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tv   Power Lunch  CNBC  May 27, 2016 1:00pm-3:01pm EDT

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venture back startups. >> financials? >> i think interest rates will dictate it. the financials have a good run so far. they got hurt in the beginning of the year. if the numbers come in as we expect, financials will still continue to run. >> good stuff. we'll see you on the other side. "power lunch" begins now. >> a big week for your money coming to a close with a warning about a possible recession coming ahead. those are your top stories heading into the long holiday weekend. hi, everybody. i'm brian with tyler and me llia and they're both tanned. >> once a year i do this, baby. i koment remember whether it was the day before the fourth of july or the day before memorial day. so i wore it today. >> this is the decline of the american work ethic. that's what you're hearing. >> hold on. if you're on the radio, tyler
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mathisen is somehow not wearing a tie. more than economic data never takes off and you got some big data earlier today. let's find out what it may say about the economy and your money with the very bespoke steve liesman. >> i may take my tie off. the bad news is that with this morning's revision, we couldn't even get to 1% for first quarter growth. q-1 actual up 0.8%. that is an upward revision. there would be hopes for a whole number. 1% couldn't make it. the good news is that weakness is so far not spread to economists for this quarter. here is the cnbc rapid update. there is news in this, folks. it's unchanged. the yfd a rebound remains intact. and some big guys like goldman sachs had the upper range there of 3%. here are the details of the gdp number. consumer spending that, is the big disappointment. still at 1.9%. business investment revised
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downward. businesses are simply not spending out there. housing is strong. revisions upwards to net trade. exports were a little better. imports a little worse. that's good for trade. inventories also. that is a trouble for the second quarter. need to talk about. that along with the reports, two other pieces of good and bad news. corporate profits were up just barely in the first quarter. reversing a series of declines but strongly negative year over year. john says profits and investment are the heartbeat of a capitalist economy. the economy is not as strong as the employment data would suggest. for some, the profits recession we've been in, i think larry kudlow will talk about that in just a minute. at the same time, before larry goes, i have to tell you this, disposable personal income is revised higher for the past two quarters. result of stronger wages and salaries. so consumers, they have more money in their pockets. now the outlook for the economy, the fed and the consumer will all be top knicks a few minutes when fed chair janet yellen sits down for a discussion.
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we'll be listening closely. >> we'll watch that speech. let's do bring in larry kudlow. does a profits recession which clearly we've been in portend a recession broader than that? >> it's big risk, high threat. that's the point i want to make. steve touched on it. >> better than 50/50. >> by the way, john riding is an old and former friend of mine. it is better than 50/50? perhaps not. on the other hand, profits and business investment are the life blood of the economy. profits themselves, i call them mother's milk of the stock market. and the numbers here allow -- i mean it's true. profits rose slightly. these are unadjusted numbers. you got look at the year on year. this is the third straight decline of year on year profits, okay, third quarterer in a row. 5.7%. >> deutsche bank is also looking at profit margin declines as a recession. >> i'm going to get to that. >> i'm sorry to cut you off. >> that's very important. domestic nonfinancial profits
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which is really the heart of the heart of the situation also third straight quarterly decline measured year on year. 5.6% drop. that is not good. business investment is far. >> is it falling? are the numbers being skewed downward? is it because they're going down in energy? >> yeah. no, not entirely. to some extent, yes. but it's never been that large a part of the economy. i mean that's the important thing. look, business investme in. t, if you're not profitable and you're not investing and you're not hiring, so the next jobs report is going to be really important. the next couple jobs reports, see if there are additional shoes to fall, i can't, we think and often say consumer spending is p 770% of the economy. it is not. that is a misnomer. new work coming out by the
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commerce department which has a gross output number, professor mark scousen, when you look underneath the hood, business to business spending is hugely important. business producing and supply chains are hugely important. business is a larger share of the economy under the surface than consumers. >> aren't people scurrying off in a depressed way. it's a cheery holiday weekend. i have to throw back at you. >> yes? >> higher disposable income. wages and salaries are better. jobs are up. true, it was weaker than the last one. we're still doing around 180,000, 200,000. claims are down. housing is doing very well. it's not necessarily true that business and those weak numbers win out for the future of the economy. >> they absolutely -- you can't have consumer jobs or incomes without business --
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>> how it is wrong? >> without business expansion and without profits, now let's look at profits. there is virtually no productivity. so wage increases, even though they're modest, are actually higher than the prices that businesses can fetch. that is a negative position for profits. okay? costs higher than prices, negative profits. unless that changes, then we are going to see if profits decline and we're going to see a business decline and that's why you got to be careful. steve, jobs come from businesses. >> i agree. here's my take on this larry. we have been through an extraordinary period where profits are percentage of gdp have been rather large. >> yes. >> and out -- and margins are falling. this is a simple correction. i believe the economy is better off with more money in consumer's pockets and because margins are so high, business can still and will still be eligible stocks with an
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adjustment. >> i can't wait. the logic here is reverse. you have the story backwards. you're not going to have incomes unless businesses are creating jobs. businesses can't create jobs unless it is profitable to do so. all right? that's the point i'm making. now on the other side, there is no inflation. 1% year on year inflation. the tip spreads are still very low. the thing that says there's no recession now is the yield curve is not inversed. >> but it has flat ened. >> the spread is the smallest. >> that's correct. >> i was going to ask a question about bringing back foreign profits but we're out of time. >> this is a worrysome report to me. >> have a great weekend. we don't got any more time. >> cut corporate taxes. >> steve mentioned janet yellen is scheduled to speak in a few
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minutes. i'm on tleechlt we're going to bring you that live when it happens, folks. the bounce back we've seen in oil not bringing drilling rigs back. rigs fell again. down by two. unchanged last week. down by two. the trend does appear to be mitigating a little bit. but we're at a 316 compared to a week ago. we're down by 330 compared to a year ago. so no reinvestment in new wells, not yet. >> all right. we have important health alert to tell buchlt a super bug has shown up here in the united states foifrt time ever. this is something many doctors have been dreading for years of mutant e. coli bacteria discovered in a pennsylvania woman. health officials are concerned this could signal the endst road for antibiotics. joining us now is professor of preventative medicine at vanderbilt university. doctor, i'll start it off with you. in terms of what can be done, people say, you know what?
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don't prescribe antibiotics so much, don't use them so much. that will prevent the rise of the next super bug. but as far as the one here in the united states now, what can be done about that one? >> well that one is under control. the public health people along with the doctors are getting all the lady's contacts and are screening them to see if there's been any spread. so far, this is early days. we don't know if there's been any spread to anyone else yet. but this one i think we have contained. >> okay. can you help us understand just the idea of the fact that this woman hadn't traveled and she in the last five months. and we know she's in pennsylvania. you said this one is under control. that's good. we shouldn't panic. but how do you think she may have come across this bug? >> we don't know. that's one of the great mysteries. why did they say she hasn't traveled only in the last five months. has she been somewhere before then and where had she been? we're waiting for those kinds of
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details. where did it come from? and how far did it spread? all of that still under investigation. >> you were talking about finding out who she was in contact with, specifically person to person. but are there other ways in which it could be spread that public should be aware of perhaps through the insufficient cleaning of cleaning such as endoscopes. there was insufficient cleaning of endoscopes and that is one reason why certain bacterial infections were spread. >> well, that's a large problem in hospitals. but don't think it has anything to do with this lady per se. but it's likely that person to person spread is the major root of transmission of this bug. >> doctor, two very quick questions. one on this super bug and one on zika if i might. how quickly can antibiotics respond to these kinds of super
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bugs? in other words, are there -- can they be tweaked quickly? that's number one. and i'd love to get your thoughts as we head into a long weekend, summer weekend where we are in fighting zika. >> as to the antibiotics, the antibiotics we can use are the ones that we have. in order to develop new ones, industry needs more incentives to open up its antibiotic research laboratories in order to create new antibiotics. that is a long story. as to zika, there is no zika in the united states that has been trans mi transmitted by mosquitos. i think we're ready to respond if that should occur. there may somebody introductions. they may even get a little bit of spread. but i think we can curtail that through quick public health action. >> doctor, i want to ask you about whether doctors are responding to all the warnings about the overuse of antibiotics. we hear anecdotes about fewer
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antibiotics being prescribed. is that something you observed? is this a good sign? >> it's a very good sign. the medical community has been working to educate ourselves all of our colleagues to be much more prudent in the prescribing of antibiotics and we made a lot of progress. we still have a long way to go. the public also are partners in this. we shouldn't go to the doctor expecting a prescription for antibiotics. the doctor says that is a viral infection, you don't need an antibiotic, we should smile and get our symptomatic treatment. >> on the point of anti-buy ottics, you mentioned that companies, they simply aren't in the business right now of developing new antibiotics. it's not a profitable business for them. what can we do to incentivize the industry to be on the forefront of this? last year they allocated $150 pll to the cdc. how should we attack the problems? is it money through the cdc or the drug companies in the private sector?
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>> it's the drug companies in the private sector who do the basic research. we have to create insent ifcent they create new antibiotics against the rersistant organism. >> thank you so much. we have breaking news. let's get to steve liesman. janet yellen is scheduled to speak at harvard university. >> there's a moment where they say ah-ha this is a career for me. when did you say i think i'm going to be ab economist and why? >> i'd first like to express my great gratitude to dean cohen and to ben for their wonderful remarks. i'm really touched and honored by this award. ben is a good friend and colleague. and let me just say that america owes him an enormous debt of
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gratitude. [ applause ] >> whether did you decide to become an economist? >> as was mentioned, i became hooked on economics when i took econ-1 or econ-10 here. and i think in part i'd always been interested in math, always enjoyed math. and i saw economics as a field that uses math and quantitative techniques but for an important social purpose. and that is advancing human welfare and understanding problems that keep people from fulfilling their lives. so it was the social welfare implications of economics plus the analytic rigor that it
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involves was a combination that appeals to me. also, in my first macro economics class, i studied the great depression and business cycles more generally. it was my first exposure really to economics, to the general theory. and i think i came to appreciate that although i don't think anyone's ever invented a better economic system and capitalism and works very well for a large number of purposes, it is capable of breakdowns periodically in which one has mass unemployment. the great depression, the great recession fortunately not nearly so serious but nevertheless a very difficult episode. i saw that monetary and fiscal policy were tools that could be used to address unemployment and improve people's lives. and that attracted me. and it continued to be my
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motivation. >> as a seecher of principles of economics here at harvard, i'm great to hear that that is so transformtive in people's lives. you mentioned economics, i want to talk about your pedigree. when you went to yale as a grad student, you studied with james tobin. you know this, but to gift audience background, he is one of the great macro economists. he studied in harvard under alvin hanson, he is an early economist. one of the first people that took canes seriously and the general theory to the united states. so you can see that intellectual trajectory from canes, hanson to tobin to you. i went to lunch today. you talked to allen garger. >> i did. he tells a little bit about your relationship with tobin and how that worked? >> well, i went to yale. i chose yale as a place to get my phd because i was so
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impressed by tobin. i took his course in monetary economics. i served as his teaching assistant in the core graduate macro class. he was certainly an important mentor to me and a friend. and later on, when i went to serve at the federal reserve and council of economic advisors, he would visit me in washington and give me the benefit of his policy advice. but tobin to me was more than just a teacher. he was really an inspiration. and to him, sometimes economists are accused of working on highly
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mathematical models and the applicability of them is questionable. for tobin that, was never the case. economics was always important because the policy applications of it had the potential to make people's lives better. as you indicated, he studied here in harvard, read the general theory shortly after it was published, lived through the depression. so not only the horrific economic toll it took on our nation, but also the political and social reprecushions of that for many, many years. he was determined to make sure that our country never suffered through such a situation again when there were policy tools that could be deployed and that was exactly the focus that i have had throughout my career.
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>> i didn't notice by the way as a m rachlt cro economist that recessions have one positive biproduct. i went to grad xul during the '82 recession. and this recent recession, the financial crisis, has a lot of people interested in macro economics again. there is one little upside to economic down turns. something to smi about the evolution of economic thought. so if you think about what you learned, how the economy works as a student both at brown and yale and what we know today, what is really fundamentally important that they didn't know when you were a student? >> well, macro economics is a field is absolutely continued to advance. and dean conen, her remarks talked about what i'll refer to as the macro economics foundation -- >> we've been listening to january he will yellen engage in a q&a with a harvard economists.
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she is talking about how she got in economics and her background. let's go to rick santelli. rick? >> it's been a tough week for fixed income traders. futures, options and cash. a variety of issues collided this week. we have early closes in many markets. we're putting up some charts. we had pretty big moves to the upside in yield, at least moves on a relative scale. but everything ended yesterday afternoon. a lot because of janet yell en. not sure what to expect. many option traders neutralize positions. all day long today, traders are coming torn between get ago way from the beginning of the holiday and trading in the computerized markets versus the pits that are not open anymore. rick, is she going to say anything about policy? now my answer and i got lucky although there is still more q&a left, i didn't think so. i don't think it's a presentation or to give us cues
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about the economy. it shows how tightly wound traders are. we have a few stragglers behind me in other option that's are open regular time. but the fact that they're unchanged with a volatile scenario that was insighted by the minutes a week ago wednesday that made traders think sooner rather than later. i don't think they're convinced of that. they're really hungry for information as far as how they can put the strategies into the marketplace. i can't underscore. they watch fundamentals like a hawk. it's all about that lady, the chairperson and the future that she has with regard to monetary policy. >> all right. rick santelli, thank you. of course, we'll continue to monitor yellen speaking at harvard. if she says anything material or about rates, we will, of course, bring it you to. if you're one of the millions of people hitting the road this weekend, probably all in the new jersey turnpike, you're probably wishing for one of these.
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this is amazing. you're looking at a model of an elevated bus that rides above the road. it allows cars to pass underneath it. it was unveiled at a tech expo in china this week. the first real life test run of that bus is planned for later on this year. meantime, back here in the usa, good luck. many america's roads and bridges and railways in dire need of repair and will cost a lot of money. but you know this. but did you know there may be a big money making opportunity around all of this? let's bring in our guest. he has three names you may want to consider if you believe in the infrastructure story. tell us why aztec industries may abe good bet? >> thank you very much. aztec industries, they're a leading player within the material company or the companies that make the equipment that goes into the road construction. roughly 70%st products they make can be used in road infrastructure.
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90% of roads in the u.s. are covered by asphalt. theret leader in the asphalt paving plants. they also are -- have number one or number two position in the other products they sell. road construction, road milling equipment, paving machines and the like. >> if you're a better on the machines that lay down and repair the asphalt then we can assume you're also better on the asphalt companies themselves because the machines have to have something to lay down. that's where volken materials comes into play. are they the same you to or is one perhaps better looking, more attractive on a valuation basis, whatever, than the other? >> they're pretty similar. you know, both of the two companies have either number one or number two position and roughly 80% of the markets. they're both very high fixed cost business that's have incremental that's would throw to profitability at 60% plus. they both have pricing. you know, the regional footprints are slightly different between the two. there is a little more composure
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to texas and 10% of the composure to cement. they have a little bit more exposure through the southeastern part of the u.s. generally speaking, you know, number one and number two in the markets. >> he's going to keep it short and sweet and hope you're right. that means the roads will get a lot smoother. stanley, have a great long weekend if you're on the roads. good luck you to as well, sir. >> thank you. take care. >> all right. time to reveal today's mystery chart. this stock is hitting new all time highs for the past couple of weeks. all you "power lunch" viewers may recognize this name. >> take a check on zylum. this is a water company that's been on this all time high list for a number of days. >> the names entering the new all time high. >> it's zylum, a water infrastructure company that transports treat and efficiently use water. dean dray has an outperform rating. great to have you with us. a water utility company
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continuing to make new all time highs. it seems in congress except for this bid to safety that we've been seeing in this market. is that what's driving the company? >> they've only been a public company for three years. it was spun itch frup from itt. they had a ceo change. and we see the company just beginning to hit the stride. and this has been a rerating story. we're not surprised to see it hitting new highs. we think there is good news ahead for xylem. >> it is a good thing that oil is $50 a barrel. they have exposure to oil and mining and energy. that was actually the drag in the most recent quarter. as we do see the energy head wind subside, is that better for xylem? >> that's a good point. mining and oil and gas is only about 5% of the company. but it has been a drag. they've been able to offset it with terrific growth in
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municipal water infrastructure. and that was up 12% organically last quarter. we think that's also good news for xylem. >> what are the capital allocation plans? they're 1% which is low in this environment. >> yeah, it is. this is a guy that has defensive appeal. what you are seeing is the new ceo beginning to gradually open up the capital allocation to m & a. water test, high end water treatment, smaller deals but i think that's where they're focusing on m & a. >> all right. dean, thank you so much for your time. dean dray with rbc. tech stocks springing back to life. will tech remain hot into the summer? we'll dig in ahead. plus, the link between cell phones and cancer. a new study reigniting this debate. what you need to know still ahead on "power lunch."
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hello, everyone. here's your cnbc news update for this hour. president obama on his way home
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after a three day trip to japan that included a historic trip to hiroshima. he arrived on wednesday to attend the g-7 summit before becoming the first sitting u.s. president to visit hero sheem yachlt he began his asian trip by visiting vietnam. russian president putin arriving in greece for a visit that will include a trip to a secluded male only christian orthodox sanctuary. he was welcomed at athens airport about it country's defense minister. the national ocean annic and mtsic administration predicting the number of storms in the upcoming atlantic hurricane season will be near normal. after fewer than normal storms last year. it says there will likely be ten to 16 named storms including four to eight hurricanes of which one to four will be major. so get ready. a painting by picasso is previewed in hong kong ahestd london auction in june.
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the most important work to come on to the market in decades. it is expected to fetch $43 million. ty, back to you. >> thank you. welcome back. breaking news on verizon. we have the story. >> we have a deal in principle. that's what labor secretary tom perez just announced saying the verizon workers that have gone on strike in the unions that represent them have an agreement in place on a new four year deal. it is an agreement in principle says the labor secretary of u.s. they also go on to say that parties are now working to reduce the groemeagreement and communications workers of america and the international brotherhood of electrical workers. those are the two big unions representing the tens of thousands of striking verizon workers. again, an interesting move here.
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also, of course, it brings into focus a lot of the jobs picture and the u.s. those people had not been on the job or working for at least about six weeks now, april 13th is the day they walked off the job. a big development here. one of the most high profile work stoppages we've seen in recent memory. verizon wireline workers will be back on the job next week. that is the latest statement here from the u.s. secretary of labor tom perez. back to you. >> thank you. charles rhinehart joins us now. he's from main stay investme nt. let's start, charles, i know that you do not run the main stay fund. but one of the top holdings in the epic global equity fund is verizon. you like it because of the yield. you must like it even more now that they have a labor solution? >> that's right. uncertainty has gone down. we love it for a couple reasons. they do pay a dividend yield. they have a strong management
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team. what we're looking for are investments whereby the management team likes. dividend paying companies are less volatile. they decide correctly, we think, in terms of how to return cash to shareholders. >> 4% yield there at verizon. global utility, also 4% yield. one of the big holdings in the fund. bell canada, 4%. melissa asked an important question, do you have an opinion on whether verizon should buy yahoo? >> right. so i don't have a strong opinion. i don't have a strong opinion on. that but what i do like about the xmp that they're very good stewarded of capital. i'm going to leave it to them. >> let's bring in art hogan if he with might. do you have any quick reaction to this verizon story? it is the kind of stock you like? i note you like a fair number of
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consumer brand companies like kate spade, pvh and oxford. >> yeah, tyler. one of the things we're concerned about and i certainly can understand the dividend play and certainly understand the attractiveness of the dividend plays. what you get worried about is the staples, telecoms and utilities are too high right now. i'm not as concerned about verizon and at&t. the telecoms of that group are probably less expensive. you just have to get nervous about the crowded trades. i would say the brand names, strong brand names and consumer discretionary is where you're going to make money in the next six months of this year. if you look at kate spade, we have great opportunities there with recognizable brands. >> is pvh calvin klein? >> yes. >> art, hold on a second. charldz, hold on a second. to steve liesman now for breaking news. >> fed chair janet yellen -- if we can go right to janet yellen.
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she's been asked about rates here. let's see if we can pick that up. >> so the kple is continuing to improve. economy is continuing to improve. we saw weak growth in the first quarter of the year and relatively weak growth at the end of last year. growth looks to be picking up from the various data that we monitor. and if that continues and if the labor market continues to improve, and i expect -- i kmekt those things will occur, we'll continue to monitor incoming data and also we'll assess risks to the outlook. but it's appropriate for the fed to gradually and cautiously ingreece the interest rate over
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time and probably in the coming months such a move would be appropriate. >> okay. >> one of the interesting challenges they face is zero interest balance. they went to rock bottom and stayed there and some sthauugge that negative rates and people are worried that we could have another recessionary shock in the future. the fed won't have many tools left. how much does that worry you? what do you imagine doing it in that sort of scenario? can you imagine going negative interest rates as some european countries are trying. how do you think about that? >> so let me agree with what doug said this morning. it is a concern. we have very limited scope to use the traditional technique,
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namely, lowering overnight interest rates to support the economy. even if we go without adverse shock and take a reasonably optimistic scenario, they're asked to write down every three months what they regard as a normal longer run level of short term interest rates. and so this is something that they might expect to prevail, say, five to seven years from now. so even if we go a number of years without conquering an adverse shock and the short term rates got back to that level, that is lower than a lower level
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of rates than we've seen historically. we don't even know for sure that level of normal or neutral rates will rise that high. in a typical recession, when the fed wants to respond, we would cut short term interest rates by maybe 400 or 500 basis points. so we don't have that scope. we have other tools to stimulate the economy. we use longer term asset purchases and we try to shape market expectations about the path of short term interest rates through our communications and so-called forward guidance. i think we would resort to those tools again. negative interest rates is something we considered briefly.
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we were concerned at the time that there could be a number of negative reprecushions from lowering negative interest rates from lowering interest rates to zero or negative territory. and so we didn't really pursue that and it's not something that we're really thinking a great deal about now. although other countries could have used it. this is a concern. one of the reasons it's important to be cautious in raising interest rates is precisely because if we were to raise interest rates too steeply and we were to trigger a down turn or drobt a down turn, we have limited scope for responding. and it is an important reason for caution. i would like to see doug and others talked about this this morning, there should be greater scope for fiscal policy in the
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future to be usable to address economic weakness and if we were to take steps to raise productivity growth in our panelist talked about a number of important things, education, children, investment in inf infrastructure, if we had faster productivity growth that, would probably push up the normal level of interest rates in the economy and give us a bit more scope there as well. >> i'm assuming in the audience there are some students and i'm sure there is some students looking at you and saying, wow. she's had a really cool career. twint do something like that. what advice would you give that student? >> so, i think the starting point for me as i've said and others have commented was finding a subject i loved and
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have been able to feel passionate about over all these years of my career, namely, economics. but finding a career every year that you want to work on. it's a lot less hard if what you're working on is something you're really interested in. to me, that's key. in thinking about a career, you know, i know i've achieved a remarkable position. but it's not just the end point of one's career that matters. a satisfying career is about what you do all the way, you know, throughout your working
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years, leading up to where ever it ends. and for me, when i think back on all the stages i've enjoyed them all. i'll mention two other thins. i think it's really important to affiliate yourself with organizations that you really feel identified with their mission. that you feel proud that you work for the organization. i've certainly felt that way at various universities i've been at. and i felt that way very much working in the federal government. several of our panelists this morning talked about public service. and i will say that some of the finest, smartest, most dedicated, most passionate people that i've worked with
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have been at the federal reserve and in the federal government. and throughout, finding people to work with that you brainstorm together. you have to figure out what are we going to do about this problem? and coming into work and having a group of people you feel -- really, these are people i want to hang out w i feel proud to have these people as my colleagues. that's always important to me. so the people you work with and choosing organizations, you feel somebody says where do you work? i work at the federal reserve. i feel it's an important organization. it's devoted to the well-being of america. >> well, thank you very much. >> welcome back. that is fed chair janet yellen
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in a it sitdown interview. he got to the question that everybody wanted to hear. he introduced it in a funny way. he said that a lot of traders delayed their trip to the hamptons wait for this speech. and she did saying she thought it was appropriate, would be appropriate to raise rates in the next couple months. if the economy goes as forecast. maybe a touch more dovish than the other comments out. there but really in line with what's been said about the possibility of a rate hike in the next couple months. you had movement in the, for example, the s&p 500. it fell by 2 points or 3 points and now it's back half of that. let me take a look here. you had a fall -- or a rise in the yield of the two year hit. it's like 91 basis points. and that is around 89 when janet yellen started talking. a modest move. was the market fully prepared for janet yellen to affirm? probably not. the market repricing a little bit when it comes to fixed income and stocks when it comes to the possibility of a rate
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hike. now the dow which twitched negative back in positive territory. let's go back to charles rhinehart and art hogan. what did you hear her say? anything new? >> no. i think it's good we got it out of the way. i think if you're janet yellen and you have an impactful change to make in your reddic, it rhet it's june 6th. it is probably appropriate to gradually raise rates. that's not major change there either. i think nothing new. i think the important thing is she is backing up what the minutes say and what several of the groups have been saying that it's a possibility. problem bhi happens in july. i think that it's still on the table because it's eight days before the brexit vote even though that's looking like a nonvent as well. i think we heard what we thought and i think the market is reacting the way it should. >> as i sweeted out, i'll be
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more blunt on the air, okay? i know you're a blunt guy, if do you what you do or anybody else that runs money, do you not know that a rate hike is coming. should you not find something else to do at this point with your life and career? that's why the stock market is not reacting. >> i think the stock market is already reacting. i think they do a good job of choreographing. so they send out the regional precedence. they set the tone for the minutes. we hear more regional fed precedence and then she says, yes this is what we're talking about. we're data dependent. the data has improved. that's got news. at the end of the day, the good news is the fed sees fit to raise rates after being too low for too long. i think that's a good statement. >> i think that's interesting point you make. it's been so well telegraphed that markets are already taking this in stride, when you take a look at sectors that you're
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invested in, for instance, utilities and telecom, they've been holding up. there really hasn't been the pull back you would think if we were on a rising path that could pose a threat. >> the fed doll something in june or july. it is well braced for it. and also we're getting closer to the watch where profit growth should resume. profits are expected to turn up in the second half of this year and advance further into next year. you don't have to be bullish on the economy and given how low we developed country interest rates, are you don't have to be very bullish on the economy to be looking at opportunities in credit and the equity market. >> you don't think there is any pullback whatsoever? how can they be defensive stocks in the face of a fear of volatility because of a hike and then also do well during the volatility of a hike? >> perhaps a short lived garden variety correction happens about three times a year. bigger pro jacketed events happen less frequently, around a economy decelerating or in is
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another major problem out there. >> i don't hear you worried at all about what we began this program with which was larry kudlow saying that based on the recession and corporate profits, three quarters in a row now, he handicaps the possibility that the broader economy will go into recession. you don't see that at all? >> no, leading economic indicators were up swiftly. the fed's probability of recession indicator is very, very low. we're getting closer to the profit growth should restore itself. so we'll have garden variety pull backs. markets move up and down. they twitched up. at the end of the day, we're close to all time highs. when you start looking out a year, 18 months or further, i would not be surprised if we were pressed. >> the conversation with larry was going in one direction. so for once in my life i kept my mouth shut. >> hardly. >> i'm not going after larry.
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what he said was there is was a profit recession compared as a percentage to gdp. a lot of that comes back to the idea that, you know, listen, corporations are finding out they don't need people. that is the problem. i think some of the data is skewed off here. art hogan, we look at the markets, i'm looking at a bunch of etfs in green here. best performing etf today is the retail etf. it sounds like the collective market is saying that, hey, a quarter point rate hike is not going to kill the u.s. consumer either. you have to actually identify those companies like a pvh or oxford, kate spade they're actually doing well. they're gaining market share. they're working the right direction. look at kate spade, they're taking market share from michael kors and coach. they put up a great quarter. another winner here. pvh has strong brands.
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consumers are willing to spend. nobody is buying ten pairs of jeans but they'll buy. two you have to make sure you're making the right ones. whether you look at an oxford or vista or pvh, i think the consumer discretionary spending -- when you think about the drivers behind that, we have -- we're creating north of 200,000 jobs, not just. that we still have a pretty cheap gasoline. so to me, consumer confidence is playing into. this and if you have the right brands, i think the consumer discretionary is heading back. can i answer the question about dividends and utilities? i agree with the thesis. but we're only talking about 25 basis points. >> what do you mean? >> we're going to 50 basis points. >> i'm not asking that specifically to day's move. i'm asking about a move in general. we see a move higher because people are seeking yield. >> yes, but when you say rates are going higher, it's like we're going from an f blus to a d minus. >> if they're raising because the economy slooking better, then you want to be more leveraged to the beta names
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which is why we're seeing a recent pickup in the technology, russell 2,000 and all the sort of names. >> they're not going to stop at 25 basis points. >> i think we'll see the move he is talking bchl right now we're still so low and no one thinks that we're going june, july, august, september. >> who knows who the fed chair will be one year from today? >> who? >> that's an interesting thought. >> they're below the rate. that's a pretty good deal. >> i would mention also, if you look at the top brands that art is speaking about, about half are domiciled in geographies outside the united states. other investors don't look for getting diverse fiction out side of the united states. dividend yields are lower. on international stocks, europe, japan, australia and put them together. and with the 50% currency hedge, you don't have to predict currencies. >> the other thing with the move or nonmove is don't forget what today s we could see a big move
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on tuesday. bond desks are all but empty. bond guys are laid lazy by nature. just kidding. >> i hope rick santelli can hear you now. i hope he can hear what you just said. >> rick is coming in. >> he knows i love bond people. i'm just teasing. >> here we go. >> i know a lot of credit junkies that work very, very hard at their craft. >> like rick santelli. >> rick, you get my point. if there is no counter party out there, you'll see a slowdown in bond trading on a day like today. yes or no? >> absolutely. i'll tell you what, it was such a weird couple of days. traders really did change after the minutes. here's the argument. they're not concerned you're going see a huge move in the long end and even the yield curve. they don't believe it says will give you an idea of the future the way it used to be. what they want to do is just get out of the way of some of these
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issues. so let's look at what happened. boom, you see the yield curve flatten again. so after this came out, you see from will 83, 48 basically unchanged on the week, we're back over 90, 91 basis points in the two. cash market closed in eight minutes. i try to get here as fast as i kfrment my phone is going nuts. traders tossed in the towel. didn't think anything was going to happen. what they're nervous about is if you really look at things objective, it is not the data dependent open tune time to raise rates. in 2013, we had 2.a% gdp. in 2014, 2.5% and it's questionable 2016. so traders conclusion is they want to normalize for reasons maybe they're not necessarily being absolutely transparent about. and that is what makes them nervous. if you think about it from the
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trader's perspective, it's a strategy they're embarking on to normalize. maybe data gent is the red herring. they're not fully convinced. data doesn't really seem to be n'sync. if the argument is rick, you know, atlanta fed gdp now is almost at 3%. in 2013, we had almost 5% two quarters. 2014 we will a couple quarters well over 3.a%. so traders are trying to get a gps. and to be quite frank, a lot of them, the gps might be the fixed income market. but it's the pits behind me where a lot of people left much it's the equity markets that concern them the most. there is an old custom in history, if you save somebody's life you're responsible for it. what traders are concerned about is if you do all this to keep the stock market up because you are forced people to -- there's no yield anymore. you take risk or going to the stocks. well, if the fed is guilty of that mass exodus in the equities, does that mean they're now responsible for all that? if they start to raise rates and
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that goes down, you know, people missed out on the income with regard to interest rates. if you're going to retire, pension funds have grabbed a lot more risk and tried to alter the complexion of the portfolio to be more equity driven, because that's what the fed wants. >> rick k. i jump in with one other thing side ways, guys? throw up the hyg or something. the one thing we have seen is a huge amount of corporate bond yields coming. forget about dell's $60 billion. that skews it. you have a bunch of companies rushing to market. do you think we're going see a flood of new issuance ahead of june or july or whatever it may be which could dilute the bond market? with a lot of layoffs, we don't necessarily have the trading capacity to handle it. >> i think that is a very safe assumption. it's highly likely. and, you know, maybe the better question then is -- believe me, i'm not saying anything negative. but the dell's have changed their business model quite a
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bit. it is many in ways due to the dynamic and i think when i look at the treasury complex and how holding treasuries get special capital issues with regard to who's holding them and bank's balance sheets, corporates is a dicier topic and highly i will liquid and serve on that barge. yes, the answer is yes. >> i can jump in on that for a moment you? mention high yield. there is one of the areas where we use it as a tremendous opportunity for generating income. spreads have come in since february 11th by a little over one-third. but the spreads are still higher than the long term average. and the anticipated defaults are concentrated in the energy and commodity sectors. alongside with the growing economy and with low levels of inflation, we think that this is actually a very good opportunity for investments and something we focus on. >> all right. >> one question for the guest though is, if you hold it, yes.
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if the company doesn't go bk, you'll get the income stream. don't you think it will be dicier if you try to get out brit matures? >> i think you have to take a long term view when investing in that, rick. >> through go. >> that's what i would advocate. >> and the fed is going to make long term a month when they start to normalize. >> we're going to leave it, there folks. thank you very much. charles, good to spend time with you. art hogan, good to see you. rick santelli, same you to. >> we're going to take a quick break. we're going to talk more about this and plenty of stuff. the all-new audi a4, with available virtual cockpit. ♪ with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call being a usaa member because of my service in the military
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commence from janet yellen moving the markets. steve liesman with a comment that send the bond market flying. >> we waited for it. there was discussion about her time at yale and back in 1952 and then we kind of dropped out of it because people got board. and then the question was asked and the setup for it was the harvard economic's professor said there are a lot of people delaying their trip to the hamptons, waiting whether or not you're going to move the markets. go ahead and take it. she said, yes, the economy is improving. i believe it will improve from weak first quarter growth and then she said this --
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>> it's appropriate, and i've said this in the past, i think for the fed to gradually and cautiously increase our overnight interest rate over time. and probably in the coming months such a move would be appropriate. >> right. >> you can go to the hamptons now. >> like other fed officials, her comments are contingent upon the forecast. obviously, we have the jobs report coming out next week, june 3rd. and the economy rebounding. it was in line with what colleagues are saying. >> she certainly didn't knock them down. gradually, cautiously, next few months. what is your reaction? >> i wouldn't go. i mean, i wouldn't go. unfortunately, i disagree with yellen's assessment of the economy. q-2 is going to be 2%, 2.5%.
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that is coming off q-1. there are a lot of seasonal adjustment problems. steve is always right. i also do not see any inflation. >> the last -- >> the last was higher. it was 2%. >> today's inflation report 1.3%. and the consumer deflator which is their measure is 1%. year on year. 1%. so in my -- >> cpi. which was higher? >> yes. >> but not the one they favor. >> the broader price measures show nil inflation. a point below the target. and my reading of the economy is profits and business investment are falling. >> what about risk management, larry. you're really at zero. the economy is much better than it was when they first went to zero.
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so you're going to get higher inflation numbers down the road. why not move 25 basis points ahead and then set up another one perhaps in december? take out a little insurance? >> 25 basis points is not the end of the world. there is a risk that market will see one in june and then think hikdz are coming. that would not gb. let me just say this, i don't like zero inflation. i never like thachltd i didn't like qe. how do you get out of this with minimizing the dangers to the economy and to investors and whatever? i think it's very tricky business. i believe the fed should follow markets. okay? so my plan is cut the corporate tax watch the economy go up and the fed follows them up. that's not going to happen overnight. >> that and a cup of coffee will
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get you a quarter. >> and i would not be in any rush to change monetary poll sichlt. >> so we all talked about the data. i think we agree on. this let's get back to the news. do you think, larry, that janet yellen said we're raising in june or july. she said appropriate in the coming months. >> it sounded like it. i don't know. i've been doing this so many years. it sounded like it. i just don't know. i'll take her at her word. she didn't knock down any of the others. >> she sounded like dudley. are you surprised she sounded this -- i don't want to say aggressive, but at least affirmative maybe is a better word? >> okay. i just -- you know what? if i could wave a magic wand. >> she just wasn't knocking down -- >> i would take the fed out of the interest rate control game altogeth altogether. okay? to me markets should drive interest rates. and then the fed's discount rate can trade above the t bill rate.
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i think it's a crazy game. i thought qe was a crazy game. i think all the corporations have used zech ed zechlt. rp to borrow in the market for financial engineering, the thing to help the economy. it damaged savers. i don't like any of this. i'm just -- all i'm saying is how do you get out of this? >> and you're not waving a magic wand. but even with the comments, we're ending the week, a week in which the markets, the s&p 500 is going to finish up on gain of 2% and nasdaq up 3% if, we're in the business saying the feds should follow the markets, a rate hike if june or july, that's okay. because that is -- that was the context of this move higher. it wasn't that they're back ago way from a hike. it's that there was actual realization according to the fed funds futures that there will be a hike. >> i hear you. i you this your read is correct. ail say this regarding the stock market and the bond market, they
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haven't really moved in, what, a year and a half? >> a year, certainly. >> over a year. >> and that connection profits started there. f flattening and decline during that period. i would say regarding stocks, don't worry so much about the fed. worry about the underlying profit anlt of these companies. and right now i don't like what i see. >> it's a back and forth process between the fed and markets. fed suggests stuff. the fed watches very closely how the markets react. and it will back off. and dudley said this and yellen said this that they try to prepare the markets. the markets aren't ready, they back off and have done it several times. your observation is right. this reaction shows they're ready for this. >> what did the ten year do? >> the yield went up. three basis points maybe. then it came back down a little bit. >> if they can hold that and the ten year doesn't erupt, that's a good thing. brian kelly said many months the risk is the fed raises the target rate and long term rates
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go down. and that's a recession sign. >> right. >> and that's just what happened. >> we go down a tiny little bit. >> and in gdp which is not the end of the world, nonetheless, there were some lousy signs in the gdp on profits and business investment. so ms. yellen says it will do better. statistically she'll be right in the second quarter. i don't think funneled. ally she's right. >> all right, folks. have to leave it. there. >> i may be wrong. >> larry, steve, thanks. >> we should note that bond market is closed now. the bond market has an early close today. if you say why isn't the bond market moving? it closed at 2:00 and there wasn't a lot of liquidity. >> they're headed to the hamptons with steve. >> i work on saturdays. i do a radio show 52 weeks of the year. >> he is harder worker. >> for the record, i'm not going
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to the hamptons. >> i'm going fishing. >> the s&p 500 carving out gains this movement up 1.5%. not a terrible month. check out technology though. pretty good month so far for may. up more than 4.5%. that is easily the best performer of all the ten major s&p 500 sectors. dominick chu who i think works 24/7 joining us for the big tech winners. >> i don't work 24/7 and i'm not going to the hamptons either. i don't know where everybody else is headed. i'm going home and sit by my grill froefrt of the long waekd. but anyway, let's talk about the overall market. like steve liesman said, perhaps the market is anticipating already. and i've been telegraphed about a rate increase which is the reason why technology stocks and the market overall have been perhaps moving higher despite the fact that there could be a risk of a rate hike. if you look at tech this week alo alone, check this out. check out what is happening with technology. up 2.a%. if you look at the big winners driving that trade so far in
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technology, fun and games i call it, right? chip stocks. micron, active igs, blizzard, applied materials, they make the stuff that makes computer chips. ea, video game publisher, video game con soles, those guys really led the way higher for technology in recent weeks here. and check this out here. of course, we have to mention one tech stock that everyone wants to talk about, apple. we know that it had a rough time the past couple weeks post earnings. check out what is happening over the past month, up 2%. apple starting to make a move higher. we'll see if it keeps up going into the summer months. >> thank you, dom chu. >> so which tech stock should you keep an eye on this summer? let's bring in a chief investment officer of hartland management. guys, great to you have with us. i think there is a larger question as we have listened to janet yellen and digesting the notion of a june or july rate
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hike, is now time for a market rotation? that's what we've been seeing the past couple weeks. a move in technology and out of the very crowded trades, yield trades of consumer staples and utilities. michael, i'll start with you. is this a great time to be in technology? is this the right time? >> well, yeah. we like technology because of the longer term higher growth potential there. i say there is always a good time to be there. but in terms of sector rotation, you know, clearly, you know, the consumer staples, utilities, those sorts of things, a lot of money has been going there as yield alternatives. it's natural for money to come out of that with the fed potentially moving and looking at more growth sectors or beginning to weigh that bonds versus stocks yield comparison that they probably haven't had to do for a while. >> nancy, one stock that may have benefitted in part from this rotation is apple. of course, it also benefitted from an investment by berkshire bath way. apple's been up quite sharply since then. do you stwik this move? was it too much in short period
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of time? >> well, me list yashlissa, i w with michael the day apple passed by google as the largest holding and was recommending it on a valuation basis. it has moved up about 11.5%. i think it needs to catch its breath. but zbrust look out over the long term this is a company that can solve its lack of innovation with its cash. so whether it's time warner or whatever content provider they're either going buy or the content they will develop. i'm not concerned about this company having gone too far too fast with a three to five year time horizon as an investor. the year to date utilities are up 13.9% if you just look at the bpu. technology is up 1.5%. i think we have room in manufacture the stocks. so many of the old tech stocks are in transition. and can solve their problem. microsoft to cloud, apple to services, cisco to securities.
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so i think there is opportunity and big yields. >> okay. we have to leave it there. thank you so much nancy and michael. michael's picks are autodesk and facebook snifrment.
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all right. it's 2:14. news alert relating now to sumner redstone. we have the story. hi, david. >> thanks, tyler.
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we got a statement from the spokesman representing sumner redstone, the controlling shareholder of viacom earlier today. we report thatd board of directors of viacom including his chairman were bracing for the possibility that mr. redstone as the controlling shareholder of the company could move to replace much many f. not the entire board and replace them with a new slate of directors. a spokesman for mr. redstone 15 minutes ago said sumner redstone will may every decision with the same deliberation and consideration with which reremoved philip dehman and abrams as trustees based on the best interest of shareholders. of course, it was a week ago that we first got the news that mr. abrams and mr. dauman were removed as trustees of the trust that will take over upon his death or upon when he is deemed mentally incapacitated. the controlling stake and national amusements which then
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controls cbs and viacom. since then, what a week in termed of back and forth and including, of course, a suit in the commonwealth of massachusetts trial court for probate and family court in norfolk, massachusetts. that from mr. d auman and mr. abram saying we should not be unseated saying undue influence of sherry redstone, there is a case in which redstone formerly a estranged daughter manipulated her daughter to achieve her goals. again, we'll see whether in fact there say move by miss redstone to replace the board of direct yordz at viacom and whether it comes as soon as today as manufacture the directors believe it may. this, of course, is a statement of this type and others like it during the course of the week establish something of a public record that this decision is being made by mr. redstone and not as mr. dauman would claim by his daughter. he is 93 years old today is mr.
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redstone. but, guys this is just one heck of a week. unprecedented really and kind of some of the things that i've seen and what is a pretty long career at this point. having the current and sitting chairman and ceo suing the daughter and in effect going against the wishes of his controlling shareholder. you don't see that every day. and, of course, it does leave viacom and potentially cbs in something of limbo right now as the two struggle to figure out just who is in charge? >> for viacom, that could be a good limbo. the viacom stock has done horribly. 35% decline. but even this past week alone it's up 13.5%. there must be thinking that this would shake up at least at the very least yield better management of the better company. >> absolutely. i think that is the key reason it's been up. the people i speak to do not expect in any way that shari redstone and/or mr. redstone would seek to sell the company. it is on the idea that new management will be installed.
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but for now, it has the infect of parldzing everything at the company. and so there is frankly a hope on all sides on even on the sides of the directors i believe that something get clarified quickly. i should point out if this does occur as i reported earlier, they will immediately file suit in delaware to have it stayed under something called statute 225 for those of you who care about corporate governance and delaware law. >> they being dauman? >> yesterday, led by the lead director actually, tyler. >> well, is there a way -- we talked about this yesterday off the air. when you look at the moves that have been done here, shari redstone's moves, whatever the point of view is on this, a couple months ago she had dauman say that her father was of his right mind. he was fine to run the company. now when he was removed off that board, dauman basically said, i guess through an attorney, that, you know, he's not of his right mind and therefore, this was not a ligit move.
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shari redstone seems fairly machiavellian here. >> you know, there is a move being made here, some would say, by her at this point in time where mr. redstone to your point is believed to have at least or not been deemed incompetent to gain control. that at least is the claim as you say from mr. dauman and abrams and others on the board of directors. the lead director is trying to see mr. redstone for some time. thou he was going to see him on may 16th. it got put off. he continues to try through correspondents with mr. redstone's new attorney to try to actually get an opportunity to speak to mr. redstone. but, yeah, dauman said those things about six months ago in the complaint we got earlier this week filed in massachusetts, brian, he now says things have changed in those six months and he wasn't really commenting on his meantal competence as much as he was commenting on other things. >> all right. i want to ask about cbs. cbs hasn't come up in any of this. is it simply because cbs's stock performance is better or because
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the relationship between ms. redstone, shari, and les munvez is better? >> both. i haven't had a opportunity to speak to ms. redstone despite trying a number of time. the belief is both. the stock price performed better. the company performed better, the relationship between leslie munvez and miss redstone is believed to be far better than what we know was a very contentious relationship between her and philipe dauman f you're at cbs, you still have to wonder what is in store or simply whether they're going to be any changes to come as well. >> all right. david, thank you very much with the latest on the redstone drama at viacom. all right. modern medicine how incredibly new technology is helping the blind to see. that is powerful stuff. plus, a lig study linking kre cell phone and cancer. what you need to know when "power lunch" returns.
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♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪
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cell phone towers may cause cancer. at least apparently they have in rats, male rats to be precise. not sure what color they were. the link in humans or female
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rats not yet confirmed but it does raise a ton of questions like why are rats hanging out in the cell phone cameras or also should consumers ab lerted about potential risks? let's hear from john forth and john stire -- or jeff, excuse me. listen. i was make light of it. okay, rats, male rats, i don't know what kind of male rats. how severe or definitive is this study? >> i think it's definitive that the national institutes of health which spent $25 million on this study needs to rethink its priorities. you know, you hear the cdc saying we don't have enough money for zika. you hear the food and drug ald mgs saying we're not sure if e cigarettes are less harmful than cigarettes because we don't have enough research yet. we need to do a better job of prioritizing our research in this country because we're continuing to fund garbage like this. >> how do you really feel about it, jeff? so is your quibble with the
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research the idea that these rats were bombarded constantly? >> yes. >> haven't we learned -- >> or the dosing of the radiation that they received or what? >> you can expose a rat to, i don't know, quinoa and kale salad, you expose them to enough of it, they will get cancer, too. at least the males. but here's the thing, these studies are animal studies, high dose long term exposure. nobody is exposed to that much cell phone that long of the human equivalent of the rat. this study is more junk science. it's not relevant to our every day life. i have no quibble with the study, by the way. it's true. i'm willing to keep my male rats away from cell phones. but it's not relevant to us. >> john, you know, can you sell how big a problem is perceived by how much money a company spends on it. so have apple and sam sung been spending any money on researching this or trying to, you know, quash these sorts of studies or anything to that
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nature? >> not that they've zdisclosed. i wouldn't call this junk science. this is nih oversaw. i do agree. they expose the rats to 9 hours worth of radiation basically one hour on, one hour off for 18 hours over two years. that doesn't really line up with human cell phone use. i would argue that over the past three years or so we probably hold our phones to our faces less than we used to because people are texting and on social media. they don't have phones to their faces like they used to. that said this is an area where people are using technology, using wireless technology a lot. we need studies into its effects. so i don't know that i would say that studies into its effect in general are a waste of time. but this one certainly doesn't show a kind of causal link. people need to understand what these studies do and don't say before they start freaking out. >> we have big tobacco, big food and now big cell phone. >> john makes an important point. this research if you want to do it, that's fine.
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i don't it this research itself is junk science. i think the idea that has any relevance to humans is junk science. that's why i think it's a waste of money. >> jeff and john, we appreciate you staying. it is late on a holiday friday for a long weekend v a great weekend. thank you very much. >> all right. >> what a week for the crude oil market. it is getting trod close for the week. we're going to have the final trades. plus, the markets up this month. should you take your last chance to sell in may and then go away? maybe play. come again some other day? i can rhyme. all the time. we're back after this.
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hi, everybody. here is your cnbc news update this hour. labor secretary thomas perez announcing a settlement in the verizon labor dispute. the company and striking unions agreed in principle to a four year contract. that deal must still be ratified by union members. striking workers walked off the job an april 13 nl. defense secretary ash carter delivering the commencement address. the class of 2016 which included more than 900 graduates gathering in memorial stadium in annapolis. >> a new strategic year and at a
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time the great change, the united states must and all of you will continue to ensure that ours is the finest fighting force the world has ever known. >> iraqi soldiers firing tear gas to disperse protesters who had gathered near a bridge leading to baghdad's heavily fortified green zone. several protesters were injured. they have been calling for comprehensive reforms for month and have been demonstrating every friday outside the green zone. and take a look at. this a lightning strike was caught on not one but two kentucky sheriff's cruisers on thursday. both videos showing a lightning bolt striking a home. the strike knocked the video camera from its windshield mount in one of the cars. miraculously, nobody was injured. that's the news update this hour. they've had a lot of bad weather this that part of the countries. back to you. >> all right. sue, thank you very much. oil market closing for the day. let's take a look at crude and the prices there. up more than 3% this week.
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as you remember, they hit $50 a barrel yesterday. right now at 49.28. it is up 7% so far this month even though they're down about .5% today. let's talk about trading nation and the outlook for stocks this summer. ted johnson from piper jaffray and chad i had a question in my head for you heard yellen earlier today. what is your view on stocks this summer? and did what yellen say today change that view? >> well, the view somewhat more hawkish. the dollar is going to continue to strengthen. when it come to the view of the summer, next several months, woib is sm what more cautious on equities at this junk tour. one because valuations right now are quite stretched with very little earnings growth or revenue growth. two, because global growth looks like it's still moderating or e deceleratin decelerating. we believe a 2.a% growth is
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where we're going to land in the next 18 months. and, three, as you start to see global trade, global trade hasn't been that ebb lant, you're going to continue to see disappointments within the earnings cycle. earnings drive the stock market. aat a valuation of 17 1/2 time, i don't think there is a lot of upside lift to the markets in general over the next six months. >> okay. craig johnson, you look at the charts. when you look at the charts or anything else you want to look at, i'm not going to tell what you to do, does it change your view on stocks for the summer? what is that view on stocks? >> you know, brian, we're bullish on stocks and continue to think there is more upside. we think is 12% upside to go. we're look forglooking for 2350. the recent price action we had was a nice pull back and retest of support. we push forward here up towards 2115, we think we're going to push through that. retest the highs and ultimately
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push through. one interesting observation technically, funds have been weak since april. the market continues to push higher in here. we think there is a lot of dry potter on the sidelines right now that is going to step up and come into this market. in terms of a longer term valuation, look out to 2017. the numbers out there suggest low double digit earnings growth and i'd rather look forward than backward. >> if i may add, brian, the problem with that expectation is that margins are starting to come down for the s&p 500 companies. and we're have deviations from the north. so that is going to be soft underbelly of the bullish statement. >> all right. we appreciate both your views. thank you very much. chad and craig, thank you. for more "trading nation," head to our website. we'll see those two gentlemen and two other segments on line. >> new technology that is helping the blind to see. we have this incredible story. meg? >> this is a very cool story. we're looking at new ways of
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fighting genetic disease. take a look at this. let me see that. >> caroline and coal have been through more than your typical siblings. >> i can't imagine it being any different than the two of them being together. and going through this together. you know, they've had kabs together, they had to learn braille together. they've gone to school for the blind together. >> early in their lives, they were both diagnosed with a rare genetic disease called lca. >> the doctor really said there's nothing, there's no medical treatments at this time. >> both caroline and cole were expected eventually to go blind. but their parents found an experimental treatment and two years ago, the kids enrolled in a clinical trial. it was with spark therapeutics formed out of research from the children's hospital of philadelphia. >> the idea is that we are taking a correct function add copy of a gene and adding it back into the cell that's have
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dysfunctional or missing copy of that gene or blueprint. >> it is called gene therapy. and it's relatively unchartered territory medicine. the technology uses a modified virus to deliver a help yij copy of a gene to make up for one that causes disease. scientists have been working on it for decades. but only now are the first gene therapies approaching the market. sparks is among the most advanced. the healthy genes are delivered through eye surgery. once they're in place, they're designed to do the work of a normally functioning gene, meaning, patients only undergo treatment once. >> what we're doing is different. we're actually adding the blueprint in and the cell then knows how to do the last step which is to make the protein or the enzyme that might be missing and, therefore that, is what creates the potential for it to be a long lasting effect. >> in trials of 41 patients, the therapy has shown to improve vision and light sensitivity with no major side effects. >> go. >> caroline and cole were no exception. before their surgeries, both
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kids had trouble seeing in low light. now though the vision is not perfect, they say they're noticing big differences. >> good things are to come. >> outside it was snowing and i was like, i can see the snowflakes. it was really cool. like, to actually see something that i've never seen in my life before. >> spark is one of the several companies developing gene therapies targeting everything from hemophilia to sickle cell disease to other rare disorders. if they're successful, it will be a new paradigm for medicine, fighting genetic disease in just one treatment. >> i thought it was really cool how simple it was and how much it changed my life. >> cole actually was a braille champion before he ent therd trial. now he's reading large text. a lot of companies including spark therapeutics which is
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ones. they're not on the market yet but close to the market. a lot of stocks involved in gene therapy. >> how is that close tok fully fda approved. >> >> they started rolling the fda application. so poeblly first gene therapy in the u.s., but for spark, maybe next year. >> meg, thank you. great stuff. modern medicine series. next up, five big calls on five big stocks and bentley's new luxury sfrment uv. we're back in two.
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all i could think about was our deadlines racing towards us. a loan would take too long. we needed money, now. my amex card helped me buy the ingredients to fill the orders. opportunities don't wait around, so you have to be ready for them. find out how american express cards and services can help prepare you for growth at bentley making the big debut in the big suv space for the ultry luxurious bentega. 600 horsepower vehicle goes from 0 to 60 in 4.1 seconds. it starts at $229,000.
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remember yesterday the builton billionaire was us with. tyler and i tilman went out to see the bentley with bentley north america's ceo outside of cnbc. >> the reviews, i get all the car magazines. they've been beast of a car. fast, ultra luxurious. the styling, whatever. what is the reaction been to the car so far? >> we sold out for the first year. >> so bad reviews be darned if there have been any. >> i don't think there have been any bad reviews. there's been some controversial reviews but no bad reviews. the fact of the matter, is it's the most luxurious suv on the market. it is the fastest. and -- >> why do you say -- let's prove the most luxurious. >> yes, let's look inside. >> every bentley is known for and the bentley brand is known for being the fastest and luxurious cars on the market. luxury in the sense of materials being used, handcraft employed.
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>> i'm going to sit in it. >> it takes about 120 hours to assemble one of the cars. just the steering wheel alone, you have someone spending six hours to do the hand stitching of the leather and so on. that sort of thing does not exist in the car industry anymore. so if that perspective. that is what you're really getting into. >> michael, take the top end range rover runs around $200,000. >> yes. >> and this car will be $30,000 more than that? >> yes. >> but there is a -- to me this car is not even on the -- in the same level as a range rover. this car is so much further advanced in every way, right? >> what makes it unique is the craftsman point, if something looks like leather, it is leather. if something is a piece of wood, it is not just a veneer, it is wood through and through. if something looks like a piece of high quality aluminum, that's what it is rather than a piece of plastic. from that perspective that, is a difference to some of the premium products on the market.
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>> is this a four seat car or five, seven, what? >> this particular car is a four seat configuration. can you have as a five seat or seven seat. >> can you build it, genting on your -- >> i'm obsessed with the tray on the backseat. >> how do you find the -- i would put nut backseat. >> why do you find the people for the leather? >> tyler mathisen, the four fingered wonder, sorry about. that. >> they come in a standard color scheme. but truly for a small car like this, you have exactly that pattern. where are these made? >> they're made in england. >> outside of manchester. >> yes. >> every single car is made there, sfligt. >> yes, absolutely. >> should i -- we said -- don't use it as a sport sue tilt. could i take this thing off road? >> yes. it will match anything that the any benchmark suv doll off road. one of the very special things about the suspension system in
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this car is that it has a specially developed 48 volt electrical system that allows you to actually run the air suspension in a matter as to where you have extreme articulation. so while you don't have the jacked up four wheel drive, the articulation of the wleelz heels can do just about anything. >> come around the front. i want to show people the trade mark grill. that is as unmistakably bentley as anything can you imagine. >> yes. >> who is the buyer of this? who are you selling this to in your dealership, tilman? >> we're sold out. i can tell thuchlt people are trying to cut in front of other people. you know, i'm fortunate. i own a dealership to be able to sell them and have a sold out car. so everybody. you'll see women want to buy it and drop their kids off at school. but you'll see executives want to drive it. it really is a car that it's the
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range rover driver on steroids. the person that can afford this, who can afford the range rover will come after this car. >> every bentley customer typically has four or five cars in the garage. they have a bentley, a lamborghini and a ferrari and twun or two premium suvs. >> there is an old lamb borghin back there. this car is about two seconds faster than the lamborghini. michael winkler, real pleasure. >> thank you. >> thank you. >> nice so see you. >> thank you. >> in case you're wondering why there is a lamborghini in the parking lot, it's melissa's. this stock up is 25% this year and wall street -- >> you don't even drive. >> not unless forced. >> unless she is being driven. anyway this stock is up 25%. wall street just got more bullish on it. that and four other big calls on "street talk "owe next. i asked my dentist if an electric toothbrush was
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man 2: the old solutions aren't working. man 2: the world has changed. man 1: meaning? man 2: it's not just security. it's defense. it's not just security. it's defense. bae systems. time for "street talk." these are stocks we believe you need to hear about.
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ulta. price target rising on the name. 15% jump in sales lies on another plain. they continue to gain awareness and market share in a growing pie. the company beat on nearly every metric. guidance may have been lower than some still calling for a 1 to 12% sales growth, melissa. who has that. they raise it to 244. >> this is a new all-time high for the stock. next up, valeant. wells fargo is out with a note completely knocking that story. david has a sell rate on valeant. he said he's always speculative about a take joer on a friday. in this case, after a close on a thursday night before a long weekend. he said it would have come public with it sooner as opposed to now, more sal yant. it indicated to him they have no interest in bausch & lomb. >> interesting story. next up, synergy.
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canter fitzgerald upgrading them from a buy to a hold. they're more confident about it. they do note the market needs to better understand and political risk in colorado. fracking. you got it. they say the company is stronger given current market conditions. about 25% upside. scotiabank, by the way, upgraded its zok by about a month ago. 13 on the market. >> we got the last one with an analyst who actually made the call. >> all right. next up is polaris. under the drawer name, st. louis-based shoe retailer, you may know dr. scholes, naturalizer, that's them. they say they're incrementally more positive on the stock given
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the reiteration of the guidance. athletic shoeware expansion and progress of the supply chain. 26 bucks. 17% move on the market tow. >> wow. >> we should have precaught this one yesterday, i'm sorry. >> i have the last stock today. upgrading guess. a $15 price target. the valuation had been too rich but five times. per for mall-based retailers. the outlook not great though. even the expansion of stores in 2018, it's difficult to see it growing at a faster pace than it is forecast right now. as i mentioned, joining us is the analyst who made that call. rick snyder is with us. you say gas is going to be dead money in the next 12 moths which
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is why you're sticking by your $15 price target. >> yes, that's what we're saying. it has a 5.5% sales. >> you say it's going to be flat with a flat store expansion. >> i think we guided down the margins. this year we're expecting a little gross margin next year, so a little -- the big margin compression is going to be this year as they begin this build-out by expanding their store base by 50%. next year, that anniversary, we could get a little bit of leverage there. >> rick, great to have you with
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us. ri ri rick snyder. "power lunch" is back in two. and all i had to do was ask for their money and pretend i was investing it. their life savings is now my lifestyle. female announcer: don't let someone else live the life you're saving for. find out if you're dealing with a registered investment professional at it's a great first step toward protecting your money. before you invest, e*trade is all about seizing opportunity. and i'd like to... cut. thank you, we'll call you. evening, film noir, smoke, atmosphere... bob... you're a young farmhand and e*trade is your cow. milk it. e*trade is all about seizing opportunity. sign up at and get up to six hundred dollars.
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let's take a look at where they stand. not too much moving even on the back of fed chair janet yellen putting on table, well on the table, the possibility of a june or july rate hike. the s&p sticking to that range there. 25 is your level up by a quarter of a percent. >> there's your weak. >> hey, time now for your first look at our exclusive power indices for the year.
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if you're new to the show, first off, welcome. but you're also wondering what they are. what they are is stock indices that we build with the 12 big market cap headquarters that helps us and you figure out who's doing well and where they're doing it. so let's show you the three best and worst pcis so far this year. bad news first, san diego, bad weather. down 4% this year. detroit, their stockmarket down 6% this year. they're the second worst. and the biotech taking their hit with an average loss of 7%. enough doom and gloom on a friday heading into a holiday weekend. let's take look at the cities whose stockmarkets are doing the best this year. some of the best, st. louis. it's coming in number three. posting an average return of 9%. >> is that monmonsanto?
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>> yes. >> houston, no surprise. 12% jump for houston. and the best performing city so far is the one that made it to the stanley cup last night, pittsburgh. the steel city, their pci up more than 13% this year. oil and gas story, too, guys. dick's sporting goods doing well, as well. only gnc is dragging it down. congrats, pittsburgh. you've got the best performing stockmarket in all the land according to our indices. >> it will be interesting to see if boston gets a turnaround. the it will be interesting to see if that will be reflected in the power. >> i think of pittsburgh as a health care city, health care economy. >> they had milan, but we had to but out of the index because now they're headquartered in dublin.
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pnc, dick's -- i think dick's is doing well. sports authority said they're shutting down some stores. melissa, you bring up a good point. when we build these things, there are certain cities that are almost one thing. san diego is qualcomm and bay oh tech. they're going to live and die by that. houston is the same thing. >> the ten largest companies. >> 12. >> 12. >> memphis has 11, only 11. i think nashville has only ten. but they have 40. >> 40? >> 40. >> did we look them up on the website? >> i've got it on my stuff. >> brian keeps it. the master of the power city domain. >> if anybody cares about the pcis, it's job security. >> then you're out of luck. >> there you go. maybe we should go pittsburgh. >> i love pittsburgh. >> they've got a great culinary
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question seen. i see light, my friend. >> i like that. >> finally hour of trading is going to get under way shortly. >> thanks for watching "power lunch," everybody. >> "closing bell" starts right now. i almost wore my sunglasses but i thought it would be overkill. working for the weekend. >> it would have worked for me. >> welcome to the "closing bell." i'm kelly evans. >> and i'm bill griffeth. we still have one more hour of trade to go. we'll talk about what fed chair janet yellen did. some markets definitely moved on her comments. >> and verizon reading a deep with the labor unions. what it could mean. the jobs number next week. >> plus, why theon


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