Skip to main content

tv   Power Lunch  CNBC  January 7, 2016 1:00pm-3:01pm EST

1:00 pm
into a cyclical bear market, again, it doesn't mean there's a crash. we're already 8% off the high, so we might have already done a lot of heavy lifting. >> last thought. >> let's find the bottom and then you will get natural buyers. >> good stuff. thank you all for watching. "power" starts now. scott, gentlemen, thank you very much. tyler mathisen here, mandy drury there. there would be the new york stock exchange. another sell-off on wall street, although, mandy, we are well off the session lows. >> yeah, absolutely. the dow, in fact, was down as much as 318 points. currently we're down by 241. we're still, of course, well below the 17,000 mark, but it's all improvement coming off the day's lows that's important here. the s&p 500 is still stuck below 2,000. it is off by about 30 points, and the nasdaq is down by nearly 2% and is actually nearly pretty much wiped out a good chunk of
1:01 pm
2015 gains. we remember that the nasdaq was the outperformer of the three indices in 2015, but now it's not doing well at all. it's off, as i say, by 2%. let's get to bob pisani who joins me on the nyse floor. you have to ask you, bob, today when i was coming down to the stock exchange, my driver turned to me and he said, i was reading that the u.s. stock market is down because of something that's happening in china. he said why should u.s. stocks care so much about china? and then, of course, we spent the next 30 minutes trying to work it ought out. >> that's a big can of worms. a good part of the s&p 500 gets its earnings over seas. take a look at what we're doing. we rallied a little early in the morning as we heard chinese authorities suspended their circuit breaker. you can see we're moving to the downside. look at the dow stocks. a lot of growth sectors, financials have been weak throughout the morning, big industrials like ge, apple also just cannot bounce at all. energy has a modest bounce but not all of them.
1:02 pm
some of the big beaten up names like eog have been rallies, pioneer natural. one stock i want to highlight is exxon, down only 1% for the week and very much trading indifferently to the way energy is trading, and i think it's a breakout stock potentially if oil can stabilize. as for china we're seeing heavy volume in all the etfs with exposure to china. the important thing is this has come back. this is forward looking. this would suggest that traders are betting there will be a drop in the china markets tomorrow but nothing like they were anticipating at the open. these etfs that trade here, they're forward looking. >> fundamentally, do you think it comes back to the fear in the market that maybe the chinese authorities have lost control of the currency, the stock market, and no matter what they do whether it's circuit breakers on, circuit breakers off, they don't really know what is going to work? >> the chinese authorities have been trying to implement some kind of controls. they haven't worked very well. give them kudos they are now walking back on that.
1:03 pm
it shows there's a learning curve. at least they're getting what the market is saying. >> ty, over to you. >> mandy, thank you very much. jim cramer joins us for an extended stay. we're grateful to have you. >> happy new year. >> happy new year. >> not so sweet 16 so far for u.s. stocks. >> it's been very tough times listening to scott wapner and the "halftime" show and scott wapner was talking about how average stock in the s&p is down 20% from the high. >> and a lot of them are really in bear market territory. >> definitely. i think only been a handful of stocks up last year that made it so the market is even. i think we are in an emotional bear market, high anxiety moment where people feel like it's much worse than it really is. >> it's fear. it really is fear. it's not fundamentals so much. >> my top is -- from "mad money" is we have nothing to fear but fear itself but fear is really bad in the market. >> fear is real. it's not imagined. >> no, it's not.
1:04 pm
>> let's go to china because the market certainly today and yesterday and really all week have been in the thrall of china's market, also responding to the chinese economy. the two are very different. >> yes, they are. >> right? let's talk a little bit about that, and, second, are we paying too much attention? are we too much enthralled with china? >> these are great questions. the first is that i think there's going to be relief in china. it's going to come from one of two ways. the government will either come back in, but if you close the market for 50 minutes, the communists don't have a chance to do some buying. secondarily we get a market that's true. >> we need some good communist bhooiers. >> where are the communists when you need them? it is interesting to look at the overlap in the nasdaq 2,000 when you looked at bubble starks 1998 and completed in 2001. it's almost exactly the same as what's happened in china down to the 5,000 mark. and yet think about the u.s. economy. you didn't even have that much to do with the nasdaq.
1:05 pm
here we're suddenly saying that the equivalent of a nasdaq bubble there is going to crush us here. i always find this so funny, ty, because what is the biggest complaint you have about u.s. business people when they're doing business joufer seas? why don't the chinese let us in? the chinese have left in kfc and they've let in starbucks. they've said yes to nike and they said yes to apple, okay? those are consumer companies. our big industrials other than caterpillar have been shut out. suddenly we're supposed to have all the downside of china and none of the upside. our companies would love to be there. the reason f.a.n.g. is so popular, goggle is not allowed -- >> netflix isn't there. >> and amazon is trying but it's really not a focus. f.a.n.g. happens to be immune from china but it's very expensive. >> let's talk about what happened today, that is the market in china that is opened 7 7% or 8% down. they shut it down basically and
1:06 pm
then they said, wait a minute, maybe we shouldn't do that. now they've taken the circuit breakers away. is that a good thing or a postpone am of pain or does that make pain come sooner? >> either one is good because right now we have just a total zombie market, okay? and you can't have a zombie market. i actually looked at the top 100 names in that index. you have a lot of stocks selling at five to six times earnings. if they would let them come down, i think american money managers, believe it or not, would be tempted to buy some of those, but no one is going to be tempted to buy some market that closes after 15 minutes. the mickey mouse factor is going to leave and that's positive. do i like the chinese government coming in at 2900 like they did the last week of august 20th and stayed there through august 25th? not crazy about that, but it would make it so we would not be talking about china tomorrow which would be a delight since we're about to go into earnings season. what you want is for them to step aside, find out what stocks are worth, and then if the
1:07 pm
shanghai were at 2,000 like it was 18 months ago, we wouldn't be talking about -- >> i want to bring mandy in, but really a key point you just made there. so long as the market -- the chinese officials are prone to shut the market down, put in these circuit breakers, you really don't know what the price is. >> $6 trillion worth of nothing. and i think that if -- there's a work in progress. the communists turned out to be not as good as rigging a market or running a market. these guys are the heir to that. you love to think they're so good at making money and great traders. history, thousands of years, great traders. when it comes to an s.e.c., their rules are always if someone gets out of control who is a white collar criminal, we execute them. that's not the way to do it. >> mandy? >> i was just going to say it literally makes the chinese stock market a casino based on the whims of the regulators. i wanted to broaden out the
1:08 pm
conversation a little bit because i guess if you wanted to try to draw the similarities between 2008 and what's happening now, you could probably get quite a list happening, but if you also wanted to draw up the differe differences between 2008 and now, you'd also have a list. are there more differences than similarities now? >> i see a lot of similarities to 1987. in 1987, people forget, in two weeks in october we went from dow 2,700 to dow 1,400. that was intraday. the market didn't work. it just didn't work but the u.s. economy didn't skip a beat. china, the problem here is that the chinese economy is skipping a beat, so it should be down. i mean, it makes sense for it to be down. there is some resonance of the economy into any stock market, but in the u.s. in '87, our economy did not skip a beat. u.s. in 2000, the nasdaq didn't bring us down. this market will not bring down china and, therefore, not bring down us.
1:09 pm
there's probably 90 million people in china who play the market -- >> will not bring down china, will not bring down us. that's an important thought. >> look, china is devaluing. they're trying to do better business. the economy is slowing. maybe even our economy is going to at one point pass their economy in growth, but we have nike, apple, starbucks, kfc. kfc had some problems but starbucks is going to open its 2,000th store in china because it's the best market for them. nike in the last consult, it was blow out. now, apple, i know every hates apple all of a sudden that's fine. if you step back five years from now will you see this big decline? i don't know, but i think they have a big ecosystem, it's working and we know as of the fall china sales were still good. i don't see the consumer market in china doing as badly as people think. >> jim is going to stay with us and talk about specific stocks after the break. before we do that, let me get your quick thought on oil and whether the low price is better
1:10 pm
for us or not so good. >> 40 states do better, 10 states do arguably worse. we have seen a lot of federal reserve data out of texas. we're beginning to see the consumer starting to spend. they were held back considering we were looking at power based consumer. hey, listen, it got cold. i think the consumer is finally recognizing that gasoline is not going to go right back up. i do not see, unlike my friend boone pickens who was on last night and thinks it's going to go to $70. i don't think that's possible. there's a glut of substantial portions. we did trade in the 20s from 2000 to 2003. there was more oversupply then but i can't be as bullish on owning an oil company. absolutely right bob pisani said exxon is good but that's up substantially from august 25th. would you rather have the chevron 5% yield or the verizon 5% cheyield? i know which one i prefer. >> verizon.
1:11 pm
>> we'll come back and talk about that and finding good yield stokcks for reasons those companies may not deserve -- >> it worked in 2008! >> we're going to take a quick break. you manage a lot of money so we'll talk about where to put cash in this market. the answers from mr. cramer right after this. 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.
1:12 pm
is our partnership with habitat for humanity. pg&e is committed to clean energy and part of that commitment our mission is to build homes, community and hope. our homeowners are low-income families, so the ability for them to have lower energy cost is wonderful. we have been able to provide about 600 families
1:13 pm
with solar on their homes. that's over nine and a half million dollars of investment by pg&e, and that allows us to provide clean energy for everyone here. it's been a great partnership. together, we're building a better california. rejoining jim cramer now but we want to point out nasdaq and s&p 500 are at their session lows. the dow industrials dipping there more than 300 points
1:14 pm
lower. >> it's not a good market, tyler. it's not. we're fighting the fed. china is very worrisome. i'm not minimizing that. we haven't gone back to where we were the last time that china pierced its 3,000 level, which would still have some room to fall, but i think we want to put the fear in perspective. if that comes out as being buy, buy, buy, then i have not said things correctly. >> so not exactly bullish. >> right. >> you're not saying go in there and buy and you would if you saw it. >> yeah. look, the average stock is down 20%. that doesn't mean go buy the average stock. there are rules that worked in 2008 and i'm putting them into place now. >> let's talk about some nonaverage stocks on your sort of list of either buys or appealing scenarios. we closed the last block talking about verizon. what does verizon represent apart from that 5% yield -- >> a steady cash flow at a time where it's almost back to where it was in the august 26 low, so
1:15 pm
buy some here, maybe buy some when china fall apart again. i don't think it's going to because the government props it up. i like the fact that 10-year is back to 122%. just not giving you a lot of oomph. 5% is not bad with 2% on the 10-year. >> let's go to walmart, a stock that's had its stumbles but lately has been doing a little bit better. >> walmart was in a horrendous bear market. down 30%, one of the five worst stocks in the dow. cold weather, restructuring. i think you're starting to see some of the benefits. we know from macy's, even if you do poorly, your stock doesn't get hammered once it's all the way down. i found myself writing a piece where i say buy it on weakness but will we get weakness? because this stock has been a rocket. this stock -- >> lately, yeah. >> -- or above where it was on
1:16 pm
august 26 baht tottom. >> is it and -- we'll get to more names many -- >> i like that walmart 3%. >> 3% dividend there. is this a direct beneficiary of lower oil prices? >> i think what's happened is we had this health care deductible people aren't aware of. charlie runs visa, another good dow stock. he said many times the consumer doesn't seem to realize that gasoline may stay low. they think it's going to fly back. i think it's dawning on people in the oil patch that maybe it ain't coming back so fast and it's finally dawning on people now that it's sub$2 for a long time, i got a little extra money in my pocket, and the heating will is not going to be that bad. it's the dawn of the recognition that maybe this $1,000 tax -- >> this is for real. mandy. >> apple, will it be able to get its mojo back? it's the multibillion dollar
1:17 pm
question. everyone asks what's happening with aple? >> when a stock gets hated, it doesn't make me say buy, buy, buy. i think you can own apple. we saw great numbers from the app store between christmas and new year's. nobody cared. everybody decided apple in its own personal bear market. it's now well below where it was in the august 26 bottom that marked the similar bottom to china. but, again, i have no catalyst until we annualize easier comparisons which will not occur until the end of the first quarter. >> right. do they need another hot product? >> i have been saying -- i have been saying they have to own mobility. there's the phone and there's the car. i have suggested over and over, harmon had a fantastic presentation at ces talking about security car and the brains within the car. just shell out the $9 billion. stop buying back and the stock and buy harmon which is an amazing company which has a hammer lock on so many different brains of cars because they have their factories right next to the car plants.
1:18 pm
i know because i go by one every time i go to mexico. >> let's talk about disney. another company that has been under the spotlight so to speak. concerns about espn and the changing business dynamics there. >> again, we've got to go back to the august lows. there you saw it at $95. stock looked like it was going to hit that this morning before the chinese said, listen, the circuit breakers, we're going to take them off. disney is a company -- in '95 we didn't know "star wars" was going to be the greatest box office hit in history. now we know that. if we're going to just trade this tick for tick with espn subs, then the stock is not going to get out ever its way. but how about if we see shanghai comes back, we have shanghai disney, another stream of revenue. this one is not a static situation. it's a dynamic situation, and i think that bob iger should be bank with if the stock gets to
1:19 pm
95. >> you're a best of breed kind of guy. one of the stores on this list i think is best of breed in its space and that's tjx. they got sort of -- what do they have? tj maxx, home goods, my wife's favorite store. >> i went to home goods. i went for thanksgiving to get some centerpieces for the table. they had blown out of them already. really great home goods in neptune, new jersey. i got a tjx in the building at 14 wall street. you're so right. plus, remember, they have cash. they are always going to -- >> what's the other one? are they marshall's? >> i wore a marshall's suit to my interview with goldman sachs. >> not anymore. >> here are some hundreds, go out and get yourself something. i was a corduroy suit. how the heck did i get the job? i also want to point out l brands put up 8% comp numbers. he had the best december ever. he's obviously got the right merchandise. he called it highly emotional merchandise. what store is highly emotionally
1:20 pm
charged to you? >> highly emotionally charged. >> victoria secret. >> i have got emotions there. i have got e motmotions -- >> that delivers. >> mandy, did you want to jump in here? >> i was going to say the markets are going back down here, folks. we're at session lows and we've been pushing even lower despite trying midmorning to try to come off those lows, so now the nasdaq is pretty much wiped out a big chunk of those 2015 gains and the dow and the nasdaq are both more than 9% from their recent highs which means, folks, here we're brushing correction levels. jim, if you're still there -- >> yeah. >> -- people are starting to talk bear, bear market. do you think -- what chance probability would you give that? >> look, if you're -- if the average stock is already down 20% from its top, then you're in a bear market per se. >> the indexes may not be but -- >> you google it, it's like bear market. but mandy, you're right. i don't like the market. the market is not a great place to be. the anxiety level is incredibly
1:21 pm
high. people comparing to 2008. so you put into place rules about yielders that can pay the dividend that you know have become accidentally high. you can go back -- come look at the companies we're talking about. basic companies. a kellogg is interesting. it's not exciting. i wanted to come out here and talk about microsoft but i saw it's 14 points higher than it was in that last week. that's had a very big move. home depot, safe, safe, safe, but it's had a gigantic move. mcdonald's is up from 90 to 116. these stocks are due for pullbacks. i'm not -- >> those ones you just mentioned. >> they're great companies but the stocks got up too high. i can say i want you to buy netflix because my wife wants me to watch "murderer" this weekend but that's not a popular stock. it's not in china yet. let's get some fundamentals like verizon. is verizon not a bull market
1:22 pm
stock? >> it's not. >> corvo. >> we didn't even talk about the next coach of the eagles. we didn't even get there. >> i want sean mcdermott but he has to win the super bowl first. sean is from lansdale, about ten minutes from where i'm from. >> always great to see you. >> thank you. >> you can't afford to miss "mad money." jim has the sell-off survival guide. "mad money" 6:00 p.m. eastern on cnbc. we will be back in two minutes.
1:23 pm
1:24 pm
1:25 pm
welcome back to "power lunch." rick santelli on the floor of the cme group. a wild range trade again in 10s. you look at the intraday chart, we have definitely come up. as a matter of fact, we're close to unchanged on 10s. down a couple basis points on the short end. the long end on the 30-year bond also unchanged. look at the 10-year starting at the beginning of december. we're comping back to the 11th of december in terms of when we were last at these yields but they keep coming up. it's all about foreign exchange, that's transition and much of the readjustment going on or recalibration. if you look at an august start to the dollar versus the chinese currency, you can clearly see how that world has changed. maybe the most fascinating is the dollar/yen starting at the end of 2014 because we pretty much negated all of 2015 as the
1:26 pm
carry trade has made those shorts cover by yen selling dollar. mandy, tyler, back to you. >> a typical safe haven, the yen. let's take a look at the stock market here. the s&p and the nasdaq sitting around session lows. the dow is back down below the 300 to the downside mark and so we're wondering where the strategy is now and what are the key support levels to watch. we're all here -- we're here at the nyse floor with peter costa from empire executions and matt cheslock from virtue financial. great to see you once again. peter, a moment ago we were discussing how really we're only seeing average volume, and to get a capitulation move, sort of a total washout in stocks to the point we can start to talk about a bottom being in, we have to see much bigger volume than this. >> yes, but we've also seen a lot of changes in the market in the way it's reacted to certain things over the last year and a half, so i'm not 100% sure you're going to need that huge -- i mean, technically if you look at an economics book, that's what you're looking for. you're looking for a major move
1:27 pm
on the downside with corresponding volume. i don't necessarily think you're going to get the corresponding volume but you are going to get that move. >> yeah. >> i think we will see it. >> a move to what level? what's the next level you're watching? >> i think 1865 is what i'm looking at and i think that was right around the august lows and i think we might hit that again. >> if you're trying to look for one silver lining in all this, matt, is it a good thing that the expectations -- just pause for two seconds. we have breaking news. seema, whae what's the story? >> we continue to follow the story in china. not just the recent volatility but the devaluation in the chinese yuan. reuters reporting over the last ten minutes that the china central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply by as much as 10% to 15% as its recent gradual softening is thought to have done more harm than good. we know one of the reasons china has been weakening as a currency, of course, to basically provide a stimulation to its exports, but the big
1:28 pm
concern is what that will do to some of the u.s. and european multinationals that rely on china as a source of business and what that will do to their products. again, reuters reporting we could see further devaluation in the chinese yuan by as much as 10% to 15%. mandy, back to you. >> those neighboring manufacturing asian economies are really not going to be happy with that. we'll see more money flying out. matt, do you have a comment about what that means for us in the united states? >> we saw the market react to that before we knew what the news was. the market was down over 100 points in the dow. i'm probably more optimistic than peter. but i think 1915 is an important level for the s&p to hold. while that's only -- seems like a lot, 35 points off on the s&p, that's really not a lot because we see a 40-point move today. it happens quickly. the volatility has increased tremendously. we have a 400 or 500 dow swing today. the volatility has increased. >> is it a good thing that going
1:29 pm
into 2016 there was such subdued sentiment to begin with, expectations were not high, so we're not having to go through that unwind of euphoria like we have in past situations. >> if we get the fed to clear up some of their projections going forward, people can put their money to work going forward in the u.s. economy because i think it's the best of the worst out there. >> okay, guys, thank you so much for your pulse check on the markets. tyler, back to you at hq. >> thank you very much. as stocks sell off this week, money is going into gold, up 4% this week as equities slide roughly an equal amount. let's go to jackie deangelis as though closing trades are crossing. >> good afternoon. fears in the global marketplace sending traders back into the gold trade. a safe haven trade, if you will. a nine-week high for gold crossing that $1,100 threshold. a near $20 bounce today. dollar weakness today supportive of this trade but breaking through $1,100 certainly key even though some traders are telling me they're not sure how
1:30 pm
high we can go. $1,120 may be a little bit of a cap, maybe $1,150 but some of it is short covering as well. copper on the other hand echoing the fear in the marketplace. obviously an industrial metal. worries about china contributing to the losses we're seeing in copper. you can see why it's moving to the downside, but the metals really reflecting what we're seeing in the broader markets today. >> thank you very much. 2016, of course, off to a rocky start. the three major averages down as i mentioned about 4% so far on this first week of trading and we're not nearly done yet. oil tanking about 9% this year. fears about china's economy having a ripple effect with doubts about growth here in the u.s. will china conceivably send the u.s. into a recession? jim cramer says no. we'll see what larry kudlow says. woah!
1:31 pm
father, why can't we have directv like the macgregors do? we're settlers, son. we settle for things. like having cable instead of directv. hey, jebediah, how's it going? working the land. hoping for a fertile spring. all right. so we have to live with lower customer satisfaction? i'm afraid so. now go churn us some butter, boy, and then make your own clothes. yes, sir. (vo) don't be a settler. get rid of cable and upgrade to directv. call 1-800-directv.
1:32 pm
1:33 pm
hello, everyone. i'm sue herera-here is your cnbc news update this hour. it wasn't lucky number seven last year. las vegas lost nearly $262 million in the $2015 million. a narrower loss than the prior year but it was the seventh
1:34 pm
straight year of losses. those figures released by the nevada gaming control board. gop presidential candidate jeb bush campaigning in new hampshire says he's offering grown-up solutions to complex problems, and he's tired of talking about inconsequential issues. >> look, i'm a solutions guy. you can tell i'm not a great talker. i'm not -- i just think -- i'm tired of talking. look, i watch espn because -- if you have cable, it's yap, yap, yap, and nothing seems to happen. >> the heat is on. the annual average u.s. temperature last year was 54.4 degrees, 2.4 degrees above the 20th century's average. it's the second warmest year on record between 2012. the temperature pattern resulted in every state having above average annual temperatures. and speaking of the weather, take a look at these spectacular views of a northwestern chinese city which is shrouded in fog.
1:35 pm
the high building in crane tower stood in the dense fog and they're partially hidden and partially visible and kind ever creates a world of fantasy 260 feet above the city. and that is the cnbc news update this hour. i'll send it back to you, mandy. >> thank you very much for that, sue. let's get back to the markets here. the declines in the market are accelerating and this may be partly due to reports that china's central bank is being pressured by policy advisers to let the yuan, the currency, fall 10% to 15%. the dow is now down by 334 points and volume is also picking up a little bit as well. joining us now bob pavlik and john kanaly. bob, you know the saying shoot first, ask questions later. there's a bit of that going on right now. where do you find safety? >> i think what you have to do is look for areas of the market that represent that kind of safety. things like consumer staples, names like costco, names like
1:36 pm
cvs, the health care space i think continues to represent safety. people are going to continue to take their drugs no matter what china is going. names like lily, merck, pfizer. some of these stocks are not cheap but they do represent potential to increase in value. >> some people are finding safety in gold. would you be as well at this stage? >> i'm not. i think gold is a volatile trade. a little more volatile than my clients really want to take on. >> what about you, john? where is safety for you? >> well, i think you have to decide why you're here. i think what's going on is that the chinese economy, which was a big part of global growth for the last 15 years or so, managed by the chinese government, people have lost faith in that and now we're in a period where no one is quite sure and i think the things that may have worked in the last 15 years might not work in the next 15 years. we're treating this pullback -- >> hold that thought for two seconds. we're officially in correction territory for the nasdaq which means it is down by 10% from its recent highs, and to your point,
1:37 pm
john, about market investors losing faith and losing the credibility -- i'm sorry -- not having any credibility anymore in what chinese authorities are able to do with their economy and also the market, would you also say that that goes for the fed as well? because some people are saying, you know what? that hike, that was a policy mistake. how could they possibly be hiking in what is a shaky economy and market still. >> i think i would fall on the side of the fed there. this was the most well telegraphed fed rate hike in history. so i don't think that's really the issue. i still think the focus now for the markets is what's the next step in china, what other countries have to devalue their currency because of what china is doing. that's the key, but you want to set yourself up for winning later in the year by prepositioning now, so taking some risk off now, and that gives you some dry powder for later in the year. that's how we're approaching this. we expected volatility this year. we just didn't expect it the
1:38 pm
first week of the year. we're likely to see 10% to 15% down this year at some point. also 10% to 15% up. we see about flat for the year, but definitely a lot more volatility. >> let's certainly hope that the volatility is all front-loaded, because this is the third year in a row we started off pretty roughly. >> and earnings are in question. there's certainly a question about where earnings are going to be headed in 2016. people are projecting 7.5% earnings growth but we've been in a declining trend. i think what you have to do is you're a retail investor, at home watching this program, look for areas of growth in theoverall market. there will be interest in places like europe and the emerging markets but i think the trades fade out because quantitative easing hasn't helped here. we only experienced 1.2% gdp on average. so i think what you have to do is really try to position yourself for that kind of steady, continual growth in these areas i mentioned.
1:39 pm
>> thank you very much, bob. thank you very much as well, john cannally. you can go to powerlunch.cnbc.com to see some other large cap stocks that bob does like this year. it's all on the win sieeb site. >> the industrials off big time as you see. down 386 points. more than 2% on the day. here is a graphic look at all 30 of the dow stocks and 29 of them are lower. the only one that is higher today, as it has been all week long, is the one that jim cramer was just talking favorably about, and that is walmart, up about 2% on this down day. walmart has been up every day so far this year. four trading sessions. while the market has been falling lower. when we come back larry kudlow will join us and he will talk about china and whether china has the potential to pull the u.s. into recession. that and more when "power lunch" continues here on cnbc, first in business worldwide.
1:40 pm
here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade. continues here on cnbc, first in
1:41 pm
1:42 pm
the nasdaq in correction territory, at least touching it down nearly 3% today. it is now 10% lower than it's most recent highs way back in july. the dow diving as well as you will see on our scroll there. as you can see on the bug on the lower left of the screen, down 375 points. what will china's 7% stock plummet mean for the u.s. economy, if anything? let's bring in cnbc senior contributor larry kudlow. happy new year. >> you, too, tyler. thank you. >> what do you think about the connection between china's economic struggles which are one thing, it's market struggles which are another thing, it's currency woes, which are yet a third thing as people flee that currency and now the state apparently under pressure internally to let the yuan fall even further. >> i want to really -- can we go there? that last one is a really important point. the rest of the world doesn't know what china wants.
1:43 pm
they are not communicating a strategy. it's really an important point. for example, the currency has fallen i think since last august by about 6%. that's not such a big deal, but, okay, it's news. its capital outflows -- >> flight. >> flight. exactly right. a, because the economy is softening and the rate of return is falling, and, b, a lot of speculation is coming out of the chinese market. now, china is actually resisting. i'm not hearing this, and i want people to understand. china is trying to resist but they can't. >> resist? >> the decline in the yuan. because if they go out -- if they start going out and buying dollars, okay, and they got to sell yuan assets, that drains money, it's recessionary. how far can they go? they've got to let the thing float, and they have to communicate that to the rest of the world, and they're not. second point, the discovery of the price of the stock market. >> right, right. how can you do that if you are
1:44 pm
bringing in circuit breakers and closing the market. >> that's right. get rid of the circuit break percent. >> so this is good what they did earlier today. >> it is good. it's very good. i think it's one of the reasons our market has come back a little bit, and, again, on the currency story, let the currency do what it's going to do. now, china has things to do, they got to privatize -- >> that's so anti-communist. they don't want to -- they don't want to let markets do what they do. >> they are trying to -- >> they're trying to control it. >> they're trying to move in the right direction. they're not getting it done, i agree with you on that, by the way. china does some things better and other things very badly. that's a whole separate subject. i just want to say though, don't overestimate this currency. this has more to do with china than us. are we going to import recession? how can we? our trading volumes with china are tiny. you're talking about a half of 1% or thereabouts. i mean, basically, t-shirts now, americans are buying chinese t-shirts are going to get 6% lower price. >> cheaper. >> that's all it is.
1:45 pm
there's nothing going on here. what you should watch is the fact that profits in the u.s. are weakening. very important, right? the lifeblood of the economy and the mother's milk of the stock market is weakening. >> if we don't go into a real economic recession -- you say no. >> no. >> but we may go into a profits recession. >> we have had by some important measures two declines of year on year profits. better keep an eye on that, that's more important than the chinese yuan right now. i don't think we're in a recession, but i think we're in a 1.5% to 2% growth zone, so you could almost call that a growth recession. we have big supply side problems on taxes and regulations and things like that. those are all important issues, but, look, the consumer is holding the economy up with lower gasoline prices. there is no business investment to speak of at all. let us hope the jobs numbers tomorrow are okay. i don't know. the consensus is 175,000, whatever. no one should make a recession
1:46 pm
call in the u.s. it's too early. just slow, sluggish growth. >> in the face of this slow and sluggish growth a labor market that seems to be performing reasonably well. >> not bad. >> full employment, one half of the mandate of the fed, the other is inflation is price stability, we don't have any inflation in this country. >> thank you, thank you. >> when oil is at $30 a barrel -- >> that's like a really important point because i got to tell you, smart people like stanley fischer of the fed, john williams of the fed, talking about rapid fire interest rate hikes every quarter, this is extremely unhelpful. you're looking at an economy that's growing at less than 2%. the fourth quarter may come in -- if you look at the atlanta fed gdp now, i think they have it at 1% in q4, okay? jobs are rising, they're not booming. the participation rate is still low. there's no investment. there's more deflation than inflation out there. look at the commodity indexes as well as oil. look at the inflation expectations shrinking. why would these fed guys go out
1:47 pm
there and start hammering away we must raise rates every quarter? that hurts the market, and they don't know. their models have failed as bad as everybody else's. >> their predictions have not been notably right. >> i'm saying humility is good for them, for me, for you, for everybody, so really what they've been doing this week is unhelpful to the whole atmosphere if you ask me. >> it adds to the already palpable sense of fear and uncertainty that is out there right now. let's talk -- >> the psychology. >> it's the psychology. >> i will concede one point, the chinese problem does hurt psychology. i will grant you that. but i don't want to confuse that with recession. that's a different matter. >> let's talk a little bit about the election. i know this is a topic of interest to you. i'm shocked -- >> some. >> america is shocked to learn. usually elections are about the economy. will this one be? >> well, this one will be, but i
1:48 pm
will only add to that this is also going to be a very heavy national security -- >> yes. >> it's isis and the economy. but let's not forget the economy is very important. i agree with that. >> does the economy -- there's the iowa caucuses in a couple weeks, new hampshire right on the heels of that. the economy take a backseat there to national security concerns? >> no, i think they're equal. >> why? why do you say that? >> people are very unhappy, tyler, with wages -- >> incomes. >> incomes. you know, jobs in the aggregate are okay. jobs in a lot of sections of the country are not. a lot of people not participating, et cetera, et cetera, going to be very important. whether you like it or not, whether you're a republican or democrat, the reality, i have been in and out of this game for a long time, the reality is the current administration will suffer with a lousy economy passed onto a successor. so in plain english, hillary
1:49 pm
clinton has got a problem. she's got a problem. >> why is that cute little socialist bernie sanders doing so well? >> i'm so glad you asked. i was thinking to myself, i was thinking, self, if you look at the real clear politics polls, bernie sanders, a, is nipping on hillary's heels in iowa -- >> in iowa, yeah. >> b, is ahead of her by significant margins in new hampshire, and as i was having this discussion with myself, i was wondering if the stock market was taking notice. now, let me say, bernie sanders -- >> stock market wouldn't like bernie sanders. >> bernie sanders is a frequent guest on "the kudlow report." he's a man of great character and integrity but he is a socialist self-proclaimed. i do not believe our stock market wants a socialist. it's early in that game, but just a little bit. >> once again, happy new year. >> you, too. thanks for having me back. >> larry kudlow. man mandy, over to you.
1:50 pm
currently down 340 points on the dow. only points away from hitting correction territory whereas the nasdaq has already hit correction territory, 10% off the most recent high back in july. let's take a look at the stocks taking down the nasdaq 100 right now. names like baidu, china exposure. vertex pharma, yahoo!, jd.com. let's go to brian sullivan to see what is ahead on the next hour of "power." >> thanks very much. on deck, real money advice to help you manage your portfolio in these increasingly uncertain times. bill gross will join us ahead. he'll talk china, the economy, the market, and why age may be more than just a number. plus, the chinese stock market no less than a dumpster fire lately, and if you think the worst might be over for it, we do have one chart that you need to see. and the very latest on oil's continued slide along with a few stock picks in the oil patch that one analyst says you might just want to hold your nose and buy. all that coming up with continued coverage of this
1:51 pm
market sell-off as "power lunch" rolls on right after this short break. it's hard to find time to keep up on my shows.
1:52 pm
1:53 pm
that's why i switched from u-verse to xfinity. now i can download my dvr recordings and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. welcome back to "power lunch." i'm mandy drury. with u.s. stocks picking up their losses, the nasdaq hitting correction territory officially
1:54 pm
today. tech and financials are leading the decline, and jpmorgan and boeing are the biggest dow losers.
1:55 pm
1:56 pm
a decent yield is pretty hard to come by these days,
1:57 pm
especially in a bruising market like today which is why when you hear about two asset classes with the promise of double digit returns, it naturally gets our full attention. dennis moon is with u.s. trust bank of america and he says the best way to boost your portfolio is invest directly with mother nature. welcome to "power lunch." i'm gledreedy, i want safety bu also want yield. >> a lot of it is going back to basics. a lot of original investments was on land, in dirt. in terms of true transparency in true yield, we feel going right to the heart of what built this country, dirt, dirt owning trees, growing trees, take advantage of the demographics and opportunities showing in timber land. owning good quality u.s. farmland. at the end of the day we all need to eat, and they're making less and less of it, of arable land and things like that, so growing crops is critical and we can achieve yield on those asset
1:58 pm
classes. >> i like the way you put it, invest in dirt. but, okay, taking jurz myself, it's not easy to go out and buy a pile of farmland, to buy lots of forest land. how do i do it? what vehicle is available to me? >> our method is doing it in direct investment. it's achievable with clients or buyers at u.s. trust who have the wealth to invest in the actual real estate. it's not in a product. there's a higher minimum we look for in order to do diversification in an asset class that provides trudy verse if ication. we can actually by farmland and land whether it's in iowa, illinois, missouri, in timber land, the actual dirt itself and legal title comes with it. >> how vulnerable are you to fluctuations in commodities. obviously it's soft commodities which have done better but what is the outlook for commodities right now? >> when it comes to the commodities that we grow, corn,
1:59 pm
soybean, wheat, we are seeing some softness there. the china impact, no doubt about it with the strong dollar and the weak currency in china. we are seeing some slowness there. if you look at it as a long-term investment opportunity, it's still there. at the end of the day we have to feed a large, growing population. >> i have to ask you because you're a texan, you live in dallas. oil, what's going on? what are we now? $33, $38, close to $32 this morning. are we going to go sub-30 padrepadre? >> it's probably going to get worse before it gets better. we are seeing a slowdown in production. we're going to see a recovery. it may take longer than we all think. as to when that's going to be, i'm not going to say because i'm with everybody else trying to figure it out. texas is feeling the pinch a little bit, no doubt about it, but still if you have been in the oil patch and been in the business before, you've seen it. it's been a boom/bust environment for many, many years.
2:00 pm
>> when off boom, you always have a bust. >> absolutely. >> good to speak with you dennis moon. and our good colleague brian sullivan has just come back from texas and told that good story, too. tyler, over to you. >> thank you very much. stay with us, folks, because we've got another hour of "power" coming up. look at the dow down 353. take note of that and certainly the fact that mandy has been pointing out we're back in correction territory for the nasdaq. so, mandy, we'll see you when you get back here presumably tomorrow. meantime, over to brian. >> yeah, guys, mandy and tyler, thank you very much. now 2:00 on wall street, 3:00 a.m. in beijing, china, where chaos in their stock market continues to spill over into our markets. stocks near session lows, oil touching a fresh 12-year low. the nasdaq officially in a correction down more than 10% from its highs of last year. hi, everybody, i'm brian sullivan. let's get more on that nasdaq stock story with melissa down there. >> brian, we're looking at a loss right now of 134 points or down 2.75%.
2:01 pm
take a look at what's really taking us down in today's session, that would be apple. apple is trading below the flash crash levels. the next level is the flash crash intraday low and that would be $92 a share. we're just about $5 and change away from that. biotech also really taking it on the chin leading us lower here at the nasdaq. down by almost 4%. even the f.a.n.g. stocks offering no safe haven here, quote, unquote, safe haven for tech investors. netflix had been trading higher by as much as 1% early in the session before reversing. now we're seeing the whole entire complex trading lower. let's get to the new york for example and bob pisani. what i noticed was financials, morgan stanley, goldman sachs hitting 52-week lows. >> big money center banks have been weak, even big broad investment companies like blackrock have been weak down 3% or 4%, melissa. take a look at the s&p 500. choppy trading session. we gapped down at the open and
2:02 pm
rallied back. china announced the suspension of circuit breakers right after our market open. we lifted and lifted further as soon as oil rallied and then weakened. you see the move to the downside. there was a reuters story out on pressure on government authorities in china to allow further devaluation of the yuan and i think it was a factor in the late-day leg we took down. sectors, tech, financials, materials, industrials, this is what it looked like at the open, it got better, and now back down to where we were at the open, maybe even a little worse on that. exxon one of the stocks holding up very well, down only 1%, and that's been a big reg tiff outperformer for the week. you might want to look at how china is going to open tomorrow. you want to look at etfs that track mainland china. these are forward price mechanisms. here is ashr.
2:03 pm
this is suggesting that mainland china is going to open to the downside, not nearly as much as they were anticipating at the open earlier today. as for volatility, a lot of people asking me about the vix. it is elevated, 24 and 25 now, but not as much as some people think. and here is what's interesting. you see that vix at 25? futures contracts out. look at january, february, march, they are lower than the current vix. it's called backwardation. it's suggesting traders don't think this high volatility is going to last for the next several months. i will say this, brian and melissa, if this was just a u.s. issue, for example a collapse in earnings power in the u.s., the vix would definitely be higher. i would think it would be over 30, and that's giving me a little bit of comfort, brian, thinking they are thinking some of the damage will be contained in the u.s. back to you. >> all right, bob pisani. thank you very much. we've got some white house comments right now on two things, north korea, but also about china and their market. we don't have the white house
2:04 pm
comment a lot on exchange rates and currencies, but that's exactly what we've got crossing right now. again, just some one-line headlines from the white house. they're talking about south korea and discussions over north korea's alleged test of the h bomb but the white house also saying there's an understanding it will take china some time to implement market reforms and that they have pressed china on the pace of those reforms, including the orderly transition to a market-based exchange rate. so the white house commenting on exchange rates with the chinese and also about the pressing of china about when these market reforms will fully take place. again, that's all we've got. i'm sure we'll get more from the d.c. bureau, the white house commenting on china. right now though dominic chu with a market flash. >> transportation stocks notably down near 3% today dipping below the 7,000 level. you can see for the dow transportation average that's the lowest average since december 2013. the index is down by more than
2:05 pm
20%. something some traders refer to as bear market territory. today some of the worst performers, alaska air, avis, jetblue and matson. so, brian, transportation stocks remain a focus along with osh perhaps leading indicators for what's happening in the markets. back over to you. >> thank you very much. with us now is bill gross, fund manager of the janus global unconstrained bond fund. we want to talk about your latest investment outlook as well. it has to do with age, but before we get to any of that, i have to get your world view right now. what is your take on china? what is your take on how china may impact your investments and your clients' investments? >> well, sure, brian. you know, china has been the growth engine for the past several years, actually ever since lehman in 2008-2009, but it's true that no one really knows how fast china is growing, and, you know, whether that growth is balanced between investment and consumption, which ultimately it has to be in
2:06 pm
terms of the latter. so there's a lot of mystery to it. i call the chinese economy the mystery meat of economies because people really don't know what's in there, and it's the same thing in terms of their financial markets. i mean, they distort markets, they buy stocks, they let others -- or they prevent others from moving out and selling stocks, and so the artificiality of both the economy and their financial markets is weighing on the global market. it affects commodity prices via demand. it affects commodity prices via the exchange rate with the dollar and the rimmen b. there's lots of interconnections that china affects and we're seeing that on a daily basis. >> when you look at your investments, bill, and you refer to it as mystery meat, maybe we don't know what's in the sausage but we know right now the sausage has made us sick. when you look at your portfolio, how do you say, well, here are my second and third derivative impacts. here is how i'm going to invest
2:07 pm
for my clients for a measure of safety. is there anything that looks, quote, unquote, safe to you right now, bill? >> yes. yeah, but the returns are low, but let me give you some ideas. of course, you can speak to treasuries. treasuries are safe during a period of high volatility in a flight to quality. that's what treasuries represent, but there's several ideas that investors can take advantage of. there's a berkshire hathaway warren buffett buyout on a company called precision cast parts, pcp is the ssymbol. he's paying $235 a share in a few months. stock trades at $232. is that a large return? not really but perhaps 3% or 4% annualized. we're investing in a closed in fund called blackrock build america. these are bonds semi guaranteed by the u.s. the fund yields 7.5%. bbn is the symbol. it's done very well and it participates as long bonds, long
2:08 pm
treasuries go down in yield. lastly, you know, tips represent a decent value. to the extent oil is beginning to find a bottom or will find a bottom some day, then tips, which reflect future inflation, are a decent value, too, and there's an evident, tip, which directly affects it. those are three good ideas that are relatively safe that an investor can invest in. not too high of a return but there you go. >> bill, you have sort of been on this theme for a while now. and listen, let's say these return 2% a year, maybe 3% ex dividend. that looks good compared to a nasdaq down 10% from its july high. do you believe that 2016 will be an all-in zero percent return world? and that 1% might look good. >> yeah, i think it's close to that for stocks, and, yes, the
2:09 pm
first five days of january are indicative, but perhaps a little too extreme in terms of what we've seen for the past few days. i'm not suggesting a bear/bear market, but, yeah, will rogers back in the depression, way back when, basically said, i'm more concerned about the return of my money than a return on my money, and these are some ideas that give you a 2% to 3% to 4% return on your money as well as the return of your money. so i think at this point when interest rates are zero in most developed countries in terms of the policy rates or even negative, you know, you have to know that prices are artificially high almost everywhere and that ultimately if central banks like the fed begin to raise interest rates, then there's some risk in terms of tightening credit and some risk in terms of slower economic growth. >> i knew you were going to say the "f" word, bill, fed. because the big debate is how many times they're going to raise. do you think what's happened now and what's happening with china will influence the federal
2:10 pm
reserve? >> i hope so. you know, they go in and out in terms of one statement they say yes, another statement they say no. fisher and yellen basically stick to the old model in terms of the fisher model and the unemployment rate and the jobs created, which we'll see tomorrow, but ultimately i would think that fed officials have to acknowledge that global growth, currency, prices in the financial markets are, you know, important in terms of their own particular policies. so, yeah, i would persuade them or hope to persuade them that, yes, financial conditions should move up a little bit higher in terms of a notch relative to employment and that the past few days should indicate that perhaps they won't go for as stanley fischer said and perhaps they'll only go one or two or perhaps as some are suggesting tha
2:11 pm
they'll have to go down again. >> speaking of the federal reserve, we've got some breaking news from the fed. let's go to steve liesman. >> thanks very much, brian. chicago fed president charlie evans, he is one of the more well-known doves on the federal market committee. he says that he favors the slowest possible path for the fed funds rate this year, and he suggests a funds rate that could be below 1% in 2016 and below 2% in 2017. he cites lower potential growth in the economy as well as inflation running below the fed's targets saying rates will stay, quote, quite low for some time. he cites the weak global economy offsetting u.s. growth. a couple things on the u.s. economy where he's generally upbeat. he's brought down his forecast. says he's 2%, 2.5%. this is a speech he's giving. 2%, 2.5% gpt in 2016. unemployment falling to 4.75%. and gains in household wealth and consumer spending. he says the fed has not met
2:12 pm
employment mandate. in terms of the problems he has, what you can see is he's concerned about declines in productivity and says the u.s. could face lower potential growth. just want to remind you of what jeff lacker said earlier today. he said he could see the fed hiking more than four times this year. he's a hawk on the committee and does not see china impacting the u.s. economy substantially but there is charlie evans, brian, one of the more well-known doves on the committee, saying he's looking for maybe two hikes this year. >> good timing. steve liesman, thank you very much. bill gross still with us. your reaction to the evans comments. we have the hawks, the doves, the flamingos, the pigeons all out there in the last couple days. >> we know about evans and lacquer and they represent the extremes. whatstanley fischer and janet yellen are moving more towards the lacquer camp. basically they're suggesting they have to renormalize and now
2:13 pm
is a good time. i suggested for several years they have to move the fed funds level up in order to normalize, but, you know, they missed their chance i think perhaps 12 to 18 months ago, and now in the fade of currency fluctuations and perhaps much lower growth in the global economy, it's difficult to believe that you can raise the fed funds level by 50 or 100 basis points in the next 12 months. i don't think they can do it. >> bill gross, we do appreciate your time as always. we'll let you get back to trading for your clients. thank you very much, bill, as aulz. >> thank you very much. >> folks, a lot going on. you need an explainer on exactly what's going on in the market? maybe one chart says it better than i ever can. crude turning positive earlier in the session. that helped pull the dow out of its 300-plus-point hole. crude now head he had back lower and now stocks are back lower, down over 300 on the dow. oil dominating stocks along with china. you got a dow down more than 2%.
2:14 pm
we're going to have the oil close. more on this market rout coming up. as we dig in on the dow 30, guess how many stocks on the dow 30 are in the green right now? just one, and maybe walmart, the only up stock, a china beneficiary, all that stuff we buy at walmart made in china, maybe a little bit cheaper and perhaps walmart will benefit. you always benefit watching cnbc. we're first in business worldwide and we are back after this.
2:15 pm
2:16 pm
2:17 pm
the dow is down nearly 370 points right now, down 2%. the s&p 500 also down by 2.2% and the nasdaq is down 134. we quickly slipped into correction territory, although we've left that behind so far. china stocks plummeting more than 7% triggering a trading halt. the yuan falling to a nearly five-year low. so is china losing control? let's bring in wilford frost and dom chu. wilford, thanks for hanging in there after doing the morning show. there's a reuters article that was out within the past hour citing sources that the people's bank of china is under pressure to allow the yuan to appreciate another 10% to 15%. what could the ramifications be of that because that seems almost evidence that perhaps the chinese regulators are losing control of the situation. >> i think it's very hard to know whether that reuters article is accurate but it's definitely that question which we have all been asking this week, have they lost control of
2:18 pm
the currency markets? is that why they continued to allow devaluations every day despite that market turmoil or is this, in fact, something they're managing. that's the big debate. moves of 2%, 3%, they're not getting us near the free floating market rate. we're a long way from that. impossible to know whether that's a further 5, 10, or more. who knows? the question is can they manage it smoothly and can they get the market to be confident again? that's an open question. one trader said to me on the bullish case, look at the moves we've seen relative to other currencies against the u.s. dollar. last year it only moved 5%, the yuan against the u.s. dollar. the euro itself was 10%. so let's just put that in perspective. and add to that as well on a trade-weighted basis last year, the yuan was actually slightly positive. so if that is their target, it doesn't really matter what's happening -- >> i get that argument but those other currencies aren't pegged to the dollar. they have a trading range. the fact the yuan has
2:19 pm
depreciated that much is sort of significant considering its supposed to trade within a range. >> you're right. that's one of the bull's arguments, not one i would necessarily agree with. you have to give some credit to the way they have managed economies in the past and wonder whether they can get through this but i agree with this, it's very different. >> while this is all going on, dom, we're awaiting the final trading session of the week where there won't be circuit breakers. >> it will be interesting. the reason why there are so many, including those at our network, we'll be all hands on deck throughout the next 24 hours. the reason is because this is really unprecedented territory for the chinese markets. we do know, of course, about those two circuit breakers that got triggered and now they've gotten rid of them. not only have they put if first ever circuit breakers, they have gone to taking them away all in the span of a week. the real question becomes do we see a sharply lower open but remember everybody says it's been a vicious cycle, that these circuit breakers have kind of begotten more selling. so if we do see a sell-off, guys, the question then becomes whether or not you see stability
2:20 pm
brought in from people who actually come in and buy the markets as opposed to maybe just the government spending its own ammunition to do so. >> or maybe that's one and the same. maybe the stability being brought in so to speak is the government nudging institutions once again to step in and be the buyers of last resort. >> i think there's one thing that's absolutely clear, i would agree with dom, the circuit breakers haven't worked. managing the economy is something they have done well over the last couple decades. it's different than trying to control the stock market. they didn't learn the lessons of last august. something that was meant to reduce volatility they have withdrawn. there is one thing that's undoubtedly true whether we're talking about the currency or whether we're talking about the stock market, their communication will be terrible and that's really what we're reacting to. >> wilfred, you know, i was on the phone this morning, and i described china as kind of like an 18-year-old nba basketball prospect. the kid is a stud, but he's still a kid, and he's got to mature until he becomes that all-star. do we wildly overestimate china's ability to manage its
2:21 pm
own economy given that it's only been a, quote, free market for as long as you and i have been in this business? >> i don't think we overestimate the ability to manage the economy. i think they've done an incredible job going from rural to urban over the '80s and '90s and graduating from investment to consumption led but there's a huge painful transition to help to go from investment led to consumption led and the currency is a manifestation of that. they have to go from artificially holding the currency above its natural rate which has been the last four or five years to a free floating rate. we don't know how much further that is. there's a lot of pain to come during that process and they have big reserves. they have the ability to probably get there. but it's going to be more painful. it's going to be longer than people expect, and my take always on china for the last couple years is you can't go from 8% to 7% to 6%. at some point there's a binary
2:22 pm
point and companies go bust. we've had long periods of growth and at some point we're going to drop not just to 5% growth but possibly to 1% or even minus 1% and that doesn't mean it won't be the world's second biggest day economy and one day the biggest economy. it just means two or three years they will have a little bit of a pull back. >> this is very much about the long game for china, and we've heard so many geopolitical analysts say it. the idea here is they have maybe not as much experience managing the economy. the real issue is whether or not they can do so and how many years they're will to let it take, right? it could be decades to get this thing to go the way they want it to go. >> and how long investors will stick with them. great discussion, dom chu. wilford frost, thank you for joining us. brian? >> he should just go to the office now. >> 5:00 a.m. >> they're already starting the production. wilford, don't even sleep. coming up, more real money advice to help you manage your investments in these increasingly uncertain times.
2:23 pm
and if you think the worst maybe is behind china, you might want to think again. we have a chart you just have to see. a lot of red on the screen. dow down more than 300. oil below $32 or $33. we are back right after this.
2:24 pm
2:25 pm
2:26 pm
welcome back to "power lunch." gold at its highest levels so far today extending gains for a fourth straight day. we're hitting a nine-week high, $1,109 an ounce. stocks up 6% to 10%. a sharp rise. the market investigator gold miners etf, gdx is up about 5%. keep in mind gold miners etf is also lost a quarter of its value over the course of the last 12 months, so the down trend is in place, still a strong start to 2016. back over to you. >> thank you very much. well, with today's stock market drop, the dow is now down over 4% already this year, so we'll need about a 4.5% gain just to get back to flat. put another way, we are smack dab in the middle of one of the worst starts to a year for the dow in a century. let's bring in brian bell ski, bmo capital markets chief investment strategist who is optimistic long term. as you said last year on this
2:27 pm
program you were negative to begin the year, so kudos to you on that. >> thank you. >> were you this negative? >> yes, we were actually. you know, we think there's a very good chance that the market could see a pullback to 1800. now, when we were here in december talking about that, we got a lot of pushback and when we wrote our year ahead report for 2016, i have to tell you, it's probably one of the reports that we've had the must push back on in 26 years. >> what did they say? >> we weren't supposed to be bearish. >> we hear that in the financial media. >> our call has been since 2009 u.s. stocks have been in a 20-year bull market. this type of weakness actually only accentuates and strengthens we think the duration of what we think is going to be a very long-term bull market for u.s. stocks. so nothing in your long-term, long-term bullish thesis has
2:28 pm
changed because of what is happening in china? >> no. in fact, let's think about this. here is some perspective. here is some perspective. we think what actually is occurring this week could actually be the semblance of a start of the last of the unwind of this relationship with respect to emerging markets and global investing in general. we've become so reliant on china and emerging markets. we think we're in the final stages of the final unwind of these types of strategies. >> that's a good point. we look at brazil, oil, commodities, iron ore, coal, steel, you name it, all this stuff, and we forget that the majority of companies that trade in the united states don't sell anything outside of the world and probably don't buy many products from outside of the world, that they are american to american or american to canadians in bmo capital market's case. >> we just published our weekly piece ten minutes before air and
2:29 pm
there's a cool chart that shows the u.s. stock market can do well when emerging markets are weak. >> we can. repeat that. it's important. >> the united states stock market can do very well when the emerging markets are weak. however, the majority of investors have only been doing this for 15 or 20 years and have been so focused on energy and commodities and china that they have really, i think, forgotten that and have ignored the trends we've seen since 2009. and i think it's really, really, really important to understand that. >> brian, i'm curious though, when you take a look at historical data, the reliance on emerging markets, is it as great as before? i mean, are we at a period where companies are actually relying on emerging markets and particularly china as the next engine of growth unlike any time in the past and so maybe this time, i don't want to say this, but maybe this time is a little bit different. >> well, you talked yourself into a trap, this time is different. however we know around 45% of u.s. revenues come from overseas. now, what the percentage of that comes from china, i think that's
2:30 pm
the more important question. however, i think the key point is that america went through a lost decade between 2000 and 2009. and because of that, u.s. corporations became very conservative, consistent, rebuilt their cash, earnings have become more consistent. i think there's a pent up scarcity proposal in terms of growth in america that we think that 45% from nonu.s. is actually going to be growing and we think they're going to see more domestic growth going forward, and, oh, by the way, this volatility in emerging market only increases the likelihood we see onshoring, manufacturing renaissance as companies get sick of dealing with of this volatility overseas and bring back operations -- >> nat gas power production is low, cheap goods now that the yuan is devalued and gas is cheap maybe explaining why walmart is the only -- >> and we have had low oil prices. >> as it lasts longer you change because people think maybe this is for real. brian bellski, thank you.
2:31 pm
i have to look at the dow. if you're just joining us, the dow jones industrial average continues to lose steam on all the stuff we just talked about. the dow is down 379 points. we are down 4.5% for the year, one of the worst starts to a year in nearly a century. oil a big part of that story. jackie d., how are we going to close today? >> good afternoon, brian. it was volatile with a capital "v." after touching session lows, $32.10 a low not seen in 12 years, we came back into positive territory before we finished the session at $33.27. the technicals setting us up for more downside but traders tell me there will be players coming into the market with the buy the dip mentality. the deputy crown prince in saudi arabia said there would be a decision in the next few months. saudi tapped the debt market last year, it was unprecedented for them. now mulling an ipo. this is a very, very big change that shows these oil prices are having a significant effect and
2:32 pm
that goes far beyond that budget that they released. so definitely something to watch here. back to you. >> and jackie, roberto friedlander put out a note saying if saudi aramco goes public it would be likely be the biggest company in the world. >> in the world. >> it would be bigger than apple because it has ten times the oil reserves of exxonmobil but it could be negative for the shale companies because suddenly you have a huge amount of capital they're going to have to put somewhere and maybe production goes even higher. >> it could be and what it also says to me, when they consider something like this, this kind of transparency and bringing itself out into the marketplace, it really kind of signals a little bit of a cry of desperation here. >> why do they need the capital if they're so wealthy. jackie d., thank you very much. just a note, you know the nasdaq is in a correction, well, the dow briefly went into a correction. it was down 10% from the most recent high. it's no longer there but just off it. how worried should you as maybe a 401(k) investor be about
2:33 pm
china's economy? one of the country's top economists joins us next. you need to hear what he has to say. stick around. it's hard to find time to keep up on my shows.
2:34 pm
2:35 pm
that's why i switched from u-verse to xfinity. now i can download my dvr recordings and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. the dow briefly dropping 400 points.
2:36 pm
we're down 384 right now on the dow. we're only 16 points above it but briefly we were down more than 400 points on the dow. you got concerns over the chinese economy, potential currency wars, the continued commodity collapse, a lot to talk about. michelle caruso-cabrera is joining us live with one of china's top economists. michelle? >> hey there, brian, thanks so much. won ye ping, an adviser to the central bank of china. the currency in china has devalued or dropped quite a lot this week. why is that happening? >> i think -- well, the currency has been under pressure for about six months. but the main reason is they have a switch pegged to the dollar and now it's targeting a basket of currencies. the dollar is rising and other currency weakening. if you look at the effect of the
2:37 pm
exchange right, ie in reference to the basket, it's been relatively stable. >> there are reports coming out of reuters where they are quoting people who they say are advising the central bank there should be a devaluation? >> i guess that's one of the techniques people are advising. if the currency is on the way down, whether you should do a step by step or do just a one step. i don't have a particular opinion, but i think pboc's goal is to maintain stability relative to the basket of the currencies. >> but is it possible that we could see another 10% or 15% move? do you have any predictions -- >> i don't have a particular prediction, but partly depends on what happens to the dollar versus other currencies like the euro and the yen. if the dollar continues to strengthen significantly, we can expect -- >> should the u.s. market be so concerned about what's happening with the chinese currency? >> well, the currency has been under pressure to depreciate, but as i said, the economy is
2:38 pm
not too weak, and we have -- we don't have lots of foreign borrowing. our foreign exchange reserve is still $4 trillion. so i don't really see it's a sustaining depreciation pressure, but in the near term the pressure is there. >> yiping, thank you for joining us. >> thank you so much, michelle caruso-cabrera. for more on the impact of the declining yuan on u.s. markets let's bring in sean darby, jeffrey's global head of equity strategy. sean, great to have you with us. are you more concerned about the decline we've seen in the yuan or the declines we've seen in the chinese stock market? >> more the declines in the chinese currency really. their stock market has been relatively insulated to international investors. i still feel it's out of the whole conventional markets. the yuan is entering the financial system at the moment and i think that's where the major distortion is occurring in global financial markets. i think the currency is the one
2:39 pm
to watch at the moment. >> what caught my eye in your january note was the notion that there's so much dollar denominated debt in china and with declining yuan, that could really impact the companies that are very levered. they would be sort of the old-line companies, manufacturing, utilities, miners. if we do see a further devaluation of the yuayuan, whi many people expect, what happens then? what's the ripple effect? >> there's a lot of ripple effects. they've had a large amount of capital outflows. the yuan is weakening and it's drawing down on the foreign exchange reserves. in a catch-22 situation which they need to let the yuan fall as fast as possible to clear the currency, get it to be cheap, and then hopefully all the other issues solve themselves, but going back to the dollar debt, at least they can refinance locally. the banking system does have a large deposit base. the problem there is rates may be very different from what they borrowed in the past. >> much higher cost of capital.
2:40 pm
will it force bankruptcies? will this sort of force the chinese economy to have some sort of a shakeout? >> i think it will to ultimately a lot of companies that have borrowed in dollars may default in debt restructuring. that's part of the process. i think ultimately getting the yuan to be a flexible floating currency is the ultimate aim and whether those companies have to go bust, i think that's an unfortunate side issue really now. >> to bring it back to investors here in the united states, what is the impact on either u.s. companies or u.s. investments? >> well, really it's not that big. i mean, in terms of financial aspect, your biggest export to china is agricultural products and the rare craft and cars. so it's not really that materially big. i think more of it is in terms of the relation china has with the rest of the world in global trade -- >> so europe. europe will see a much bigger impact than the u.s. >> and other emerging markets as well which have lift off global trade and have a secondary
2:41 pm
impact on the u.s. in terms of revenues to mexico and other latin america countries. >> sean, thank you for stopping by. sean darby of jefferies. a sea of red for the dow but there's one spot of green and that would be walmart. walmart is the only stock in the green and it is up by about 5% so far in 2016. we have much more on this market sell-off straight ahead. you're watching cnbc, first in business worldwide. by. business worldwide. you're late for work.
2:42 pm
you grab your 10-gallon jug of coffee, and back out of the garage. right into your wife's car. with your wife watching. she forgives you... eventually. your insurance company, not so much. they say you only have their basic policy. don't basic policies cover basic accidents? of course, they say... as long as you pay extra for it. with a liberty mutual base policy, new car replacement comes standard. and for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. learn more by calling at liberty mutual, every policy is personal, with coverage and deductibles, customized just for you. which is why we don't offer any off-the-shelf policies. switch to liberty mutual and you could save up to $509. call liberty mutual for a free quote today at
2:43 pm
see car insurance in a whole new light. liberty mutual insurance.
2:44 pm
a quick programming note. you may have noticed melissa and i have not done our "street talk" segment, well, being on the road and having the markets go haywire can do that to a show. "street talk" should return tomorrow because even in the craziest markets there could be good opportunity for you and we want to help you find it. that said shall it , it is time "trading nation" segment. larry, how much more downside for the u.s. markets do you think and your team think could be ahead? >> well, in the very short term we're extremely oversold. we've lost about 7% in 13 days. 7% in 13 days. that's as big a drop as we've had in the fall of 2014. it's not quite as big as the recent drop in september, but near term we're going to bounce, and we probably bounce with
2:45 pm
commodities with oil, but then near term say over the next month so much damage has been done technically that we'll probably retest these lows within 30 days or so. >> okay. craig, you have got a long-term chart of the s&p 500. do you believe that we are, as larry said, oversold here? >> you know, brian, on a short-term basis we are, but i want to put into perspective the long term on the s&p 500, and when you break out of a huge multiyear base, 2000 to 2013, what do you typically do when you break out? you ultimately come back and retest, do you some backing and filling. i think you're in that natural process of doing some backing and filling, and the question becomes where do you ultimately find the levels of support? so when you zoom into like a one-year chart on the s&p 500, you will find some support at 1880 and then at about 1820, and then you can start valuing this market on a traditional pe-type basis to see where you find your ultimate support. but from my perspective, yeah, we're a little short term
2:46 pm
oversold. i would look for a bounce. i don't get a sense that a lot of fund managers are participating at this point in time because they came into 2016 fairly flat, and this is probably good for them for an opportunity to jump into this market on a little bit more weakness. so look for that relief rally and then we're going to see some further consolidation and retesting, but this, again, is still just a retest in the context of a longer term secular bull market that we've been calling for since 2012. >> okay. technically saying what brian belski said earlier today. thank you very much. we're going to let you go. craig, before i let you go, i want to play my hand a little bit of technical analysis and see what you think. looking at a long-term chart of the shanghai composite index. i want to get your comments on this chart to my borderlined untrained eye, it looks like we were in a gigantic head and shoulders top for that shanghai composite. what is your trained eye seeing from our chart? >> well, brian, first, i respect
2:47 pm
all views in terms of technical analysis, but i would -- >> here we go. >> -- say from my perspective -- >> with all due respect, you're an iidiot. >> no, no, no, brian. from my perspective is looks like we've had a counter trend rally that has started to unfold. when you look at the longer term chart we put up, you got back to that 40-week moving average and then failed. typically when you see this kind of price action, i would suspect we'd come back down and retest the august lows, and that would be the kind of next area of support. now, i'm not sure that level is going to hold, and then you're looking at something like 2500 to 2250 as your next area of support. but, brian, i got to tell you, when you see these kind of big, long, parabolic moves and advances up, typically they do not end well, and they typically retrace about 110% of the entire advance, and if that is, indeed, the case, you could see the shanghai sub-2,000 before this is all done. >> so my weak analysis aside,
2:48 pm
the conclusion may be the same in that it's a giant overhang and it looks fairly ugly in the future for the shanghai composite, at least technically. >> yes, sir. >> craig johnson, nice guy, minnesota nice. next time i'm up there i'm bringing you a hot dish made from my own oven. craig jazohnson, thank you very much. china security regularity suspending their market circuit breakers. let's look at some u.s. stocks with heavy china exposure. wirn resorts down 8.5%. qualcomm is down by almost 5%, and broadcom, the best of the three but it is down by 1.5%. we continue to watch the markets during this market sell-off as we head to the close so stick with us. "power lunch." sure, tv has evolved over the years.
2:49 pm
2:50 pm
2:51 pm
it's gotten squarer. brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. the dow was just down about 400 points just 15 minutes ago.
2:52 pm
we are clawing back just a little bit, we are, quote, only down 330 points, all ten sectors in the s&p 500 are in the red, the materials among the worst, the least worst is telecom. by the way, only 10% of the s&p 500 is higher right now, the single best performing name is the gap, gps, if you own it at least today congratulate yourself. a terrible performer today is yahoo. they are holding on to that alibaba investment and what is going on in the china could right down the alibaba investment. the stock is down about 6%. not a good day for yahoo. you need good money advice, "mad money." the sell off's survival guide. jim has a big special planned for you, 6:00 eastern right here on cnbc. literally can't afford to miss it. "power lunch" back in two.
2:53 pm
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.
2:54 pm
2:55 pm
steve, other than making i'm here atme move stuff,rade trader offices. 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. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. markets are off the lows, the dow still down by just about 336 points, the s&p 500 is off its session lows by about 10 points, it's down by almost 2% right now. tonight at 5:00 on "fast money" we will be speaking to global macro investments raul paul, he called it right when it comes to decline in oil prices, also the decline in markets, we will see what he sees ahead for 2016. tonight 5:00 on fast. i remember i said that he
2:56 pm
was the smartest guy that i know and he got all like embarrassed about that so i won't say it, but i think that he is. >> i agree. >> melissa, thank you very much. if you believe the investment advice of buy the worst performing asset from the prior year, then high yield bond market might just fit your investing bill. junk bonds posted an overall bruising return of negative 5.5% last year but given that nearly everything and anything is selling off today may be a contrarian bet on junk bond doesn't look so bad. a least according to the next guest. martin, it just seemed like so one year ago that everybody said high yield was fore telling doom for everything, you don't think so. how come? >> you know, i can you've got a market that's gotten hit badly in the commodities area, energy and the metals and mining, the yields up there 16, and 17% and
2:57 pm
they had negative 20 plus returns last year. the market outside of that is not cheap, it's only at an average valuation historically speaking, but with those very depressed industries mixed in there it brings it up to a more -- a more attractive valuation. the distressed area in particular, about 25% of the issues in the high yield index are at distressed levels, meaning ten percentage points or more above freshees in yield and that would ordinarily indicate a default rate for the coming year of 7%. moody's and fitch have come up with numbers in the 4.5% range. so if you can find the right spots there there probably are some issues that don't deserve to be at levels as depressed as
2:58 pm
that. >> for our viewers that are not high yield traders can they buy the hng or j & k but risk energy exposure that might be the f on the report card? >> that's definitely the risk and there's no guarantee that oil is coming back anytime soon. it will eventually. but you could have a lot of financial destruction in the meantime. that's what the market is reflecting. the metals and coal sectors, very bleak outlook for the time being. >> what's the biggest risk, then, to high yield, martin, outside of the obvious energy structure? >> well, the real problem is there's almost no liquidity in the market. that's owing to some regulatory changes that have come in since the financial crisis. it's been getting worse, but that's accelerated so very hard to sell. that makes it much less attractive as an asset to be
2:59 pm
trapped in those bonds and that's a big negative and i don't see any real change coming there anytime soon. >> martin fritzen we will leave it there. we love your insight. thank you very much. appreciate it, sir. >> my pleasure. loets let's get to seema mody for a market flash. >> shares spike on a reuters report that shire pharmaceuticals planning to announce an acquisition of backs al at that. there has been speculation of the companies coming together. the deal could come as soon as monday. >> brian, we are approaching the final hour and we are kicking lower, for the s&p 500 we are just about 6 points off of the session lows, we will be watching that very carefully as we enter this final hour here. >> yeah. again, just your guest tonight, raul paul, he has been talking about this for a while and big into currency risk and talking the bond market. i don't like talking currencies
3:00 pm
but they are incredibly important right now. >> especially the yuan in today's market. thanks for watching everybody. >> the "closing bell" will start with a big market hour. final hour of trading right now. welcome to the "closing bell," everybody, i'm kelly evans here at the new york stock exchange. >> and i'm bill griffeth. here we go again. buckle up. another ugly day of selling for of the bulls today, the dow did look like it was headed for a come back midday, but it turned south again. we are off the lows right now, but we will see whether we can turn things around into the close. the last three trading days the imbalance has been to the buy side. we will see if that happens again today. >> if this time is different. u.s. stocks are selling off after china devalued its currency once again sending its shanghai market down 7% and triggering a circuit breaker less than 30 minutes after

62 Views

info Stream Only

Uploaded by TV Archive on