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tv   Power Lunch  CNBC  January 11, 2016 1:00pm-3:01pm EST

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>> one more comment. >> rates aren't going to comment. >> banks? >> i do like u.s. bank and i like wells fargo going into earnings numbers. >> pnc to that list. >> so you go regionals, not necessarily the biggies. thanks. good stuff. we'll see you tomorrow. "power lunch" begins now. >> thank you very much, scotty. this is "power lunch" with tyler mathisen. i'm mandy drury. stumbling out of the gate. >> not at all. how are you, everybody? welcome. is this bull run over? we'll look at previous big dips and look ahead to the earnings season to see what it all says about the market. is this the time to buy or wait? >> "power lunch" all access. we have six ceos and they're ready to go all with unique takes on their business and beyond. so on the list we have volkswagen, johnson & johnson, toyota, shire, and hyundai. and a chinese official making some blunt comments on that country's economy today.
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and he did so only to cnbc. plus, an american who runs a manufacturing business in china will tell us what he sees over there. >> stocks are really seesawing between gains and losses. at the moment we have the nasdaq and the s&p on the losses side. the dow is just up very slightly, now back in the black, but we did have a gain of triple digits earlier on in the day. the nasdaq is trying to avoid an eighth straight losing session. it has not had an up closing session so far in 2016. the s&p is also still way below the 2,000 mark. it's losing another 5.7 points and oil is tanking again. we're currently down at $31.27. this is the lowest, folks, in 12 years. in fact, we're down by nearly 6%, and brent is down by nearly 6% as well, $31.55 with some very, very bearish calls out there. some analysts are saying prices may fall as slow low as $20.
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let's bring in fidel. thank you very much for your time. you think the new normal for oil is still 50% to 100% higher than current levels. why so? >> well, i don't think the current oil price is sustainable. the same way i felt the $100 oil price was sustainable. the market is driven by pure speculation. nobody in his right mind thinks oil prices can go to $20 and stay there, and nobody in his right mind should expect oil prices to rebound to $100 and stay there. what we're looking for is for the oil market to find its equilibrium and the normal price is going to end up being between $60 and $70. it's not going to happen overnight. not in a year or two. it's going to longer. it will be painful for companies large and small. all oil companies as we speak right now are spending more than their cash flow. you cannot sustain that for much
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longer. the oil industry needs minimum amount of investment to keep oil supply in line with demand. even if the demand in china is not as strong as we thought, there's still -- the current investment right now would not be -- would be sufficient enough to bring additional production to meet global demand. so eventually oil prices will have to rise. >> let me make one observation and just to clarify and then ask a follow-up question. the observation is you say $50 to $70 a barrel is the sort of natural price for oil. but you don't see it going there for another year, year and a half? did i hear you correctly? >> or longer. >> or longer. >> absolutely. >> so if oil stays at these low and by your reckoning, my word, not yours, depressed levels, what does that mean for the sustainability or the survivability, one, of some companies in the oil business
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today and, second and most important to lots of investors who may own the big oil companies, the chevrons, what does it do for their ability to maintain their dividend? start there if you wouldn't mind? >> well, obviously, if oil prices are going to be at the current level, oil companies large and small will have to think twice about their dividend. exxon and chevron have increased dividend for 28 consecutive years, but they have never been through this kind of environment where costs are high and prices are low, and prices could stay lower for a lot longer because i still believe that there is an agenda here, that saudi arabia will not allow oil prices to recover until they take care of marginal producer in shale plays in the u.s. also to settle their score with the iranians and the russians. i don't think we are going to see a rebound in the oil prices in the near term. we're talking about years, not months. >> if we can just pin you down on the point you just made, what percentage of what you call the
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morningal producers in the shale arenas may have to go bankrupt? >> half of them. >> half of them? >> half of the current producers have no legitimate right to be in the business where the price forecast even in a recovery is going to be between say $50, $60. they need $70 oil to survive. >> fadel, thank you very much. always good to be with you. we appreciate your thoughts there and some provocative thoughts, indeed. last week was the worst five-day start to a year ever. remember it was five days last week. we had to work a full week. >> i can't remember anything about last week, it was all a big blur. >> it was a big blur. >> a blur of red. >> stock down 6%. some people putting an epitaph on the bull market. michael santoli and dom chu is here. often when there is sell-offs of the sort we've seen so far this year and are continuing to see to a degree today, that sets up
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a rebound because it sweats out some of the marginal producers to go back to the prior discussion. >> and actually that's where you get the talk of so-called healthy corrections. remember back to last year we had gone almost a record time without a 10% or more decline. you got one of those in late summer. you went down 12.5% in the s&p 500. nice rebound. in many ways a very familiar pattern. you had this autumn sell-off, very much a "w" bottom if not a "v," and then it was maybe seeming like an all clear in november. what i took a look at this time though is if we go down just a little more from here, about a 1% more from here, we're down another 10% from the november high. so it's essentially two corrections within six months. basically unprecedented since 1928 if you have not made a new -- >> what does that tell you? does the healthy correction thesis hold up or is it just really putting, as the saying goes, lipstick on a pig? >> i that i we're ink we're in between bull and bear. we have not made convincing highs in the s&p 500 for almost
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18 months. the majority of stocks have been down 20%. it doesn't mean we do straight down from here. bear markets without u.s. recessions are relatively rare. we don't really see an accumulation of evidence of a recession but the market is not acting in such a way the buyers are ready to take control. >> bob pisani has pointed out where we have had a bounceback and there are so many sellers waiting to hit the sell botton. they're not convinced the volatility is over. if we get a bounce, is that just a tradeable bounce or a sustainable bounce? >> that's what you never know except in retrospect. you have a lot of negative sentiment. so you have the fuel for a rally. >> let's talk about the fuel for a second. the fuel for the last maybe couple months has been macro economically driven, geopolitical -- >> interest rates. >> china. that sort of thing. this week we put the microcompany-specific fundamentals back on the table because we kick off earnings season kind of this week.
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as we talk about earnings season we talk about a possible earnings recession. economic recessions, more than two consecutive quarters of negative gdp growth. this could be the second straight quarter of actual earnings declines year-over-year. i want to point out the statistics here. thompson reuters xils thcompile this is data. we're forecasting for s&p 500 to have an earnings decline of over 4%. sales declines -- >> compared with the first quarter last year? >> no. >> not sequential. >> fourth quarter. these are the fourth quarter numbers. >> i'm sorry. >> so the fourth quarter over fourth quarter of the prior year. >> right. >> if this comes to fruition we had have the second consecutive quarter of actual earnings declines according to thompson data. why that's important is you talk about all of these factors affecting the trade. are there now appointments that you can point to that corporate fundamentals, meaning earnings and sales, are no longer
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supportive of the kinds of markets we've been having. to mike's point, we could have a healthy pullback but the bear case is maybe the corporate fundamentals aren't there to support it and that's what the analysts are saying at least for right now. >> that you have for laying it out for us, mike and dom. >> health care one of the big laggards. check out shares of johnson & johnson, over the past year, down 6%. it's been a portfolio darling for many blue chip investors. what's in the pipeline for the company, j & j in 2016 and beyond? johnson & johnson's ceo joins us first on "power lunch" as you listen to some david bowie. you're watching cnbc first in business worldwide.
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welcome back to "power lunch." i'm mandy drury. wells fargo is moving higher by half a percent with goldman sachs upgrading that bank to buy from neutral saying wells fargo is well positioned to deal with a variety of potential negative factors like low oil prices or a slower chinese economy. hershey downgraded to neutral from overweight at jpmorgan. the chocolatemaker overly optimistic about its earnings growth. hershey's is down just over 1%. and another mega merger in health care. shire buying baxalta creating a giant in the treatment of rare
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diseases. shire stock is taking a hit of 9% on that news. baxalta down just over 2%. shire's ceo will join us to tell us what that means for his company and you the investor. >> as we continue with a discussion of health care, it's the biggest health care investing event of the year, the jpmorgan conference in san francisco. more than 450 companies, 3,000 investors, and who is there in the center of it all? our meg terrell with the ceo of johnson & johnson. first on cnbc. hi, meg. >> tyler, hi. thank you so much. alex gorsky, the ceo of j & j, thank you for joining us. >> great to be here in san francisco with you today. >> we've been talking about what's going on in the market. it's a tough day in health care. it's been a tough year so far. how do you look at sort of the environment right now for what you guys are doing and how all of the broader things that are happening around the world are really affecting health care and your business? >> it's a great question, meg. i consider myself a realistic optimist and we have to look at this in a lot of different ways.
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you know, of course we have challenges out there right now. we have, you know, a lot of people being challenged with getting access to health care not only in the united states but more broadly around the world. at the same time we have incredible innovations in technologies that are happening that are, frankly, bringing about cures and finding ways to help people live longer, happier, and healthier lives than we ever thought possible. we're saying solid performance in the united states. if you look at employment, if you look at real estate, if you look at capital investment, so many other areas, i think we're on our path back. we're not where we want to be, but we're certainly moving in the right direction. i think in the emerging markets, there's so many people there that in the long run, that continues whether it's brazil, russia, india, china, the middle east are going to be important but certainly we've seen some near-term setbacks in some of those areas. so we're optimistic, but we also realize, look, we'll have our fair share of challenges in the near term as well. >> i want to ask you specifically about china and what is your exposure there, and i have heard from folks here, they are seeing a little bit of
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a slowdown but maybe they aren't so exposed in china. how is that for you guys? >> we've been in china for 30 years. we said we have a little over a $3 billion business there. we're the largest medical device company. we've added a consumer business and a pharmaceutical business. with 1.3 billion people, we know for the long term it's a very important market. a lot of unmet patient need, but we've also seen some slowdown in the near term, but we're working with regulateders to say what can we do to accelerate some of the approval in the pharmaceutical side. they're doing a lot of capital investment in their hospital infrastructure particularly in the rural areas. we remain bullish for the fuel. >> we're seeing biotech valuations taking a step back. how do you look at that as a potentialal yaal acquirer? >> we do try to look at this from the long-term point of view. this is the 130th anniversary of johnson & johnson.
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when we look at the biotech market and device market, we try to take that long-term point of view with our investors. if you look at our history we have invested 50% to 55% of our research and development in internal opportunities and about 45% in external opportunities. we tend to do smaller deals. we like new break through innovations, and we identify them. we use our clinical development, our regulatory expertise to develop them, get them approved which we've had 15 compounds approved since 2009, and then we globalize that platform and create a great commercial opportunity. that tends to be our strat skeg and our approach. >> you're not looking at it saying this is a 30% discount to what it was before, it's a better time to buy. >> we try to be disciplined and decisive. in the end we have to make a big difference for patients. we have to have great innovation and we have to great value for shareholders. frankly, we did
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challenging over the past year. we're always on the hunt and we want to make sure we're getting the best invocation. >> i have to ask you about drug prices. access is a big issue. does the drug industry need to change something about how it prices drugs or considers access? >> meg, i believe it's much more than a pharmaceutical pricing issue. it's a health care pricing issue. i think it's good we're having the debate we are in the united states right now. when you look at the demographic trends and the other things we're going to have to deal with over the next 20, 30, and 40 years. what we're really focused on is how can we continue to bring new innovations and then obviously how do we price them responsibly? to focus only on the pharmaceutical component which represents 10% of health care spending in isolation of what's going on in hospitals, what's going on with physicians, what's going on in insurers, what's going on in the government, it's really going to take all of us working together to have a comprehensive solution.
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frankly, we also have to make sure we're focusing importantly on costs but also on the benefit. the fact that people are living longer lives, and if we want to increase productivity, if we want to address these issues, it's going to take a balanced approach in the way we address it. >> we'll have to leave it there. alex gorsky, thank you for joining us. >> thank you, meg. >> stay tuned. we have a lot more coming including the ceo of celgene. >> thank you, meg. let's look at what's happening with stocks. the last leg we've been watching going down to be certainly precipitated by the big drop in crude oil. i want to show you how crude has been dripping lower and lower and just a moment ago dropped below the $31 a barrel mark. we're currently off by 6% and certainly the acceleration to the downside is not letting up at all. brent is at $31.41 with morgan stanley saying a rapid appreciation in the u.s. dollar could take it down to as low as $20 a barrel. so that very bearish call
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certainly not helping the crude market today. "power lunch" is back in two. we'll keep on watching stocks and crude on this sell-off day. when a moment turns romantic why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card in new york state, we believe tomorrow starts today. all across the state the economy is growing,
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here at the td ameritrade 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. welcome back, everybody, to "power lunch." stocks sitting now at session lows. the declines in the dow, which had begun the hour in the green, now in the negative category. all 43 points. nasdaq down. and the s&p 500 down a half
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percent. defensive sectors generally the one that is are performing a little better than the average today. utilities, telecom among them, consumer staples the bright spot. as you might expect, energy, the real laggard here down 2.8%, and that is because oil just recently dipped below $31 a barrel, as you see there at $31.02, $31.03 on west texas. brent just a little higher. both of them off more than 6% on the day continuing the slide in the oil patch. lets move to bonds right now, and you will see what's going on there in a graphic way. short end of the curve prices up, yields down just a bit. as you go out 7s, 10s, and 30s, price is down, yield is up, 2.15 basically for the 10-year yield. gold prices closing right
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now. let's take a look at how it is doing, and do we have the gold number? and silver and copper? let's take look. there you have gold. there it is. down a little bit today, $1.80 at $1,096, off about 0.1%. copper down 2.5%. palladium off almost 4%, and platinum down 0.7%. volkswagen making a big move to win back customers amid its emissions cheating scandal. lots of vw ad this is past weekend if you were watching football, as i was. vw's ceo matthias muller spoking with phil lebeau. >> essentially he said they are in the process of presenting a package of solutions to regulators in washington, possibly even buying back some of the defective models here in the united states.
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here is what he had to tell us just a few minutes ago. >> we fully accept the violation and on behalf of volkswagen, i have to apologize for that. it was a huge default of our company, and now we want to win back the trust of our stakeholders like dealers, like customers, and also of the authorities, and in that case we try to offer a package of solutions, technical solutions with a time schedule and also our customer care program which will be prepared from ken feinberg in the next 9 to 12 weeks, and at the end of the day we hope that we can have an agreement with the epa to solve the problem. >> will you buy back some models from some people who bought these defective volkswagens?
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>> you know, this is a difficult situation because we have similar generations of engines which you have to handle, and so the technical solutions are also different, and in some cases it's very easy to repair the cars. in other cases it's very expensive, let me say, and in that case we have to negotiate whether it would be better to bring back the cars to volkswagen. >> so it is possible you might buy back some of these vehicles? >> in theory it is possible. >> there you have it. matthias muller telling us it is possible volkswagen will ultimately agree to buy back some of the half million models they are currently negotiating with u.s. regulators, a solution of fixing those vehicles in violation of epa and california emissions standards. that's the story.
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first in-depth comments from matthias muller regarding this scandal. we'll send it back to you. in a few minutes we'll be going down to the toyota stand and talking about a big day for lexus. >> a very big day. thank you very much for that, phil lebeau. we've currently got the u.s. stock market at session lows. let's get to dominic chu for a market flash. >> the dow transportation index is nearing its worst levels today. leading the index to the downside are shares of norfolk southern on the rail side, c.h. robinson, fed ex off by 2% or more. among the major u.s. indexes we tracked, dow transports are getting hit just about the hardest this year, down more than 8%. the index is in bear market territory. a situation that happens when some traders say a stock or index drops by more than 20% from the recent highs. so transportation stocks certainly a focus more many investors. >> and certainly not the only sector currently in bear market
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territory. the biotechs and the semis. so what's happening over in the real estate market? the red hot apartment market is finally starting to cool off. what is causing it and the cities and regions that could be impacted the most. plus, what is the real read on china's economy? surprisingly frank and blunt comments from one insider in the chinese government. you do need to hear what he has to say coming up next.
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hello, everyone. i'm sue herera. here is your cnbc news update for this hour. two earthquakes to report. a magnitude 6.1 quake struck in the ocean about 79 miles west of hokkaido island in japan. a bit earlier there was a 6.9 magnitude quake about 205 miles north-northwest of indonesia's molucca islands and we will have more details as we get them in. three separate acts of violence in baghdad. 18 people died when gunmen stormed a mall in a shiite neighborhood and took hostages. isis claiming responsibility there. then a car bomb in a sunni area in the southeastern part of the
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city killed seven and two car bombs northeast of baghdad left 20 dead. a judge has postponed the trial of the second baltimore police officer charged in the april death of 25-year-old freddie gray. officer caesar goodson was the driver of the police van that gray rode in before he died from a broken neck. and david bowie's death focusing attention on a famous street portrait of the rock legend in brickston, london. floral tributes were left this morning. bowie died of cancer sunday two days after celebrating his 69th birthday. that is the cnbc news update at this hour. ty, back to you. >> sue, thank you very much. got some surprisingly frank comments from a chinese official on the problems with that country's economy. michelle caruso-cabrera joins us now with this -- results of this exclusive conversation you had. michelle, who is he? what did he say? >> we just came back from a briefing at the chinese
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consulate. his name han jun. like you said, he was surprisingly blunt. speaking through a government supplied translator here is some of what he said. we have to go through a pause in the economy. i asked specifically if the current growth rate would hit the target of 6.5% that the chinese government has set. he wouldn't answer directly however he did say, even it growth falls below 6.5%, it's not a disaster. biv, a target of 6.5% doesn't necessarily mean gdp growth every quarter will be above 6.5%. his point was it could fall below 6.5% in the first half of the year and recover in the second hafer and still achieve that number. we're so focused on 6.5% because it's the target of the government but it's also the lowest annual growth rate in china since 1990 and then this. i thought this was the most interesting. chinese people don't care about gdp if it means bad ecology. when they see blue sky, they don't care if the gdp is 6.3%,
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6.8%, 7%. he's speaking through a translator. >> what does he mean? >> pollution. >> pollution. >> people are very upset about pollution, and if you get lots of pollution because your growth is too strong, which has been the case because they've been so focused on coal, et cetera, he says there are trade-offs is what he's trying to say, but acknowledging weakness in the chinese economy that we haven't really seen -- >> that kind of frankness. >> yes, exactly. >> i assume he also put some brighter lights on certain parts of it, but did he say anything about the currency? >> yes. he also talked about the currency without being asked about it. he said the currency has fallen recently because of the markets, because of what's been happening in the offshore trading where it's much more liberal. we thought it got too disorderly and you saw the chinese central bank stepped in in the last couple days and will do so in the future to prop it up if we think it's too disorderly. acknowledging the chinese central bank went out there and started buying up the currency. said they'll do it again if they
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feel the need. >> it's very expensive for them to do it. >> they burned through a half a billion in reserves but he kept insisting they have more than $3 trillion. in his mind they were suggesting they had enough. he told reuters the idea is ridiculous that there would be continuous depreciation of the yuan against the dollar. >> china's economic slowdown may be ending later this year according to a new report by the oecd but the next guest isn't buying into that. peter baum conducts business in china. peter is a frequent traveler over there. peter, welcome. good to have you here. >> nice to be back. >> what you just heard michelle quoting a leading economists in china, does it make sense to you? is it too bright a forecast, too pessimistic, what do you say? >> going back to 2011 we've been seeing this was coming. as an example right now our manufacturers won't quote a
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price until after lunar new year. they can't get a price from the raw material suppliers. a lot of those raw materials are imported from out of china. for example, commodities come from australia and canada, and both those countries have problems with their economies because there's no demand out of china, and, you know, it's a ridiculous thought that after seven-plus months of negative or contracting supply managers reports that their economy is growing. that means there's unbelievable excess supply and there's not enough demand, and we see this all over regardless of the product category or otherwise. >> so they've got -- basically they've got a big inventory problem. >> well, they have too much supply, and in order for them to come out of their malaise,
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they're going to need demand from outside the country because, as i said, even if they're switching to a consumer economy, 70% right now or more is still manufacturing for export as well as invvestment. so if you said in the united states that 70% of the consumers had a decline in confidence and a decline in income, what would that portend for the united states considering that 70% of our economy is consumer? >> peter, indeed, they tried to say today that, oh, well, even though manufacturing is weakening, the service sector is picking it up, but you suggest that's not necessarily the case. what about the big moves in the currency in the last week? has that impacted you? do you think it's going to impact you? what do you think it's saying? >> we don't give much credibility to the stock market or the currency markets there. we kind of rely on what do we see on the ground? what do we see happening? you know, there are certain things that are just -- you
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can't deny. if you look at all the countries around the world, whether you're in south america, brazil, argentina, if you look in europe, if you look in australia and canada, as i mentioned, there's no demand for anything out of there. so i don't understand what their currency is doing and what their stock market is doing because it's a rigged game. i don't play in those games. >> thank you very much for being with us. peter baum of essex manufacturing. mandy? >> we have stocks at session lows. the nasdaq is down by over 1%. oil has fallen below $31 a barrel. right now currently sitting at $31. $31.04. just sneaking back above the line. a very negative day. can earnings season give the market a boost? joining us is rob lutz and eric wristman. so it looks like the russell 2k, rob, is set to close in bear market territory but that will only be joining a number of
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other indexes and sectors that are already in bear market territory like the ibb, the dow transports, the chips, i could go on. the nasdaq is in correction territory. are you advising, rob, your clients to buy this dip? >> yes, we are. we're fairly positively positioned to this market, and we think that the music is always changing on wall street. you know, you work into a waltz for one minute and then the music changes and then you get the foxtrot going. and i think that's what's happened here the first part of 2016. the focus on things outside of our country has concerned invests a great deal, but i think starting this week we're going to start to look at earnings and start to focus more on facts coming out of our economy, and i believe our economy is stronger than most people give it credit for. the services part of our economy, the consumer part of our economy are on firm foundation. it's the manufacturing sector that's the thing that's giving people trouble today. >> if i could just stop you there and pick up what you're
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saying about earnings and that maybe things happening domestically will be able to pull us back into what you call the foxtrot, but are we looking at now at least three consecutive quarters of negative earnings growth, what we call an earnings recession? aren't a lot of the multinationals in the s&p so exposed to that slowing global growth, not to mention the stronger dollar, and energy, throw in all these negatives, isn't it going to be a difficult earnings season? >> clearly earnings have pulled back a little bit. but earnings are at a very high level today, and, in fact, on a valuation basis, the markets i think are priced pretty reasonably. i actually think earnings valuations can move up here, but we are a very diverse and complex economy. the innovation going on in many parts of our economy are going to drive earnings higher. so i think you have to take a positive viewpoint towards this. it's possible we get into trouble but i think a probability of a recession in 2016 is less than 5%, so i think you've got to be very positive here. >> okay. so you're feeling fairly sanguine and buying the dips.
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what about you, eric? are you feeling as optimistic? >> well, we also -- i agree with rob, the recession risk this year seems very, very low. i would agree with you we're going to see very lightly negative earnings this quarter. market consensus is 4% to 5% negative. it will probably come in at 2% to 2.5% negative on the eps, but the flip side of the coin is that you're re-establishing a very low base. almost all the negative numbers are coming out of one sector, energy, and energy is now only 6.5% of the s&p 500. it is losing its ability to be a huge drag on the aggregate earnings. we think that actually sets up well for a reasonable earnings growth year in 2016, say 5%, 6%, and that should be enough to get the s&p 500, the broad market, into positive territory, but we're thinking single to middle digit equity returns this year, not a whole lot more.
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>> wait, wait. when you talk about the equity returns this year, is that coming from the u.s. or other parts of the world like eric or japan, erik? >> i think the global numbers, we like europe. we think that's going to be in excess of that because of support of monetary policy and we like japan for some of the same reasons. we think global equities in mid to low single digits, europe a little better than that, japan maybe a little better but not as good as europe. >> thank you very much for your views there. you can go to powerlunch.cnbc.com, the website, to see the sector that is rob is avoiding this year. that is powerlunch.cnbc.com. tyler? >> all right. another potential rally fizzling out. the dow was up more than 100 points at the open, but right now down 72, about a half of 1%. we have our eyes on that and more. we'll bring it all to you when "power lunch" returns in two minutes.
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welcome back to "power lunch." let's take a look at the ongoing slide in the stock market. the dow was up by 115 points earlier. it is now currently down by 80. the nasdaq composite, this is a very interesting one, it is in correction territory and is now on course for its eighth straight losing session. it's not managed to close in positive territory for any trading session so far in 2016. by the way, an eighth straight losing session would be the first time since 2008 for the nasdaq. the russell 2000, it's currently over the past one month down by 8% and set to close in bear market territory. so a loss of 20% or more from its recent highs and oil is a major part of this story. the wti is currently sitting only slightly above the $31 mark. we did break below that threshold about half an hour ago and we could -- there you go. as i speak. i didn't mean to jinx it but it just crossed below $31 once again with a loss of 6.5%. let's go to dominic chu. >> oil not the only thing
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falling along with the rest of the market. etsy near its lowest level falling by 10% to a record low right now of $7 a share, $7.55. that's less than half that ipo price of $16 a share. a lockup of shares expires today. it's first time since the online artisan marketplace had its ipo in april. about 24 million shares eligible for sale now. shares have lost more than half their value in just the last six months. so, tyler, etsy very much a down story. only worth $854 million. >> thank you very much. let's get out once again to detroit to the auto show there where our phil lebeau is joined by the ceo of toyota north america. phil? >> thank you, tyler. i am joined by jim lenz, ceo of toyota north america. i just asked our producer what is the price of oil? she said are you kidding me, i don't know, but we just found out it's under $31 a barrel. most people might be cheering that from an auto perspective. this concerns you as it
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continues plummeting, doesn't it? >> i think it's a concern because we have to forecast what it's going to be to decide between our car and truck mix. right now the assumption is it stays low, maisch not that low, for some time to come. if we have a sudden change in price based on something that could happen in the middle east, it totally changes our production plans. >> the knee-jerk reaction, that's what worries you. >> the knee-jerk reaction is what worries me. >> because you can't turn on a dime? >> it would take us probably six months to turn around. we'd be okay because we've got this big portfolio of products, cars, trucks, suvs, so we would be okay, but it still takes some adjustment time. >> when you look at the prius which had sales well under 200,000 last year, first time i think in three or four years that's happened, does the prius come back only when gas prices come back? >> i don't think so. 2 million cars on the road. they are very loyal to not only prius but the hybrid segment in general. we sold about 108,000 liftbacks.
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we think we'll do 140 thoub th, year. >> final question, there are a lot of people worried about incentives and we're at the lexus stand, incentives for luxury cars, not suvs, cars. is this overstated in terms of there possibly being an incentive war? >> i think it's overstated on the lexus side. we don't use incentives to push volumes. we use incentives to manage our life cycle. we tend to spend a lot less money, protects the customer in the long run because it doesn't have a negative impact on their overall trade-in values. >> tell us about the lc-500. >> coming out probably next spring. great new coupe. 467 horse power, 10 speed transition, gorgeous inside and sought. >> i think tyler is going to order one. jim lentz. we will be talking with hyundai motor of america ceo at 2:30.
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>> that is a beautiful looking car. to john harwood with breaking news. hi, john. >> we've been waiting all campaign to know what hillary clinton, the democratic front-runner, is going to propose in terms of a top personal income tax rate. the current top rate is 39.6%, the same as it was when her husband left office. she's now speaking in waterloo, iowa, and in this speech she's going to propose a 4% surcharge on incomes above $5 million. that would make the top rate on incomes above $5 million, 43.6%. that would raise about $150 billion over ten years, help pay for hillary clinton's spending proposals. there's a $400 billion gap currently between what she has already lay laid out in terms of new revenue sources and the spending she's proposed. almost half of this would be closed by this proposal. this her version of the
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so-called buffett rule. she wants a 4% surcharge on incomes above $5 million to raise $150 billion over ten years. short break now. "power lunch" will be back in two minutes. in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. like in the hudson valley, with world class biotech. and on long island, where great universities are creating next generation technologies. let us help grow your company's tomorrow, today at business.ny.gov perfect driving record. >>perfect. no tickets. no accidents... >>that is until one of you clips a food truck, ruining your perfect record. >>yup... now, you would think your insurance company would cut you some slack, right? >>no. your insurance rates go through the roof.
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take a look at this wild weather video. this is in fillmore, california, east of santa barbara. a man on a highway driving in reverse to stay ahead of the floodwaters. eventually the water slowed down enough for him to turn around and drive away. that's the speed of floodwaters from this el nino effect. omaha, a historic building there catching fire over the weekend. they were able to put out the fire, but it was so cold in omaha that the water they used turn immediately to ice engulfing the entire building. it's like a cathedral of ice, like something right out of "frozen." >> the weather gods are mad at us for something. welcome back to "power lunch." i'm mandy drury. here are this hour's power points. crud plun crude plunging below $31. the dow currently down 110 points. it was up earlier in the day by 115 points.
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complete reversal and the nasdaq and russell 2000 small cap index are down 1% with the russell set to close in bear territory. energy and health care the biggest losers. consumer staples and utilities are in the green. well, apartment rental rates are starting to cool off. we're going to tell you what happened and where it's finally starting to slow rents down. good thing if you're a renter. "power lunch" returns right after this quick break.
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we must have said something wrong because we began the hour with the dow industrials in positive territory, albeit by a small amount. but right now down closing in on yet another triple digit decline. the big story has been energy losing, what, another 6% on oil and that dragging down the stocks in that sector. >> but be assured there are a couple sectors out of the ten on the s&p that are still in the green. utilities, very defensive play there, managed to move marginally higher along with consumer staples. after an early rally this morning, it's not the case right now. let's go to dominic chu. >> more green for you guys. hospital stocks among the best performing groups industrywise in the s&p 500. if you look at shares of hca,
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tenet and universal all higher. health care stocks are likely to be volatile with a good amount of trading this week because of the jpmorgan health care conference going on right now. so, mandy, tyler, very much a focus, hospital stocks green today. >> thank you very much for that, dom. a classic case of supply and demand in raem he eal estate any be cooling off apartment rental rates. diana olick joins us now. this is a very regional thing though, isn't it? >> it absolutely is, but it could be the first sign nationally that the red hot apartment market is losing a little steam. this is the first two quarter rise in six years which calls this a turning point in the national apartment market. new construction is beginning to outpace demand, but it's mostly on the high end. that's why rent growth isn't cooling nationally. still up 4.6% from a year ago. but let's go local so you key
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what i mean. new york city, which, of course, commands the highest rent in the nation averaging $3,400 a month has rising vacancies and rent growth below the national average. san francisco, the second priciest rental market at $2,400 a month has vacancies flat. rental apartments are still hot in atlanta, miami, and d.c. with vacancies falling and rents still rising. salt lake city, charlotte, and portland, oregon, are the top three in biggest rent jumps. developers tell me it is robust construction of all the high-end rental buildings that's cracking the market. there are just so many people who can afford that kind of rent and, unfortunately, there has been little to no construction in lower income housing which, of course, is where it's most needed. back to you guys. >> diana, thank you very much. beautiful day down in my hometown of washington, d.c. that will wrap it for the first hour of "power." >> thank you for watching and stay tuned for mr. brian sullivan and the second hour of
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"power." >> we are coming up on 2:00 on wall street and we have a big market story developing for you. crude oil remains in a free fall and as mandy and tyler told you, that is now bringing down the entire market, as it has for the past 12 months. stocks are near session lows, and this chart says it all. check out both the move in crude oil and the s&p 500. they are tracking together. oil now trading at levels not seen since december of 2003 and actually if you adjust up for inflation, it's even worse than that. now, that bearish tone in oil is not only spreading across the entire energy complex, but the overall market as well. and morgan stanley out today saying it is possible, not going to happen, but possible that crude oil could fall as low as $20 per barrel. by the way, morgan stanley analyst who made that call will join us on this show tomorrow. i want to show you, you often hear me talk about the screens we follow here. this is a company called fact set. it enables you to realtime track stocks. i want you to go into my fact
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set and look at the oil complex right now. the question is, is today really going to be a washout day for oil because look at this. i know you can't read the names, folks, just look at the red. red obviously means down. i am just going to highlight some of the trades for you. bring it in here. thank you very much. this top screen here, these are all the big cap names. look at this, marathon oil is down another 8% today. it has lost 51% in just three months. conocophillips down 5%. i have broken these out by region. the next group, that's the balkan. you see some names down 10%, 12%. the eagle ford shale right there. let's move it up. that's the permian basis, 2%, 5%, 8%. sand ridge energy down 12% right now. mlps, offshore, everything is in the red. a couple names in the gren. some of them actually have market caps that are so small, really can't talk about them except for the fact that they used to be much bigger. some of the equity is going away. so the question is, is this
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really going to be a washout day because everything is in the red unless they've got some kind of special situation. i will dart off camera for a second. john la forge with wells fargo joining us. the head of real assets. quick question, do you think -- i know you're not a day trader. does it feel like a washout? like a capitulation to you? >> a few more days, yeah. we're already at the '08 lows, so $31 was that technical low in '08, but usually the way super cycles die, and this is the dying super cycle, you need some washout. i wouldn't be surprised if we see 20s but it would be brief though. the one part that isn't necessarily understood yet is the supply/demand growth environment is starting to balance, so it won't last. >> it may be starting to balance, but with all due respect, it's still not anywhere near balance. >> correct. >> it's getting closer, but it's still a long way off. >> true. >> part of the dying super cycle, what happens, something we talked about off camera,
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which is how many companies are going to go bankrupt? >> if you look at the '86-'87 period, it was north of 25%. i think the number was 27%. right now we sit at 7% is what -- >> again, melissa is jumping in for a second -- you're not trying to scare anybody but when i see a $1 billion company with a $12 million market cap, i also look at many of the bonds. we looked at that on my computer before we came out here. the bonds are down 70%. there's a wave coming unless something changes. >> absolutely. there was a guest on maybe an hour ago when i was in the green room. he said probably mid 20s. europe get a washout effect but a lot of companies cannot effect at $60, $70, anything less than $60, $70. i think the number is lower than that. but $30, oh, my gosh, there will be a lot of companies that go bankrupt. one statistic to know, once oil bottoms it takes a solid two months for the average energy stock to bottom.
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a solid two months before the average energy stock does because they burn the street and no one wants anything to do with them and it takes a while to come back. >> john, i'm curious how confident are you in achieving that balance and what that balance actually is because there's a supply side and demand side. are you confident demand will still be there and just as strong? which side of the equation are you relying on to either go up or go down? >> yeah. it's the supply side that's really the balance in the e quition at this point. now that we're in the 30s and possibly the 20s. it's coming on fast, very, very fast. so demand growth isn't that high. it's 2.2%, 2.3% but you're basically with supply growth starting to go negative now. and in the past usually what happens is within a few months you get oil balancing. at the free fall it's in right now i wouldn't be surprised if it's the next few days, next week or -- >> just to understand, the base case scenario behind the forecast is demand grows -- >> yes. >> -- as opposed to remaining
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the same or contracts. i think that's the real concern in the market at this point, especially with china's volatility overnight. >> complete wildcard, correct. as of now, it's the supply side that is balancing. the demand side really isn't falling apart. if it did, it would wipe out the idea we're going to bounce back. >> the idea is supposed to be simple. low prices -- >> yeah. >> induce more people to drive or fly or ship. that resuscitates demand because things get cheaper so we consume more of those things and thus you get that balance. we have driven more in america but to melissa's point, if china slows down, then that may negate any positive effect from our demand side. >> it absolutely could. i can't negate the demand side at all. usually when a super cycle dies, it's the supply side that really gets out of wof whack and that' where we are. as long as demand doesn't fall off a cliff, i think we're going to be fine. >> you're the head of real assets, not just oil. arch coal filing for bankruptcy.
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any coal company you see worthwhile? and is there any commodity you see as a whoorthwhile investmen? >> no on arch coal or any coal company. >> no coal companies are worth anybody's money at all? >> it's just not. you're seeing some demand out of china with coal because it is cheaper, but it's still not worth it. you don't get enough of a presence there. commoditywise, no, you're still in that dying super cycle. >> for everything? >> pretty much everything. the future is doing to be more about food. so if you're talking shorter term, i would say not much of anything but at this point in the cycle with commodities, if you're allocating money into the space over five, ten years, this is a good spot. for the next few months, not necessarily. >> but five years is a good trade. >> it is. >> a basket perhaps. hold your nose and let it go. >> super cycle has pretty much run its course to the downside. >> john laforge, a plesh smur to get you on. some comments from dennis
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lack ha lockha lockhart. he says it's unlikely to see enough data to support a january rate increase. he also says there probably will be several more weeks of market volatility that could change the economic outlook. he says all fed meetings though are live for rate rises, that the fed is monitoring the china developments, and in essence he's basically saying in december he was reasonably satisfied it was time to raise rates, but he says it's unlikely to see enough data to support a january rate increase. but i think most on the street did not expect a january rate increase. they're looking out towards march. so we'll see whether the market reacts to it. back to you. >> and we'll see if he's gone rogue in a way. i'm not going to vote for it. >> he's not a voting member this time around. >> he's just talking. >> yes, he is. he's talking. >> i'm definitely sure that the chargers are going to win the super bowl.
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they didn't but i'm definitely sure of it. we have another news alert out of detroit. motor city with phil lebeau. >> a california federal judge has appointed robert mueller as settlement master to oversee approximately 500 civil lawsuits against volkswagen involving rigged diesel emissions. those vehicles with rigged diesel emissions. the idea robert mueller because of his experience will oversee a possible settlement that could be likely costing volkswagen billions of dollars. this news comes within the last hour of us talking with the ceo of volkswagen, matthias muller, where he told us on cnbc it is possible as volkswagen works out a settlement with the u.s. federal government regarding these 500,000 rigged diesel emission vehicles that volkswagen potentially could buy back some of those vehicles. so, again, robert mueller, former fbi director, settlement
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master overseeing approximately 500 civil suits against volkswagen in the emissions scandal. brian, back to you. >> i'll take it, phil. thanks so much. let's take a check on the nasdaq. off of the session lows. the nasdaq is down for an eighth straight session. we're down by more than 1% right now. we're 20 points or so off the session low. eighth straight sessions of losses, that hasn't happened since 2008. biotech is a big part of the story. the ibb falling sharply down 4.7%. it is down nearly 13% in 2016 and the ibb's largest holding cell goen has dropped 12% in that time. it is down 6.9% right now. just hours ago the company announcing a new ceo will take over in march, it gave guidance for 2015 and 2016. the 2016 side of things were a little disappointing here. let's get to the jpmorgan health care conference where meg terrell is live with celgene's outgoing ceo. meg? >> melissa, thank you very much. bob huggin, thank you for joining us. >> great to be with you, meg. >> we want to get to the
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movement today in what's been going on in biotech but first we have to ask you, the announcement came as a bit of surprise. why are you moving on? >> i'm really not moving on. i don't want to disappoint anybody. i'm still full time at celgene. i just think dynamic companies should challenge their leaders, should extend them and stretch them, but also capitalize on their strengths. we've got great leaders, mark and jackie, and giving them more responsibility while i stay on as executive chairman full time to help lead the strategic direction of the company and drive strategic initiatives, i think we're getting the best of both worlds. really promoting people who could do more and greater impact and retain me to help do the kind of things where i have been focused on. so i think the future of celgene could not be brighter than it is today. >> well, there is a negative reaction in the stock together. just seeing the stock fall so much. are you hearing -- what do you attribute that to? what do you hear from investors as to why the stock is down so much? >> we have lots of meetings and they're just starting, but overall the tone is positive. the underlying fundamentals in
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the markets and liquidity is pretty weak. we don't have large exposures to china so there's nothing out there in our fundamentals. the 'results were spectacular. we had 21% revenue growth, 27% earnings growth, and into 2020 we're projecting 19% revenue growth compounded annually and 23% earnings growth compounded annually. so the outlook for celgene that we talked about today is incredibly promising. >> i know you guys as a company are not so exposed in china, but we were talking before we came on just about how you view china as a risk to the market. can you explain your thoughts on that? >> i think there are concerns seriously, the economic dislocations. if there's a harder landing than people think, the rush to pull things out of growth and high return assets is a concern to us, so it hurts the biotech sector overall. but i think we have to be careful. these kinds of reverberations related to china cannot mask the underlying strength of our
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industry and certainly celgene is a barometer of that. strong revenue growth, strong earnings growth. the productivity in research is accelerating. we're in the early days of the benefits of the revolution of molecular biology. this industry is a key driver and this is short term reverberations. >> i'm interested to know your thoughts as to how this downturn and this environment makes you look at m&a. does it give you discounts in who you might think about buying? >> we like to buy things at a lower price than a higher price. in the end we look at it very binary. it's either going to be way cheap because everything worked out great or it's going to be way too expensive no matter how cheaply you bought it. the most important thing is to buy good assets and preferably develop your own first and then if you're going to add to your portfolio through collaborations or acquisition, buy quality. price is important but secondary. >> bob hugin, many more questions, we'll leave it there for now. thank you for joining us. >> thanks, meg. >> a lot more coming up from the
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jpmorgan conference on "the closing bell." >> we'll see you soon. thank you very much. coming up, we're going to try to break into our crystal ball to find out what this earnings season might look like and mean for you and your money in what has been a year to forget. we are just minutes away from the oil market closing for the day. will we close below $31 per barrel? you got to stay tuned to find out. i don't know. we'll see br the traders take it. we're going to take you live to the nymex when "power lunch" returns with a tribute to david bowie. ♪ today, we're seeing new technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care, to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies
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i'm late for an important function. compare.com. saving humanity from high insurance rates. welcome back to "power lunch." a busy day for the stock market. the nation's second biggest coal miner filing for bankruptcy protection. shares of arch coal have fallen basically 100% in the past year which happens when you file for bankruptcy. also today good times continuing at southwest airlines. southwest reporting an 8.6% jump in revenue passenger miles for december. for the fourth quarter revenue passenger miles climbed more than 11%. another once hot ipo cooling off. shares of fitbit falling below $20 a share. they're at $18.89, down 35% over the past month. melissa? >> brian, earnings season is
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about to heat up with alcoa reporting after the bell. that's followed by jpmorgan and intel out with earnings tomorrow. ahead of tonight we're breaking out our crystal ball to find out what earning season might have in store for your money. let's bring in lauren skol. you have a great read on the middle market and from there you can extrapolate qu. what are you seeing? >> nice to see you again. we have good news to share again. golub index shows growth in middle market. earns up 2.2%. while that growth is a little slower than it was in q3, we're seeing particular strength in consumer discretionary which has really outperformed high expectations with 17% growth year-over-year. >> now, you're highly correlated to the s&p 500, is that correct? but there are differences in terms of what you're exposed to. when you say consumer discretionary on the s&p 500 we think restaurants as well as retail. things like apparel, department
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stores, which have not been doing well. what are you more weighted to in terms of consumer discretionary? where is the strength coming from? >> absolutely. our index is well correlated with the s&p 500 and with gdp generally and it's important to keep in mind that it's based on real earnings from real companies. we're the largest middle market lender. we have a $15 billion loan portfolio, and so these are actual results for companies from october and november. as a lender there are some segments we're more interested in and some segments we're less interested in. apparel is underrepresented in our portfolio as would be energy and commodity manufacturing. so we're seeing the strength in leisure and entertainment, in fitness sentence tcenters, in t people are spending on pets, entertainment. >> are you getting the sense from these companies that it's because the consumer has more money in their pockets from lower energy costs? as a lender, do you view that as a positive for their businesses? >> absolutely it's a positive. we see the strongest factors
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actually being more people have jobs, wages are going up. absolutely discretionary income is going up because energy prices have come down some. the contraction of energy prices is not really a long-term sustainable feature. when we talked last time i expressed some concern that going into '16, the tailwinds from energy cost reductions would diminish, but actually when we look at first half 2015 oil prices in the low 50s and oil prices now in the low 30s, those tailwinds will probably continue for the next six months. >> lawrence, we have to leave it there. thank you for coming by. >> thank you. >> lawrence golu burke. >> underwear, it's fun to wear and profitable to invest in. we're going to explain that. and a check on what is working this monday. not many names, but you have tenet health care, hca holdings, and macy's up nearly 6%. we'll show you what's happening
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hello, everyone. i'm sue herera with breaking news concerning fan duel and
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draft kings. the companies have been granted a permanent stay which means they can take business from new yorkers throughout their appeal process. you might recall that this stems from a november 2015 injunction issued by new york's attorney general eric schneiderman which said their operations basically were illegal gambling and they were restricted from doing business in new york, which is their biggest market. now, through this whole appeal process, the companies will be able to take business from new yorkers. so, brian, you're up to date. back to you. >> sue, thank you very much. it is time now for "street talk." this is where we dig out the most interesting stock recommendations of the day just for you. stock number one, pass to do with that underwear comment. hanes brands getting a bit of a double push today. it was mentioned favorably in barron's saying they could have 30% upside because they dominate the underwear market. an analyst also out today upgrading hanes brands to a buy from a neutral. he says he thinks it can, quote,
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side step traditional retail volatility. basically hopefully you got to buy underwear. i think it's going to be -- except for cramer from "seinfeld." it's going to be a multiyear market share gainer. he has a $35 target on the stock which implies another 15% on top of today's gains. >> the barron's reasoning is kind of odd, because it dominates the underwear market. i guess everybody has to wear underwear unless times are tough, maybe that is some sort of leading economic indicator. >> that's the commando market, a different segment. >> second stock here, gm, general motors, credit suisse upgrading. strong free cash flow, about 13% in 2016 can be sustained longer than the street is expecting according to credit suisse and there could be margin upside in 2016. also what the analyst called substantial cost savings ahead. >> general motors has been pounded a little bit lately. some of the ratings and price
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targets, morningstar, the highest i see, $48 a share. stock is just under $30. so you wonder if some of the analysts will start ratcheting it down. credit suisse the opposite. they are very confident. third stock is google, aka, alphabet. i still can't call them that. raising the price target to $900 from $880. this is why i pulled this out, it's the strength of the youtube search. that's what the analyst is basing this on. thinks the share of digital ads will go to 40% on youtube by 2020 and think the most people in the ad business are still not classifying digital video ads the right way and they see it evolving into google's favor. i know there's at least one $1,000 target on the stock. >> wow. that's interesting. you know, from just a trading perspective, the fundamental story, the monetization of different aspects of the business including youtube, that's definitely part of it. from a trading perspective in a market like this, the traders on "fast" are all saying look at google carefully or alphabet,
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sorry, because this could be the next source of funds in the market. there are all these stocks that have done very well. google is up 44% in the past 12 months. this may be one people want to take profits, take the gain in 2016. we'll see if it comes under pressure. >> can we just keep calling them gooingle for the sake of falling f.a.n.g. stocks. f.a.n.a. stocks are not as exciting to say. >> goldman sachs making two calls on two banks. upgrading wells fargo to a buy while downgrading jpmorgan chase. wells is well positioned to deal with a potential variety of negative factors including lower oil prices and slower china economy. the downgrade to jpmorgan is based on the recent outperformance. >> you know, i don't want to defend wells fargo, but the stock is down 8% this month. it kind of looks like the indiscriminate selling we've been seeing, loan rates are up, default rates are down.
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>> yield curves are flatter. >> that's probably it, too. 8% decline for wells fargo this year. finally today's under the radar name, imperva, cyber security company. guggenheim securities upping it to a buy from a neutral. they say the stock is worth a, quote, second look because of its best of breed status and market leadership in a number of key areas. it's a big player in defending against thins like denial of service attacks. price target, 78, 35% upside. stock down 12% in the past quarter. >> and it is often mentioned as a potential takeout target. as you may have heard -- by the way, this is "under pressure," this is not "ice ice baby." it's a david bowie tribute day. a huge day for crude. jackie deangelis is always under pressure at the nymex but always cool as a cucumber and she will join us coming up.
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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. hello, everyone. i'm sue herera.
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here is your cnbc news update. some tense and scary moments in houston. two window washers have been rescued after getting stuck in scaffolding on the side of the tallest building in that city. look at that. their scaffolding system experienced a motor malfunction so firefighters and a high angle rescue team placed a rope around them and guided them to safety through a 71st floor window. wow. video purportedly showing shiite muslims firebombing a security building in the a saudi city thought to be in retaliation for execution of a cleric. vladimir putin calling for global cooperation in the fight against terrorism. he accused the west of exacerbating international crises that he says have contributed to terrorism. and pope francis giving his first major speech of the year to the vet can diplomatic career. he focused on migration and the
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need to find dignified solutions. that is the cnbc news update this hour. brian, back to you. >> all right, sue. thank you very much. well, the oil markets are closing for the day, and they're going to close down again. let's find out how much down. jackie deangelis at the nymex. >> good afternoon. it looks like a more than 5% down day for wti closing over $31 a barrel but we had that intraday low $30.88. we haven't seen that since december of 2003. it's a 12-year low. so what happened here today, it was really tough on oil traders. the first piece of this, it's all about china. but which aspect of it? the demand side certainly in focus. also, that morgan stanley note out this morning saying if there's further pressure on the chinese yuan, that will push the dollar index up and that will be very bearish for crude. morgan stanley saying that's enough to push crude down into the 20s and that's really what worried traders here. they're telling me they're going to be watching the numbers coming out of china very closely
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this week, and whey also thought was interesting, brian, was that we started the session in equities a little bit higher. it's like we wanted to diverge here, but the crude pressure today really pulled the equity market back down as well. so it shows you how much influence it does really have at this point and it's something to watch. if we crack that 30 handle and go into the 20s, it's going to be significant. back to you. >> so let me get this straight. the stock market is controlled by oil. oil is controlled not by supply/demand but by moves in the chinese currency. so our viewers who maybe have money in a 401(k) are now subject to the whims of chinese yuan currency traders. >> well, it's multiple factors. we talk about them all the time, but certainly currency is playing more of a role than it has. now you have to watch the dollar as it relates to the yuan. >> by the way, the analyst you referenced will be a guest on this fine program -- >> that's right. >> -- tomorrow. jackie, we'll see you soon. thank you. it is time now for "trading nation" because, after all, traders do trade better
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together. let's get together and talk about investing in walmart. the worst dow jones average strong of last year suddenly has become the best dow stock this year. what has really changed except for the calendderoling over? erin gibbs and bud bugach. what changed with walmart where people hated it last year, they love it this year but we're talking about a calendar change. >> that's really the change. walmart is doing what the management has laid out to do for some time now which is to improve the experience in the stores to do some sku rationalization, to worry about its inventory but it's tried to improve the experience of the customer in the store. they invested $1 billion this year, and, quite frankly, what changed was the calendar and the valuation. walmart did peak at $90 last year, and ended really near the
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lows for the year. >> and you have trimmed your price target a little bit but you are still bullish on walmart. >> i am, indeed. and i think i like what i see going on in the stores. i like some of the actions that i see happening particularly in the messaging. i think that's been very strong. and i think that the improvement in fresh and deli is also showing up in the stores. we do a monthly price analysis of walmart versus some competitors local and national here, and we see good things happening particularly in some of the areas of fresh, particularly on the produce wall. >> okay. budd, you are positive. erin, you are less so. >> less so positive, yeah. so i think one of the catalysts we've seen recently is consumers are expected to have more money with wage growth and spend more, but one of the problems with walmart is that they need to raise wages as well, and when you look at on the earnings
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side, we're really looking at lower margins over the next 12 to 18 months, and actually declining earnings growth up until fiscal year 2018. so though they are bringing in more money and we're expecting revenues to grow similar to what we're seeing with wage growth, the earnings are still pretty tough. it's a good stock if you want something defensive, more about capital preservation versus growth. 3% dividend yield, very nice, but i think there are better options. >> budd though does like the name. we'll follow it. thank you very much, budd and erin. >> to more "trading nation," head to tradingnation.cnbc.com. melissa? >> the ceos of the world's biggest automaker is in detroit to show off their latest vehicles. phil is there with the ceo of hyundai america. >> dave zukowski.
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right in front of the g-90 but it's the genesis brant, our luxury brand. >> it's our first for ray into a luxury brand. it's coming out as a brand new vehicle. it's an awesome vehicle. we want -- we have been selling luxury cars for seven years and we're going to take a bunch of great individual models and create an umbrella brand called genesis. we're going to leverage the equity we have in the genesis name and we're going to bring out six new products over the next five years. >> are you going to have your own dealerships or will they stay within the hyundai dealerships? >> right now we have what we call a showroom within a showroom structure. >> right. >> there's half of our hyundai dealers are equus dealers and they have a cop nant they are required to comply with in terms of additional training and additional facility requirements. all these new products we have coming won't go to all hyundai feel e
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dealers. >> you know how competitive the luxury market is. you're going up against not only the traditionals but also theatiothe asians who have their own brands. why do you believe genesis can compete effectively? >> number one, we've proven that's the case over the past seven years as we brought out genesis. it was north american car of the year and our first foray into luxury was north american car of the year. we brought out genesis. our share in the luxury segments is double what it is -- >> even though it's not traditionally labeled as luxury. >> exactly. there is no compromises in terms of performance and technology and vehicle dynamics. there is no comprise in any vehicle out there. we've proven we can spet with anybody in the world and the value we represent -- some people that want the logo on the vehicle aren't going to come over and consider us. >> were you losing many hyundai customers to those other luxury brands? >> not really because we never would have seen them before. we started seeing a lot of competitive luxury owners that would come in.
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we started intercepting a lot of folks that might have been moving up from a full-size sedan to a competitive luxury vehicle. we started seeing those intercepts and more importantly, we saw a lot of our own owners that might have been moving on to the next phase of their life which would include a luxury vehicle, not losing them to defection but keeping them in our name plate. >> dave, man, you're going into a crowded market. you know that. >> we are, thanks. >> the new luxury brand from hyundai. >> have to check that out. the big winners and losers as we approach the final hour of trading. "power lunch" will be right back. you both have a
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lunch," everybody. a big market day. if you're just joining us, we are seeing the dow jones industrial average continue to fall again. that chart if you're on the radio, it's a chart of oil and the s&p 500, you can see they are tracking the same way. oil has been leading the stock market as well. we are just off our lows. it is continuing the worst, melissa, start to the year of all time, right? it's data has been tracked. >> yeah. >> let's start over. can we just have a happy new year party tonight and reset? >> pretend it never happened, the first 11 days, but we should keep in mind we saw oil in a free fall before, but we're about 1% off of the session lows right now and zittditto for the 500 so we did strength. we are seeing some strength in the final hour or so. >> some of the worst names in the s&p 500, freeport-mcmoran down 17% right now, that's today. that's not this year, that's today. consol energy, arch coal filing. consol may be falling in
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sympathy. also mckesson down 10%. check out under arm you'ouarmor. >> they downgraded the stock to an underweight and they said they saw evidence that there is lower average selling pritss for the footwear part of the business and we know nike has been very strong in that part of the business. levels we haven't seen since january '15. for under arm you'ourarmour, tht year never happening. on the nasdaq we are off session lows. take a look, we're down by 0.6%. we haven't clocked a positive session so far this year, although there is still hope for today. among the biggest losers in the nasdaq 100, liberty, vertex, and micron. check this chart out, netflix. the intraday low is $111.20.
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this is really helping the nasdaq turn around. we are seeing a lot of pressure from the biotech sector in today's session. netflix, $113, $116 and change is the intraday high. also take a check on small caps, bri. horrible year. horrible past 12 months. >> why, why? >> horrible past 12 months. >> why? >> the russell 2,000. >> bear market which means 20% from its june high. >> this i don't get because what we've heard, melissa, is that the big cap stocks are getting walloped because the dollar strength, all that currency conversion becau conversi conversion. the russell is primarily small companies -- >> domestically oriented. >> only in the united states. they have no currency risk whatsoever. low oil prices are supposed to help their customers, and yet the russell is down 20% from its high. i am sorry, it does not make sense. >> that may be a statement on what people think about the
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u.s.'s growth prospect. >> and why is netflix up? everybody is so scared they're home sucking their thumbs curled up watching "narcos." i think it's the best show on, quote, tv. >> i can't get into it. >> is it considered tv? >> it's tv. >> tv. "narcos," check it out. coming up, will oil's pain bring down the junk bond market? this is a big question that matters to you and your money on deck. we are going to dance with invesco's scott roberts on that very question. stay tuned. ♪ okay, so you launched your bank's app. now what? how will you keep up with the new demands of today's digital economy? the fact is: some believe they won't need a traditional bank down the road, so at cognizant, we're helping banking and financial services companies think digital, be untraditional, and reimagine what the bank of the future can be.
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i guess the upshot is gasoline will probably go nearer. oil dipping below $31 a barrel. lowest level since 2003 and the 2003 prices are about $40 at today's prices, so it's even worse than that. we did bounce back slightly but still closed down 5% in crude oil. let's bring in john killdoff and kyle cooper. john, back in august we spoke, and you said oil is going to $30. i smelled your breath to see if
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you had been drinking, you were completely sober and you were right. you say oil could go below $20. >> i'm looking for $18, brian. >> again, no three martini lunch. >> not yet. maybe right after this. >> might need it, you and the whole oil industry. why do you see that? >> there's been no reaction whatsoever from any major producer in the world whether it's opec, russia, the shale guys. everybody is hanging in there. >> the silence is deafening. >> and they're hunkering down. the saudis are maybe going to hock the family jewels by taking aramco public. the russians are dipping into their foreign reserve, their rainy day fund, and i heard over the weekend that the talk at the goldman sachs conference for oil producers is they're all trying to figure out a way to survive at $35. >> we were there, and they're not going to say those words to us. we're trying to figure out how to survive. you have marathon oil, i'm not picking on them, but they're down 70%. >> yeah. >> in 12 months.
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thtion one of t >> this is one of the biggest oil producers in the united states down 70%. kyle cooper, when you dig into the inventory numbers, we love having you on, do you think the fundamentals of oil barrel? >> right now probably so, brian, because, you know, despite everybody -- i mean, i've read so many reports about how the oil market appeared to be tightening up in the third and fourth quarters, its inventory accumulation slowed at the end of the third quarter into the fourths quarter but normally the fourths quarter inventories fall and they didn't, they rosa little bit. they are at record highs. keep in mind that's against a five year average that's rising. quite honestly it's just not cleaning up here in the states. i don't know, john, if i would be to your 18 bucks but it certainly still looks lower. >> john, i wanted to foil up on the 18. what gets you to 18? is it geopolitical risk, i mean, what is the primary driver to 18 bucks a barrel? >> i think the supply story is
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fairly well known at this point. right. >> we are at 2 million barrels a day. now china has gone off the rails for the oil market. okay? you saw the michelle caruso-cabrera interview today. the best we can hope for is 6.a 5% gdp we're being told. i heard the chinese are l done filling up their spr, the fake demand we had from them is gone. the last pillar of home was demand from china and that's been lost. >> i feel like consensus of growth of 6.5% or close to 6%, but the demand side won't really change that much. does that mean that there has to be a ratcheting down of expectations on the demand side for 2016 because i feel like people are standing by that and they're saying, do you know what, it's the supply that's too high? >> i think the supply remains too high. part of my 18 is we need a shocking price point for the producers to get hit over the head by a 2 x 4, whether russia,
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saudi arabia or our own share producers and react, react to the situation and they are not doing it. the last ray of hope was demand, we won't have it now with china at 65.%. that's not good enough. nowhere close. >> kyle, i hate to say it because i love your city and the oil business but we are going to see names coming off the doors here, there will be bankruptcies coming up soon, we all know that is correct the sbonds are showing t the stocks are showing it. is there talk when you guys go out for cocktails or sitting around the research table when these companies starting to under their fields are going to go inactive and maybe we could see a supply turn anytime soon? >> see, the difference there from everything i've heard with interest rates, granted the fed raised a little bit but interest rates are so low people are still looking for yield. when you change those hands from somebody that doesn't have any cash to a new owner that bought assets at 15, 20, 25 cents on the dollar they might have extra
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free cash flow to reinvest to make sure they maintain the product they have and maybe increase it. you have to get hit by a 2 x 4 to be some reaction because there has not been a supply reaction at all. >> the government announced -- a couple months ago the government said they are going to sell oil from the strategic petroleum reserve for the next few years. should the government say we're going to start buying oil? >> absolutely. >> fill it up on the cheap and maybe help stabilize the price. >> it's generally good policy to buy low and sell high and what they're doing right now is the opposite. >>est that the government. >> this would support our government. we've got to do a number of things to support our guys. we don't want them wiped up and over a barrel and be importing two-thirds of our oil. >> thank you very much. melissa. >> you can't talk oil without talking high yield. coming up next one high yield fund manager with more than $3
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billion under his belt, he will join us. "power lunch" will be right back. you pay your car insurance premium like clockwork. month after month. year after year. then one night, you hydroplane into a ditch. yeah... surprise... your insurance company tells you to pay up again. why pay for insurance if you have to pay even more for using it? if you have liberty mutual deductible fund™, you could pay no deductible at all. sign up to immediately lower your deductible by $100. and keep lowering it $100 annually, until it's gone.
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dave, dave's on it. what do these three sectors have in common, airlines, home builders and retail? they are all trading below their flash crash lows, tonight we will tell you which stocks of these sectors maybe you should take a look at right now. >> they also all rely on people buying stuff. >> that's true. >> that's the technical term. we know oil has been sinking, crude oil, brent crude are all
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down. for much of last year he was slightly overweight energy producers now he is getting defensive and we welcome into "power lunch." instead of saying that i was just going to scream and say we're doomed. that's not a great introduction. how is the high yield market literally doing right now? it's under a lot of pain. clearly the dollar headwinds with oil in the storage situation we have here is creating a lot of pain in oil and so our view is we're probably at least six months away from finding a bottom in oil. we think when the refineries finish up their maintenance then they will have higher crude runs. we may see a bit more demand for crude but that's not until late april or may. >> as a bond guy did you think you would be paying this much attention to the price of crude oil. >> energy is an important sector, just over 10% today. thankfully in the summer of 2014 we went from being overweight to underweight, not that we knew crude was going to fall this much. >> by the way, 10% of the high
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yield market is about 150 to $200 billion. >> that's just oil and energy. >> to be fair there are four different sectors, the midstream and refining space have not been affected to the same deb. the epicenter of the problems have been in service and e & p. >> do you own any oil related debt at all. >> absolutely. you need to play defense, you need to find attractive companies in the best space in the u.s., without a doubt that's west texas. we're looking for moderate to low leverage. the best assets we can own. >> diamond back. >> that's one of them. contra resources, rsp. we think m&a does pick up and we think that's the epicenter of it. >> what is going on in high yield? are there sectors which are being afforded any premium because they are seen as relatively safe or within the high yield universe compared to energy? >> one of the things that we're seeing right now is the stress and the energy space, mining is
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pulling out valuation in other sectors. in our view we think st prudent to address k to u.s. facing sectors, automotive, wireless, consumer products. we want to take advantage of that strong u.s. consumer. >> is that what you're buying right now, scott? >> we have been. we're overweight those areas. >> what's the biggest risk out there besides oil? >> well, global slowdown. i mean, china is a wild card. >> do you think that's coming? >> china is not growing at 7%. >> slow down a is not a collapse. which one are we going to get? >> i think china will continue to manage. if we have lower growth rates, 54, 5% that's still a healthy environment. royal is one of the only commodities that had demand growth last year, the estimates were a million barrels a day, demand was up 2 million barrels a day last year. >> some interesting ideas. we do appreciate your views. good to see you and hope to see you back on the program sometime soon. >> thank you. >> thank you very much. all right. melissa, should be a wild final hour on "closing bell."
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the dow now down every day in year. this year sucks. >> so far. we're still early. >> so far. >> top of the first inning, brian. thanks so much for watching, everybody. >> "closing bell," big hour, starts now. hi and welcome to the "closing bell," everybody, i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. yes, a big hour coming up. early on it looked like the bulls were finally going to have their day today, the dow did open 100 points higher, but then the major averages lost those early gains as oil prices fell again. this time wti below $31 a barrel. it hit $30.88 at one point and since just the oil price itself, energy stocks across the board are deep in the red today and now some market analysts are calling for an earnings recession as we get ready for

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