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tv   Fast Money Halftime Report  CNBC  April 1, 2016 12:00pm-1:01pm EDT

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the markets going into the afternoon. >> the firming up of the markets came right with the ism numbers. watch oil. if we can decouple it's a different picture. now let's send it over to scott and the half. >> our top trade this hour, tesla, the stock racing higher so now is it too good to pass up? courtney is with us today. global head of equities. tesla unveiling the latest model last night to rave reviews and big lines. already getting 150,000 preorders in the first 24 hours with some suggesting that number could double through the week d weekend. >> it will be $35,000.
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and i want to emphasize -- i want to emphasize that even if you buy it no options at all, this will still be an amazing car. >> well w shares already up more than 20% in the past month though is it too late to get in? does the high valuation even matter? that debate begins right now. josh brown, what do you do here? >> you avoid if you're not already in the name because the valuation does matter. it just maybe doesn't matter right this minute but it's a really, really tough situation. what is this company really worth and look at the leading analyst covering the stock using dcf models on hypothetical 2020 numbers. if you're a trader and you're in this because it's momentum and breaking above the prior high congratulations you're making money. if you're an investor it's tough to make the case that you're getting in anything reasonable here at 240. >> courtney, how do you view a
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stock with braa very high valuation. one that's a flavor people like. what do you do? >> that's just it. if you really like it then you get in. it's warren buffet that always talks about it. if you hold that stock ten years from now then go ahead and put it in your back pocket and close your eyes and move forward. where do you think that valuation is going forward. >> why do people focus so much on the valuation when in other instances they give companies a pass for the most part. amazon, high valuation. facebook, sales force, netflix for example. >> the answer is because hanging out there is the realization that this is an auto company. if you look at gm and ford and i'm not saying it's the same as gm and ford but it's an auto company. they trade at single digit multiples of earnings and 40 times earnings two years from now so it's conceivable that this could come down just to meet the multiples. >> you're going to have a hard
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time convincing people that tesla for what it is is an auto company. should be valued like general motors or ford. >> i agree. it's a technology company for sure. >> it's a technology company. >> no. i'm going to stick with the fact that it is bending metal here. >> it's more than that. this is a game changer in the auto industry. this is a technology leader in it's space. i'm not justifying a valuation. i don't even understand the valuation to be honest with you and i tried many different ways and i get it that this is a growth story and it is a game changer and you want to be involved in those things. it's just that it's such an emotional trade and so it's hard to own for the long-term and you can put it in your back pocket as you just said. >> it's impossible to value. it's being valued onlines and the last thing that was being valued onlines is apple. >> it's not just the valuation
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but they need to raise money. >> they might need to raise money. >> most likely. >> it could be. might as welsey. it's about execution and gaining scale and getting these products out the door in the right time frame. it's really a big execution story too. this is a question of the stock. a classic question of a great company but a stock i don't want to own. we can disagree about whether it should or should not be compared to an auto company. >> i don't know when you can say valuation is high but i should still be buy it. when should you buy it. >> for it to go higher from here it would be very speculative for it to go higher from here. >> if you think it's going hire that's when you buy it. do you think it's going up 5 cents or $500? >> i was looking at facebook
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awhile back and i wish i would have bought it at 30 but i still bought it at 100 plus. that's what determines whether you buy tesla right now. >> i don't hear you making that argument. you talk more about where it is today. >> here's a frame work for when you buy the stock. this is a company that's big challenge is going to be execution. they delivered less than 50,000 cars right here so we're valuing this thing along side ford and gm that sell millions of cars a year and even they have execution problems so let's assume that at some point in the future there's going to be a hiccup. a manufacturing problem. an orders problem. something with the batteries, maybe another consumer reports, trashing, something. if you love the name and you love elon musk and you think this company is going to transform the industry and reap the benefits of being that transformational which is not a given you buy on those hiccups and there's at least two or three a year. you're not buying on a day like
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today in my opinion where the company is the world's fair and everyone is falling back in love with it. >> book is not a niche product. we'll see how the model three does. that's what people are excited about. that's why the stock rallies 60%. >> facebook has no competition. amazon barely. tesla is going to be competing on electric vehicles with bmw, mercedes. that's going to happen and trust me, the guys at bmw are not sitting there eating crayons. >> the analyst community is giddy. probably the well-known and most well respected tesla analyst i think. tesla can produce and deliver. close to a $35,000 price and it's probably quite undervalued. and will be $35,000. those are legitimate questions to raise based on prior experience on what things were
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priced before they came to market and what the end price will be. another gentlemen, brave new world. >> awe struck analysts don't impress me. i'm going to say it again. i said it a minute ago. for the stock to go higher than here it can support a higher price here. >> let's bring in one of the analysts. they're calling it a game changer. joining us now on the phone, george, welcome. >> hi, everyone. >> you heard the conversation no doubt. do you want to respond? >> yeah. i mean, i think that the point we would make is comparing the multiples to ford and gm in our view isn't a valid comparison. part of the reason these companies trade at the discount they do is that all the investment community is aware of the ever increasing cost curb from emissions regulations globally. both the costs that they're
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going to struggle to pass on to the customer in which they can't get away from. so tesla there's an argument to be made that it can only go in the on sit direction whether that's from economies at scale or improvements in technology. >> how do you get beyond the valuation? how do you convince them to look up elsewhere. >> it's the people we know that are positive on this stock are really looking at it over the longer term. that's how we determine our $310 target price and what we're really looking at is a company that if it delivers half a million units in 2020 it's then faced with a choice and continued to address in growth or does it look to bring down over time its r and d sales to industry standards which are
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somewhere in the 4 to 7% range and if tesla was to do and that combine that with the gross margins we're seeing today you'd be looking at an operating margin of low to mid single digits which would be best in class. >> you and i are going to disagree on whether or not we compare it. and on that note my question to you is everybody is trying to build an electric cart. not just at the luxury end but gm and ford and nissan. everybody whether it's the bolt or the leave or whatever is trying to come out with a competitive product to tesla. how do you view that? >> yes, they're going to get much more serious in this area and particularly when they see tesla taking 130,000 orders for the cared on a blind reveal they're likely to have their product development teams
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working night and day now on the electric mobility of the future but one point we would make with respect to tesla is the strategy of approaching this from top down and building significant brand equity and positive reputation in the company is paying dividends and gives them a competitive advantage. that's why you see 130,000 people looking to put down a deposit that no other car in the automotive industry were aware of that's had this kind of consumer reaction. >> thanks for calling in. appreciate it very much. >> so you can scrutinize valuation, courtney, all you want, that's where the money was made in the last few years. fang stocks, these high growth, high valuation names. >> i think that if catalyst, you said if they can deliver. if they can execute. if they don't have any sort of conferring glitch then maybe
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this is the buy and if you're in that game selecting based on that then go for it but at the end of the day that's a big if. >> well, look, i'm just thinking about what you said. it was a good point earlier. it's not what happened in the past. it's what's going to happen next and i think we have this year seen a rotation more to value names. i do expect that's going to continue and implicit in that is that valuations are going to matter. >> that doesn't mean that some of these stocks are not going to continue to be winners? >> no, but look you know i'm a value investor so in a certain extent i'm talking my book and i do believe the shift to value is on and it's going to continue and that's where you want to have your money. >> here's what's coming up on the halftime report. >> still ahead, apple at 40. >> let's get the party started. >> not the way i taught you. >> co-founder steve woziak joins us to talk tech, innovation and apple's 40th birthday. plus losing altitude.
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>> get in crash position. the airline stocks are selling off today on an analyst downgrade. is it time to bail on the high flying trade? and halftime's very own carmen san diego. steve joins us from dubai. find out what he's hearing about where oil is headed. it's all coming up on the halftime report. we were born 10o into a new american century. born with a hunger to fly and a passion to build something better. and what an amazing time it's been, decade after decade of innovation, inspiration and wonder. so, we say thank you america for a century of trust, for the privilege of flying higher and higher, together. ♪ every auto insurance policy has a number. but not every insurance company understands
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man 1: they got in through a vendor. man 1: do you know how many vendors have access to our systems? man 2: no. man 1: hundreds, if you don't count the freelancers. man 2: should i be worried? man 1: you are the ceo. it's not just security. it's defense. bae systems.
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you can see up about 40 points right now for the dow. s&p about 1.5 points and the nasdaq up 17 or 18 points. if you take a look at the sector heat map the action has been at least on the upside of things for health care, staples and financials, energy, telecom and y utilities. to close out this quarter we have now had the biggest quarterly come back for the dow since 1933. so the wake of the great depression, remember, a huge move down in the early part of this quarter only to end positive. a big come back there and let's just set up the macro picture for you and to get an idea of where things go now. oil, down $1.39. down 3.5%. gold down $19.
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and now it's the last trade there. ten year note yield. you can see 1.78%. scott that's the set up here as we approach the second half of the day. >> all right. thank you so much. we get to the macro market picture in a moment. i want to just update a tweet moments ago saying model 3 orders are now at 180,000 in 24 hours. he says probably $42,000. $7.5 billion in a day. the future of electric cars according to mr. musk looking bright. stocks up 3% as you know. but back to the market, does the rally have legs? we come too far too fast? >> i think the rally does have legs. unless we get into a situation where it becomes a self-fulfilling prophesy because everyone thinks the market is going to tank again. i think it does have legs and with earnings coming out on the
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first quarter coming up here soon we're going to see that. numbers coming back better and you're seeing companies get tighter. i think it does have legs. >> maybe earnings won't be as bad as people think. >> i was encouraged from the economic data. i'm interested to hear what they say. the manufacturing data has certainly improved and the dollar has weakened so that should lead to better guidance but let's watch. let's not forget about that. that was less than a week ago. >> and the job numbers were better than expected if you look at the details. especially on the wage front. that's a sigh of relief and the data has been better than expected in the last couple of weeks. not only that but internationally. chinas numbers were good. >> oil erasing all of 2016 gains
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today and steve weiss travelled to the middle east to get more on that story. we get the alternative investment management summit. he joins us now from dubai. we're on a big delay. tell us what you learned. what was the number one thing you heard from investors out there. the production of energy in the uae and what he told me when i asked about oil prices was that we think in 50 years, increments of 50 years. we don't think about tomorrow, the next quarter, the next year, number one. number two he said it would not be good for them if oil were to go above $50 barrel. now what hit the papers today was an interview with the ceo that occurred in saudi arabia
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and they said regardless of where the commodity price is, they're going to continue to with their production plans increasing production through 2020 and the aue came out yesterday and said that they're going to increase the production $3.1 million barrels a day to 3.5 million barrels a day through 2017. so while they're going to the april 17th meeting what they're not going to do, at least as i see it is agree to any type of freeze. so that is sort of troubling. more so than that, around here they talk about the saudi plans to go in and buy shell assets. so it's not going away. it's just the controller of the shell assets will be going away. we'll see how that playsout. >> buy some of the very assets that they're helping destroy.
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>> well, i would say yes but buying out of bankruptcy. so you're going to have to be a bankruptcy player to buy them and just talking to one of my private equity contacts in the energy space he's working on ten bankruptcies that haven't been announced. let's move on to the markets. the sovereign wealth funds in terms of pulling capital back in, they're still putting money out to hedge funds and, in fact, they're also looking at one off situations in terms of very dislocated stocks or other situations where they can make that direct bet. they used to subsidize gas and health care and they are no longer subsidizing gas and health care they're moving some
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and they're adding a tax. so they're very, very well aware. they're in it for the long haul. anything could change but looks to me like there's a lot of concern about equity markets in particular. credit markets as well and a difficulty in deciding where to place capital. so private equity is very active here. >> steve weiss on the ground in dubai for us. safe travels back. we'll see you on the desk coming up in the next few days. don't look now but emerging markets are on a tear jumping 13% last month. is the rally just getting started or will political turmoil put an end to it. getting ground at deutsche bank. it's our call of the day and we'll debate it coming up. ♪ in new york state, we believe tomorrow starts today.
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you did not even buy $26 million worth of this stock. but you bought jp morgan on the same day. >> i did. any time a ceo is backing or putting his money where his mouth is to me that sends a
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strong shifting to the marketplace. we see how they're getting tighter and leaner focussing. it's a longer term play. it's going to continue to be a struggle but the positions right now, particularly jp morgan is going to lead to significant out performance. >> it has to be a longer term play. one we have been talking about in the current environment that we're in. >> it has to be a longer term play because you need the help from the 2.5% you will get the help from the fed. something like one or two raises at the end of this year and then into next year. that's the thing that makes it very appealing. >> you bought suntrust this morning so you two regional. >> i own bank of america and jp morgan and goldman sachs because they have gotten too oversold.
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the suntrust story i always liked and now the stock is trading at 1.2 times tangible. and i like the southeast markets because they're growing faster than the overall nationwide economy and this company had a good job diverwith their revenu streams. >> i do like city better than jp morgan but it trades at a meaningful discount to book value. you could get about a 30% rise at stock price and have it trading at tangible book value. still a discount to jp morgan. i'm underweight on the financials because i don't want another reason to follow what the fed is doing. they all laid an egg. they had a nice come back since the diamond bottom. do you like jp morgan the best in breed or are there other banks you own as well? >> that's the only one i decided to get very specific exposure too. at loop we don't pick stocks.
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however our clients we are definitely seeing them, the smart money getting into financials. they have been doing it. they did it the day i did as well. they're getting in at low valuations so whether it's citi, jp, you take your pick. it will come and happen and the stocks will come back. >> josh brown. >> morgan stanley got cut in half between july and february of this year. it is now 20% off it's bottom. has retaken a declining 50 day and if this thing gets below 56 it could be a powder keg. this is the type of name that's so hated and thrown under the bus and finally seeing some momentum here so i would be watching that level before pulling the trigger. there have been some false positives there. let me make a general market point really quickly. today the banks and bio techs following yesterday's rally now being the best two performing groups. super important. you want to see that rotation. the banks are now 15% off their
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lows as a sector. the region nals and the top three names in the s&p 500 going into show time were all bio techs so that's what you really want to see here. >> that's what you have been looking for. >> it does do that. >> no doubt. >> coming up, gold is posting it's best in 40 years. is there more room to run or is there more room to sell. as we go to break let's take a look at the heat map today. the big jobs report. there it is. s&p is flat. consumer staples health care in the green. know your financial plan won't keep you up at night. know you have insights
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>> i'm seema mody and here is your update for this hour. they protest education cuts and inadequate state funding. the teachers that join the
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protest will not be paid. a sacrifice many union members are willing to make. police in india detain five officials from a company building and overpass that collapse on to a crowded neighborhood killing 24 people and injuring 80 more a day after the collapse. >> the funerals for the two dutch siblings that live in new york and were killed in the brussels airport attack were held in the netherlands this morning. they were headed home to the u.s. on the day of the bombing. alex was on the phone with his mother when the line went dead as the bomb detonated. >> seema, thank you so much. now to gold kicking off the 2nd quarter in the red today despite
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the biggest quarterly rise in nearly 30 years. dominic is back in the newsroom with the futures now. >> thanks a lot. the yellow metal sliding. are things about to take a turn? >> i don't think so. you know, since february 11th gold traded above 1200 and stayed there. with the uncertainty about what the fed will do and when they will act, gold will still get a bid here and the buyers will come in. i'd like to buy close to 1200. i put it tight because if the dollar does strengthen it will get through that number. >> jimmy in chicago, what levels are you watching for price when it comes to gold. >> have the same levels. mine is 1195. that earnings part of the number is a little strong. it's not like the market thinks the fed is going to go from the relatively mutual bias to immediate tightening but they might need reassurances that they're not too worried about
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earnings. >> so you're look for possibly more price declines on both sides. and that's the gold trade for you guys now. for more on gold, check out futures now and go to the website here, futures now.cnbc.com. >> did you miss the opportunity to get in that trade or does it in fact have further to run? george is the head of gold investment strategy at state street global advisors and joins us here. you heard what the traders have to say and their opinions and targe targets. >> i'm not convinced. and there's a lot of global uncertainty. and you had global currency wars and you had talk about what the fed was going to do. what's the catalyst to keep it moving higher.
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and they're looking very volatile. nobody is talking about 10% growth in equities. that's a favorable climate for gold. >> 1350 by year end? >> it's possible. that would be sustainable given what's going on in the gold market and the variables that will drive the price. >> are there any pick ups projected for consumer demand for gold? >> they have been net buyers since the year 2010. this is all in the emerging markets that have less than 5% in gold and they are continuing
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to buy and have every intention of continuing to do so. most of my work is with central banks for a long time. as long as nothing happens to make the chinese economy crater they're not going to grow at 11.5%. but they're still growing at somewhere between 3 and 7 depending on which report you read. we give it that and so would europe. and across the emerging markets. we're not going to see much of this i don't think but that's going to be good and provide support. >> does the price of gold drive demand? meaning investment flows now being the primary determinant of what happens versus some other festival or the things that used to be important.
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and what's happening with competing assets and equities and what are people feeling about risk. the feelings about risk have been the major feeling since 2016. i don't know that the risks have changed but they have done a 180 and looking for risk off trades and gold is the originally kwid alternative. >> as it relates to the risk off trade we saw a record in flow in high yield in the first quarter. that to me says risk on so how does that effect your goal targets for the end of the year and candidly are they taking it from gold? could that happen to then go into the riskier asset classes. >> it's also representative of this risk on and recovery as some of these troublesome situations have recovered in high yield certainly one of those areas, how would you answer that question? >> i guess i'm thinking of the
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first quarter as a whole. if you look through january and february and the first half of march risk off is what all the conversations were about. you're looking at the last two weeks if you're starting to talk about risk on again. and as we see the numbers coming out again and go into more and more numbers coming out and the economy doing better does that then begin to really start to damage where oil is now and where it will go through the end of the year. >> you never know but if you look at in flows into the state street goal of etf that was more than 7 billion in the first quarter too. that's amazing. it's more than made up for all that we lost through 2014 and 2015 combined. >> if we all had a crystal ball. >> i'm just optimistic. >> thanks for coming by. >> head of gold investment at
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state street. coming up apple turns 40 and as we all know the company has been revolutionary and profitable. if you were lucky enough to buy apple on its ipo you'd be up a modest 28,000%. some investors worry the company is running out of innovations. we're trying to make a connection with steve woziak as well. as we go to break, a look at the halftime portfolio leader board. there it is. back in the lead. we're back after this.
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coming up at the top of the hour on power lunch, tesla shares are soaring because orders for the new model topping expectations. how much of a catalyst is this? plus new research showing global
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smartphone growth is expected to be the slowest ever in 2016. the stocks that are most vulnerable and the rise of the robots. they're everywhere. factories to companies like amazon. they're also potential risks, right? how big a danger are robots to humans in the future. back to you. >> thank you so much. airlines under pressure today following a downgrade at deutsche bank. covering to hold. guys they're looking at a slow down in corporate travel. they cite the macro environment. some of the things they say are improving or maybe not looking as bad. they don't buy it. >> business might slow down and they're also saying consumer is going to remain strong and they're going to focus more on the domestic airlines like a southwest air but if i look at delta they're going to benefit
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as well from the consumer. they have some business mix for sure but their valuation is three terms cheaper as 7 times forward versus southwest at 10 or 11 times. >> they're making their bread and butter and the fillet from the corporate customer. >> what's important to know though is that the valuations are really cheap. that the environment remains very positive in terms of supply. in fact capacity is going to be getting much easier as you progress through the year. so if oil stays around here that's also pretty good so not everything is perfect for sure but i think the valuations are very supportive. >> what do you do with these? >> if you own them you can continue to own them. the reason i did is i made a lot of money on them coming out of the recession. the only time you want to own these for real is when there is a significant downturn in the global economy and sell off. if you want to own one right now alaska airlines, it's a niche player but it's good in that northwest place. and if possibly making a bid for
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virgin atlantic which could increase it's size and scope and that's one interesting. >> you have american down 21% over a year. united down 12% over a year. those aren't intriguing enough. >> you know what the thing is, i made a lot of money coming out of the recession on airlines and granted i missed the last couple of years, they haven't gone that much up. i don't want to force this trade because when things go wrong, whether it's oil or weather or regulation it really goes wrong. i'd really rather own them when they have been disastered in a recession. >> josh. >> we went through all the charts and i hesitate to be able to say that any of these look viable right now. they're messy and all range bound and sideways over the last couple of years. they'll break out or break down and i prefer to let that happen. the best is hawaii. i don't know about the company fundamentally but this is the one that's in the best up trend. >> over a year, it's up 114%. didn't you say it was at an all time high?
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>> it's going higher. this thing is being bought on every dip. the accumulation here is off the charts. nobody knows something. i know nothing so i'm staying out of the group. >> i'm with him. i haven't done the work on the airlines but ultimately there's a play on whether you're looking at doing something on the play on travel or the play on the increased spending of consumers if you think that's going to play out the air lines should do better but i'm not holding any airline stocks right now. >> global emerging markets are on a role. should you be buying into that rally? is the risk worth the reward? is the reward worth the risk? as we head to break, a look at the dow 30 heat map. there's the dow. it's up 32. halftime report back after this. . you are called the father of behavioral economics. i've been called a lot of things. i have read all of your books. did you learn anything? i learned that humans are complicated. we're emotional. absent-minded. and we make some really bad decisions. my trade-off analytics can help companies make better decisions,
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but i am still learning what makes people tick. what makes you tick watson? natural language processing, reasoning algorithms, statistical parsing. now you are just showing off.
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>> seema has a look at who leads those gains and where we could head from here. >> that's right. a surprising come back for the emerging markets thanks to oil prices, rebound and base metals and the weaker dollar held by the fed. gain 13% in marchand if we break down the gains in march china is up 12% for the month. india up 10 and russia up 6. but this has really captivated the attention of investors up 16% in this month on prospect of a change in government. the president continues to lose
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support. just this week her key coalition partner the brazil democratic movement party announcing that it sharply raises the odds of her getting ousted which investors areon the. there are key events in april. the lower house will vote on whether to impeach rousseff. they need two-thirds of the majority before the vote moves to the senate. the outcome could likely be market moving. keep an eye on broo bazil. monetary easing is working, the question is whether the rebound will continue that would scaleback expectations of further weakening in the yuan. india, central bank meeting next week, and the governor is expected to cut rates and if markets -- and the markets are anticipating that. if it doesn't happen, we could see a retreat in indian stocks. >> seema mody, thank you. courtney, maybe this is one of the most surprising things about this, this six-week rally.
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the comeback in the emerging markets and magnitude that a lot of the markets have rallied. >> again, i think it is buying low. you know again that long-term play, the large institutional investors went in when it got hammered and you're seeing that right now with it coming back. it is a plan the economy is doing better and getting your portfolio positioned for the long-term. >> you guys like the emerging market here? eem up 8% in a month. >> i only oen stown stocks that exposure, i don't even the emerging markets per se but companies that have exposure to the emerging markets, abbott lab or 3m or whirlpool. and that's all brazil, for sure. i like to have a better balance. >> our asset allocation models are between 8% and 10% emerging market at all times, not necessarily in line with what the msci index is. we think it is not enough to get
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u.s. company exposure, you knee the equities to be diverse fide and capture the benefit when they start to outperform, which at some point will happen, that will mean revert. the meantime, look at brazil, scott, today. this is a market that opens down with a big gap, recovers, now up 2% or so. there is a bid for these stocks the first time in recent memory and it is nice to see. >> just to extend what josh is saying here, we also think that anybody strategic asset allocations should have emerging markets but we have to understand, this is going to be a very -- just what you pointed out with brazil, always going to be a very volatile asset class. we term it a rip van winkle, put the money in there and don't look at it every day, look at it over many years. you'll be pleasantly surprised f you look at it over a short time frame, you could be disappointed. >> coming up, under the radar plays. stephanie and jim, where are they seeing buying opportunities today.
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all right, let's go under the radar. >> u.p.s. had a nice lift from its lows. but this is after two years of being massive underperformer. i think domestic margins are the key to the story. the companies -- i think domestic volumes are poised to actually do better and if that's the case, i think the stock goes higher. >> you say you're looking or buying. >> buying. own the portfolio. own it in this portfolio. >> joe. >> master limited partnerships have been under the radar for the past few months and maybe we should be happy about that. there is news iteming highlighting what could happen when the mlps, some of them go bankrupt and the tax implications they're in. what is happening is a classic baby getting thrown out with the bath water situation.
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you should be looking at the sell off in the entire space and look for the cream of the crop. the magellan midstream partners or embridge energies, those are companies you shouldn't have any fear of bankruptcy. and they're selling off today and presents a good opportunity. >> okay, courtney ratlive, josh mentioned biotech doing well. maybe a couple of days don't make a trend, but do you -- do you feel like that space, which has been so beaten down legitimately has an opportunity to do something in this quarter? >> i know that's one of stephanie's favorites. i might want to just kind of toss it over to you. i think health care in general and as you look at biotechs, those names have been beaten down. it is time for them to come back. we know what is going to happen long-term and the demographics of the country and the world. and i think just across the sector it should do better. >> it has been a laggard year to date, the sector in general. as josh pointed out -- >> is there something going on to turn it around. >> i don't know. i still feel like the political
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environment is very much of a head wind, but you get some of the best in breed companies that have fallen 20, 30 bucks like sell gene, gilead, it is tempting if you have a long-term horizon, you could be picking at these things. >> you think there is some legitimacy to this move. >> well, all i'm saying is if you look at areas like banks and biotechs that have been glaring, you want to see money flow there and some winners starting to be separated from losers. and not just this kind of index driven give up on the whole sector. >> you don't want this sort of defensive tone to the rally. that can only take you so far. you look at utilities and telecoms and some of these areas that have led the way, that's only going to get you so far, right? >> without a doubt. and the story so far this year has been kind of bifurcated.
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you had big materials that came back that started in mid-february. since january, you had massive outperformance. the big middle is what really counts. steph would agree with this, you need financials, you need health care, there is a big part of the real economy, there is such a big part of what is actually happening in our lives and we need to see some positive sentiment around those names. >> let's talk about apple hitting 40 as we said. sort of we're marking the anniversary. look ahead to what this stock could have in store for the quarter ahead. it had a great run here, up 10% or so in a month. >> you have an ugly quarter ahead. you probably have some not great guidance as well. but i think everybody knows the iphone units will be down 15 to 20% year over year in the upcoming quarter. i think you're going to hear about a bigger buyback, bigger dividend and that's what the market wants. they want quality, balance sheet, dividend. this fits that bill. you have the iphone seven coming in the second half.
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>> i generally agree with steph. one thing i disagree with, i think in the last quarter, i think they guided sufficiently low, it is a hurdle they can easily beat. >> you look at the dollar and look at consumer spending, everything looks good. >> thank you for being here. "power lunch" begins right now. breaking news and steve liesman. >> thank you very much, scott. remarks out this hour saying is it appropriate to gradually raise interest rates. mester is a voter this year. thought to be more hawkish. she suggests she's on board now for the rate hikes saying after raising rates policy remains easy for some time. this is justified, she says, because of head winds including the strong dollar, decline in manufacturing, they justify the easy policy. and gradual hikes. she said the risk to moving too soon are equal to the risk to waiting too long. she talks about this issuef

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