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tv   Power Lunch  CNBC  January 28, 2016 1:00pm-3:01pm EST

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the rest of the group. >> you think we'll get anything on the dividend? are you worried about the dividend? >> they came out and planted a flag and they said -- >> here on this network. >> they said, you can take the dividend to the bank. so -- >> good stuff. kate, thank you for being here. >> thank you for having me. >> see you soon. "power" starts now. scott, folks, thank you very much. with melissa lee, i'm tyler matheson. welcome to "power lunch." the first chart you're going to see here, you got to see it, it is oil. >> yeah, what a stunning chart this is. right now it is up by more than 3%, 3.5% or so. but check out the spike in the fall. we were up 7 plus on news that cuts could be on the way. >> the drop has forced the dow a little lower as goes oil, as goes the major market indexes and the industrials are up half a percent but stronger earlier. 75 points. the nasdaq at 4509. up 41 points.
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about 1%. the s&p 500 a little bit between the two in percent terms up about three-fifths of a percent. >> bright spot in the market, the bank stocks, fantastic day. this on the heels of facebook's blockbuster earnings report. look at the gains across the board. we have facebook clocking in a gain of 16% at this hour, a staggering move considering this is a $274 billion company as of yesterday's close. amazon shares are trading up 7.5%. netflix up 3% and alphabet, google, up by more than 4%. let's dig in on the a in fang and that would be amazon. the company expected to report earnings after the bell today. an analysts are looking for $1.56 a share on revenues of 35.93 billion in revenue. let's bring in james chockmock, a neutral rating on the stock. aaron kessler of raymond james, strong buy on the report. great to have you with us. >> thank you. >> so many investors out there are all -- on amazon web
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services, the area of the most growth for amazon. i'm wondering because in january there were price cuts unrolled and back in 2014, when there is the sort of price cut concern, we did see amazon web services revenues drop 4% and saw operating margins drop to about 8% from 23%. how do we know the same thing isn't going to happen this time around? >> couple of points there. one, i think the recent drops are much more minor. we think midsingle digit police cuts and 2014, that was the 40% price cut range. also i think amazon is becoming less about pricing and more about the breadth and depth of services that they're offering. so the decisions from buyers are becoming less about price weeping, less of a need for amazon to lower pricing and compete with other players out there. >> james, could this comparison be faulty in that back in 2014. google maybe wasn't as fierce of a competitor and may not have been more aggressively looking for market share as it is now. >> sure, look. we love everything that jeff
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bezos is doing. even his quest for an oscar, but i do get the optimism, i think you got to think about a couple of things. what drove the stock in 2015 was the acceleration of gross profit dollars in aws and growth and leverage there. this year i think we'll see escalating big money developments in content, local shipping, and in including the broader shipping space with planes and ships. and on the ews side, if google, don't get me wrong, i don't think google is a formidable threat to ews, but if they step up their efforts, you could see broader industry pricing pressure. >> i think james brings up a good point about spending. are going to see one of those quarters, get the feeling coming out of the quarter that this year is going to be a big spend year and profits are going to take a back seat? >> yeah, amazon does continue to spend aggressively. at the same time they have shown nice margin leverage, not just on the ews side, but the core retail business, north america.
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international still investing a lot. that's been a source of margin pressure. still we expect international to turn around, expect some improvement and to 2016. but they have shown nice margin leverage. we're expecting 200 basis points of margin expansion in north america on a year over year basis. we think that continues into 2016. >> you cut your rating on the stock to neutral from buy, not that long ago. but i wonder, if i'm looking for core holdings, for my portfolio, for the next five to ten years, can you make a case that amazon shouldn't be one of them? >> no. i mean, if we're looking at five to ten years absolutely amazon should be within the core portfolio. the reason we cut our rating, we thought estimates would get ahead of themselves and looking at some of the margin expansion kind of assuming that it would continue indefinitely and amazon just, the fact that, you know, bezos spends as he wants, you know, we don't have that conviction that we will see that
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indefinite margin expansion this year. so, look, we love it long-term, but we just thought that there could be a potential for a better entry point to build positions on the stock. >> all right, guys. thanks for your time. appreciate it. james chakmak. >> news alert in the bond market, seven year notes up for auction. how do we grade them? >> listen, everybody get your apple cameras out, take a picture, the seven year note results on your screen. this is the definition of a stellar auction. a plus. can't give it a higher grade. yield on the 29 billion years at the dutch auction, 1.759. lower yield, higher price and that is for sure 2.63 bid to cover. best since february of 2014. okay, buckle up. indirect bidders, 69.4. to the best of my memory, early
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'09, first seven year note auction, this is best of breed, i don't think there is a higher indirect percentage direct for 14.8, best since halloween of 2014, dealers take a bit less than 16%. listen, fed meeting made it dicey. dovish. look at the dollar index statement, gave a tailwind to the seven-year note auction. back to you. >> all right, sir. rick santelli, thank you very much. let's go out to the bay area, where ceo jamie diamond of chase is introducing that the chase center will be the new name of a new arena to house the golden state warriors, the hottest team in basketball with the hottest player in basketball. steph curry. best shooter i ever saw from the point guard position. so they're going to have the naming rights of a new center that will open in a couple of years out in the bay area, 2019, 2020 nba season and right now nobody has the warriors' number
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but chase has the numbers, the right price. >> and -- >> all righty, fed policymakers on pause for now, leaving rates unchanged. but given the recent market volatile, the big question is what will they do next? martin feldstein, economics professor at harvard, and former chairman of the council of economic advisers under president reagan. also joined by steve liesman, brian sullivan to take part in our conversation. welcome as always. great to have you on cnbc. >> good to be with you. >> were you heartnd ened by thed statement yesterday or would you like them to be less squishy on how they see the economy because i know you're in the camp who feels that rates ought to move up from here. >> i think they ought to stick to their plan, their plan of increasing it four times this year. i didn't read anything in their statement that made me think that they were walking away from an increase in march.
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i still wish they would say more about financial stability considerations, which is one reason why i would like to see interest rates moving from super, super low to just plain low. >> they did seem to -- they did remove the reference to an assessment of the balance of risks in the economy, which suggests that they may be a little bit confused about the direction of the u.s. economy. maybe a little more concerned than in december about the possibility that the economic numbers are a little softer. are you worried about the growth pace in the u.s. economy or not? >> not really. we're going to get a terrible number for the fourth quarter in a few days. it is going to come in under 1%. but that's all about inventory correction and about net exports, and it is focused on fourth quarter. all of the forecasts for the first quarter are talking about
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2%, 2.5%, which is good for an economy that is already essentially at full employment with an unemployment rate of 5%. >> marty, my headline from yesterday was that the fed made march look very unlikely. one of my competitors headline yesterday was that march was still on the table. goldman sachs says they think march rate hike is likely if the financial market has gone down. morgan stanley says their pebes guess is there is a skip. does the fed have a communication problem here? >> i don't think so. they don't want to commit themselves to what they're going to do in march. but i think there is nothing in what they said that would make me say they have ruled out an increase in march. they're going to look at the data. the data i hope they won't look at is what is happening to the stock market. if they say my, the stock market
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is off another 5%, therefore we shouldn't raise interest rates, i think that would be a big mistake. it would be a kind of fed put which would simply encourage more overpricing of equities. >> it is worth ex-plorg your reasons for that, which are if i'm correct about this, you think the market is overvalued. and you think fed policy is too easy. and that when the fed policy normalizes, the market will appear to be more overvalued. your point is, let's get to that lower place in a smoother way rather than in an abrupt way. >> couldn't say it better myself. >> i think i took it from your writing earlier. >> you might have. you might have said it himself, actually. >> exactly. >> marty, brian sullivan, yesterday i argued that the fed should be like nfl referees and important part of the game, but not known by name and not able to influence the game because of the players. we look at the stock market, i think to your point, sir, which is the market is the game, is
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that why you say that the fed should ignore the stock market because then it might give big hedge funds or sovereign wealth funds the ability to indirectly or directly influence the fed instead of the fed leading. >> well, i think that's too complicated a story. what i really would worry about would be a signal of the fed put. where i start is that the s&p price earnings ratio is now about a third higher than it's been historically. so there is air that has to come out of that. it has to come down. and it is not just the stock market, you look at commercial real estate, cap rates, extremely low. so i think the fed doesn't want to give the signal that if there is weakness in these financial markets, that's a reason for them to stop raising interest rates. as they indicated in the statement yesterday, as janet
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has said repeatedly, conditions are now very accommodative, very easy, and if they raise it four times during this year, they'll still be very accommodative, very easy. so let's get on with doing what has to be done so that they don't drive up the stock market by giving a full signal about a fed put, and then having to really come down hard at some point in the future. >> professor, sounds like you're saying that one of the reasons why the fed shouldn't back hike is because the stock market is too high and should come down. that would be a primary mechanism for the stock market to be valued more fairly. is that what you're saying? >> well, i would say more generally that asset prices including commercial real estate and stock market and we're beginning to see some corrections now in low quality bonds and emerging market debt, but there has been a whole slew of mispricing because of the
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extremely low interest rates that the fed has purr sued fsuee last half dozen years. that strategy worked in terms of getting the economy back to full employment, but somehow we have to unwind that mispricing. >> is an achilles heel perhaps of your forecast here that we have to see the inflation at some point? right now, the market thinks there ain't no inflation and ain't no inflation ever coming. i know that's part of the way you think the data is going to unfold. >> yeah, i think that if the fed continues with even with what they have said, this relatively slow but faster than the market thinks increase in short rates, we're going to see the unemployment rate coming down from 5 to 4.9, 4.8, 4.7, that will start to drive up inflation. so i think it is not going to be the kind of terrible inflation
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problems we had decades ago, but i think and the fed made it clear that they're willing to tolerate a little inflation above the 2%, but we don't want to -- >> professor, i'm sorry to jump in, quick question on that, do you think the fed immediate nee change inflation measures? >> that is a very big question. i think that the way we measure real numbers is just terrible. because we don't have a real handle on quality and so it is hard to know what to make of the numbers that the fed obsesses about when they say, well, we're at 1.3 and we have to get to 2.0. so that's a conversation for another day. >> we'll have to -- >> it really is. did you have to bring that up? that's a huge can of worms there. >> i like to throw a little firecracker in the -- >> they're trying to go to break. but i would just add that most
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people -- most economists think inflation measures dramatically overstate inflation because of things marty was talking about. >> and most of our viewers say it understates it because -- i'm doing the math on college and you're looking at that or health care costs and are you insane, inflation is out of control, maybe not as the government. >> we're not measuring quality. >> that's right. and that really is critical. and so the real challenge going forward is how do we do monetary policy and other policies with this understanding that we really don't have a good fix on how to deal with quality and therefore we don't have a good fix on what is really happening to the cost of living, what is happening to price indices. >> good question, good answer, thank you very much. professor, we're always happy to have you with us. we have much more coming your way on "power lunch." up next, the fears over the zika virus quickly spreading. health officials now say up to 4
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million people could be infected. we have the latest on that outbreak ahead. plus, one for profit educator getting schooled today by the u.s. government. that name is ahead. and later, to cut or not to cut, that's the trillion dollar question in the oil market in terms of production. we're going to go inside this global game of chess when "power lunch" continues on cnbc. e is at seizing opportunity. so i'm going to take this opportunity to go off script. so if i wanna go to jersey and check out shotsy tuccerelli's portfolio, what's it to you? or i'm a scottish mason whose assets are made of stone like me heart. papa! you're no son of mine! or perhaps it's time to seize the day. don't just see opportunity, seize it! (applause) seize it! checking out the listing on zillyeah, i like it. this place has a great backyard.
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lunch." we're keeping an eye on travel and hospitality related stocks as the zika virus spreads here. airlines among some of the industries being watched. airlines, some of them issuing refunds to zika stricken areas. among the names, american, united, delta, and jetblue between 3% and 5% lower. cruise lines in focus. royal caribbean, down. zika not the only factor adding to the negative trades. overall market part of it and oil in that story as well. automatic these companies are closely tied to fuel prices so zika and oil a big focus for some traders. >> dom, thank you very much. let's talk more about the spread of this zika virus. joining us is dr. batina frise from the stonie brook university school of medicine. michelle caruso-cabrera, our international correspondent and co-anchor joins us well. dr. frise, welcome. we had you on when we were
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talking about botalk talking about ebola. the cdc says it is unlikely to see a widespread outbreak. the world health organization said the virus is spreading explosively. which is it? >> so, right now we don't know yet. zika virus is spreading all over the americas. and it is and a virus. and the concern is though the virus itself causes a benign viral infection, most people won't feel it, the concern is that we have seen a rising incidents of microcephalus, a small head born in children born to women who have that infection during pregnancy. >> is there a cause -- >> do we know whether the virus is the cause of that or is it an association that is alarming? >> it is still an association. there is credible evidence from the -- from epidemiological data
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that there could be a causal relationship between this viral infection and the incidents of the increased microencephaly in the children. we know the incidents in brazil is 20 fold up. there is also concern that cases of gillian barr is rising and we're watching whether this could potentially be associated with that infection. it is an ascending paralysis in patients after viral infections which sometimes lead to serious complications. >> dr. fries, back to tyler's first question, we have one organization saying they don't think it is going to be such a huge epidemic and then a report that it is spreading explosi
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explosively. we see people canceling flights to latin america, the cruise stocks are off for fear people aren't going to travel. how bad is this going to get? >> so i think the concern we have is that we do have this mosquito also in the united states, only in the southern -- in a few southern states of the united states. but there is a cousin to that mosquito, different species, that could potentially transmit this virus as well. and then we would potentially see a spread of 32 states. right now we don't know. we haven't seen infection in that mosquito yet. but that right now is the concern. and as you know, other viruses are very difficult to contain because these mosquitos bite during the day and at night, and we don't have a vaccine, we don't have specific treatment, so that's why who and the cdc
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are very carefully watching this. >> years ago, doctor, i actually got malaria, another mosquito borne illness and they told me i couldn't donate blood for the rest of my life because it would be in me forever. is that the same when people get the zika virus, will it live with them forever as well? how long does it stick around? >> it is an rna virus, so it shouldn't stick around forever. there have been reports of people giving blood who were infected with west nile virus. and that has been transmitted to people that received the blood. the same would probably be true with zika virus as well. so if i would give blood while i was -- i could potentially transmit it to the person that receives the blood. so there will be probably questions asked when you give blood, whether you have recently traveled to this area and then you would potentially be excluded, but not for life. >> couple of questions, are there ways other than through a mosquito bite this virus could
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be transmitted quickly? >> right now, we don't think so. right now the main is the mosquito bite. there is, of course, the transmission to the unborn child, so there is a transmission, and blood potentially as well. >> forgive me as we move along here. only one out of five people who are infected get sick. what is the incidents so much as we know it about individuals who have gotten the virus and have been pregnant and have then delivered babies with that microcephaly. what is the incidence? >> they don't know that yet. they're in the process of acquiring that epidemiological data. that will be critical. the incidents of this -- these abnormalities in the children is 20 fold up in brazil and over 2,700 cases. >> would you recommend that a pregnant woman not travel to areas where this virus is
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prevalent? >> i think right now i wouldn't travel if i was pregnant to those areas. i would postpone traveling if possible. just because we don't really know whether there is a true causal relationship, and once you become infected with a virus, there is not a lot you can do. so we don't even know what the chance is that you would transmit it to the unborn child. >> thank you very much. as always, great answers. we appreciate your time. >> thank you. for profit educator devry getting skoold ov inting school markets itself. we'll get the often fiery take straight ahead. as we head out, look at the big winners at the nasdaq. facebook leading the pack. citrix, paypal and lam research, all in the green.
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devry university under pressure again today. they're getting sued by the federal trade commission for alleged deceptive advertising. devry taking heat in particular for this one widely advertised claim. take a listen. >> last year 90% of devry university grat grads actively seeking employment had careers in their field within six months. >> devry says it will, quote, vigorously contest the suit. let's bring in herb greenberg who has been following the for profit education space for some
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time. the issue is that in the study, they claim that those who sought jobs got jobs within six months of graduation in the field of study. if i study business administration, i get a waitressing job, i'm a success story according to the ftc's allegations. >> and this isn't the first time this kind of thing has come up. back in 20 10 i was on cnbc and ro wrote a piece called fuzzy math. that was an arch school company and they were basically, the allegation was you go to starbucks, after graduating, paying tens of thousands of dollars, you get a job, as a barista, but because you're doing the chalkboard, you're getting a job in art. that's the same allegation here. and if you go through the lawsuit, the allegation is very clear that they're basically fudging what somebody really has.
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and that, you know, the issue here, melissa, is tons of government loans, tons of defaults in general, not just devry, and out of that, people are attracted because they thought, hey, my chance of getting a job, 90%, therein lies the problem. >> so, herb, do most people who attend these schools like a devry, are they getting government support to do so? are they getting government loans? i guess the other question is a follow-up to that is, you know, the department of education is saying that it is investigating. is that the concern because they turn off the spigot of government loans, could that impact their enrollments? >> government loans have come under great fire. and that has been the big issue because government loans and defaults. i was looking at a website today on online education, but in all education, and devry ranked 19 out of 30 schools with the best placement rates squeezed between princeton and georgetown, which is, again, it looks so great. and i'm sure -- look, devry can
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show a lot of their students get jobs. we have to give them credit. nursing students, veterinary students, a lot of different students in a lot of different fields. but you're coming back to, you know, was the government defrauded. and is the government continuing to be defrauded in different levels with this. some of the ads go back to 2012, they go back a number of years. >> are these for profit schools, for profit schools drawing extra attention in terms of how they measure the successes of their students that a princeton or a georgetown might not get? in other words, do we know they're counting their successes in an absolutely cricket way? >> wow. >> well, tyler, you also have to take a look, are they guaranteeing you -- are they promoting you to go to princeton because you're going to 90% of their students are getting placements? >> i don't know if it is an expressed promise but it is an implicit promise, fu yo if you
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this university, you'll land on your feet, so to speak. >> you hope you will and there are certain students better than other students at getting jobs anywhere. the issue of placements, if you take it and go much further out, placements in humanities and creative writing, no matter where you go, that's going to be difficult. so those are issue people raised. look at the not for profits as w these are ads, we get it. >> herb. >> thanks. >> to the bond market, rick santelli tracking the action. >> good old-fashioned hockey. yields moved down. there was a time when supply, when it was done, we had 90 billion this week, when it is over, there is a rush, whether it is pulling off short edges, post fed meeting and you are seeing it. look at the intraday 30. see it there too. if you put up a two day of 30, what jumps out, he had as much volatility on weak durables, claims and the auction as you did yesterday on the fed
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meeting. now, let's switch gears to the most important market. dollar index, started on the 7s. good chance we have the lowest dollar index close since january 7th. and i know everybody likes oil and stocks, i'll give you a new one to like. this is ten-year, on top of a ten-year dollar index, ten-year note yields, since early december. one reason i think yields are going down, a little more horsepower than after the fed yesterday is because the dollar index is going down. dollar index really a good indicator, now, exactly who is following who gets a little complicated to actually answer. melissa lee, back to you. >> rick santelli, thank you. up next, the case for your money, why one big bank says ignore the volatility because a big breakout could be coming.
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welcome back to "power lunch." i'm meg terrell. an update. walgreens, partner in the blood testing business saying that in light of the letter from center for medicare and medicate
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services, walgreens has informed theranos to cease use of the california lab for blood test analysis this after a letter from cms said severe deficiencies at that lab. they're saying walgreens is suspending the services at the palo alto california store effective immediately. now, they also is a partnership in arizona and theranos said in a statement in response that 90% plus of its tests go through that arizona lab, not the newark, california, laboratory. but walgreens says tests collected at 40 wellness centers in arizona must only be sent to theranos labs in the phoenix area or another accredited lab for analysis. back over to you. >> is there any indication walgreen could revisit this? technically they have ten days to correct the deficiencies found at the laboratory. >> that's right. they say they have already
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corrected a lot of them and play plan to respond in a couple of days. now they say no patient samples will be sent to the new york lab, walgreens, until all issues have been fully resolved. waiting for a word that those have been resolved and probably i would assume wait until cms has confirmed that as well. >> let me make sure i'm understanding here. does this knock the products out of walgreens nationwide or just out of the walgreens that sent the test to those two labs? >> it is specific lab in newark, california, that we're talking about here. and it is one store in palo alto, california that walgreens is saying they're suspending their laboratory services at. and they're telling walgreens they should only send samples to their arizona testing facility, not to newark, which is the one under examination by cms. >> all right. thank you. >> thanks, guys. now look at the markets here and we are in the green, pretty much across the board. the dow jones industrial average is up by 72 points, half a percent. the s&p 500 along the same
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trajectory, nine points here. the nasdaq is up by 29 points or .7. look at the russell 2000, small caps, up by a third of a percent. gold prices closing about now. we'll check in on that close in gold and closed 1115.10 per ounce. look at the metals complex here. silver, copper, palladium, all pretty much down across the board. to sue herera for a cnbc update. >> here is what is happening at this hour. a man found to be carrying two handguns has been arrested at a disney land paris hotel. he is a 28-year-old european, his bag contained the guns and a copy of the koran. a female companion was detained, no one was injured during that arrest. ethan couch, the affluenza teep teen who killed four people in a drunk driving incident in 2013 arriving at dallas-ft. worth airport in handcuffs. he took a commercial flight from mexico city. couch and his mother were arrested in mexico last month
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after they fled the u.s. the sentencing hearing for former speaker of the house dennis hastert delayed until april 8th. according to wgn television in chicago. hastert, who was convicted of a financial crime last year has been seeking the delay due to poor health. leonardo dicaprio meeting with pope francis at the vatican today. the two share an intense interest in climate control. dicaprio was in fact just presented with an award for his green campaigning at the world economic forum in davos, switzerland. that's the news update this hour. back to you, melissa. >> sue, thank you. up next, a big bulk case for your money. "power lunch" will be right back.
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the all-new glc. mercedes-benz resets the bar for the luxury suv. starting at $38,950. this bale of hay cannot be controlled. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running. chase for business. so you can own it. welcome back to "power lunch." chrysler shares lower over the
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business plan which increases emphasis on north american sales on the popularity of suvs. deaggio reporting a drop. las vegas sands reporting profits below with revenue below analyst projections. but they did raise the quarterly dividend sending shares higher by almost 3%. the dow has moved 200 points or more in each of the past four sessions. alternating between gains and losses. so what is the volatility telling us if anything about the bull market? with me, patrick shavanic at silver crest management and julian emanuel at ubs. big titles. welcome. you both agree there is very low likelihood of a recession in the united states this year. you both agree it is very unlikely we're in or heading toward a bear market. let me ask you both, quickly, to
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answer the following. what are the odds as you see it that stocks have bottomed for this correction and that oil has bottomed. you first, julian. >> we don't want to call the bottom, but what we think we have seen over the last week and a half is the beginnings of a series of capitulations which we think once you get past next week's data, and next week's dwrat data is very important, ism, employment, gd pp tomorrow, we think it will be reinforced and we're seeing signs of a bottom and the oil market which as we all know has been very correlated to the -- >> it moved a lot in the past ten days. >> very much. >> below 27 to 33 plus, 34ish. what do you say? are we -- have we put in the foundation of a bottom for stocks and oil? >> i think those that are coming
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in for earnings and gdp will help provide reality. there have been all these anxieties, anxieties about the fed, oil, china, the people had a hard time wrapping their minds around. and so we think, for instance, that with cheap oil, and the end of china's investment boom, it hurts some sectors in the economy, that's clear. but there are also winners for that. and you only see that when the earnings numbers come out. >> julian, just because oil bottoms and there isn't going to be a recession doesn't mean it will be a straight shot up. that's essentially what you're predicting with your s&p forecast. your forecast is $22.75. that's about 20% upsid from where we are now. >> it is. >> that's a big gain. >> it isn't a straight shot up. if you take the premise that volatility increased and going back to august, within that context of well above 20 as
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opposed to 1415 which we experienced for the majority of last four years that isn't a straight shot and our view is when you look at how sentiment swings in higher volatility markets, the almost apocalyptic sentiment that the public has expressed on stocks, you know, equivalent to at the lows in march of 2009, and institutional investors moved in that direction as well, we think that once there is evidence that that sentiment is not warranted, that's how you get that type of refle reflex reaction. how do you build that into your model. >> the way we build it into the model is, first of all, it is very typical in the later stages of bull markets, particularly when the fed is active. we have seen it many times before. we saw it in '94. we saw it in '99. by that token, it is not surprising. but when you look at it, valuations, and we do believe as
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patrick does, there is going to be earnings growth, a return to earnings growth, valuations are not taxing. even at that type of -- >> you do not see a 20% move this year. if i were to listen to you, i would just say i'm putting my money in an index. you don't see it that way. you don't see it is an index kind of year. >> we're cautious about the index. we think the index will be flat. but what we see are winners and losers. >> give me some winners. >> well, china rebalancing, most of the earnings losses that -- the damage to earnings, even over the past year, has been in energy and in materials. so these are inputs. the end of china's investment boom is hitting the input sector very harshly, but it is actually going to be reflationary for outputs, it is going to relieve the overcapacity weighing down markets globally. it is important to -- i think what has happened in the past month or so is a sell-off that
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is indiscriminate. it is not making important distinctions between winners and losers from cheap oil, winners and losers from a slowing chinese investment boom. >> we have to leave it there. patrick, thank you very much. julian, thank you as well. bgo to powerlunch.cnbc.com, go right now, see if patrick and julian are getting into energy. that's powerlunch.cnbc.com. melissa? crude oil off its highs on reports that opec has no proposal in front of it to cut out the 5%. still in the green. wti 3.4%. 33.40 a barrel. this one chart, look at this one chart, could be the key to the health of the global economy. we're talking to a man who is watching the ships come in. straight ahead on "power lunch."
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labs for blood test analysis. oil bouncing all over the map in today's session on a global back and forth over supply cuts, russia, saudi arabia, they're talking, they're not talking, you can believe them, you can't. we'll have more on that coming up at the top of the hour. and stocks are holding in the green, but they are well off their session highs. one bright spot, the fang stocks. facebook, amazon, netflix, google, all firmly in the green. and the best of all, in the 500 under armour. if you missed any of the big stories in the past hour, go vest our site at powerlunch.cnbc.com. sure, they know more about your ipad than you do. and maybe you have to ask them how to reset the wi-fi every once in a while, so they're pretty tech savvy, but how much do america's high schoolers know about financial literacy? that story just ahead. stick with us here on "power lunch."
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cyberatoongz ttacks on the one company is releasing fico like scales.
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alan sharp paul is upguard, co-founder and ceo. great to have you with us. how does this work? does your company go and try and hack a website? >> not quite. so at a high level, there are two major components to the score, the upguard score. there is an external scan. and the external scan, if you were a business and doing a scan of your systems you need to understand there are hackers out there all over the world doing that external scan now. we get you up to par with the hackers by providing the external can. we also provide a deep internal scan of your system, of your servers, network devices. the combination of the scan of the internally and externally that we aggregate up to a single score. >> how do you make money? i ask you that because i want to understand whether or not your score is actually an objective score. the company is paying you to give them a score on their
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website. >> the external scan is absolutely free and we provide a single internal scan at no charge at all. if you want to continually scan your systems internally, that's how we charge them. we charge on a per device basis. >> so if you're a consumer out there, how do you access this, how do you know a company has a c star score? >> we released a browser extension, which allows you -- as you browse websites, what consumers are used to now is seeing the somewhat comforting ssl, little green tag next to the ulr saying the company is using a secure connection. we provided and extended that and gave a browser extension that will show you the company's c star score. >> is this meant for the consumer or meant for the insurance companies out there who are now underwriting cyberinsurance? >> fundamentally the first use case is for businesses themselves. obviously the amount of breaches
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that are occurring today is going through the roof. businesses need to better understand the cybersecurity position and risk. how we help the insurers is insurers are equally suffering due to the lack of visibility, lack of understanding and the reason is they simply don't have actualial tables for this type of insurance at the moment. and they're not charities. they want to get more insurance themselves of the position of businesses and that's how we're assisting insurance providers as well with this score. >> let me understand, what exact websites you're grading or assessing in term of the risk. are these the consumer facing websites of a company or are they the internal websites, the intranet or their oracle for hr. what exactly are you assessing? >> with the external scan, we are assessing external scores and sights and consumer facing sights. with the internal scans -- >> so walmart.com, if i go on walmart.com, that's what you would be grading, right?
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>> exactly f you have the browser extension installed, you would see walmart.com score and scored on things like how secure their website is, how secure their e-mail is. a range of different factors, but, yes, that's the external score you would be looking at there. >> interesting stuff, alan. thank you for joining us. alan sharp paul of upguard. oil, the big story of the day as it has been so many days in the past few months. crude off the highs, but still a big rally, more than 3%, 33.39 for west texas. above 34 for brent crude. we'll find out more. brian sullivan and michelle caruso-cabrera here to pick up the story. take it away. >> thank you very much, guys. crude surging earlier today. you talked about it after russia told reporters saudi arabia suggested cuts of 5% and that they were considering a meeting with opec and nonopec members. seemed hard to believe. we had guests on saying they thought it was patently untrue.
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we have a full story on cnbc.com about why that is all considered to be highly unlikely. check it out. in the meantime, built this graphic on the wall to show you, opec's biggest producers and russia, where did they stand on production cuts last we knew? saudi arabia, big fat no. we have been telling you that story, four months here at the top. iran has been saying, wait a minute, we just got back into the market, we won't cut production, we need to regain our market share. iraq, they softened, kuwait, uae, all going along with saudi arabia, all of them saying, look, if everybody cut, we would cut, problem is, iran has not been willing to go along. russia has also said, executive chairman of ross said no can do, maybe they're softening as well. who are the yess? the desperate people. venezuela, nigeria, algeria and angola, all would like to cut production because they have
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such terrific problems with the fnz finances in their countries at this point. that's a rundown of where they stand. and we'll see if there is any truth to this headline today. but a lost people thit of peopl highly unlikely? we're getting a cheer. the big cap oil names are getting a bounce from the move. is this whole thing based on a whole lot of false hope? we're joined now by helen mccroft at rbc capital markets and from houston, kyle cooper, managing director at criterion research. do you buy these headlines or just the gift of gab trying to drive up the price of oil? >> certainly putting it out there gets the price up. throughout the last year, the saudis kept saying, russia, if you go along with us, like you did in '86 and promised in '98, we'll pull barrels. the russians kept saying no. maybe the economic reality is hitting them, a shift is convenient. $20 oil doesn't work for anybody. just getting the noise out there is helpful. >> here is the problem, though. saudi arabia can say that
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because they're basically one company. that are a country that is also a company. russia, i know ros nef is the biggest but can russia drop the hammer and all the producers fall in line? >> well, vladimir putin has persuasive power. if he says let's get this done -- >> understatement of the year. five star award in 2016. >> i don't think you're going to say no. this week some prominent energy company officials in russia for the first time came out and said we're willing to do this. the official from luke oil said i would rather sell, i'm watch igor, what does he say about this? if he shifts, then i think it becomes a potential reality. >> what about the issue with iran? they said if everybody goes along, we'll do it. but iran has said, we're not going to go along, we have been out of the market for so long, why should we give that up? and aren't they just as big a problem? >> they were the biggest
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spoilers. they were like don't look to us for anything. you do this all on your own. what is interesting is since december, the iranians have become a little more reticent saying, you know what, maybe we'll be slower in putting barrel on the market, we don't want to trash the market, so has there been a little rhetorical shift in the iranians? >> not ramping up as much as they had previously said they would. >> they have elections in february. maybe they don't want to be blamed by their population for driving the price down further. a lot of talk right now, real question is does it lead to anything. >> kyle cooper, do you buy this? traders are a little bit today, but do you think we're going to see a production cut? >> yeah, actually, i agree 100%. whether or not it comes to fruition. imports yesterday were still 7.6 million barrels, i think there is a lot of crude on the water, and really they can talk all they want. it is very convenient to try to help boost the market and boost the price. but i think it will be relatively short lived because even though there was a total
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petroleum stock draw yesterday, it failed to meet the five-year average draw and the surplus rose to another record of 238 million barrels of a five-year average in the states. >> saudi arabia, opec, do they even have the ability to do this anymore? the u.s. used to be the price taker. but now we're still huge producers, even with the cutbacks we have seen to some degree in production. they don't -- can they have the same marginal effect they would have had ten years ago? if they raise prices, don't we just get more oil coming back on production online here in the united states all over again? >> yeah. absolutely. saudi arabia -- just like the u.s. doesn't have the same effect it did two years ago, saudi arabia and opec don't have the same supply effect. the u.s. producers are so good at getting a lot of the ground, though we can't put on the spigot immediately, a lot of the plays start ramping up again.
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we have a real quandary on our hands in terms of balancing long-term supply with demand growth. it is has been a little lackluster. >> the bottom line, to follow up on michelle's question is, will oil prices move meaningfully higher if america doesn't change our production? are we focus too much on opec? are we really, as saudi arabia said, the world's swing producer? >> with the saudis keep saying is we're okay in part because u.s. production is coming down. and there is recovery in the back half of this year or 2017. they keep saying, stick with us. but, you know what, they're now talking about stick with us to 60. no longer 70, 80, 90. >> the only thing cheaper than talk is oil. >> that's pretty funny, yeah. i think the saudis figured it out, they don't want to catch this falling knife, give up the market share and have the price stay low. learn this lesson over and over. >> the one thing i say, very good russia expert reminded me, putin is not a chess play,
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master of the short game and loves the surprises. again, i'm not rolling out a russian surprise, not my base case, he could just surprise us all. >> feels like the fog and the scorpion. the scorpion wants to ride across the river. heard this one. i won't give you a ride, mr. scorpion, you'll sting me, we'll die. the scorpion said, no, we're fine. they go halfway across, the scorpion stings the frog, the frog said why did you do that? we are both dead. the skocorpiokor scorpion said nature. is that opec? >> saudi arabia in particular has -- they just really got tired of giving up market share to the early portion of the decade and i think they underestimated the amazing ability of u.s. oil producers to ramp up supply. and i think they're stuck between a rock and a hard place. >> scorpion, we'll leave it there. >> absolutely. >> hopefully we're not the frog.
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thank you very much. take a look at this chart. the baltic dry index, measures the price of moving major raw materials by sea. it is down more than 55% in the past three months. it has been an all time low for several days since mid-january. what is that saying about the global economy? shawn monahan say partner at at kearney. good to have you here. if you look at 20 or 30 year chart of the bdi, it looks so painful. this is telling us there is some kind of issue in the global economy. what exactly is it? >> i think it is a combination of two things. both the global economy and also the supply side. i don't think there is any new news. look at the baltic dry index, driven by china, imports on iron ore and coal, which is down. economic slowdown from 8%, down to 6%. but really tremendous capacity growth over the last decade. i think that's what is driving it is more the supply side. >> that's chaeinese, right?
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even as you see the prices fall, the chinese companies haven't slowed down production at all. they keep bringing on supplies. is that true? >> absolutely. it seems, you know, the intake of new vessels seems to continue to be moving ahead, continuing to grow. so this is not -- we don't expect the index to turn around anytime in the near term. this is a bit of a multiyear play. >> who are the big losers here? a lot of private equity started buying up ships, there was some big funds that did so. and a lot of the long-term players seem to get back thinking that things looked frothy. >> several years ago, people were -- began to be irrational, saw the growth and started to invest. from the shipper side, those that have invested -- have their own vessels will be constrained to slow down, new vessels and eyeing existing capacity or taking things out of the market. it is those speculators, people that invested as financial
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instrument they think will be stuck for quite a while. >> lose money. >> yeah, because, shawn, we talked about oil. eventually somebody can stop producing oil, the ship's life is 10 to 15 plus years. when are we going to see the supply demand imbalance of these big boats come back into balance. >> i think it is important the different types of ships to look at. you touched on the tanker, the tankers are doing fairly well now. if you look at both the dirty and clean, you know, indices, they're both running relatively flat. and little bit of an uptick the last month or so. so that side is fine. the traditional container side, more consumer driven, more china to export, again, seeing similar declines, not as dramatic as the baltic index, and also in decline. and also due to oversupply from our perspective. >> michelle talked about the baltic dry index, those ships, people aren't familiar, you probably have been on them, they're granular hold, dump
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fertilizer, corn, soybeans, whatever in the holds, that's a different type of carrier. is that at a problem market as well too? is the bdi giving us a false read because there are too many ships. >> i think there are too many ships. the demand side isn't new news. the global economy is fairly kind of stable, growing in certain markets. but supply side has gotten out of control the last several year and now coming to roost. >> record number of idled ships sitting out there doing nothing at this point. thanks so much. it was great. shawn monahan. >> thank you very much. the american housing market facing a new kind of crisis or semicrisis. what it is and how it is impacting home buying coming up. how educated are young americans about their own perm finances? we have exclusive new date why and here is a hint, it doesn't look good. trump versus the gop. he says he ain't going to attend
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tonight's debate on fox. how trump is changing the face of the party come up.
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welcome back to "power lunch." i'm michelle caruso-cabrera. stanley black and decker down more than 4%, beating profit estimates but sales below forecast and the company sees a clefrgi in challenging year ahead. free port mcmoran down almost 4%. posting a smaller quarterly
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loss, but moodys cut it three notches. the stock down 75% over the past year. remember, carl icahn bought a huge stake in august when the stock was at $8. now it is at $4.47. a number of stocks hitting new 52 week lows. ebay is one of them. investors not happy with the latest earnings. american express and qualcomm at new lows. something funny is happening with home sales. the data is kind of being funny by being all over the map. up one month, down the next. let's dig into that and also whether there may be a new crisis on the horizon. welcome in neleh richardson and robert frank. neleh, first to you, okay, pending home sales coming in okay. but they could be super strong one month, super weak, everyone is trying to spot a trend, how much is low inventory, not a lot of homes for sale, skewing and screwing the data? that was hard to say. >> you did well.
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a lot. doesn't the housing market start to resemble the stock market with all the swings up and down. >> it will boom one month and the next month dead, the bears come out and say, see, housing is in trouble. you're like, if there is no homes to sell, why would the number come in strong? >> the key difference in the dynamic going into the new home buying season of 2016, you know, everyone focuses on the buyer. what are buyers doing? let me tell you, buyer demand is there. it is what are sellers doing. because what we're seeing is a market where inventory is just not keeping up with demand. no matter how high prices go, it is hard to get sellers off the couch and listing and there is reasons behind that. >> why? because it is for so long sellers said, a, i can't sell my home because i owe more on it that i can get for it, or, b, i'll wait until prices go up. now prices go up. is this greed in action part two? or is there another reason they're not selling? >> there is a lot of reasons why they're not selling. some of them are.
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and so let's make that point first. people are listing and at higher rates than they have -- than we have seen in the past three years. >> but not transacting. >> there is so much demand, just a drop in the bucket of all of the demand out there. the second reason is, we're seeing this more, you know, it is hard to trade up these days. prices have risen everywhere. and for us gen xers, if you bought in 2005, 2006, at the top of the market and you are -- just have a little bit of equity, where are you going to buy? >> this speaks to everything you cover here in the wealth reporter here. the high end is always doing fine. >> it is. it is a little different dynamic, maybe even a mirror dynamic what is happening in the broader market. you have all the home builders and spec builders targeting that rich luxury product. so we have new data out today from douglas that shows in beverly hills, inventory is up, even though prices are also up. aspen, the average home sale price in aspen is $7.9 million.
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but there is also rising inventory. what we're seeing is rising inventory at the top, rising prices, and eventually something has got to give. i think basically on the price side, with stock markets where they are now, the high end of the market, very high end, really marches to the drum of the stock market more than interest rates or any other factor. >> what about oligarch money and flight capital and talk about chinese capital controls? i would think that could have a terrible effect if suddenly they really did clamp down. isn't that where a lot of the high end purchases are coming? >> i have been predicting reduction in outflow of chinese wealth for months. but in fact we're seeing the opposite. we'll really look at these first quarter numbers to see what is really happening. talk to the brokers, talk to the banks, mortgage companies, all the people that deal with that overseas money, it has accelerated toward the end of last year and beginning of this year. so i don't know if we take a look at a couple of homes, but
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aspep n asp aspen, average price is $7 million. >> you brought in house porn for us? >> always, brian. >> six minutes into the segment and now we get to see it. >> snow porn too. >> got plenty of that here. >> that's a $7.5 million house. that's the average sale price in aspen and we go to the hamptons -- >> go back to that. who would want that as a ski -- whoever owns that home doesn't ski. you come in with your boots on -- >> that could be a guest that we have on the show. >> the caretaker's cottage. but really at the high end, everyone is targeting the fat margins at the to. look at the sky towers, spec mansions in aspen, this is starting to feel for me like 2006, 2007. >> that's a key reason why the market is more supplied now because the builders were focused on the high end. nobody wants to build the nonsexy starter home when you can't make the same margins. in the affordable price point,
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for a lot of people buying, there is no inventory. >> we hear all the reports about whether or not the economy is slowing, so interest rates can come down, but if you're nervous about the economy, what is the bigger effect on home buyers. >> home buyers, the bulk of home buyers, not the high end ones you party with, but the bulk of them are concerned about mortgage rates, the rates. can they get a loan, first and foremost. that was a key question going into 2013, 14 and 15, and what rate can we get? you can still get the very affordable fha loan at 4% or under. that's a big deal. >> housing is so different than many markets. it is a trickle up market by far. the renter has to move up to the buyer because then every other seller in that chain can't move. if that one person doesn't go, that person can't go, how is the renter doing? are they getting serious about buying again? >> rents are going through the roof, right? >> too high. >> high. it is really hard to save for a down payment. we're not seeing them build the
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money they need to make that down payment without some assistance. >> what is going to break the logjam for the lack of supply in the sort of broaded my market and lower market. what will happen to trigger the people to move up, to trigger people to buy -- to build those homes? >> i think at the high end there has to be some economic confidence. i mean, i think buyers are concerned about what is going o. there is a lot of very volatile stuff going on right now. >> good discussion. thanks so much. neleh richardson, great to have you on set. pretty tech savvy, how clued up are america's high schoolers when it comes to personal finance. we have exclusive data on the state of financial education in america. probably going to be surprised. don't move. in new york state, we believe tomorrow starts today. all across the state the economy is growing, with creative new business incentives,
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the market.redict... but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years,
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our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... ...in our experience. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence. welcome back to "power lunch." i'm michelle caruso-cabrera. teenagers need to understand how to watch their money. many high schools are failing to teach these important lessons. sharon epper son is here with
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the exclusive details. >> generally states set the guidelines for financial education in schools like they do for math or english. today's report from the council for economic education finds just 17 states require high school students to take a personal finance class to graduate. we went to east greenwich, rhode island, to talk to students taking classes in business, finance and investing to find out what they thought. how many of you think that students all over the country should have a personal finance class? and how many of you think the personal finance class makes you smarter about managing your own money? these teens say what they learned will help them be smarter about managing their debt, investing and even running their own business. >> if we're educated, we can make the right choices on the right credit cards with interest rates and all of the liabilities that they carry. >> the price of college today is insanely high. so you have to make sure you'll be able to make money after college and pay that back. >> knowing about personal
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finance, it is definitely contributed to the successfulness of my small little business. >> but a new survey by the council for economic education finds two-thirds of states don't make financial education a requirement for graduation. teacher patricia paige says students across country, not just in her class, need it. >> 100% of our students are going to need to make financial decisions even before they graduate. they need to be prepared. and our job is to prepare them. >> her students note personal finance classes are helpful, but getting states to require schools to offer them has been a slow process. just two years ago, rhode island didn't even have standards for teaching financial education until a group of east greenwich students successfully advocated for change. it may be that student led action is what is needed to get more states to do the same and we have much more about this report, you can go to our website, powerlunch.cnbc.com. >> kids get together. my high school, we had one teacher who in particular was
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very interested and started a course. it feels like it has done much more at the grassroots level. >> one of the students who graduated from the program said, when your parents talk to you about financial education, it is like put the money in your piggy bank, save. these classes are teaching them how to use this material in the real world and find that so much more helpful and they're better at managing their college loans and research has shown they're going to have better credit scores. >> the best sort of advice/game i got about compound interest, somebody said, if i offered you a million dollars right now, or a penny today and doubled that amount every day for 30 days, what would you choose? i was, like, the million bucks, please. you leave like 6 million on the table over 30 days, the penny doubled two cents, four cents, eight cents, becomes 7 million bucks. >> so important, what is interesting is when you see -- >> i hope i did the math right on that. >> an elementary student may come back to you, they're learning at that level, and
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that's what the council for economic education is saying, these k through 12 standards many states have, that's a good start, but we really ned to make it a requirement in order to graduate and offer it in the high schools. >> thanks, sharon. oil is rally on talk of possible production cuts. the closing trades in oil. >> we're coming off session highs and near 7% pop today because of the headlines that we saw earlier this morning. we're holding about $33 a barrel. we'll talk about what the truth is behind these rumor and if you can count on this rally to last when "power lunch" comes back. you both have a perfect driving record. >>perfect. no tickets. no accidents... >>that is until one of you clips a food truck, ruining your perfect record.
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welcome back. 11:30 out west. good morning if you're joining us. here is how the markets look. the dow, a decent rally, up 130 points now, oil names like chevron and exxonmobil leaving the dow. amex, your worst dow performer now. the f in fang getting an a on earnings. facebook soaring after crushing expectations. facebook is now america's ninth biggest company, facebook is bigger than wells fargo, at&t, or walmart. by the way, the news flow isn't going to slow down.
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tonight, amazon reporting their earnings after the bell. in fact, about 90 minutes from now. slightly bigger than facebook. >> and a press release in the last 20 minutes or so here that i've been combing through, they'll be doing some -- bra still state oil company cutting jobs 30% of management in the nonoperational areas, fly trying to save 1.8 billion, multiplied by four to get to the billions you would save. a company in trouble because of the decline in the price of oil. there is the adr, trades more than three bucks a share, down 52% in the last six months. announcing job cuts in order to deal with what they say is the new reality of the oil and gas sector. so they had it reprioritize how they're spending their money in order to be more competitive. >> they say they would cut some production, their production budget, exploration will cut, production will be cut. i've been bearish on oil, but we are seeing a couple of
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companies, continental resources is one, whiting is one, a couple of companies, petrobras said we'll start preducing productio. this might be a slightly bullish tack is my point. >> for the overall, not for them. >> they got a lot of their own issues. >> they have -- they need oil prices so high, the deep salt, it is so expensive to produce out there. you need 80 bucks a barrel. you can't even fly helicopters, it is so far offshore. you have to go by boat. it is so expensive. they're in a world of -- >> it is on land in africa. that's how far offshore it is in brazil. >> all right. >> geography humor or attempts. >> that was funny. that was funny. oil is trading -- oil trading about to close for the session. to jackie deangelis. >> we finished at 33.24 for the session, up 3%. as i mentioned before, about a
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7% gain at session highs earlier this morning. as you guys discussed that story about petrobras and how people are being squeezed by the low oil prices, that's what traders are telling me the rumors were about in the marketplace today, the russians saying the saudis and opec ready to cut production. senior gulf delegates saying in plans to cut production. but the bottom line is people are having a rough time, these big producers are having a difficult time, but having a coordinated effort to cut production is also a very difficult thing to do. having said that, you did have a rally on the news today. people were excited about it. i think the oil trade has been so difficult for so many that people want to see a bottom here, but a lot of guests on cnbc today saying maybe the bottom is not in just yet and there is downside ahead. if the production numbers stay where they are right now. back to you. >> all right, jackie deangelis, thanks so much. dow at session highs now. s&p is higher by 15 points as well. let's get to sue herera, 139
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points, gain of more than three-quarters of a percent. >> michigan governor rick snyder and flint mayor karen weaver meeting with flint area pastors this morning. michigan lawmakers have agreed to set aside millions of dollars to address the lead contamination in that city. authorities in southern mexico have begun fumigating homes in a bid to prevent an outbreak of the zika virus. there are 18 reported cases of that virus in that country. the world health organization says the virus is, quote, spreading explosively in the americas. suzuki recalling more than 68,000 motorcycles in the u.s. because the battery charging system can fail and cause the bikes to stall. the recall involves 15 models from the years 2008 to 2012. and nasa marking the 30th anniversary of the loss of the space shuttle "challenger" with the day of remembrance. today's ceremony also commemorates the crews of apollo one, challenger and columbia, all three of those missions lost
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astronauts. that is the cnbc news update at this hour. back to you, brian. >> sue, thank you very much. well, it was a pretty good session for oil. at least today. let's get more on your energy trade with the trading nation team. i understand mostly oil names are up today. the big names, small names, midsized names. not sure why we're cheering 33.5 buck oil considering that to be honest with you, based on the balance sheets, 33 and 30 and 29 don't make a world of difference for most of the companies. >> i completely agree with you, brian. the fundamentals for oil really don't look that good. everybody assumes if you cut supply, we should see oil rise back up quickly and the reality is there is so much oil out there, and demand is so low, that the demand problem is really exacerbating this. while you may think that oil might come up, this pig is not even halfway through the pipe in terms of oversupply. and even if everybody cuts
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today, you're still looking at low oil prices for a while. and i'm not sure you'll get a cut yet. >> i never heard that metaphor before, the pig is halfway through the python. >> we did talk about brazil, an amazon and -- >> that's it. >> maybe in gina's head. she travels around the world. what does the openings market tell you about energy's next move. we're in a -- it isn't mount everest of steepness. >> it is not. what the options market is telling us is everybody is an oil export now. people have reason for why it is going up. people have reasons for why it is going down. where they express it is by buying options on the xle and crude oil and to convert those words into numbers, the vix trade in theed my 2 ed mmid-20. if you look at a vix type instrument on oil, it would be like me, just barely over 50.
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so there is great deal of uncertainty in the actual oil commodity flowing into the energy stocks, but also then in turn flows into the s&p 500. >> i love what you had to say. thank you very much. having been to texas, north dakota, i know very little as well. here is the thing. you get private equity execs, they'll opine on the price of oil, you go it midland, texas, third generation oil guy, $100 million driving a ford f-150, he'll tell you, i got no idea where the price of oil is going. >> he should know better. >> fortunes all made in the downturn. >> that's right. >> always what you buy something at is where you make the most money. thanks, guys. for more trading nation, go to the web. tradingnation.cnbc.com. donald trump says he will not show up at tonight's debate hosted by fox news. people thought he was bluffing. he's tried this so many times before. but we're only a few hours away and he hasn't changed his mind. what happens if he doesn't show up? we discuss next. and look at how some widely
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held stocks are trading today. cisco, wells fargo, gilead and comcast. power lunch will be right back. and now the latest from trading nation.cnbc.com and a word from our sponsor. >> some people say trading in the after hours session is like trading in the wild wild west. and while there is nothing wrong with trading in the post market, it is important to realize that the spreads are probably going to be wider, the liquidity is probably going to be lower and the risk is definitely going to be higher.
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welcome back. i'm michelle caruso-cabrera. under armour soaring today, earnings better than expected and they credit steven occphan . under armour has curry under contract until 2024. osi, big hit today, down 33%. the company makes airport security scanners. earnings came in 41 cents a share shorter what analysts were looking for. weakness in the global economy hurt the company more than expected. united rentals, its earnings came in well shy of expectations. that stock is off 17.5%. the company rents heavy equipment, mostly for
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construction and industrial use. brian? michelle, just me or should airport security scanners not be economically sensitive? >> that's true. if you need them, find the money. time for street talk. analyst recommendations of the stocks every day you need to know about. first stock, rockwell automation, should you short this stock? it will fall post earnings. the company lowered the forecast last night. bernstein research cutting the rating to an underperform from market perform, target to 81 from 105, stock's at 93. well below the current price despite being in a number of big industries. this is an oil and gas company, since providing guidance back in the day in november, i guess it was, oil and commodity prices have deteriorated, projections per growth have softened. as a result, we, rockwell, are lowering the midpoint of organic growth violence. >> trip adviser, raymond james, a downgrade to an underperform from a market perform.
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this is rare. raymond james believes the combination of a model shift and macro environment creates material risks, raymond james' words. raymond james cutting a 2016 by 22%. many sites point out, yelp and angie's list, they struggle with transition revenue. >> it you see my underperform and raise me another underperform. double sell. buying. most of you aren't shorting stocks. here you go. third stock. kinder morgan. dual upgrades today. credit suisse, upgrading kmi to an outperform from market perform, boosting the targ fret target from 20 to 18. the analyst note starts hard to see much downside from here. >> hard to see much downside from here is today's bullishness. it is the new bullishness.
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new bullish in in the energy secretarier. >> it can't get worse. >> whenever someone says it can't get worse, i get nervous. credit suisse upgrading the stock. steven nicholas upgrading it and $17, slightly less bullish. >> credit suisse pointed out even if wti averaged 20 bucks a barrel, management sees downside of that $120 million to its d f dividend payout category. >> borrowing money is the new making money. >> in the energy sector. fourth stock, service now, the stock is getting pump l inting . it was the billings that was a problem, came in with guidance on full year on billings, coming in, in line, downgrading to neutral, saying the current macro conditions can't sustain this multiple, which is nine times, 2016 estimated sales, which is a premium to its gears.
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>> how can you beat earnings but billings come in light. today's under the radar name is nectar therapeutics. nktr, starting coverage with a buy and a $21 target. stock at 1364. in volatile markets, the commercial portfolio offers a degree of stability. they said disappointment on the nktr 214 product, if it doesn't work, is ten bucks. but the upside is higher if it does work. this is a melanoma and renal cancer product. 214, the code name for nectar's product. that's the one you got to watch. >> 4%. >> stock down, analyst note helping squat. michelle. >> i love alpha capture. >> you always got to free it though. >> catch and release? >> trump versus the gop, guys.
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he says he's not going to the debate tonight on fox. is he bluffing? we don't think so. how he's changing the face of the party and the debate next. here at td ameritrade, they work hard. wow, that was random.
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random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. td ameritrade. ♪ light piano today i saw a giant.
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donald trump says he'll make good on his threat to boycott the fox gop debate tonight. he says he'll host a veterans benefit at the same time as the debate and asked the press to carry it live. john harwood and sarah fagan from our d.c. bureau. sarah, what do you think? does this hurt trump in any way? >> i don't think it hurts him right now. i mean, part of what has happened is he positioned himself as the aggrieved party. fox put out this ill advised statement comparing him to putin and the ayatollah of iran and saying he was afraid of them and making this strange comparison to megyn kelly that nobody got. >> very cheeky press release about, you know, whether or not they would be -- if he can't face off against megyn kelly, how will he against these two. >> so he's the aggrieved party, he's been offended and now doing this great charitable act for veterans. >> is everyone else on stage
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relieved that he won't be there, they'll get some air? >> they'll get some of the air he sucks out of the room, but the entire conversation is about him. we're talking about him right now and not anybody else. >> true. >> and he's now set he's now se up. i don't think there's any chance he's going to show on the stage. he has to appear at this alternative location. fox -- donald trump is somehow turning what could have been a bad situation into another victory for him. it's amazing to me. >> john harwood, i would say the fox press release was trumpian yaxt in its release. but who is likely to be the winner in this aside from mr. trump, the best person manipulating the media i've ever seen? >> reporter: i have to agree with sara, i think the only winner in the situation and with
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this caveat, we'll have caucuses on monday night and find out what happens. we have a measurement today that shows donald trumpwise a 7% lead. if he loses the caucus, we can may maybe he made a mistake. as far as i can tell the only winner is donald trump. we're talking about him. we'll be talking about him and what he does at that event more than we talk about the debate. he's taking attention from rivals who need attention, who need confrontations with him to try to make some head way. this guy has got a genius for dominating attention and found another way to do it today. also, by the way, i would be interested in sara agrees with this, there is risk in these debates, he's done okay and sometimes very well. but there's always some risk that something will happen that will endanger your lead. he has avoided that risk. >> to add to that, i would think of all of the times i've seen
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him speak, the debates are sometimes his weakest moments. >> i would agree with that. >> that's the great genius of what donald trump has accomplished, gotten himself out of a risky situation and so yes, it's a double win for him. he doesn't have to appear and take the potential of a really bad night going into the caucuses and he has this other event that's going to suck up oxygen from the debate. >> can i mention one other thing too. >> of course. >> if donald trump goes on and runs the table and wins the nomination, let's say he wins the iowa caucuses and holds his very large lead in new hampshire, holds his large lead in south carolina, does well in the southern primaries, the fact that he was willing to take on fox oddly enough, may help him in a general election by making people feel who are evaluating
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candidates and say, hey, wait, he took on this conservative media organization, maybe he's a little bit independent. so i think there's actually a triple genius to what trump is doing. >> he made fox part of the establishment, interestingly enough. >> that's an interesting way to look at it. we are fans of acc basketball and i think of trump going into a four corners here four days before the iowa caucuses. take me, john, through a little bit of history here. have the winners in iowa or the winners in new hampshire routinely gone on to secure the nomination? >> reporter: no, but it's windowing process and beginning of the process. in the last two iowa caucuses, mike huckabee won in 2008 and he became the principle challenger going forward to john mccain. he wasn't strong enough to get the nomination but that set the terms of the finals. in 2012, rick santorum tiled
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mitt romney, got a few votes ahead in the final count. he was the guy that came out with this with late momentum and seen as the winner and he became a member of the final group with mitt romney. it's a windowing process. but what happens, you can survive a loss in iowa and even survive third place in iowa, but then when you get to new hampshire, the stakes get higher, no republican has ever won the republican nomination after finishing third place in the new hampshire primary and so as you get -- >> that's a good point, john. >> reporter: candidates have to move up. >> sara, we have no time, only a yes or no. does trump get the nomination? >> no. >> let's see. >> thanks so much. >> bold. >> bold, yeah. >> you know what else is bold, the dow, how's that for a segue? you talk about serious presidential stuff but it is up
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90. very few people have talked about the economy over the last year. i would like to see that engage a little bit more. tyler mathison, you're already taking off my friend, you're out. "power lunch" is back in two. 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. with your wife watching. she forgives you... eventually. your insurance company, not so much.
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can a a subconscious. mind? a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? welcome back. snow on the ground, it is nice around the country, i'm going to ruin it for everybody. tomorrow is the last day of
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trading for jan, unless something changes, the nasdaq will be in its worst january ever, the worst before the 2009, 9.8% drop. we're on pace for the worst january for the nasdaq. viacom killing it by the way. >> should that be any surprise? apple had a strikeout on earnings and netflix had a strike outand facebook we thought maybe that could be the savior. before the massive gain off earnings, mafacebook was down, amazon, down 9% and mike crow soft down 7%. we'll get earnings tonight and following the conference calls and trading comments off the comments at fast money at 5:00. these will be keys here into the next new month. >> very interesting that stock market rallied so hard along with oil, even though if the production cuts are true, it
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doesn't solve necessarily the demand side of the equation. >> if you're worried about the global economy suddenly and that's what we've been talking about for the last few weeks, even if opec cuts, that doesn't mean demand picks up in the world. >> demand has been a little higher year over year. >> generally speaking if you're worried about a recession at this point, then cutting production doesn't take away or offset that. >> i think it makes it worse. >> we're talking a little bit about facebook's gain being twitter's pain. and twitter is certainly a stock in pain. it will be interesting to see whether twitter remains independent. i doubt it. i think within 18 months it won't be. there's my stake in the ground. the thing that will be interesting going into february and beyond, is the thing we talked about in the last hour, whether a bottom has been hit for stocks in the short term in january and whether the bottom has been put in for oil short term in january. those are two things that will be very curious. >> burning questions.
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>> lots to do. >> big night on fast money. 3:00 somewhere in mountain time zone, wlfr that is. >> it's 5:00 somewhere. >> it is in about two minutes. >> thanks for watching "power lunch" everybody. >> "closing bell" starts right now. hi, everybody, welcome to the closing bell i'm kelly avenevans and you've grown, bill. >> i'm wilfred frost in for bill. the two big stories facebook and under arm our, whether these are the must have stocks for investors. >> oil rallying on reports that russia and saudi arabia are considering production cuts. >> health care and biotech stocks have a hit today the the massachusetts attorney general is

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