tv Closing Bell CNBC January 14, 2016 3:00pm-5:01pm EST
messaging, an indication of what we're doing differently today than six months ago and why, you should feel more confident. i do think they will be coming back to the brand. >> diane, thanks so much. >> thank you. >> thank you everybody for watching "power lunch." >> a big power of "closing bell," the dow up 300 starting right now. welcome to the "closing bell," everybody, i'm kelly evans here at the new york stock exchange. >> yes, i'm bill griffeth. we've been waiting here patiently for you. >> ages. >> we've got a rally on our hands today. some are calling this the bull lard bounce, st. louis fed president james bull lard hinting that another rate hike in the near term could be tough to justify. economic data has not exactly impressed and the decline in oil lowers expectations. >> we also have bulls coming out on wall street. we will have somebody who says this is the time to buy biotech
and also tom mcclellan saying he is seeing bullish sig nalgs in the near term. >> then there's gopro, that's hit an all time low today, but we have found a bull on that stock. analyst michael pacter is keeping his outperform rating, he will explain why coming up. a lawsuit hitting shares of fiat chrysler, it claims they conflated their sales. some big charges there and we will get you the details. >> let's start with one of the dow's big gainers today, jpmorgan, better than expected earnings giving the financial sector a nice boost. kayla tausche has details on that. >> jpmorgan is up with the overall market bucking the trend that we've seen recently in the financial space which have been down pretty harshly this month. expectations for jpmorgan were taken down coming into earnings, but the banks managed to beat the estimates on almost every single metric.
you saw loans growth 16%, the bank cut costs across the board, most noticeably in the investment bank, they shrunk the balance sheet by $50 billion meaning they have to hold less capital and they also set aside less money for loans that could go bad than analysts had expected. about a tenth of the money that they set aside was to cover oil, gas, mining, metals, companies, that was possibly a problem. analysts asked ceo jamie dimon whether the bank had possibly underestimated the weakness to come in energy. diamond said no. that being said there have been worries from the bears in this sector that the spillover from the weakness in energy, the emerging markets, whether that means the fed will hold off on another rate hike. that has been dragging the whole sector down, jpmorgan down 11% this month alone even including today's ride. s&p financials testing a new 52-week low earlier today, we will have to see what the rest of the banks have in store for us. citi group, wells fargo on tap
tomorrow. an cysts say perhaps jpmorgan will be a bellwether in a positive direction. back to you. >> we're actually going to have wells fargo's cfo on the show to break down those results tomorrow. there's been a back and forth between wells and jpmorgan in who is the tell, who is the barometer for the banking sector. it will be interesting tro hear what contrast if any wells draws tomorrow. >> jpmorgan tends to get a little bit of that trading investment banking market sluggishness because wells fargo doesn't really play in that sector. they do some investment banking deals, they are trying to bulk up in that space but jpmorgan falls prey to some of the trading weakness that's why analysts this week upgraded wells fargo, they said it would be immune because it's a more pure play banking business model. sometimes with interest rates being what they've been that can murt it too so we will see. >> jim cramer has made it clear he thinks that jpmorgan is the bellwether, he said if it ghoes
down we are all in trouble. >> i think he also meant because the quarter was so good, it was so much better than anyone expected and it's against the tape we're seeing if even jpmorgan couldn't put up a positive trade with a quarter like this pretty much no company has a hope. >> jamie dimon still the smartest guy in the room. goldman sachs, their shares higher on a report that it is cutting jobs. mary thompson has that part of the story for us. >> of course, the rally helping goldman shares as well today. a source down playing the report. the bank is set to cut 10% of its fixed income force. keep in mind goldman does an annual review of their work force cutting 5% of its employees every year, focusing on those that have underperformed. a source saying from year to year some areas have a higher percentage of underperformers than others. the report, though, coming ahead of goldman's fourth quarter
results which will be released next week. all wall streets firms they will be a focus in comp sons from 2014's tough quarter. that should be favorable but a bad sequential decline for number it's expected. fixed number has been hard hit by a tough trading environment so regulatory pressure recently prompting calling of some fixed number debts. morgan stanley saying it's cutting jobs in fixed income commodities and currency along with 730 other positions. back to you. >> mary, it will be interesting here to see whether this is a cyclical phenomenon because it has been a difficult period for some of these businesses or is it as you suggested with technology is there a shift under way where they're able to move some of these -- this is one of the few parts of the business where it's really human intensive. i wonder if they're making any strides and able to let people go as a result of that. >> it's been interesting what
you're also seeing is some of these big investment banks like goldman because of the regulatory pressures and troubles that some of their rivals are taking have actually been taking shares. that might actually offset any layoffs that are coming, you know, that might be promoted by technology or some other -- other trends that are impacting this area. listen, there is no doubt that you could see a shrinking of the work force in march, part because of technology, but kind in mind, again, the number of companies continue that could mitigate the job losses there. as far as morgan stanley goes, it's a bit of a different story,en area that has been difficult for the company and it has been trying to right size that business for some time as it's been decreasing its assets there. >> we await more from all of these companies as their full results coming in. thank you, mary. let's talk about the dow up 312 points right now, i think that's the high of the session right there, get to our "closing bell" exchange for this thursday, joining us chris retzler, jonathan corpina and
rick santelli checks in from chicago. john, we got a bounce today, do you believe it? >> i don't think we will have a parade down the canyon of heroes just yet. there are a lot of different factors out there. the beginning of earnings season clearly helps here, economic data, we have pretty good economic data on the calendar that's coming out tomorrow, maybe that can help support this rally. hobby i would have liked to have seen a smaller bounce in this market. i don't think these large moves that we continue to have is very healthy for our markets, but intel after the bell, we know how strong financials during earnings season can help this market, we get that tomorrow morning, let's see if we can continue this rally tomorrow. the other factor that scares me is we're heading into a three-day weekend. usually when we get close to a three-day weekend we start to see a little bit of a risk off trade, especially with all the global economic factors going on right now. even if this rally does continue tomorrow i wouldn't be too
surprised if we a start to see a fade friday afternoon. >> that's why, chris, given what a tough stretch it's been in small caps to see a nice rally there today. you just be exhaling or is it holding your breath ahead of what more turmoil may be to come? >> i've been at the need ham growth conference meeting with small company companies. things are not great, there's definitely nervousness in the companies, investors are nervous, people are paying up for liquidity and, you know, that is what makes a market. so for longer term investors i would be getting your shopping list ready as we get into the earnings season that kicks off. a lot of buy back programs are not going on right now which was supporting a lot of the market last year in these small caps. so, again, i don't think the sky is falling, but i'm not too quick to get out there and start buying hand over fist at this point. >> so, rick, what did you make of james bull lard's comments today if we are to believe that this market rally is a bull lard
bounce of sorts that he made it clear the economic data is not great, the lower oil prices reduces inflation expectations and reading through that of course means maybe the fed doesn't raise rates anytime soon again. >> you know, the whole argument to me is very nervous and it makes me very nervous because i think, you know, like many space movies we've seen we get one chance to get this right. you know, i've talked about recalibrati recalibration, the reason it's difficult is because it becomes the landscape that the fed created through sticking with zerp well after the crisis had ended recalibrated everything and it isn't going to be easy to go back and if they don't go whack i think that we will have a future very similar to japan's. that's not a horrible future but it's not the american future i think most americans were looking for after the crisis. you know, there's a great story in the american thinker about the velocity of money. it never recovered after the crisis and it gave two reasons,
lack of confidence in the post crisis economy and the other was the significant drop in interest rates and that basically not only cements but it creates a cycle where the policy continues to create results that the policy is there to cure. i think that's where we are at now. all these reasons i'm hearing, oh, the market believes the fed was wrong because interest rates went down. okay. let me see, a full exit would require all the trillions they own to be sold. maybe that would make it go up. or we could go back to may of 2013 the taper tantrum when everybody was belly aching interest rates went up 100 basis points. i guess that was the right thing then. listen, there's one reason why long-term rates are down, the relative value trade in europe and the fact that global growth is flat, as a pancake, and i'm not talking about the album by head east. >> rick, anything you might hear out of the gop debates going to make you feel better? >> not really.
i think when i look back at the landscape of the past and listen to some of the republicans currently that are going to be on that stage all i can think of is whether it's tax reform or reforming healthcare, all the other issues, i don't know that they've helped accomplish some of the things they've talked about the most. we need a doer and i'm not sure who the doers are. >> before we go, john, levels you're watching. is 1900 important to you on the s&p or what are you looking at? >> i'm a down side 1901, 1900 has come up as a support level here and any resistant level we really have broken through, 1925 we went right through, 1937 is the next level, i think if i look at the board we're getting close to that, too. on the upside on a day like today it seems like it's starting to evaporate on the higher end. >> lsthanks, guys. >> we will get right over to dominic chu with a round up of some of today's biggest movers. >> there are quite a few of them. three of today's best performing stock in the s&p 500 were all
down very big yesterday, if you look at williams companies, also freeport mcmoran and csx. shares of sears down near 3% as the retailer announced plans to close a small percentage of its u.s. kmart and sears locations. the intel surging before reporting its quarterly results after the closing bell today. we will see if that sticks after those earnings come out. >> they could have an impact on tomorrow's trade, that is for sure. thanks, dom. so we've got 48 minutes left in the trading session here today and a rally under way. the dow up 319 points in part because of a rally in oil as well today. >> a lot can change in a week. last wednesday tom mik clel len said we were in a bear market, now he seems to be changing his tune, find out why he is turning
the dow still holding these gains, it's about the high of the session right there up 321 points, exxonmobil and chevron the biggest gainers today, as oil continues to rally. s&p is up 43 points and the biggest gainer today was yesterday's biggest losers, the nasdaq up 2.7%. meanwhile, twitter has made a dramatic come back today after hitting an all time low earlier in this session. investors have been worrying about deteriorating user growth and the stock has lost nearly half of its value since jack dorsey came back to run the company officially back in july. meanwhile, twitter is being sued by the widow of a victim of an isis attack. she claims that the company knowingly allows terrorist groups to spread extremist propaganda which is in violation of u.s. anti-terror laws. twitter says the lawsuit is without merit. >> gopro also falling to new all time lows from it's ipo price of
$24 a share. the company announcing weak guidance yesterday in that 7% cut to the work force. michael pachter maintains an outperform rating on the stock which is now trading at just over $12. he did just lower his price target to 18 bucks from 33 and joins us now. michael, i mean, how can you still have an outperform rating on this company? >> you know, kelly, we've got a broken stock and not necessarily a broken company, but i agree with you, i mean, investors are going to have trouble trusting the management and wading in here. the fact is that they've screwed up on their product strategy, they had launched a new motion capture device every fall for three years running. this year they decided to get a little cute and they came out with something that did not work with consumers, it wasn't a hero 5, it was a session, it was a little tiny camera that was waterproof, they priced it too high, two price cuts later and a
bad miss later people threw these guys out. we know they have a quad copter drone coming out in the first half, my guess is that means may or june. they acknowledge they will have a new product refresh in the fall. i think you will see a return to revenue and earnings growth and i think a growth stock deserves a near market multiple, i have a 14 multiple, that gets me to $18. the stock was at 20, i wouldn't have a buy, but it's at 12. >> michael, we are making much of your buy rating hanging in there even as the stock has lost as much as it has. i think it's something like 80% of its value since august, but you are not alone. we looked into it, there are 19 analysts on wall street that cover gopro, ten of them still have a buy rating on this stock, seven have a hold rating and only two people have a sell rating on gopro right now. why not move at least to just a hold or is it too late at this point, do you think? >> you know, i heard you say earlier, bill, you were a sprinter.
i was a long distance guy. i'm in this for the long haul, i think this is a pretty good company and i think the stock is a pretty bad stock right now. if the quad copter takes off i think it adds as much as $100 million a request rt to revenue growth and it will be profitable. if we start seeing that i think this is going to be a very solid investment, just not yet. i think you wait until april or may, get in in front of the quad copter and take a shot because i think they're going to deliver. >> michael, if you were going out on a limb here and giving it an outperform, having previously been bearish i'd say you're brave, we appreciate the perspective, you're really sticking your head out, but, i mean, at this point you are just sticking with the recommendation that has not worked. and i understand, you know, it's a tough job, you are an analyst, nobody can ever have perfect redig testify powers, but, i mean, isn't it missing the plot here? >> i'm reminded of covering electronic guards on the way from 30 to 11 and i was the biggest idiot in the world from
my out perform, from 11 to 65 i looked like a genius. i don't know. maybe i'm wrong and i'm wrong a lot and maybe i'm seeing something that others aren't. i think the market for motion capture is huge, i think people don't want to put their phones on top of their ski helmet or surf with their phone in their hand so i think these guys have a real market, i think they do a very good job with it, they just blew it with one product once and they guided poorly. >> but what about the skeptics, even going back to their ipo a couple years ago who said, you know, the valuations are way too high for this company that is essentially what they would call a one trick pony with this technology, that they still are selling right now. looking back, is that a more valid evaluation of this company? >> yeah, that's totally fair. i'd say that if the bears are right then it deserves a 9 multiple which is right where it's trading. i think that there's some opportunity for these guys to grow revenue, mostly because
they have some pretty cool new products coming out and i actually think this quad copter is a big deal, not that there will be 100 million groans out there, but if there's a million drones out there these guys will do a big share of that. it's not like it's a melting ice cube and no one is ever going to buy a camera again. i think they are going to keep dominating share and there will be plenty of cameras sold. it's not a dead business. i think people look at this more like, you know, value it like a sony or something in the television business and that's fair and that's about where it's trading so i think it's faced. i think the stock is probably done going down. >> michael, thank you for joining us. >> michael pachter on gopro. 40 minutes to go here. actually a nice session in markets, a sharp rebound from the declines we have seen yesterday and the relentless selling pressure we have seen year to date. the dow is up more than 300 points, the s&p 500 having its strongest session at one point since september, the nasdaq making up at least a good portion of yesterday's declines
35 minutes left in the trading session, the dow hanging on to gains almost 2% up 306 points, a 2.5% gain for the nasdaq. so technology has turned around today, biotech as well got a prominent buy rating, but not all technologies doing that great, best buy shares hit hard today after the consumer electronics retailer revealed same store sales declined 1.2% during the holiday shopping season compared to a 3.4% gain last year. slow mobile phone sales the biggest culprit. they are cutting their fourth quarter revenue guidance and that stock is down 9% right now. >> but speaking of this big up day the past week we have been telling you all about the bear calls being heard around last week, last week we had tom
mcclel len on who says he thinks we are in a bear market. >> last summer it started on schedule when it was supposed to start for the small caps it started a little earlier and it's not due to end all the way until about october of 2016, we should get a preliminary bottom around april. >> but now he's out today saying he's turning short term bullish. he joins us for more on this call. tom, good to see you again. walk us through what you're looking at in the market, how bullish are you in the larger context here? >> hi, kelly. no real change, we are on the plan. we're having our preliminary bottom that we should see a bounce from up until probably late february and then down into that lower bottom in april and the final bottom of this bear market year is not due until october. when we get to october we will probably get the bottom to go up and it will finally be a good time for investors, but the rest of this year until we get to
october is just going to be a freight time for traders. i made a change in minus letter last night to short an intermediate term bullish, meaning for traders with a viewpoint of a few days to a few weeks. for long-term traders i'm still having a bear stance. >> fundamentally, tom, a lot of analysts are saying, look, even though china is slowing down and there are some who are talking recession we are not going back to 2008 and the financial crisis we had there, but you are still drawing parallels marketwise, chartwise, to the markets of 2008, aren't you? >> not to the magnitude of 2008. that was our last real bear market, so when anybody thinks bear market they think 2008. we're doing the same dance steps on the chart roughly, but not to the same magnitude. i'm not telling anybody that we will experience 2008 again, for one thing i don't think the fed is going to screw up and do a negative qe this time like they did in 2008 yanking liquidity
out of the market. i think they learned that market so we won't did see that, but we are seeing a relatively similar pattern that will show us a january bottom and attempt to rally. i think the rally will look different than how it looked in 2008 based on our other long-term forecasting tools in our crystal ball. >> i wonder if this leaves investors feeling a little bit whip sawed. if i got out of the market last week are you saying i should get back in now or no? >> i never give anybody individual advice, i just tell people what i think the market is going to do and i think the market is hitting a bottom now, we could see the dead cat flopping around on the sidewalk a few more times between now and the middle of next week. we have an uptrend until just about the end of february and then more down side work to do. it depends on who you are and what your stomach is like, the quality of your stomach lining as to whether you can take these whipsaws or whether you would close your eyes and wait for a year from now. by the time we get from a year
from now the uptrend out of october's low should be a good one. >> a lot of traders are taking their cues in the equity markets from oil right now in part from the currency markets. what else are you looking at to confirm your analysis in the equity market right now? >> well, yesterday wet a mcclellan os later rating of 282. about minus 150 is oversold so minus 282 pretty darned oversold. we're also seeing -- we saw a jiks divergence, a lot of sentiment surveys showing huge amounts of bear i wishness and hardly any bullishness. when you get all those conspiring together at a time when they're supposed to be conspiring and forming a bottom it's a nice thing to see. >> well, tom, thanks for joining us into keep up updated. >> nice to be with you, kelly. >> time for a cnbc news update. let's get over to sue herrera. >> here is what's happening this hour. defense secretary ashn carter says it appears a navigational error caused navy boats to stray into iranian waters in the
persian gulf. after being detained overnight by iran the ten soldiers and sailers on board the vessel are back with the american fleet. amateur video showing the moment a bomb is floated near the starbucks café in jakarta today. islamic state militants launching an assault on the end knee shan capital. five gunmen and two civilians were killed, scores were injured. jetblue is delaying flights causing long lines at the airport after a power outage disrupted the company's network. jetblue by responded by saying they are experiencing intermittent network issues. the san francisco 49ers from hired chip kelly as their new head coach, he replaces jim tomsula who was fired after one year on the job. the coaching carousel in the nfl continues. that's the news update. back to you guys. >> i was saying musical chairs and the music hasn't stopped yet. >> more to come.
>> they're shifting one team to the left or something. thanks, sue. all right. we head to the close, we're going into that final half hour. let's see if we start to see a little more buying, we are seeing selling coming in heerks the dow up 285 points just off the highs of the session. weren't interest rates supposed to rise when the federal reserve raised the fed fund rate last night? coming up scott mather tries to explain why rates have only gone down. >> we will hear from a healthcare hedge fund manager who says kbooits arer a bargain after this year's 16% selloff collectively. he names the most attractive stocks in that sector coming up a later on "closing bell." stay tuned. you're late for work. you grab your 10-gallon jug of coffee, and back out of the garage. right into your wife's car.
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welcome back. a strong rally on wall street today, the dow up 252 points but it was up more than 300 not long ago so coming a little bit off that high, the s&p 500 still up 33 points, the nasdaq which was hurt the hardest yesterday up 93 points today bolstered by a sharp rebound in the biotechs. phillips 66 getting a nice top today, energy prices are higher, oil prices but also an sec filing showing berkshire hathaway bought, buffet has been
buying a lot of the stock lately as it who was around three month lows and has built a pretty large position in the name, bill. >> heading into this last half hour of trading let's bring in mark newton. a couple charts you want to look at, what the stock market is telling you. you're getting mixed signals based -- depending on which time frame you're looking at right now. >> you're absolutely right. it's encouraging from a short-term perspective we're recouping all of yesterday's losses, right up near the highs from yesterday, short-term signs of capitulation i think to a certain degree, signs of fear rampant over soul conditions for those who heard mcclenen. i think we are too quick to jump the gun and think we are at an absolute low yet. we haven't seen the rampant volume into the stock, no trend readings over 2 this year. there are things that suggest we aren't quite there. >> you look at a one year chart. >> you look at august lows, late
september and we've got within 10 points right now, now we're trying to stage a decent reversal. these are important levels in august. we can't afford to get under 1860 without thinking we will have real capitulation to the down side. it's important we held this. new york composite has gotten below and is trying to recoup that today. >> let's take it longer term. you have a chart of the s&p going back to 1997 and this is where you're getting a different story. >> yeah, this is what's a little bit of a concern. you're starting to see real momentum deterioration. this started almost a year and a half ago. yes, the selloff did start two weeks ago from a price perspective but momentum have been falling for the last couple years. if there's one thing i tell investors to look at that makes you sleep better at night, the 10 month moving average. when you're above it you want to be involved. if you look back over the years if you would have stayed in the market when the index was below the ten month moving average you would have missed the entire
2000, 2003 decline as well as the 2007 to 2009 decline. as of now you're showing signs of momentum deterioration which i think will be important on an intermediate term basis potentially this year. tough to say it's going to be 2008 all over again, enough to warrant intermediate concern, short term probably get a bounce. definite concerns for longer term. >> all right. echoing what tom mik clelen said just a moment ago. thank you, mark newton very much. >> we've got about 23 minutes to go here, keeping an eye on the indexes where we're seeing nice buying pressure. the dow up 250 points, nasdaq better than 2%. inflated tires on new cars expected, inflated sales figures, well, not so much, but fiat chrysler is fighting charges it has done just that and details are next. and later find out how slumping pc sales are impacting intel when we speak to cfo stacy
the market here into the three-day weekend. he was expecting that tomorrow, we're getting it right now. markets lost almost 100 points the dow has since we came on air with "closing bell." we were up 320 some odd points, now a gain of just 238. >> try not to take it personally. >> i never would. meantime, racketeering and car making aren't usually heard in the same sentence but that is exactly the charge fiat chrysler is facing today. phil lebeau has details on this lawsuit. >> it's a lawsuit brought by a fiat chrysler dealer. this is a copy of the complaint that was filed on the 12th of january here in illinois and the lawsuit essentially comes down to this, this was filed by fiat chrysler dealership group in illinois, essentially filed against fiat chrysler accusing them of falsifying sales reports. the suit is using the like co statute because it accuses other fiat chrysler dealers in the area who went along with this
scheme of being part of this. that's why they're using the racketeering charge. it says fda's action have been arbitrary and capricious as well as coerce sieve to achieve sales numbers not clearly defined by fiat chrysler. he will we will explain to you how they believe it hams. for its part fiat chrysler has been on a roll over the last 70 months. in fact, sergio marcione has overseen a company that has boosted monthly sales for 69 straight months, it's been an incredible run largely driven by the popularity of the jeep brand. fiat chrysler last year sold 2.24 million vehicle in the united states. we reached out to fiat chrysler for a comment on the lawsuit. they said the company is confident in the integrity of their business processes and dealer arrangements and an intends to defend if action vigorously. shares were down 8 or 9% in mill land, down 4% today here in the united states. the scheme that's a alleged
basically works out like this, the dealership said that they were told to essentially market vehicles sold or punch the car even though it wasn't sold, therefore, they would get a volume discount in the future on the more popular models. it's also called stuffing the channel in the industry, it's a highly unpopular and in this case they're saying, do you know what, you falsified it so you are going to have to answer to it in court. >> just extraordinary. >> yeah. >> phil, thank you so much. >> as we keep an eye on shares of all the major auto makers which haven't exactly done quite as well as you would think given these record breaking numbers. >> after the record breaking numbers we saw for last year, that's for sure. >> gains 1.5 to 2% across the major averages, the dow up 232 points, the nasdaq 92. >> pimco's chief investment officer will give us his take on this rally today and what's the fed going to do about all this economic data and the lower oil
prices. and tomorrow don't miss an exclusive interview with u.s. attorney preet bharara. 1:00 p.m. eastern on cnbc. ♪ ♪ those who define sophistication stand out. those who dare to redefine it stand apart. the all-new lexus rx and rx hybrid. never has luxury been this expressive. this is the pursuit of perfection.
the federal reserve raised short term interest rates. this morning st. louis federal reserve president james bullard said those low inflation expectations are becoming worrisome. he also cited concerns about even lower oil prices for even longer. scott mather from pimco joins us now. scott, you oversee a big income portfolio. where do you think that benchmark ten year u.s. interest rate is heading from here? >> our expectation is that it has gently higher in yield throughout the course of this year, we're probably down pretty close to the absolute low end of the range here. that's based on our expectation that we are going to begin to see inflation expectations begin to rise. we think not only we probably hit a low point in terms of energy prices but certainly the impact that it has on u.s. inflation is going to diminish over time, just based on calendar effects. we expect to see wage pressure beginning to rise. putting all those things together we think we will see
yields rising gently, we think we will still see the fed on the move this year but expect to see many episodes of volatility the marketplace. our key message is be very careful in terms of mapping this equity market volatility on to the real economy, the real economy is probably more resilient than anyone realizes. >> james bullard said that the precipitous decline in oil is worrisome from the aspect that inflation expectations will not be met by the fed. when you look at the fundamentals of oil right now it's hard to find a catalyst that would push prices higher. you sound like maybe we've got told and are destined to go higher, but i'm wondering if it's possible we do remain at these low levels for a longer period of time than is expected and if that's the case how do they justify raising rates if inflation is nowhere near where they want it to be. >> we would say there's very low expectations already priced into the energy curve if you want to look at it that way. the market has priced in low
prices that last forever. we think those are too low. what is unique about this current environment for the last year or so is much of the decline has been led by increasing supply, it's not as if demand has fallen off the cliff. people are reading this drop in the commodity prices as if it's all demand related. it's been the case in prior episodes but not in this one. as long as demand stays continuously growing as we expect this year and we see supply continuing to diminish, especially here in the u.s. then you will start to see energy prices going back up. in the meantime remember that this drop in energy prices is tremendously ben firm to the u.s. consumer and in general is good for the u.s. economy. >> but we know that, scott, but at the same time we're just trying to look at the effects on some of the oil producing regions, noah was a big contributor to this recovery, some of those jobs that were created in the sfrs around it, it's not just oil, there has been tons of commodities falling in price and a lot of those
concerns aren't just about oil supply and demand it's about china's growth rate and the global growth rate. are you not sharing in those concerns? >> it's right to be concerned, i think we're more concerned really about the potential for a misstep in terms of currency policy or other domestic policy in china that really does create a bigger underlying problem, but in the absence of that we think that, you know, you can't just look at low commodity prices and assume that that means that we're headed for something like 2008 or the big downturn in the global cycle. we think most of it is due to additional supply. it's true that demand hasn't been growing from china at the same pace it was many years ago, but in general that's a good thing for the world's developed economies and means growth would have been higher than it would have otherwise. we want to stay focused on that and take advantage of some of these volatile periods and market dislocation that is result to pick up new investments and sectors that are priced too cheaply. >> our rick santelli calls this
period a recalibration, that the market is just trying to regain its balance with the fed now raising rates after all those years of lowering them and keeping them low for such a long period of time. are you surprised by this volatility right now? is that what's going on and do you think that this kind of volatility could give the fed some pause before they raise again? >> not surprised at all that we're seeing this volatility. we've been expecting it for some time, we've been positioned for that, we think it continues on throughout the course of this year. you expect to see a lot more time, for instance, when the vix is up in the high teens or low 20s versus where we have been in the last several years. that should be expected because of this turn in the monetary policy cycle. so more of that will continue, but where we think some people are making a mistake is mapping that directly on to the real economy and assuming that it has the same impact that it would have had three, four years ago when the economy was much weaker. >> pimco's scott matters saying
we are close to the low end. thanks for joining us. before we go to seema, we have -- art cashin was sigling ever nalg that the imbalance is to the buy side, $300 million to buy but he's saying that's paired off so it should have virtually no impact with the close with the do you up 232 points. as we track this market rebound take a look at shares of apple which are helping to pro pell the s&p 500 higher, coming off their best levels of the day but still up by around 2%. the stock did drop by as much as 8% to start the year and has rebounded to be down just about 5%. apple was an underperformer last year and has lost 9% over the past 12 months. chipotle another stock in focus extending its winning streak to a second straight day after analysts upgraded the stock from buy to neutral and hiked its price starting to
$536. the firm is confident their upcoming marketing campaign to win back customers will help stop the recent sales slide resulting from that e.coli outbreak. shares up 6%. with the markets we have about seven minutes left in the trading session, the dow up just 220 points, i say just because it was up 320 points at the top of this hour. joining us right now is al began gail from ridge worth investments. welcome back. >> thank you. good to see you. >> we have a rally day but still a lot of skepticism with all this voluntarily tift lately. >> i guess i'm sharing in that skepticism right now. fundamentally in my investment process with the allocation strategy i will look at valuations, the macro head winds and tail winds and market momentum. what we can see here there's two factors that are not really working for us in this particular environment, one we know market momentum has clearly
stalled, the other factor is that really if you -- i don't think i'm being overly generalist i can by saying that the weight of the global economy is resting on the shoulders of the u.s. consumer. so i think a lot of investors are nervous about that, we're worried about the same things in 2016 that we were in 2015 and they haven't been resolved yet. i like the optimism, i think we are going to finish higher for the year but i'm going to wait. >> it says here you do like stocks, you like technology. if that's been true since the start of the year it must have made so for tough stock making the last couple weeks. >> we're still underweight the energy sector so we're getting help there. you're right, this is a very volatile session, i've been allowing cash to build in my allocation strategies. i think this is going to sort itself out but we have to see better macro numbers before that can happen. >> are you betting cash build as the market declines further? in a sense if you believe the
market is heading higher why not be putting that cash to work? >> this is a time during highly volatile times where you need to stick to your investment discipline. from our perspective we've seen a technical breakdown going on here. the timing to go in and buy it i say over and over again cheap is not a catalyst. so we want to wait for the macro environment to improve, we think that it will, i agree with your previous speaker, but ultimately i want to see that happen and then we will see this market gain some traction and there will be plebty of time to buy it. >> i will leave you with you folks to continue the discussion with mr. bob pisani. >> and you have intel's earnings coming out. >> yes. see you in a moment. >> hello, bob pisani. >> hello there. >> let's review today's action. a pretty good rally that strengthened into the afternoon as we mentioned, the dow was up 320 some odd points at one time, but we have since then pulling back from that high, we are up just 221 points right now. among the dow 30, energy stocks
were the best performers again, this time it was exxon and chevron leading the way to the upside. home depot for a second day at least in the running the biggest decliner today and one more, let's see what the ten sectors in the s&p 500 look like for this thursday and how they've been trading. everybody is green right now with -- >> energy. >> -- energy leading the way again. so we had three thing that that mattered today, three important things happened. number one, jpmorgan had a very good earnings report. that was important. we needed good news from them. when they came out 6:45 futures moved up at that time. i'm not saying that's totally the reason but it moved up. number two, oil had a nice move up right after the stock market opened. that's important, that's psychologically important $30 level and three and i think it's the most important thing of the day i think jim bullard had a big impact op market psychology
today, he said he was worried about the deflationary implications of oil being low and questioned, in fact, wondered whether there would be further justification for fed rate hikes. my heavens, there is a guy who is a sent terrorist, this is not a dove out there and i got all sorts of chatter from traders saying do you see this? maybe they aren't going to be aggressive. those are three important developments today. one thing i do want to point out we had 10% correction. it's a pretty much garden variety correction and people keep asking today is the correction over. i don't know. it doesn't seem like enough, does it to you? >> it really doesn't feel like it's done. this is -- this period feels a little different than we had back in the august/september time period. i think there's a lot of skepticism, a lot of worry about china, about oil, about whether or not that macro momentum is really -- >> is that justified or is that just noise in your view? >> i am encouraged by what i'm seeing in the developed markets. i like what i'm seeing over in
europe. i think they have -- they developed some traction in 2015, i think that's going to continue in 2016. so i actually like the developed markets internationally. that said i think if you're going to do that you need to do it on a hedge basis because i think the dollar is going to keep moving higher. >> jpmorgan today, clearly they are the leader of that sector right now. do you like financials at this point? >> i'm market weight to financials, i might be a little bit over because i think that we are going to see a couple of fed rate hikes, not as much as being projected in the dot plots. so, you know, i think that this is going to be better for the financials group, but i still -- i'm going to say that i like technology because i think corporate profits are going to pick up and i still like healthcare. energy, i think you're going to get paid to wait and see on that one. >> it will be interesting to see what intel says tonight. they have signaled a slow down in pc sales, we've talked about that forever. >> we've talked about that for
days. >> now we're seeing a slow down in sales of mobile phones. best buy was a good example of that today. >> tim cook was talking about the slow down in the pc sales, we've seen that recently, we saw best buy today talk about a slow down in mobile phone sales as well. so i can't help but think this is not good news for intel. on the financials tomorrow, wells fargo, a lot of the big super regionals like pnc bank will be reporting, i'm eager to hear about home mortgages, i'm eager to hear about how home loans are going, personal loans are going. jpmorgan was fairly upbeat today and i think that was a very important part of the psychology. >> home builders, is that a sector you'd look at? >> it is. i think the home builders -- i would say that i'm -- last year i was very positive on the auto makers, but i would say now the home builders i think are going to be a better story. >> already. alan dale, good to see you again. >> bob, we will see you a little later. as we go out with a gain of 220
points on the industrial average, but a lot of skepticism about whether this rally can continue. the folks from aqua america celebrating their 130th anniversary of their founding ringing the closing bell here at the new york stock exchange. stay tuned now, we have intel's earnings coming up on the second hour of the "closing bell" with kelly evans. see you tomorrow, kell. >> thank you, bill. welcome to the "closing bell," everybody. finally a positive session on wall street this year. i'm kelly evans. here is how we're finishing the day, the dow up 224 points, the s&p 500 up 31, the nasdaq up 88 points. all gains of 1 to almost 2%. joining today's panel to talk about this and what's going on here we have our own mike santoli along with cnbc contributor stephanie link and also with us "fast money" trader tim seymour. we also get results from intel due out in moments. we will bring those to you as soon as at the hit.
stephanie, you were saying hurry up and close the markets, we are in positive territory. >> i was happy that we held a lot of the gains because we haven't seen that in quite some time. clearly we were oversold, sentiment very, very negative at this point. i was happy to see the lagging groups lead today, healthcare, financials and technology. >> and energy. >> and energy. i'm not sure we are out of the woods. i think volatility is here but i'm glad to see oil stabilize, i'm glad to see the first beginnings of earnings season be pretty good, jamie dimon's commentary was pretty encouraging. i still think you want to own blue chip dividend stories in this environment and it was that kind of a rally today. >> we talked to tom mcclellan last hour, he said whatever his concerns are about the longer term, oversold that stephanie was saying, time for maybe a move higher here but why doesn't anybody seem to believe it. >> because we've been conditioned, it's been a one day down path since before the end of the year. tom mcclellan fits right into this, people who have had it
right, people who have been short to the market, have been saying it's been acting like a bear market you had to get out of the way and let a bounce happen if nothing else. it's great that it's met with skepticism because we are in the mind-set right now is the sell of rallies type attitude. it may not come to that if we add more to it but at least what we've done, we've got out of that idea that a market that doesn't respond to oversold conditions, that starts to feel like a crash. >> exactly. >> that's what we're out of at least for a day. >> let's get to intel. josh lipton has the details. >> kelly, intel just reporting so let's get you those numbers. intel reporting 74 cents on $14.9 billion. the street tale was looking for 63 cents on $14.8 billion so a beat on the bottom and top. looking through the divisions the kline computing division pc's, 8.8 billion, that was better than what analysts forecast, data center 4.3 billion, the street was looking
for 4.4 billion. turning to the forecast q 1 revenue, 14 billion, the street was around 13.9 billion. this conference call, kelly, starting at 5:00 p.m. eastern and we will be on it, back to you. >> josh, thank you. we're looking at the shares action moving a little bit lower here and we will have much more on intel's results when we speak with the company's cfo coming up in a few minutes. let's bring in jon fortt along with the panel. we are still combing through them but happy to hear any thoughts you may have. >> on the top and bottom lines in terms of the numbers themselves it's relatively encouraging. i think the discouraging bit might be that it's actually the data center group that underperformed and the pc group did a little bit better than expected. everybody knows that pc's are in a slump, nobody expects them to turn around in a big way anytime soon, business enterprise buying not there as much, emerging markets suffering as well. everybody's hope is that the data center group continues to perform and grow throughout the year, you know, lower double digits, maybe not as high growth
as we had seen in the past year and the year before. so the fact that that missed a bit is probably what's causing investors concern at first, you want to hear what management has to say on the call about how that looks moving forward. >> the expectation for that data center group, where they're selling big -- more expensive, maybe more profitable chips was 4.4ish billion and they came in at 4.3? >> that's right. i asked brian last week have you concerned about these mega scale cloud providers who are increasingly buyers of intel's chips for the data center as they get bigger they will start requiring price concessions and his answer was we've got to keep innovating so that they are willing to pay what we want to charge for our product. by the way, the second tier cloud providers were buying more through last year. we will see if that continues in 2016 and beyond, though, because it seems like amazon, microsoft, they're getting more and more share of the cloud. we will see whether that gives
them leverage at the likes of intel. >> a nice beat intel's bottom line, but shares are lower by almost 3% after hours. what do you make of it? >> i think joob hit on something, the data center was almost priced to perfection, it's been an impressive transition away from the pc market, but data center was guided to grow somewhere around 15%. a lot of people think they will come in, 10, 11 when you look at the full year. i think that that is one of the places why you see things a little weaker. the good news is that they're also growing in the enterprise storage ssd which they have about 25% of this market, continued to be a surprise area of growth that i don't think people have paid enough attention to. net net for a company that's -- stephanie talked about big companies, liquidity, i think this is a case where you have a fantastic balance sheet, a dividend that will continue to be here, a company that if you look at the charts $29 is an interesting place to own it, i think the weakness is going to be something that's relatively temporary, these numbers were fine, expectations were high.
>> trading just under 32, mike. >> you're looking for at least 10% pull back from here. i would point out it has been the defensive name in the group, it's actually outperformed the semi-conductor sector by 8 percentage points. essentially people have been hiding in there maybe that's why it got ahead of the expectations what they could deliver in the quarter. >> stephanie. >> i totally gree, this is more of a defensive name. the valuation is compelling, 13 times forward, 12 times x cash. if you look at the free koesh flow field it's 8% and the dividend yield of 3%. in this child of a volatile environment where this old company has really reinvented itself, this used to be 100% pc's through and through and it's only about 60% of its revenue is pc's. i don't think anybody expected 15%. 10, 11% i would take as they go through the transition, let's hear what they have to say on the call. >> what about competition, tim? what about profit margins for
intel going forward? back in the days when it was just personal computers it was a pretty reliable cash generated business for a long time. what happens in the new freewheeling world where there's a lot of different people trying to implant their chips, small chips, cheap chips in some cases in different devices. >> the fact that free cash flow is a big part of what the story has been here, kind of the inc. bags time on their chips tends to be longer than it was a few years ago. from a free cash flow or cap x perspective it's more positive for investest. i think they are in a slightly longer haul environment. when you look at gross margins we are at place where there has already been a lot of pressure. unlike the rest of the market where i think actually there has not been enough pressure on gross margins, that's what people are mostly worried about going into this earnings season, i think with intel there has been a lot of reality forced into their business model and investors understand that. >> some of the numbers, jon fortt, their revenue guidance
for the first quarter was raised to over 14 billion but their growth margin does look like it will come down a little to 58%. >> with intel gross margin projections you have to be careful to put those in whatever context we hear from stacy smith about what they're doing in their next process, these factories that are cranking out the chips as they get ready to ramp up a new process, depending on how that's going, that can involve costs and can affect their gross margins. there are all kinds of things that can affect that number but yeah, i was going to mention, as you said, the nongap revenue estimate for q 1 is 14.1 billion plus or minus a half a billion dollars. not bad there, but context is everything, particularly since we're past the big holiday season and we want to hear what they have to say about some of these new chips that they've got rolling out, including sophia they're also excited about a new type of memory that they will be pushing out in the next year or
so that they say could change the game. >> i appreciate, jon, you joining us. our jon fortt, intel shares are down 3% after hours. turning back to the broad rally we had today before we talk to the company's cfo, tim seymour, tech has been a weak spot at the beginning of this year, one that's raised a lot of concerns, do you think these results change anything there? >> no. i mean, the weakness in tech, though, is largely been from companies that i don't think fit intel's profile. high multiple, high growth companies, a lot of momentum, crowd you had trades and i think some of these trades will continue to come under pressure. the growth expectations were unrealistic weighed against multiples tough to support in this environment. i don't think this changes the dynamic at all. we obviously need to get into earnings when it comes to facebook, amazon, netflix, the names we're talking about that have weighed the most on the index this year. will people pay up for growth? sthoofs the trade in 2015, so far not in '16. >> today was interesting because you did have the fang stocks
participate for the first time in a long time. kind of as a value or garpy investor it's easier to buy these -- >> garpy. >> tim, you understand. >> absolutely. you are not garpy, come on. >> i'm pretty garpy. >> you're very garpy. >> growth at a reasonable price as a catalyst. i think that these older school companies, these older tech companies like a cisco that's underperformed, if an intel is down, qualcomm, there are companies doing good things they're trying to grow, using some of their cash for m&a. i'd like to see more of that but that's where i'm more comfortable being. maybe technology got crowd into the end of the year, so -- >> narrow the playing field. >> maybe you go back and look for your opportunities. >> probably what it would take is for the earnings estimates to bottom out for those guys and
reaccelerate. the reason you had the narrow leadership is it was such a scarce situation for growth you paid anything for it. >> growth at any price. >> i think i got it. tim, thank you four joining us. >> be sure to stick around to catch tim and the rest of the crew coming up at 5:00 on fast. jpmorgan's global head of derivatives will explain what he sees happening in an exclusive interview at 5:00. oil and stocks rebound today and according to one of the street's top strategist the rebound isn't over. he will join us with his long-term bullish outlook later. we will hear from one analyst who says now is the time to get into the beaten down biotech space. you're watching cnbc, first in business worldwide.
my name is jeff richardson, the vice president of operations here at c.k. mondavi. to make this fine wine it takes a lot of energy. pg&e is the energy expert. we reached out to pg&e to become more efficient. my job is basically to help them achieve their goals around sustainability and really to keep their overhead low. solar and energy efficiency are all core values of pg&e. they've given us the tools that we need to become more efficient and bottom line save more money. together, we're building a better california.
we begin with a news alert on amazon, sue herrera has details. >> amazon has received an ocean freight license to ship packages from china by sea, that would be called an ocean freight forwarder. an organization that basically organizes the shipments from, say, china to the customer. it's interesting now that amazon has truck delivery, it has drone delivery and maybe it has
freighter ship delivery. that's a $350 billion business of course so they have received according to blog post flex port a license to ship packages from china by sea. kell. >> okay. sue, thank you so much. >> they're in everything. >> stephanie, i'm wondering do they want to be a transportation company? >> it certainly seems like it. i will say i actually think they're making a big dent against the ups and fedexs of the world. if they want to get into something we know they have the wherewithal to do it. it depends which angle they will go through. they want to have the total end to end solution for the customer. >> there's a reason why these independent players exist, isn't there? >> you would think. ultimately maybe it makes the business more capital intensive. i almost feel as if jeff bezos like to have more people scared of him. i'm not going to threaten and intimidate the retail industry and every other business, i also want our partners in transportation to fear us. >> i'm not analyzing this enough
through the lens of -- >> elon musk landed a rocket before he did but i don't think elon musk runs ships from china. >> pivoting to biotech, our next guest is saying it is time to buy. let's bring in len yappe. why not? there has been a route clearly but why are you so sure that now is the right team? >> several things have happened over the past week in addition to the stocks having corrected to more attractive valuations. with the jpmorgan conference this week there was some resetting by some companies where the analysts were overly optimistic about the prospects for 2016, those were included in some of the stocks that not hit hard. so i think that there is a much better level with those stocks are trading. secondly, the people's mood over the past week when tech was
extremely negative and they are underinvested in the sector. a lot of what drives the sector is emotion and news coming out. i expect there to be significant favorable clinical data developments over the next year that now essentially washed out of many of the stocks. i think that the time is right to get back in. >> stiff knee, what's your view on the biotechs? >> selective because of the political environment, number one, number two, a lot of these stocks are not that cheap. so i do know that one of the names that len likes in gilead. it's been long rumored that they have to do a deal for this shock to get out of the funk that it's in. it's very cheap, no doubt, but i don't think people are going to pay for it unless they do -- do you see them doing a deal and what is the perfect fit in your opinion for them? >> sure. and i've said this for a while. i think gilead which is trading at eight times earnings needs to do a transformative deal like they did with pharma set four
years ago in order to be able to get the growth rate back. i think that they will have a hard time growing earnings between 2016 and 2019 when their pipeline starts to kick in. the pipeline is very, very good. the perfect company for them to acquire in my opinion is one that would get them more in the oncology space. right now they are a very minor player in the oncology space with only a couple hundred million in revenues, one drug, i think that the ideal can company for them to acquire is a large cap company celgene, where they would become very significant both with current products as well as celgene has become the marketing partner of choice for smaller oncology companies in immunotherapy. there is a pipeline of ten years that celgene has. the pe of celgene is about 18 so the pe would be diluted, it would be higher but the pe to growth rate ratio would be much
more favorable under that scenario. >> in a word, len, why also do you like a merck here? >> merck is going to come out with a drug for hep c that will get approved at the end of the month, the stock is trading at about 14 times earnings, yielding 3.5%. i believe that the drug, will do well in hep c, probably be priced at a 15% can i say count to current therapy. i believe they will also be a factor and this isn't that well known in the next significant hepatology disease state called nash and i think that that drug area will be over a $20 billion area. i expect merck to be one of the companies involved. >> like we said, the buying calls were coming out on wall street today, in this case len was calling saying it's time to get into biotech. we appreciate you joining us to explain a little bit more about why. >> thank you so much. general electric's decision to ditch fairfield, connecticut, for boston, massachusetts, is impacting both communities already. coming up we will get what the
move means from massachusetts resident barney frank and his connecticut counterpart larry kudlow. first intel earnings out just moments ago, the shares are falling after hours, we will break down the numbers with the company's cfo stacy smith on a first on cnbc interview right after this. you're late for work.
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switch to liberty mutual and you could save up to $509. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance. welcome back. we begin here with breaking news on goldman sachs. mary comparison has more. >> the company announcing a settlement with the department of justice, the rmbs working group actually, a settlement
that is going to reduce its four quarter earnings which are due out next week by an amount of $1.5 billion after taxes, it's a $2.39 billion civil monetary penalty, they will also provide consumer relieve for forgiveness for underwater homeowners as well as distressed borrowers. goldman sachs settling with the d. o j, this is part of the sem nants of the financial crisis. those earnings due out next week. kelly, back to you. >> just briefly, does this get another element of uncertainty out of the way for goldman or become an additional head wind for the stock. >> i think it definitely gets it out of the way. part of the bull case for jpmorgan was that it was all out of the way already. this seems like a lagging instance and the stock has been terrible. the stock is down 10% year to
date, below tangible book value. people are more worried about the book now than eight years ago. >> i think people wanted to see jpmorgan's fundamentals and hear good things or maybe just in line things. the stock is down -- the whole group is down, i don't think it will take much to see these stocks continue to rally. >> in the i is that the ceo says we are pleased to have reached and agreement in principle to resolve these matters. that was hanging over the stocks, goldman sachs having a tough year to date performance period. shares of intel, let's take a look at those, the company reporting quarterly numbers a little earlier, down 2% at the moment. we are joined by inn fell chief financial officer stacy smith. good to see you. >> good to see. >> you let me begin by correcting something i saw earlier which is important to your business. let's talk about profit margins for the first quarter which you are saying are actually on a nonadjusted basis going to be
higher. is that right? >> yes. so i think where it gets a little confusing is because we closed the al tara acquisition at the beginning of the year we have a lot of accounting adjustments. when you look at the business on a nongap basis we're forecasting a 62% gross margin for the first quarter which is right in the high end of the range that we normally see. >> okay. it's having because you guys are transitioning from a period where i remember the old wind tell term, it was just about the personal computer and just about intel being inside those machines and now especially after the consumer electronics show we see these intel chips are going to be everywhere. >> yes. >> but as that happens while the data center business looked like it was a little bit of a miss relative to expectations what is it that's going to bowl ter those profit margins going forward? >> actually, the data center was light right on our expectations. at the investor meeting we did at the fourth quarter we said we expected the data center would be up in the low double digits for the year, it was up 11%.
when you look at we've seen two very strong years of growth and we're expecting 2016 as another year of growth. to your point -- strong growth, actually. to your point what is exciting is there is all of these devices that are connecting to the cloud infrastructure and we're uniquely situated to benefit from building off that infrastructure, as you saw at ces we are doing cool stuff in the end devices as well. >> we can show people the range of products you are workingen on. a couple years ago you had that charging bowl and now these chips are found everywhere. can you give us an example of the economics. can a chip inside a bowl be as profitable going forward for you guys? >> so there is a wide change of devices that are connecting to the internet and they range from, you know, high end gaming pcs to wearables to autonomous driving cars, you know, you just kind of go through. we plan to make money in those clients and in some cases we
make a lot of money, in some cases, you know, we will make less money, but we will make money across that breadth of clients. the real power of our economic model is that all of those clients sold by us and sold by others are going to dve this build out of the cloud infrastructure. you can see the transformation of the company. we've become -- our data center business is a $16 billion business, it's been growing in double digits, it is what's powering and fueling our profit and growth. >> what about amazon, we just talked about how they are getting apparently a freight license and they've looked at going into the chip space for data centers. they have a huge business there, if they are anything like we have seen in other spaces they could say why should we take your chips. are you concerned about competition? >> we face competition in every segment of our business. why do people use intel? why are we the partner of choice in the data center? the answer is because of our technology leadership we can
provide more performance, more energy efficiency, we can actually improve the economics of the data center which for them is the factory. for us it's all about coming in and doing what we do every day and doing it at a high level of excellence and that's how we with inn in the marketplace. we take competition seriously but if we keep driving technology and innovating in terms of our product lines we will continue to win in the market. >> we just showed a drone a moment ago as well. why -- i mean, the future of the drone space is something that's kind of gone from almost a joe he can to something people are taking quite seriously, it looks like you guys certainly are. what do you expect there? >> it's interesting. i just put the drone in this category of there's lots of devices, things that isn't used to be smart or didn't used to exist that are now smart and connective and that benefits our business. the interesting thing in something like drones is the kinds of technology that it takes to do a great drone and how we can take that technology across other products. one of the products that won at ces was a drone powered by intel
that has a real sense camera in it that allows it to navigate around obstacles, think it as a smart seeing drone that can navigate around trees and obstacl obstacles. that technology is cool in drones but has implications across the breadth of our product line. we can do them in lots of other products and that's the scale of our business and what gives us economic return. >> stacy, appreciate you joining us this afternoon. that's stacy smith with the company's earnings report out and its future in drones illustrated there for everybody. thank you so much. we have a news alert on four square. let's get to that with julia boorstin. >> that's right. four square announcing a new ceo and new $45 million round of investment. dennis crowley who has run the location based social network since its founding in 2007 is leaving the ceo role and will become executive chairman, he will focus on the company's vision. jeff gluk who joined the company as coo last june will become its
ceo. they are also announcing it will ak civil pursue growth with the new round of financing which is led by union square ventures, dfj growth as well as morgan stanley putting together that $45 million there. no comment on the valuation but it is reportedly down dramatically from the $650 million valuation it had back in 2013. back over to you. >> mike. >> you know, interesting, this company has been trying to obviously create its next act, talking about, you know, sort of smart location-based data services and things like that. so this seems to me like one of those it's got to happen sooner than you've been doing it type of move. >> right. exactly. get go, everybody. it was a modern day battle of new england, general electric looking for a new home and new incentives saw connecticut and massachusetts facing off. up next bernie frank and larry kudlow will debate ge's move.
88. time for a cnbc news update. >> here is what's happening this hour. one of the three powerball jackpot winning tickets was purchased in mumford, tennessee, the owner of the store where that ticket was bought received $25,000 from a lottery official there. melbourne beach, florida and clean know hills, california, were the other winning sites. harry wilson the leader of an investment group that put pressure on gm last year to return more cash to shareholders says gm should not have given the ceo the added role of chairman. he said the role should be kept separate. israel authorities say troops killed a knife wielding palestinian assailant in the west bank today, it is the latest in a month long spate of street violence. officials say he was killed after slashing and wounding an army officer. and a memorial service was held for jethro. a police k-9 that was shot in the line of burglary.
the suspect was arrested and is in jail awaiting to be arraigned. that's the cnbc news update this hour, back to you. >> okay. sue, thank you. ge also relocating its corporate headquarters to massachusetts from connecticut. the company said it chose boston over fairfield because the business and talent pool but could also save on taxes. connecticut state income corporate tax rate is 7.5% but with an additional sur tax they were paying around 9%. massachusetts is about 8% and they got nice incentives. joining us now are two men who know these states very well, former massachusetts congressman bernie frank is here along with larry can you say low, a resident of the constitution state. good to have you both here. larry, i will just begin with you. you know, pretty troubling, right? >> well, yeah, i mean, connecticut is now accelerating its downhill slide. it's become an anti-business state, it's become an anti-successful entrepreneurial state. there's a whole -- you know, it
started with a republican, by the way, lowell liker, but in the last 10 or 12 years it's all democrat, they are beholden to the public service unions. you noted the difference, you know, connecticut taxes now worse than so-called tax chusetts. the personal income tax is 5.1%, in connecticut 7%. besides the corporate tax they have an advantage there. the last one is the property tax, connecticut has a huge property tax, i believe it ranks 49th out of 50th and that affects the corporate tax rate as well. so, you know, they are not playing ball. connecticut doesn't want business gs, they don't want joe bs and the most successful people are moving to florida. >> meanwhile, congressman, you know, we had, i guess, a series of tax cuts in massachusetts in these incentives, do you think that played a key role? >> i think the incentives did, as to the tax thing the difference is larry just said the difference between 8% and 9% isn't going to move people. in fact, the ge people
themselves said that the fundamental reason, the single biggest reason, was the nature of business in massachusetts, the progress we've made in encouraging technology. you know, as to larry's inability to resist making the partisan point let me point out that massachusetts has been until the last election a year ago as democratic if not more than connecticut. we have had a democratic governor, overwhelmingly democratic legislatures. trying to blame this in partisan terms doesn't make a lot of sense. frankly i regret the fact that we are talking about incentives. a very prosperous companies should not be benefitting from special breaks because they threaten to move. unfortunately if you are a state you are in that business you have to deal with it. the other point i would make it is interesting, talking about maths both are relatively high tax states, both of them are states with an active degree of
regulation and i think it is interesting that it wasn't one of the lowest tax states. if it was tax driven it wouldn't have been massachusetts. it was driven according to ge and i think this makes perfect sense by the protect nolg high environment. and harvard and the other companies that are there. >> i want to agree with barney on one point and disagree on another point. the point on which i totally agree is this idea of giving large corporations $150 million in tax credits without lowering the tax burden let's say, in connecticut for the woman who was starting a small business in some town that has been badly hit in the recent years. i hate that. i think you give tax relief to everybody. okay? small companies as well as large companies. so i agree with barney on that. but on the other point, look, connecticut has to have a total fiscal restructuring. for example, roughly 50% of
their pension and healthcare liabilities are unfunded. so that tells mr. imelt and others that you will have repeated tax hikes just as we have had in the last four or five years and he wants to get out from under that. my last point, this is a little humerus but it's true, i don't know if anyone remembers bill wells, a republican, william wells was the governor of massachusetts, i believe barney it was in the 1990s and he really was a great tax cutter. i think he made massachusetts competitive. by the way, republican charlie baker just won the state house. so i don't want to emphasize so much -- you're right, barney -- >> bill wells hasn't been governor for 20 years. the fact that massachusetts has generally been divided by republicans, too high taxes, et cetera, but the other point is this. if you were making a decision driven by state taxes you wouldn't come to massachusetts. i think the point of this is that the level of state taxes is
a fairly small factor for many corporations. there are a lot of more important issues for them and in this case it is ge has evolved into more of a technical company, by the way, i take real credit for that because thanks to the legislation we passed they got out of the financial business they probably shouldn't have been in in the first place and they chose massachusetts. >> you pushed them out of that business into tech and got them to leave connecticut and come to massachusetts. very crafty. >> i've been uncovered. >> very crafty. >> by the way, can connectic connecticut -- in almost every business tax break connecticut ranks 45th to 50th, it's the worst -- among the worst in the country and it's watching up. governor malloy, senator blumenthal have not done anything to help. >> my only --
>> the story continues. >> i have to respond. if it was tax driven -- -- continues to deteriorate. >> larry, if it was tax driven they wouldn't have come to massachusetts. >> i don't think it was entirely tax driven. >> i don't think it was largely tax driven. >> when you combine -- look, one thing you didn't mention, barney, it's very important to a company as well as an individual property taxes. connecticut has the 49th worst property tax, that affects corporations and individuals. >> but that's not -- that may have -- if they were leaving connecticut solely because of taxes they would not have come to massachusetts and i think this under -- under emphasizes the importance of the environment, of the technology, of the intelligence, of the degree of education, all of which by the way are related to an act of government. >> guys, we will leave it there for the time being, but i really appreciate it. it's great perspective from you both. >> i'm in favor of tax achusetts, it wins out.
>> larry kudlow, barney frank, thank you both. we have a news alert to get to on morgan stanley this time. >> changes at morgan stanley. the company naming robert rooney as the ceo of morgan stanley international, he will replace kell a her who is going to be president of the morgan stanley. in addition mr. rooney who comes from fixed income he will be replaced as the global head of fixed income and commodities by sam kelly, smith. matt burke will be the global chief operating officer of sales and trading at that firm. >> we want to give you a couple more details about that settlement that goldman sachs reached with the department of justice. again, under the terms of that agreement the company is going to be paying a $2.4 billion civil penalty, it will make $875 million in cash payments and will provide $1.8 billion in consumer relief. this is, again, a legacy from the financial crisis.
the company had reserve for it, it had raised back in august its estimates for legal -- for possible legal charges of about -- to about $5.9 billion. so in total this settlement with the government is just over $5 billion. back to you, kelly. >> okay, mary, thank you. now, the volatile swings that have rocked markets since the start of the year, nothing more than a passing disruption says scott my nert, he will join us my to explain. and the details on last night's big powerball winners, kate rogers has them coming up.
welcome back. 2016 is marking the worst start to the year ever for the stock market. my next guest is projecting anner upside of 5 to 10% of he can quits. joining us now is scott meinert chief investment officer at gug en hiem partners. >> we haven't really seen the panic. the vix hasn't spiked into the 30s. you know, i don't have -- we haven't seen large wholesale redemptions in mutual funds. you know, there doesn't seem to be fear here. when you see other things like the new york stock exchange brett, the continued deterioration in the transports and then the fact that we have this massive price adjustment that we have to do in china in terms of a revaluation on the
currency, i think we have a lot of turbulence left, but it isn't going to derail the economy and i think weakness will be a buying opportunity. >> you do think that the u.s. is a bright spot just based opd your notes. >> right. >> i'm curious, there has been a lot of discussion over the last couple of weeks about a potential recession. >> right. >> just looking at the credit markets, the flattening of the yield curve you are not in that camp. why is that? >> every recession in the united states has been preceded by at least three, if not four down months in the leading economic indicators, we haven't had one yet. secondly when you look at fiscal policy in the united states, the recent budget deal is actually a pro growth, it probably adds about a half a percent to output and monetary conditions, you know, while we are not living with qe they're certainly not restrictive and, you know, i believe my friends at the fed are concerned if we did start to see deterioration in growth that they would reverse course if
they had to just to keep things going. >> scott, if you're thinking that this all essentially sorts itself out and we do get markets to recover here, where within the risk asset world would you look? clearly credit markets have been having a tantrum for a while now, is that a false panic? >> that is the question. i really love that. thank you. everybody is so preoccupied with the stock market. when i look at the upside in stocks over the next two to three years i'm thinking we've got maybe 20 to 25% from where we are today. that's not a terribly great risk reward for the volatility you're taking, but when you look at sectors like bank loans in particular or high yield and for a retail investors closed funds which have been hammered, there are a lot better risk/reward tradeoffs out there. so my number one favorite asset
class at this point is bank loans, but, you know, high yield is okay and for people that are institutional or can get access to it certain sectors of the asset backed security world, especially collateralized loan obligations have been beaten to the ground. >> this would be a very different setup than 2008. there is a lot of people talking about that period. looking at the stock market to your point and saying, i don't know, the charts look like -- so what you're saying s hey, all of the trouble that's been created in some of these places like in high yield or junk bonds are where you're buying and where you're putting money. >> >> absolutely. that's our number one focus right now. i think to go back to where we started, the key is getting this issue in china resolved. when china is raising interest rates overnight to 60% to defend the currency we know that we're coming to an end. >> yeah. >> meaning they are going to have to make some adjustment. i can't tell you the adjustment on the path, but the path will be that r & b will fall. once we start to get to a market
equilibrium in china i think we will all clear and things will look better. >> even the energy names in that space are you buying? >> it's time to be looking i originally said $25 oil about a year and a half ago. i will claim victory at i'll claim victory at 30. it's time to start shopping around energy. >> low for the price here sn. >> we have another downward move. >> we've got to figure out the nfl move to los angeles. >> if you bought your powerball ticket in tennessee, california or florida, check your number s. more details on the big win ers. . random? no. it's all about understanding patterns.
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welcome back. taking a check of intel which is down more than 5% after hours reported its results top of this hour. the earnings number was much better than expected. the revenue guidance was raised. nongaap gross margin was higher. >> i think there was confusion in the numbers or guidance. i think you want to hear what trends are. what the company is going to say about the data center business. that's clearly the focus for investors. if they can give a good case to grow low double digits and not that 15% now. they are not going to do that. i think the stock can work. >> initially, as you said earlier, it's giving back some of that outperformance. eight percentage points is a tremendous outperformance. i don't think this is necessarily setting the tone for big tech earnings because i
think they almost always operate based on their own expectations and standards. >> we know that call will start the top of the hour. there will be an opportunity for management to clarify these points about that acquisition. >> i think it will be accretive. at least in the first year about 5 cents a share. it solidifies them in the data center business. no one wanted to see the beat on pcs. they wanted to see the beat on data center. >> exactly. we have financials tomorrow. >> you want to make sure it's not a one-off. wells fargo is the favorite. you had a couple of upgrades earlier this week. a lot of analysts say the group is getting beaten down. >> plenty of sleep and we'll see what they report. thank you so much. "fast money" begins in moments.
>> biotech has been a real underperformer of late in 2016. we've got the one biotech stock could move big time to the upside. all about the catalyst and the stock's prospects. thank you, kelly. "fast money" starts right now. live from the nasdaq market site in times square. i'm melissa lee. the man who called the swoon has a stunning call on crude and the markets. one key part of the market that predicted the recent sell-off is flashing a major warning sign. what that is and how you can protect yourself. >> intel out with a beat. the stock is down in the after-hours session. first, we start off with the big market rally. the dow jumping more than 300 points after yesterday's brutal sell-off. s&p out of correction territory as oil staged a comeback helping to set the