as i mentioned. that inventory correction which held things back in the fourth quarter, looks like we're kind of getting, you know, through
that, through the worst of it. i think, you know, as we look into 2016 manufacturing should do a little better. >> what's your take on how the first quarter will be shaping up here? there was a line of thinking that we had these maybe statistical effects that will help reported gdp in the first quarter and potentially at a winter might also be a tailwind. how do things look, i know it's obviously very early but what's the realtime data telling you? >> last couple years we have had really bad q 1,in part because there were some statistical quirks, last summer the statistical agencies tried to correct those so that should be mostly out of the way and also, you know, this year setting you a side today the winter has been milder and supposed to be mild because of el nino and that should take one factor over the last two years that at least held that q 1 out of the picture. really early to say, we don't have any december data in hand or january data for that matter, but i think there are some reasons to think that at least we should do better than the
last two q 1s which initially printed negative. >> before we go what's your estimate for payrolls this week? we had jeremy siegel saying he expects we will see a deceleration from energy related issues. >> so we have 215 for the headline number. energy has been a big drag, we think there are other factors that could help us. longer term i do think we will slow down but i don't see it for december quite yet. >> thanks for joining us. appreciate it. michael faroli. david seaburg, appreciate you joining us as well. much more coming up on "fast money" with david and the kree. it's bank of america, the firm's chief equity strategist agreeing 2016 will be the year of selling the rallies, he will explain and they will get into all that top of next hour. the clock is ticking on a deadline for saudi diplomats. hadley. >> kelly, i did get the chance
to check up with the saudi foreign minister earlier today. i asked him how can this crisis with iran be resolved and i asked him to respond to accusations from tehran that this country will face divine retribution over the execution of the shia clerk nimr al nimr. >> he is a terrorist. he is as much of a religious scholar as osama bin laden was. he was implicated in inciting people, recruiting people, providing munitions for people and he was involved in attacks against security people. what i find puzzling is this individual is a saudi citizen, he committed a crime in saudi arabia, he was sentenced in saudi courts and the sentence was carried out by saudi authorities. what does iran have to do with this? they execute hundreds of people every year. nobody says anything about it. this is their system. so for the iranians to inject themselves into our domestic
affairs is in line with what iran has been doing for years. at a certain point everybody reaches their limit. the iranians have gotten away with murder literally for more than 30 years. we did not escalate. and we have not escalated in the past. very simple. iran should back off. they should stop being aggressive. they should stop interfering in the affairs of their neighbors, they should stop supporting terroris terrorism. >> so the saudi foreign minister there telling me that essentially tehran really needs to back off and stay out of saudi's business. of course, just in another sign of just how far things have deteriorated in that relationship i asked him how his country and iran, how the world can hope to possibly defeat the islamic state if iran and saudi arabia aren't even talking and he said he basically doesn't even know at this point if iran really wants to defeat the islamic state at all. guys. >> hadley gamble, i think so thank you so much. yes, a soft-spoken guy but with
some sharp rhetoric. what's the significance for investors? >> i guess we have to calculate -- look, these are not exactly a falling out between allies, it's an escalation of this kind of rhetoric war that's been going on a long time. i don't think it's hard to outthink the markets' calculation that it's somehow another thing that's bearish for oil. beyond that i feel as if everyone is bracing and hoping that things cool of their own schedule. >> right. >> i mean, this has to be a part of the mosaic that's creating that fear and loathing i spoke about in the world market right now. last thing people want to see is more geopolitical uncertainty owe strive in the middle east, another deepening sis m between two countries, saudi an important ally of ours, some tension over global oil production granted but nevertheless a long time ally and now iran is coming into the fold with our agreement and they will be delivering additional barrels. a lot going on there in both commodities and politics to
digest. who knows, you know, this could die down a bit in terms of the sharpness of it or it could persist. yet another factor. >> either way oil investors seem to be betting, further declines are to come. coming up former goldman sachs international vice-chairman bob who are mats explains how worried investors should be about what's happens in china. major yahoo shareholders are pressuring mara meyer to sell the core business now before it plunging further. when the "closing bell" returns. you're watching cnbc, first in business worldwide.
shares are yahoo were also up more than 2% today, investors pressuring the company to sell its core internet business as soon as possible apparently fearing the business will lose value iffia waits too long, is marissa mayer in the position to sell and who would be the buyer or buyers? joining us is bob peck with a buy rating on yahoo and $45
price target. is your buy rating predicated on exactly this, shutting the internet business now? >> we think a couple of things. one, the sale of the core is the most likely, most prudent, most logical. you've already seen interested strategic partners say they'd like to take a look at it, verizon has come out a couple times and say they'd like to look at it, marrying that asset would be a lot of synergy. we think not only do you have financial players wanting to look at the asset but also ample strategic as well. >> mike, just wondering based on what you know from the company and just kind of discussions we have had in the past, you know, is this something that yahoo itself that marissa mayer that his board is likely to do? >> my impression they are not in a hurry to do it but the shareholder base, it was always a sum of the parts asset play in the last couple years, you don't have a shareholder base that says let's see if they can fix that vis business, they say
break it up, give me the value soon. i don't think their orientation would normally be let's sell this to the highest bidder, it would be let's try to make something more out of the business but i'm not sure they enjoy that luxury. >> these investors have run out of patience, i've talked to a couple of them, canyon and spring owl. the idea of rethinking the strategy as they did a month or two ago which was the story i think david faber broke, selling the internet core business, but waiting a year to make a final decision makes them crazy. they want to see more action, they are concerned about a lot of potential impacts. >> bob, that's exactly the point. if this is ultimately where things are headed why wait at all? >> exactly right. now that i think everyone is back from vacation and shareholders have expressed their interest for the company to pursue this core sale, strat jiks have expressed their trillion as well as the core players, i think the catalysts will start player.
i think the activists will be more vocal. if they sell the core you are left with alibaba shares and yg shares and at that point i think that part of the asset goes to alibaba and soft bank. you could have a sale of the entire asset ultimately. >> do you think it's true the assumptions underlying all of this which is iffia hangs on to this core business for a year it will be valued less than today? >> the tough thing is rift noose are down 10%, ebitda is down 40% or so. if it continues along that trajectory you could have a lower value than today. >> you mentioned verizon. who else out there might be a good -- or who else out there could potentially be interested in yahoo either whole or peace meal for the internet business. >> at&t, news cap, news corp., fox. >> what about liberty media. >> i believe he has said on cnbc that he is not interested. they are great with managing taxes and breaking up pieces. >> what do you think about how
they're shutting down this screen portal, you know, this was just some of yesterday i guess it was a way to try to get their news content all aggregated in one site, some of their video. what do you make of all that? >> when we reviewed their metrics and mobile, video, and looked at how they performed, they hadn't performed that well, they haven't moved and video hadn't moved since all these initiatives. considering that asset is losing 50 to $100 million or so and not showing any traction of growth it makes sense. it's what pe would do, is that treej iks would do, close down its underperformers. >> just a question. do you think it makes any sense for now investors to say sell the business, never mind the tax implications don't worry about a tax free spinoff of the core business when they said it was tax reasons that kept them from doing the alibaba spin. why is the acute tax sensitivity on one side and not with the potential sale of the core business? is it just because the tax
liability would be that much larger with alibaba? >> oh, yeah, it would be tremendous, you're talking about a $40 billion asset potentially taxed at 40%. $15 billion of taxes going out the door at minimums, we had scenarios where it was higher than that. if they sell the core we calculated it as a billion, maybe 2 billion, depends what the cost basis is, but would be a much smaller tax risk if they go with selling the core. >> bob, thank you for now. appreciate it. bob peck from suntrust on yahoo. breaking news on siriusxm. julia. >> that's right. siriusxm announcing it ended the 2015 year with 29.of million subscribers, the company adding 2.3 million subscribers over the course of the year, that's 300,000 more than the company's guidance. the company announcing that it expects to meet or exceed its 2015 guidance in terms of revenue, earnings and free cash flow. sirius xl also issued guidance
for 2016 for continued growth of revenue and earnings. in line with expectations, as well as projecting the net addition of 1.4 million subscribers. so that is growth that is lower than the 2.3 million that they added this past year, but still big growth for the company there. back over to you, kelly. >> shares appear to be a bit higher on that, too. final numbers are out and you won't believe how much bill ackman lost last year. plus apple shares sinking on a report the company may slash iphone production by 30%. that's later on the "closing bell."
hedge fund managers across the board had a rough 2015 but bill ackman's fund finished the year down 20.5% thanks to valeant pharmaceuticals' plunge. compared to 2014 when ackman posted gains of 40%. kate, this quickly becomes a tail about his particular investments as opposed to -- it was a difficult year from hedge funds from a broadway. >> three things and hopefully we have graphics to show. valeant down 30%, that was primarily in the fourth quarter. canadian pacific down 30%, he is still fighting for that norfolk
southern deal, herbal life his short up 63%. so based on these three names alone it was a really rough year. you know, he actually lost more in terms of redemptions after his wow year, his 40% up year. he has talked in his last investor letter about the redemption request they had q4 of 2016, they weren't bad at all. you have to assume people have faith in him or they are looking at their high water mark and want to stick it out for a while. you know, he has been a remarkable stock picker all in, but he has had some grand failures that we all know about. >> when the valeant thing was unfolding in the recent months you you a say lot of other hedge fund managers saying this is a levin for everybody, never become so huge in one position where everybody is staked on it your whole year. do you think that is creating any rethinking by ackman and his folks about their process? >> you know, i don't know if they are rethinking valeant, although you would have to assume they are, even if they don't want about it.
i do think they are rethinking herbal life, not that they are backing a with from that investment but he has said i wouldn't do something like this again, this billion dollar short that was dependent on policy change or an investigation and so on. it's just been -- >> an activist short in a sense. >> even though he believes in it. so i think that's going on. i also think there is a broader implication for the hedge fund industry, valeant being a perfect case are way too crowded. you look at the goldman sachs or other popular hedge fund indices you see so much momentum around valeant and so many people got hurt on t i was talking to one fund manager who said i know people that don't even take responsibility for the losses on the valeant because they thought it was such a popular idea that it's not their fault, there was an accounting issue and now the ceo has a health issue. give me a break. you have to pick your own stocks and do your own research. if you happen to agree with
somebody else, great, but it still has the onus on you when you're managing other people's money. >> with canadian pacific that also in a way making another huge bet on what the government will or won't do, in this case allowing cross border merger with a target that seems unwilling. >> in a notoriously troubling industry that is intertwined with government regulation, absolutely, that has a lot of infrastructure issues. there was a good column in the journal on chicago, the hub, and how much difficulty there is getting rail service in and out of chicago and all the issues there. it's incredibly complex and the government has been behind in terms of keeping up with what's going on from a market perspective and what needs to be done. anyway, i'm not the expert there, i just think he has picked tough sledding as it turns out, whether advocating for this deal, advocating for an investigation into herbal life and the valeant stuff caught him by surprise. but still he has bet big on some of these names.
>> see if he can make a redound in 2016. >> let's get out to sue herrera. >> here is what's happening at this hour. moments ago a u.s. judge agreed to delay the deposition of bill cosby's wife in a civil defamation suit. camille cosby was set to deliver that deposition tomorrow. a lawsuit was filed against the come dean by seven women who have accused him of sexual assault. iran unveiling a new underground missile depot showing precision guided missiles, it's a weapon the u.s. says can carry nuclear war heads in violation of a 2010 u.n. security council resolution. last week iranian president u hasn't ordered its defense ministry to expand the program. hillary clinton campaigning in iowa praising president obama's actions on gun roll control. she also unveiled her plan to help families who have children with you a sichl. and diana holland becoming the first woman come man dant at
the west point military academy. she has commanded at every level from company all the way up through divisioner. that is your cnbc news update this hour. back to you, kelly. congratulations to her. >> absolutely. are troubles in china set to spark a global setoff. former goldman sachs vice chair tells us what he's expecting and whether the u.s. can weather the potential storm. gun stocks soaring today at the same time president obama announcing those new executive actions on gun control. we will take a look at what impact the white house move will have on gun sales with the owner of the nation's largest firearm retailer coming up. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement.
here is a look at how we finished the day on wall street. those looking for a strong come back from yesterdays decline we didn't see that but the dow added 9 points. we have breaking news or yum! brands. >> basically yum! brands announcing its executive chairman will retire in may of 2016. he plans to retire following the company's annual shareholder meeting and step down from the company's board at that time. the board says that it plans to
appoint a nonexecutive chairman from among its existing directors to succeed mr. novak and will announce that appointment at the company's share holder meeting. mr. novak has been at yum! since 1999 when he was appointed chief executive officer of yum!. back to you. >> sue, thank you very much. china valeantly trying to control its erratic markets but volatility continues both in china and the u.s. bob hormats former state department and former goldman sachs vice mare than now the cries mare of kissinger associates and he joins us at post 9. >> great to be back. >> everyone is trying to design what is happening in china, it's markets and economy, are they both in trouble? >> the markets are very volatile, they've been that way since the summer, the economy is not growing at the levels anticipated a year or so ago. probably around 6%, maybe between 5 and 6%, we just don't know at this point. the key i think for china is
whether they can continue their market-oriented reforms. whether they depend less on investment. there is a lot of overcapacity in china already so the level of manufacturing investment is likely to be slower and they are not able to export as robustly as before since the global economy is slowing down. so they have to rely more on services, which are actually doing quite well in china and they also have to rely more on consumer demand which is also beginning to pick up but it's a slow difficult transition for a big economy. >> bob, that shift obviously everyone is watching it in realtime, maybe getting impatient about exactly how it's proceeding or not sure how to pressure it. i think when it comes to looking at their stock market we get the impression that these are heavy handed measures that the authorities have over there in terms of trying to manage their markets, restricting selling and things like that. do you think that they are going to just keep going back to that well? is this the way it's going to be for those markets?
>> they do tend to have a sbor interventionist view on the economy in general. on the other hand this decline we have seen over the last couple days, monday was a serious one, but they didn't do the kind of things that they did in the summer collapse of the market. they didn't do all the interventionist things they did in the past. so i think they're beginning to be more comfortable not with the declines but more comfortable that they don't have to just pull out all the stops and intervene heavily in the market to get it going again in part because not too much chinese own stocks, so the impact of the market on the chinese economy is not as great as if the same kind of decline occurred here when a lot more people own stocks. >> that said there is an important link and one ken brown brought up last year which is china was looking to the stock market as a way to bail out its heavily indebted companies on raising equity. if they don't have this anymore,
if they don't have the faith that companies can turn to the market to monetize that and help pay off some of those debt levels what does that tell you about the economy perhaps looking for fragile and trying to deal with that heavy debt load going forward. >> that was the idea last year it's not the idea anymore. the idea last year heavily indebted companies, instead of the government baling them out or their having to restructure their debt, they would go to the stock market, get money from highly valued stocks and help pay the debt off. they've given that up. now at this point they still have heavily indebted companies but i think they've come to the conclusion if they do have such companies they will have to work this out in a way that's not dependent on a highly valued and rapidly growing stock market. >> i wonder how they do that. >> they do that i think the government will have to help them do restructuring, the government has restructured or companies that were restructured, state enterprises restructured before they will have to sell off bad assets, they will have to do what a
normal company does in the united states which is to restructure over a period of time. they can do this, it's just that in the past they thought they could avoid it by selling stocks that turned out to be overvalued, now they have to do it in the old fashioned way which is restructuring. >> what are that you are thoughts on their bid for commodities. a slowly demand out of china had a slowly effect on kpodities. will it get stronger? >> i think if you look at all the emerging economies two things have had an adverse affect on them, one of them is commodities, china has been the large marginal buyer of virtually every commodity. >> right. >> and now they are not going to be that, they haven't been that for a while. so commodity prices are likely to remain weak. the second is that the rmb, the currency has devalued over a period of time and that means other emerging markets who compete with china are now
seeing the markets push their currencies down or allowing their currencies to depreciate it's had a double negative effect. >> we will be watching that currency level carefully. and everything else happening there. thank you for now, bob, for joining us. bob hormats with his perspective. president obama's push for stricter gun control driving buyers to stockpile firearms sending gun stocks up today. coming up we will hear from the owner of hyatt gun shop, it's the biggest gun store in the u.s. about the demand he has been seeing. first apple falling on reports it's going to cut it's new iphone to march. an analyst will tell us the key numbers to watch now. you're watching cnbc first in business worldwide.
apple shares tumbled today, down 2.5%. after reports surfaced the tech giant is going to cut production of the iphone 6 s and 6 s plus by 30% during the second quarter of its fiscal year. for more on what this means to the company let's bring in brian blair. brian, good to see you. listen, there was already quite a few reports about high inventory levels. why is this report today so significant? it's really more evidence that things are getting worse. these two companies are out of taiwan, one was logan precision the other catcher and they reported their december monthly numbers. it looks like it's getting worse than even it was a month ago.
i think that's where the concern is coming from. one of the things we haven't seen yet, we haven't seen analysts on the street lower their numbers yet. people are very high for the march quarter, a lot of analysts are still around 60 million units. numbers still need to come down. this is evident that supply chain is seeing weakness but wall street seems to be ignoring it to a degree. >> yeah. >> so just can you quantify what you think the numbers should be coming down to at this point if the street is looking for 60 million or so in the request rt? >> i think it's going to be low 50s. i think the street could be off by as much as 10 million units. production could be lower than that, could be in the 40s but you have to allow for some inventory in the channel and so apple is likely to report a number in the low 50s. i think street limits will need to come down by as much as 10 million. i think we will see them start doing that, we will see analysts doing that i think in the next week or two. >> brian, what do you think is the problem here? is it just increased competition, is it the fact that
there's market saturation? what has been the inflection point? what is the inflection point we are looking at now? >> a little bit of it -- it's a little bit of a saturation, growth is overall slowing for smart phones, it's been slowing in the u.s. for a period of time, but it's slowing now around the world. the other part of it is is that the iphone 6 s is an iterative model, the differences from the iphone 6 is minimal so consumers are not rushing out to get it the way they have previous models. last year -- or rather 2014 was their major year because it was the first time apple introduced larger screen phones. the iphone 6s and 6s plus are slightly iterative and there isn't that much demand. >> to that point one of the case that is some of the bulls will make is that more than half of the iphones out there are pre iphone 6. there should be this upgrade cycle that should play out. on the other hand you saw survey data out today saying people in general are just kind of less dazzled by their phones, they
are not really necessarily lookeding for the next thing. is this a longer term shift of behavior that we are seeing clues of now? >> i think we won't know the answer for that until we see the iphone 7 this september. i think it's getting harder to differentiate yourself from what's out there. most smart phones are roughly the same size and thickness and the differentiation is in the software but even at that level they are all pretty much the same. i think consumers would like to be dazzled but it's hard to guess what apple can to to dazzle people. >> all right. well, we'll see. for now the shares clearly under pressure. brian, thank you. appreciate it. >> you bet. >> brian blair on apple. we have a market alert on oil inventories now, always swings the price around, seema mody, what's happening? >> latest data from api showing crude inventories falling by 5 points million spares to 484 million, compared with the analyst expectation of an increase of 439,000 barrels.
crude stock rose by 1.4 million barrels we are looking at oil slightly lower after hours on this news -- or this report, back to you. >> thank you, seema. smith & wesson hitting an all time rude and ruger trading at levels not seen since 2014 as president obama issues an executive order on gun control. up next we will talk to the owner of the biggest gun shop in the country to get his take. and cnbc's steve liesman will have an exclusive interview with stanley fischer tomorrow at 8:30 a.m. eastern. you won't want to miss it. recommend synthetic over cedar?u "super food?" is that a real thing? it's a great school, but is it the right one for her? is this really any better than the one you got last year? if we consolidate suppliers, what's the savings there? so should we go with the 467 horsepower? ...or is a 423 enough? good question. you ask a lot of good questions... i think we should move you into our new fund. sure... ok. but are you asking enough about how your wealth is managed? wealth management at charles schwab.
a very emotional speech from president obama today as he outlined his plans for executive action on gun control laws. take a look at how some of the gun stocks have responded. smith&wesson and sturm ruger up. and investors bet that the laws will force consumers to load up on firearms before they go into place. take a listen to one of the new laws the president plans to enact. >> anybody in the business of selling firearms must get a license and conduct background checks or be subject to criminal prosecutions. it doesn't matter whether you are doing it over the internet or the gun show, it is not where you do it, but what you do.
>> for what impact the executive action may have, we are joined by the owner of the largest gun shop in america, larry hyatt of hyatt gun shop in charlotte, north carolina. welcome to the show, larry. >> thank you. >> what is your reaction to these executive orders? >> well, the biggest reaction is just a huge surge in business. just the thought of more gun control makes people go out and buy guns now because they are afraid that later they won't be able to. >> it is funny, because we've seen that play out from time to time during his presidency. president obama has also been -- it seems like there are some people who think these executive orders don't go as far as was feared. could that also explain some of the price action we saw today? >> yes. the laws are pretty mild. most of them are already on the books in some way or the other. the gun show deal is not that big.
it is just a bunch of old people trading gun collections. it is not where a lot of guns used in crime come from. in fact, only a few years ago they were trying to reduce the number of felony licensed dealers, not increase them. so a big turn-around. >> kate. >> i'm curious. in terms of the laws not being terribly intrusive, larry, i would think the reaction would be bigger if they were. because short-term you want to see a rush to get supplies if you think they are going to run out. do you think, as this process gains traction, assuming it does, the reaction in terms of good sales will continue? >> it won't be like it was after the sandy hook and all of those laws but it will still be significant. because it makes people think about. it as it gets until the news, the talk about gun control, it starts the thought processes. and people who don't have a gun, they are thinking about buying
one. and even if they don't need it. they are going to put the gun up, because if they don't buy it now, it might be so difficult or the red tame be so onerous, the same thing as banning them. >> and on the subject of background checks, how does that work at your shop? is it a long, detailed process. what is that like from a seller's background. >> it works very well. the fbi nic system is very official and worked very well. it has gotten better and better over the years and it is a great system. as a firearms dealer we like the back ground check system. we are really excited about getting more of the mental health checks in it. that is something that has been left out. that is vital. we need to know that information so we won't sell a gun to someone that has a mental issue. >> and you mentioned, larry, that a lot of people at gun shows and in your stores are just interested in lawful
purposes. but have you ever looked at somebody walking in wanting to buy a weapon at one of your stores and felt nervous about selling to them? have you feared it will turn out one of the weapons involved in some horrible shooting will be traced back to your store? >> selling firearms is a huge responsibility. we're the last line of defense. and we can turn down any sale that we don't think is on the up and up. even if they have a permit, passed a background check. if they said something or act funny, we have systems in place that we'll turn them down and try to do it so there won't be anger or anything and we have ways to do it. >> and i was going to ask, you have done that in the past. >> yes. >> interesting. last line of defense. larry, thank you for joining us today. >> thank you for having me. >> larry, the owner of the
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new york is the 23rd state to legalize medical marijuana. and sales start this thursday. our kate rogers is at a new york city dispensary with more for us now. hi, kate. >> hi, kelly. that is right. we got an exclusive look inside manhattan's first medicinal marijuana dispensary which will start sales this thursday. it is called columbia care and one of the five companies awarded licenses to operate here in new york city. you could see they have taken really great care to make this a warm and pristine and inviting environment for patients. it is really not aster ill one like what you would see in a doctor's office and they say the goal is to maximize patient comfort. >> we are tried to create an environment where patients feel welcome and warm and safe and they are having a professional experience. >> the company is run by a ceo
who is a former goldman sachs investor. they invested in the five operations throughout new york state. we should mention new york, has the most restrictive programs in the country. so in order for patients to gain access to care, they have to have one of ten approved illnesses, including hiv or aids. once they gain that access. they won't be smoking marijuana because that is not approved here in the state. some of the approved uses are capsule or oils for vaporization. and you notice there is no marijuana on-site here just yet because sales don't start until thursday. but one thing i could tell you, there is a ton of security. there are five cameras outside and patients have to have i.d. verified twice before they get into the waiting room and a ton of cameras in here in the sales room where i am right now. back over to you. >> kate rogers. it looks like a cross between a doctor's office and a apple store. >> they are trying to make it
seem very business-like. >> if you can't smoke it, you can only consumer it, that is potent stuff. >> thanks for the tip. >> that does it for us here on "closing bell." thank you both so much. "fast money" will start in moments. over to melissa lee and the gang. >> "fast money" does start right now. live from the nasdaq market site overlooking times square. i'm melissa lee. your traders are tim, steve, david and guy adami. tonight on "fast," jp morgan and then citigroup, and now bank of america, selling rally. what has them afraid. the man behind the call. plus it could be a tough year for stocks. goldman sachs is calling for a 50% upside in one name. we'll tell you what that is and if it is worth your money. and check this out. the car of the future could be closer to a reality than you think. and there is a number of stocks driving the emerging trend. we have a special "fast money"