tv Squawk Alley CNBC January 7, 2016 11:00am-12:01pm EST
morning. dow down about 318. making a comeback in the last hour. right now you can see the dow is down and the s&p is down. among the losers oen the dow, boeing and caterpillar. apple falling below the $100 mark. china with losses. jd.com and baidu moving to the down side. that's after the major sell off in asia. >> this is crazy. i don't know if they did it on purpose or show us on a day by day basis.
>> thst very disconcerting for the markets. they are learning by doing. >> there's your open there. >> just want to bring your attention to the slipping markets. they are down 3%. >> what started off as a calm, it's turned into, it's picking up steam there. we hit what they call a circuit breaker. >> it's down more than 5%. 3,349. that has frozen now. >> it hit 5%. 15 minutes later there's no work from the official.
we will hit 7% quickly too. >> there goes shanghai. they're watching cnbc. >> there we go. >> what a session. we should mention a little over an hour ago china suspended that stock market circuit breaker. it will be interesting. in school they call it a half day. >> i've never been dismissed from school after 30 minutes. >> john ford is still out where he will interview the ceo of t fitbit. we're catching the sell off. energy, all the s&p stock sectors are negative. the energy is down the least. >> which is interesting because we did see brent and wti breach that 33-dollar mark. we did see that surprise draw
down an inventory. you saw a bit of that come back as that came back. you have seen the markets pretty much recover. you wonder how much of that is the fact that the asia worries are over for the time being. those are put to bed literally and figuratively. we'll get a little more suspense in a few hours. >> let's get to bob and see what's happening there. >> we've had quite a reversal. some of this may be due to the suspension. we started lifting not long after the open. that's when the circuit breaker suspension was announced. europe coming off the lows. still down.
we're going to highlight some of the brokerage firms. your ameritrades. a lot of people don't think trading is off to a great start. a lot of these are down eight, nine, even close to ten percent. this is a good time to remind everyone that we have circuit breakers here in the united states. they were revised a number of years later after 1988. halt trading for 15 minutes. this is for the s&p 500. there's no halt in trading after 3:25 if you're down. this only happened, we only used the circuit breakers once in 1998. that was at the height of the whole asian profits.
also about deflation. all the things, exactly the same things that we're talking about today. history doesn't repeat but it does run. >> joining us on the phone this morning, a china expert. john, it's good to get your insight today. >> good morning. >> what kind of grade would you give them vis-a-vis the circuit breaker and what kooinds of action would you expect tonight? >> pretty good for a beginner. they are just learning their way around the market. i think the policymakers will be throwing everything they've got.
they are worried about the currency falling. this is many people are reporting this as the economy is weak so the market the wrong. i think this is exactly wrong. there's capital flight from china taking place. that's pulled down the currency and the market. that's what's weakening the economy. >> if it's not driven by the economy, what is it driven by? is it driven by inaction or miscommunication? what is it? >> there's a great wave that's happened here. first, we had eight years of zero interest rates and a fixed currency against china which mean it was a no brainer to borrow dollars to put over there. we call that the carry trade. last year a trillion dollars came out under the anticipation of fed raising rates. now the chinese has opened a
meaningful offshore market and which is uncontrolled at the same time the imf has approved them as reserve currency which means the chinese have announced they will peg against the basket and not the dollar. now you have currency riskins a well. that's making a double whammy on foreigners pulling money out. the domestic authorities have tightened down considerably in the last year or two since the new government which is making domestic chinese nationals want to move on the offshore. look at the real estate markets in vancouver and new york. all of those three things are torpedoing the currency. this is not the chinese government pushing the currency down. it's them being unable to keep it from going down. they spend a hundred billion dollars of reserves in december trying to do that. they failed. >> we've been talking all morning long about how much more fire power they have in that department. how long could that do this? >> they could do this 35 more
times and still not run out of money. i don't think they want to let it go that long. i think you'll see, this government is more controls oriented that's the last one which means you'll see various kinds of capital controls being put back in which will spook investors even more. this is a bad time. this is not going to go away. the echo effect on the u.s. is it will go away. i think this is not something that's going to long term destroy our markets, but you want to stay away from the chinese and other emerging markets for some time. >> john, it's going to be eventful tonight no matter what. thanks again. >> look forward to it. bye. >> let's bring in steve who can talk about all of this impacting. >> i'm thankful to the producers
who brought me on after john. a guy i've known for more than a decade. one of the smartest guys on china. he laid out the way the fed will be thinking about this, which is is this a financial issue or is this an economic issue? of course they're not totally separate. things that happen in finance and the stock market have an effect on the economics but ultimately, the way john set this up is more of a financial issue. if that's the case, then there's two different ways the fed can react. as a financial issue the fed can adjust the pace of fightening probably through speeches perhaps by the chair or vice chair. stan fisher gave me some of that. if things deteriorate, we can slow down the pace of fightening. if it's economic and seen as more core to u.s. economic growth than through policy statement, which is above the kind of speaking that goes on, they can actually eliminate some of the tightening and really dial back. either that or through their own forecast for the fed funds rate,
the so-called dot plot where the fed tells us they think the trajectory of funds are. they have an ability to respond. one of the things we pay them for is to be the adults in the room and not to react right away to the things that are going on in markets. john williams told me that on monday. stan fisher told me that yesterday. >> steve, stan fisher told you the reason whiep thy they have meetings is so they can choose not to do anything at a lot of them. thanks. >> sure. off the lows of the day, apple trading below the 100-dollar mark. amazon heading for its sixth straight day of losses. facebook, google, netflix, all of those stocks trading lower. shares of fitbit trading lower today. nearly 50% is the drop for the past six months. let's head out to ces in las vegas where we find john joined
by a special guest. over to you. >> james parks, ceo of fitbit. can't pick a better time to talk to you than here at ces when this new smart watch was announced a few days ago. the stock dropped more than 20%. there's a stock market and then there's the product market and what consumers are going to actually do. let's talk about this new watch that you guys have. 200 bucks. five days battery life. it's a bit of controversy on whether people think it's sexy enough to sell. what's your pitch for how this will stand out versus under armor coming in at the bottom end with bands and apple watch with a e freshed item on top. >> they're pretty overwhelming. they do too many things. it's not clear what they are good for. we took a bit approach. it's a fitness focus watch. it has the right set of smart features and there's a heavy focus on personalization and customization.
we're shipping with a lot of accessorie accessories. it improves or margins as well. talking with retailers, we think it will be a hot product. >> before we came live, we were talking a bit about china. new market for you guys. asia pacific is your highest growth market. what are you seeing over there as we look at the turmoil and stock market. what are you seeing on the consumer side and demand side? >> faster growing than the u.s. we see the chinese consumer really gravitating towards our devices. that's where our strategy is at approximate. >> probably checking their heart rates quite a bit on days like this or weeks like this. where do you go from here at this time of year. after the holiday season where you saw presumably a lot of sales because your app shot to the top of the app store. does your focus shift to
software? >> the number one downloaded free app on itunes at christmas and the day afterwards. great sales. our strategy is around building a digital platform to help people reach their health goals. that's the mission of the company. >> when under armor which is a brand that has a strong connection with athletes. how do you message versus them. you already amped up your marketing spending. i see the commercials all over the place. that's got to be drag on the bottom line. is that going to force you to amp up marketing anymore? >> it's a reasonable percentage. our strategy has been making fitness really approachable for people. we target every day people, active people and performance people. we're targeting a wide range. >> what are you seeing happening in the percentage of people using the fitbits buying them or
giving them as gifts. you've said the usage percentage is high. how is it trending now? >> the usage percentage of our latest products are much higher than previous generation of products. we're very excited about the use of the products. >> does that mean the higher the selling price, the more likely people are to use it? >> i think it's the inclusion of sensors and greater software features that result in higher engagement. >> what should we look at? people connect to the app more often if more engaged, are they more likely to keep using it and upgrade? >> that's our theory. the greater number of friends people have that are social network, the longer they stay with fitbit platform. >> kind of weight watchers style peer pressure, we're all in this
together. the more you can tap into that, the better off. >> fitness is social. you can think of fitbit as the world's largest fitness network that's paired with hardware. >> all right. james park. quite a wild ride in the stock market. we'll see how this product does when consumers get their hands on it in march, i believe. >> in march. >> thank you. back to you. >> thank you very much. take a look at the dow. we're back down 171. the sell off fears out of china. we have the biggest movers. niss nissan does a ton of business in that country. we'll count down to the european close. the next catalyst for the market in about 15 minutes. don't go away.
what do you think we're seeing? >> they're going to be short term turbulence, particularly in china. i'm not worried about the longer term. not all fundamentals are right. when you look at the level of the chinese, we're way, way behind any standard that china should be able to reach. 100 cars for 1,000 residents in china versus 500 for 1,000 residents in europe. there is a lot of room for improvement. >> we're looking at the sell off in the chinese stock market. it looks like there's a bit of panic going on over there. you're talking to your executives and consumers. what's the average chinese person thinking as their watching this economy? >> i think everybody is expecting some kind of adjustment. after a very strong growth,
particularly, in transportation sector, we have some kind of post. it took place in 2015. i think partly in 2016. we're not projecting a very strong growth. this average 5, 6% growth will be made of some. some months with more important growth. that's what happened in 2015. i think we will continue to see same thing. >> certainly not panic? >> no, i don't see it. >> let's talk about the autonomous drive vehicle. you took me for a ride. this is different than what we have seen from other automakers. when will we see this in nissan vehicl vehicles? >> we have many devices. turning on the red light, et
cetera. it's quiet and easy drive. the pieces. >> referee: technology will be on the market following our projection by 2020. before 2020 you'll see waves of these coming. in 2016, 2017, 2018, to see bit by bit a little bit of devices coming to the car. the full package, which allow you yesterday to stay in the car, drive with hands off the wheel, practically the eyes off the road is 2020. >> final question. you come out here on a regular basis. you're in these vehicles. you see the technology advance g i ing. coming along faster than do you expected a few years ago? >> i think it's coming along very quickly. the reliability of everything allowing this technology to give us the benefit with camera, sensors are much more reliable and much more durable.
>> allowing us to have a sneak peek at the feature from the rnd facili facility. back to you. >> the future set to begin this year. thanks to both you have. up next, the next big thing to watch, the european close. we'll bring it to you live in a few minutes time. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be.
a potentially volatile open in china tonight. there's a large number of will known chinese economists in new york city for a conference on the state of the chinese economy. our chief international correspondent joins us with one of those people. >> the conference is held every year. what an opportune time to hold
this. we're excited to have you on because most of the economists here are from universities or think tanks, you're with a securities firm in china. why has the chinese stock market fallen so hard this week? >> there's a reason. for example, definitely trigger some fear. that led -- we have this new scheme of the circuit breaker. people in time will get familiar with that. also have some role behind this volatility in the market. >> let's start with what you mentioned first, the decline in the chinese currency. it's been pretty sharp this week. the central bank has allowed it to fall fairly sharply. why are they doing that? >> in the long term china will have free floating exchange
because the whole economy is moving toward a more market based economy. i think that's the process that can with better managed to maintain stable transition and to avoid any disorderly depreciation and not only that but the global economy. now i can see there is some speculative that some investors try to front around the ppuc. that's why we see huge expectation in market. >> is it just front running or some economists outside of try that with what the central bank has done with the currency. are they trying to improve exports as the economy. should we read anything into what the central bank is doing with the currency and the economy? >> the exchange rate compared to
the u.s. dollar, we know that the u.s. dollar in the past several months and quarters. that led to visible appreciation against all currency. i think there is u.s. the rate hike period. it's not good. i think it's reasonable for the chinese authority. >> the chinese government announced they will suspend the circuit breakers that caused the securities market to shut down this week. is that a good idea, bad idea? >> i think because it's a new scheme and we definitely is room to inprove that scheme. the market seems like some volatile area. a good idea to suspend that and
it's possible. we may put that back online. >> thank you so much for joining us here. much appreciated. back to you. >> we appreciate that. europe is about to close here in about 60 seconds. not quite below. >> no certainly not. you can see a lot of red on the screen. it's much, much better than it was four or five hours ago. the dax was down 3.4%. it's now down just 2.3. you've seen a recovery around you. one of the major reasons is the oil wagers. as you went back up $34 a barrel. that's really the story of the day. the fact we've been able to cut the losses. if you looked at now day four of trading for 2016.
an out performance because of the qe from the european markets last year. you see the converse this year. so far four days in. europe is down 5.4%. lessen the losses on the s&p 500. the oils mover positive. the autos were down. what's worrying is as we had in that interview with michelle, what's happening with the currency? the last thing the automotive makers is they want the japanese currency to move against them when the euro had given them so much. they were down and still down. volkswagen in negative territory and the mining stocks are so volatile at the moment. anglo american is on the 12-month track down 80%. still they fall on those china concerns. finally, it is time, my friends, for us to start regularly mentioning the united kingdom.
this is david cameron emerging from dinner last night. he says he thinks he's got a deal and can get a deal on benefits from eu migrants he thinks the uk can stay in the european union. the problem he has is he's left the genie out of bottle. in a poll out overnight, a majority of those in the uk, do not want to stay in the european union. there will be a referendum on this by june. the implications are unknown. they are potentially huge. be aware the uk is not in the yo eurozone. that's one of the complications if it were to leave the european union. >> thank you very much. when we come back, stocks obviously not quite at session lows which was down about 318 on the dow. the nasdaq still the worse
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access shaft. a new study reveals death rates from cancer continues to drop. there's a 23% decrease since peaking in the early 1990s. that means more than 1.7 million fewer people have died from the disease. ford motor company is changing for how it accounts for pension plans and it should boost earnings. it's shifting from mark to market accounting which means it will recognize gains and losses in the earnings years when they occur instead of gradually insulting the results over a number of years. a blue sapphire said to be the world's largest has been discovered in sri lanka. the owner says it weighs more than 1400 carats. ev he valued it at $100 million. back down to squawk alley. back to you. take a look at the dow map this morning. obviously a ton of red on the screen. some investors warming to
walmart and disney. at the nasdaq, a lot of biggest losers remain in tech. let's get to bertha with more. >> let's show you a bit of green. a bit of retail love for ulta. walgreens is still in the midst of acquiring rite-aid. he said that will not be his last deal. netflix bucking the trend today. it has come off the lows. begin making a new low this morning. now back above 99 bucks. apple's woes have weighed on chips all week long and concerns that the tech giant is pulling back on its iphone component. orders, chip stocks again are the weakest. some of those components like sky works bounced after hitting new lows this morning. once again, today, new lows here at the nasdaq out pacing new
highs. once again last year's winners like the bio teches are among the biggest source of selling. biotech off the low but still a negative performer today. i want to leave you with tale of two food stocks. new dietary guidelines were released for the united states. they are warning against processed foods and too much sugar. that's hitting food maker mondelez in the nasdaq. check out cal-maine. eating eggs is okay. consuming cholesterol doesn't necessarily impact blood cholesterol. sunny side up. >> definitely a silver lining there. thanks. tech stocks in china have been feeling the impact of all this market volatility. alibaba down the sharpest of the bunch. joining us by phone is bob peck.
gentlemen, good morning to you. bob, we've heard from alibaba that the consumer is resilient in the face of the market. it will hurt them. how does this play out? >> we spent the fall going through china and india. we met with alibaba and jd. we were impressed with overall trends. the shift to consumption which the consumer is driving. it's growing about 30%. in fact, the chinese portion that's growing fast around 35% or so. we do like the point you're making here about t-mal which is growing fast around 55%. that's the international brands that want to get access to the consumer.
>> the broad base of this sell off has meant that names like facebook, twitter, that don't even have operations in china are selling off too. is this just an exhale for the momentum names that are letting off the most air. >> i think except for twitter, the winners of last year. if you look at ebay, the ones that did get a lot of sponsorship last year. you had a predictable january profit taking move. it's been exacerbated by the concerns they are over owned and the global demand for tech. facebook does not really have direct fundamental exposure to it. they're trying to domestic consumer trade again. you mentioned walmart out performing. you see a lot of other chain retailers doing well. it seems as if people are saying for the most, any way, maybe we can attempt this again to say the domestic economy remains place to hide. >> bob, when kayla mentions what's going on in china, does
that add pressure to the alibabas to accelerate growth or will that remain the locust of their activity? >> it's a key focus for them. they had 100 strategic partners that participated in their big anniversary event they do no november, singles day. that's a key focus outside of china and near term, you're seeing the chinese consumer really drive the core results while that part builds. >> we heard an executive tell michelle that it's an extreme period of volatility, but it's a new scheme. let them figure it out. it's going to unfold over time. jim cramer said nasdaq in 2000 was worst in terms of the risk and volatility. >> it really was. you saw ipos going up 100% on the first day and when it fell apart they were going to zero as
fast as they could. i can see that argument. i do think there's a sort of heavy handedness to it. people don't flow how to handicap. we don't flow what real demand is there. now you have people trying to front run the anticipated policy response and say maybe, in fact, there's going to be another rush of government money into the stock market. you don't want to be in the way of that. i think it's an uncomfortable set of things that people are trying to handicap. >> bob, how comfortable would you be in telling people to play the china names near term. we've heard this is a ten-year growth story. what happens between now and then? >> they have about 400 billion and their goal is to take that to a trillion over time. fluctuations will have an impact on that. what we saw happen in the last quarter is the consumer showed up and placing orders but they weren't buying as much. instead of buying three shirts, they were buying two. you could have some short term
bum bumpiness. it's really a large driver for the stock going forward. >> bob, on monday we just talked to the fitbit ceo, on monday you reiterate your buy. your target was 48. now it's 22. second thoughts? >> we think we have a strong fourth quarter. we predicated our call. it looks like they have a very stro strong. even if you assumed it was a worst case scenario and had commitments for a couple million units. really the reaction we thought was unwarranted and put up some good guidance. >> what are people missing? it was a sense it was about the next product line and people weren't enthusiastic about it and no reasons to step in now. >> the new product for us is not
really on an iwatch compepetitc. i think they held back some features because they didn't want to make it too complicated. they didn't want to make a full watch function here. we like some of the new features they put in there. we'll see how it sells. this isn't their only new product this year. they are likely to have other products come as well. >> we heard bob, the worst case scenario. is the best case a buy out? >> yes. you have to wonder if the capital markets has the appetite right now. that's the big question. you look at the retailers too. people think the financial engineering story can play out for a while. that's the question. we don't know if they will stabilize enough. the credit markets have been a relative bright spot. that's not been the epicenter of what's going on. >> we haven't had a high yield issue since mid-december. >> the market is not very liquid, but it's not falling
part as we speak. >> thanks so both of you. >> thank you. up next, still a rough day with the markets. we are off the lows. the dow was down 318 at one point. currently sitting down 150. rick, a lot to work with today. what are you watching? >> i'm thinking about recalibration. if you change the oil in your car, you replace electric sockets in your house. usually turn the power off to turn the car off. as the chinese learn, when markets recalibrate, you can't turn them off. we'll talk about that after the break.
our experts tell you the number one thing you should be doing during these volatile times. where is the bottom for apple? the number one analyst on the street joins us with his take. we'll see you in about ten. sounds good. thank you very much. let's get over to the sme and get the exchange with rick. >> thanks. let's look at three charts just to get a view of one microcosm of what recalibration looks like in the real world. let's take the dollar yen. there's been various currencies that's fallen under the category of carry trade currencies. i think the yen demonstrates
this especially in a timeline that i think is important very aggressively. let's look at all of 2015. from 12/31/14 till the end of november of '15 on the dollar/yen. you see the chart there. let's include 11/30 to present. you see that chart. let's put the two charts together. the recalibration move for that currency wiped out the entire year of valuation because the dollar/yen is where it was in january of last year. what is my point? there was some debate as to whether the october meeting would have a normalization of the fed. we all know it didn't. we do know we're all on red alert. you can call it whatever you want, but pretty much the entire world and the markets knew the december meeting would be it. december on, everything changed
in that dollar/yen trade. that's the recalibration process. like i said a few moments ago in the tease, whether you're overhauling an engine or working on electric plugs in your house, you can turn the power down, turn the car off to try to do overhauls or recalibrations when everything is hot. when everything is live is difficult, next to impossible. in this recalibration is really essential. i think as much as many say i'm not looking at half full. i'm trying to look at the entire glass and be realist. i think what the fed is doing we could argue about whether it was late. i think what the fed is doing right now, normalizing, for reasons that probably aren't the reasons they are giving us is essential. underline that, absolutely essential. if this grand experiment is going to end as good as it can,
normalization has to occur. turning back now would be an admission that the recalibration is permanent. i don't think that's a good thing. i still say the orderly. i sense that if we were four years getting to where we shouldn't be evaluated regarding the fundamentals, markets, economies, that it could be three or four years of normalization before we actually get to where we need to be. sounds like a long time, yes. but i think without normalization, we'd be relegating to a future very similar to japan. kelly, back to you. >> rick, thanks. up next, as stocks continue to fall, we will look for some safe places for your money to hide. that's on the other side of this break, with the dow down 200 points. oh remotes, you've had it tough.
as global markets sell off on fears of an extended china economic slowdown, where are investors seeking relative safety? dom chu is back at hq with a list that can potentially withstand the storm. >> it goes without saying that the traditional safe havens are in play. check out what's happening with ten-year government yields. these are government bonds. as prices go higher, those yields go lower. they're relatively unchanged, but still, much lower than they were over the past year or so
here. gold is one of those safe havens that people look at as well. whether you believe it or not, gold does tend to do that. and then the japanese yen. we're going to show you an etf that tracks the japanese yen. the ticker is xxy. it's currency shares japan yen etf. this goes higher as the yen value increases. that's one of those trades that some traders are looking as well. we took a look at which stocks in the dow tend to outperform when we do see protracted downturns, at least big drops in chinese stocks. it's one of the big etfs that track china. when that happens, johnson & johnson, wal-mart, mcdonald's, procter & gamble, and coca-cola, yes, they do tend to lose value, but not as much as other dow components, so these five may be some relative safe haven plays in the dow jones industrial average. of course, it's just part of the
story. the full story, including which ones do the worst up on cnbc.com/pro right now. subscribers can get that whole story on our website. back over to you. >> that's called a tease. thank you very much, dom chu. when we come back, we're looking at 1% losses across the board. nasdaq being punished today. we're back in just a moment.
obviously, the broad-based selling continues. we do have some retail movers. wal-mart the top gainer on the down. macy's higher after announcing that restructuring last night. retail names year to date short on time span, obviously. but a lot of retailers are at the top. names like kohl's, for instance. >> but then you see companies like macy's, where talk of cost cutting is what stokes investor interest. interesting to see where wal-mart is trading 6673 was the level it touched before that october 14th investor meeting, after which the stock tanked 10%. and the stock has quietly been
inching toward that level once again, currently sitting at 6458. i know that's a level traders are watching to see if it can recover. >> takes you back to that incredible meeting they had in this very building. watch time warner. the cfo speaking at a city conference. 460 to 470. the streets at 466. time warner has now jumped to the top of s&p gainers for the year at 8%. >> although, as david faber pointed out, it's still a far cry from what fox is willing to pay just a couple years ago, about a year and a half ago when it approached that company about a potential deal. could there be an activist in the stock? that is still the concern. or the hope of many investors because there are some names in there that are big asset managers. investors are wondering if they're holding slots, holding stock on behalf of the big investor. we'll see what happens. >> crude had gone positive on the day. now just slightly negative by some metrics here at the
exchange. we got an upgrade, for instance, of southwest airlines over at morgan stanley today, taking its equal weight, saying pricing is getting better. we saw a fair hike this week with low oil. >> pricing for the company is getting better. >> not for the consumer. interesting session tonight in china. let's get over there. >> guys, thanks so much. welcome to "the halftime show." joe teranova is here along with stephen weiss, josh brown. also from new york today, kathy lien, managing director. our game plan looks like this. target practice. when will apple shares bottom? the top ranked analyst who said on this very program that the company's best days were behind it. once again, joins us live. bullfight. our desk debates famed market watcher jeremy segal, who says stocks could stiis