tv Power Lunch CNBC November 2, 2016 1:00pm-3:01pm EDT
knight, something along that line. >> the oil stocks getting hammered today. what do you do with those in 15 seconds, oil is down 3%. >> avoid energy. >> i think the energy stocks are carrying 65 to 75 oil as we have a number of guests have said, as we say. i don't mind lightening up on those. >> crude down more than 3%. that does it for us. thanks so much for watching. see you tomorrow. "power" starts now. i'm melissa lee. it is the final countdown. less than one hour from now we hear from the fed, less than six days from now we head to the polls. will janet yellen surprise the markets and the entire nation ahead of the historic vote? we'll find out straight ahead. front lines of the u.s. economy taking the pulse of small business, just days before the election, money, power, politics, "power lunch" starts right now. welcome to "power lunch." i'm michelle caruso-cabrera. here is a check on the markets
ahead of that big fed announcement. what do we see on a day like today? the dow, the s&p lower, not seeing a big budge. the ten-year yield, 1.79, below 1.8% as we have seen some buying in treasuries. bi big move into gold and drop in oil. more than 14 million barrels, that's the biggest increase in the 34 years of u.s. energy information agency, actually been collecting the data. wti is lower by 1.44, decline of 3% to 45.23. it is down more than 8% in the past week. brian? >> michelle, here's what else is happening at this hour. ford sales dropping 12% last month over a year ago. shares are also down. keep in mind, october of this year, two fewer selling days than october of last year. car news, 2015 model year, the most fuel efficient on record for all cars. that according to a new government report. and in the job market, adp
saying 140,000 private sector jobs were added last month. that was slightly worse than the average estimate of the economists. we begin with two events that could have a huge impact for your money. you could say really bigley. the federal reserve and the presidential election. you may have heard both. steve liesman is in washington for the fed rate decision. john harwood in ohio with the latest on the election. steve, let's begin with you. is there any chance the federal reserve raises interest rates today despite the fact they do not have a press conference? >> i think it is very small, brian. the fed has a simple task today, get in and out of dodge virtually without being seen. it really wants to just meet the markets expectation that there won't be a november hike and pretty good chance for one in december. the market thinks that the fed doesn't want to hike because it doesn't want to influence the election either way. here is what our fed survey said, 100% say, brian, see that, say no chance of a rate hike in the survey. 69% say the fed will signal in
the statement a strong intention to hike in december. 86 say they're going to go ahead and do that hike in the 11 days before christmas. technically, the fed doesn't have to change a statement almost at all to signal that december. already said the case for a rate hike was stronger. what we're watching for is the possible addition of the words, at the next meeting. and that was used ahead of the december hike a year ago. also, a question on dissent here, three dissented at the last meeting. they could stick to their guns or they could vote with the majority if they think that, hey, six days before the election, not the right time for the fed to enact an unexpected hike that could send shock waves through the market. brian? >> steve, a question for you. you said 86% chance for december. why isn't it 100%? because of the election? is it just simply that there is a possibility that the data won't pan out? >> i think you hit the two nawo the head there. there is a couple of jobs reports, one on friday, one in
december that comes ahead of the meeting. all kinds of data before that. first rapid update today, fourth quarter looks okay to start before all the data comes in. pretty strong vehicle sales numbers running at 2.3% on the rapid update. also, i think there is -- they heard from their contact, there is uncertainty surrounding what would happen on the other side of the election. let it happen, see how the markets react, see if that's an event they have to take into account for the macro forecast. >> it seems like the consensus on wall street is that there won't be that specific language that we had last year pointing to the december rate hike. is that because of all of these -- the economy on shakier ground compared to one year ago? >> i think that's a good reason, melissa. i think there are a couple of others. i think one, the fed indicated doesn't want to be tied down to projecting stuff. by the time december rolled around, right now you have this new idea within the fed of
giving the economy room to run, also characterized by janet yellen as high pressure. i think they want to see what happens with the unemployment rate. if we keep adding jobs, unloimt rate doesn't go down, this case for being this large pool of labor out in the economy that could be drawn in, maybe the fed should run a hotter economy, that tends to build with those numbers. >> i'm going to ask you a question, steve, you would not touch with somebody else with a ten foot pole. >> why ask it? >> i want to ask it. there is a 100% chance. >> let brian be brian. let brian be brian. >> let manny be manny. strikes out most of the time but it's fine. do you believe if we get a trump victory that that will alter any chance of a december rate hike? >> i'll -- >> feel free to -- >> no problem. look, i think it depends very simply on how the markets react. i think the fed will take its cue. the fed does not say it makes
policy for the markets, but the markets can affect policy. if you have a big down draft, it affects policy. big move in rates, it affects policy. big move, by the way, in foreign exchange rates, potentially affects policy. you've seen the mexican peso versus the u.s. dollar. that's moved very, very sharply when a chance of a trump victory increased. so that's a potential affect on macro economic policy for the fed. i think that's what it will do. it will wait to see. and, by the way, i think the fed will probably be smart about this and try to disaggregate a temporary shock effect with a longer term effect. i think you can see temporary effects. we have been talking about this, last couple of days, that may not be the way that the market settles down after it begins to price in a new reality. >> right. >> thanks, steve. now it the other clock that we're watching, six days until the election, john harwood joins us live from owe owe with the la ohio with the latest.
>> just like the odds favorite december rate hike, the odds favor a hillary clinton victory next week. but we're in ohio where the race keeps getting more and more interesting. this morning, abc washington post tracking poll showed a dead heat, 46, 46. now, i've been talking with pollsters in both parties today. their consensus is a hillary clinton lead of between 2 and 6 percentage points, but we have to see what happens in the next few days. if you look at the electoral battleground, the nbc news battleground map shows hillary clinton with more than enough electoral votes leaning her way to get to 270. but the race is not over yet and donald trump is pulling every lever he can to try to turn that around, including using this news about the fbi and hillary clinton's e-mails to try to argue to voters if you voted early before this news, you can still change your mind. here's trump in wisconsin last night. >> this is a message for any
democratic voter who have already cast their ballots for hillary clinton, and who are having a bad case of buyer's remorse. in other words, you want to change your vote. wisconsin is one of several states where you can change your early ballot if you think you've made a mistake. >> now, i will say it is in the easy for anybody to change your vote in any state. however, donald trump is giving it a shot. now, hillary clinton is responding by having surrogates talk about her and defend her in ways that could be useful. bill weld, the former republican governor of massachusetts, now the libertarian vice presidential candidate, went on rachel maddow last night and said from his personal experience he was vouching for hillary clinton. they worked together on the watergate committee back in the day in the 1970s. and president clinton, in an interview with this news now, just a few minutes ago, gave an
indication without saying so out loud he doesn't think the e-mail controversy involves malice on her part or breach of national security. take a listen. >> when she makes a mistake, an honest mistake, it ends up being blown up as if it is just some crazy thing. i trust her. i know her. and i wouldn't be supporting her if i didn't have absolute confidence in her integrity and her interest in making sure that young people have a better future. >> an honest mistake blown into some crazy thing. that is president obama trying to use his plus 50% approval rating to keep this election in hillary clinton's corner as it has been in the polls this fall. six days to go, guys. >> we know. we get the countdown clock ready to go every minute. thanks, john. >> we're seeing some pretty big moves in the betting market ahead of the collections. predict it puts clinton's odds
at winning at 67%, approaching september lows. trump at 36%, approaching september highs. so how should you position yourself ahead of the election today. bob dole, chief equity strategist, and david leibowitz, global market strategist. great to have you with us. david, i'll start off with you. you make it clear that -- you're not making a call necessarily on the election, but it seems like they're favoring safety. what exactly is safety in today's market? >> so i think safety is represented in a couple of different ways. one, we want to think about uncorrelated assets, things like gold. if you're trying to close the shutters, prepare for a worst case scenario. you do want to own things like gold, probably want to own u.s. treasuries as well. we think back to prior periods of massive uncertainty, whether it was the taper tantrum, the u.s. debt downgrade, we saw u.s. treasuries rally on that. and then the third thing we're thinking about are high quality bonds out of europe. the ecb is still easing policy.
there is a bid for high quality paper like german bouunds. if they want to take a risk off approach, we think there are a couple of ways to express it. >> to be clear, are these tactical trades affecting the next six days or longer term trades and if so what does that say about your view of the economy and global growth. >> to us, more of a short-term type position. up to investors. my view personally is that bouts of volatility, uncertainty like we're seeing right now create long-term opportunity for investors. so as the equity market falls, to me it looks more and more attractive. i think the u.s. economy is rebounding from a bit of a slow start to 2016. i think you have a fed which is going to go slow and that should pri risk asset. for longer term investors, i view this as a buying opportunity, there is value being created particularly in u.s. equities. >> are you worried about what the u.s. election is going to do the markets, or not? >> not really, michelle. i think that the markets sold
off here because donald trump's prospects are improving. the market isn't saying i like hillary, i don't like donald, it is saying i like certainty, i don't like uncertainty. and with hillary clinton, there is a little more understanding. so all year long, it is hillary has done better in the polls, the market has crept higher and vice versa. that's what the sell-off is -- i agree with the polls. it is going to be reasonably close from the popular vote, but hillary has the electoral college pretty much wrapped up. >> it is funny, bob. a lot of things happened last two years. if you go back and look, the dow is flat over two years time. it is almost unprecedented lack of volatility. where do our viewers and listeners make money right now. forget about the fed and trump and everything else, how do we make some money, it has been so hard. >> right observation. we're frustrating the bulls and the bears, alternatively. not about being in or out, about being what you own and don't own. my view, we're still in a period which has been going on for several months now where you
want to avoid yield, perceived safety and low vol and own other things. the economy is doing a little better, inflation bottomed, and so some cyclicals, some free cash flow, this trade isn't going to last forever, but we know, utilities in telecom, best two sectors in first half, worst two sectors since july 1st. financials in technology and the opposite position. markets are oscillating. that will continue, but we're frustrating the bulls and the bears. got to own the right stocks and own the bad ones. >> a week out, is that what i switch my safety trade to? >> i think again, i would agree with bob, there is more opportunity in the cyclical parts of the market than in the defensive parts of the market. for us, the u.s. election is a source of volatility, a source of uncertainty, it shouldn't be dictating investors long-term allegations. i would agree that it is more a cyclical positioning that makes sense. just to expand on that a bit further, you may see people starting to run for the defensives trying to prepare for
more volatility. you know, as yields have fallen over the past couple of days, you haven't seen things like utilities and telecom rally. that means a crowded trade is still seeing its investors getten shaget shaken out. >> guys, thank you. >> thanks for having us. the world series is going to a game seven. you know this unless you literally just came out from under a giant rock. you also know this, 108 years since the cubs last won a world championship. the year was 1908. it got us thinking whether any stocks that are trading now that were around then. there are. we'll tell you the names straight ahead. so when i found out medicare doesn't pay all my medical expenses, i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out
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welcome back. gold hitting fresh session highs. higher by $19 per ounce. 13.07. back above the 1300 level, gain of 1.5%. to dominic chu, market flash. >> so, michelle, shares of bunge, trades a lot of things like grains, oil seeds, the stock is surging now. nearing session highs up 8% despite weaker than expected third quarter results. they expect large soybean harvests to help the earnings rebound and raised the profit outlook based on that anticipated growth. meanwhile, archer daniels-midland, stronger than expected third quarter profits due to exports.
g bunge and adm trading higher. news alert on directv. julia boorstin is live with that. >> the justice department is suing directv over its negotiations over parent sports net l.a., the dodgers owned tv channel, which left most of los angeles unable to watch the dodgers play for the past three seasons. the justice department alleges directv is the ring leader in a plan to make sure that three other paid tv companies would refuse to carry the sports channel. the doj alleging directv shared nonpublic information for a leg up in negotiations with time warner cable over distribution of the channel, saying, quote, dodgers fans were denied a fair competitive process. the alleged violation occurred before at&t bought directv last year. the suit comes on the heels of at&t announcing its $84 billion
deal for time warner. a deal that will need justice department approval. the lawsuit filed today is in the related to that regulatory process, but it seems like it wouldn't help. back over to you. >> this is an accusation about colluding, essentially, correct, which means that the victim here is the company that didn't get as much money or any money like they should have. >> exactly. this is an allegation about colluding and the reason why directv is singled out is because the department of justice says that even though there were conversations among four different paid tv distributors, the department of justice called directv the ring leader in this situation. >> okay, thanks, julia. tonight, both cleveland and chicago will come to a screeching halt. do not try to get anything done on either city except grab a cocktail because the world series is tied at three games a piece. the ultimate decisive game seven is tonight. the indians have not won a series since 1948. that looks new compared to the cubs who have not won a series
since 1908. teddy roosevelt was president and he nominated taft who ended up winning, by the way. a lot has changed, but it seems the cubs have survived the test of time. they're not the only ones. there are a few companies that were trading back then that are still swinging today. here is your lineup. ge, you know that one. they're one of the original 12 companies listed on the dow. universal signal for speed it up. second, u.s. steel. rounding out third, peoples gas. who's that? they're now owned by wc and ec energy, which is wisconsin electric. so people -- we didn't want to have just two. so we found a sub. >> some exist in their original form, in other words, companies that have been bought by other companies or changed their names, et cetera. >> ge back then was it ge? i think it was, right? >> everything had a much longer name. >> like consolidated something something whatever. >> general electric corporation
and fish works. they always add like back-to-back in the old days. 1908 companies. who is going to win tonight? >> no idea. >> it begins with a c. >> very honest answer. >> is this one of the greatest things ever to have a game seven in the series? >> if you're in cleveland or chicago, things will get nuts. they're going to go bonkers. it is going to be great. baseball ratings have suffered. i have a feeling tonight about a quarter of the country is going to be watching. >> the bar business. buffalo wild wings. >> where are people watching the games, right? >> recommending buffalo wild wings. >> just wondering out loud. people are watching these games, where are they watching? what are they consuming? anyway, the clock keeps ticking. less than an hour away, the
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just a reminder, we have just about 40 minutes until we get the fed rate decision. steve liesman said earlier, 100% of economists, almost all of them, as i understand, have decided the federal reserve will not raise interest rates but ahead of that, the dow is down once again. some people blame this on perhaps trump gaining in the polls, some people on the fed
guys, maybe that there are more sellers than buyers. the dow session lows. >> when all economists agree, i don't know. >> use the opposite. >> hopefully recommending to buy buffalo wild wings and saying a rate hike will happen at 2:00. >> a little more than half an hour until the fed decision on interest rates. six days to go until the election. the stress of it all taking a toll on people. so much so that south hampton hospital in new york is advising its cardiac patients to stop talking about the election. look at the screen. the hospital put up safety notices that read, due to the fact we have patients with heart conditions, we cannot allow political debates in the gym. >> the gym. >> jessica, you see her there, the manager at the hospital, so far we're told patients are following the rules. >> there have been studies that show that exercising while angry is dangerous. >> i think people are exercising to not die. i think they're, like, they're
heart patients with things strapped on them, my guess. >> the last thing you need is extra -- >> not like a real gym. yo bro, how much you bench and who are you voting for? >> that's where you go, brian? >> can't you tell? >> just a little over 30 minutes to go, fed decision. will janet yellen surprise everyone with a rate hike so close to the election? anxiety among small business owners hitting an all time high.
hi, everybody. i'm sue herera. here is your cnbc news update for this hour. the manhunt is over for the man suspected of killing two iowa police officers in an ambush style attack. 46-year-old scott michael greene was captured in dallas county, iowa. greene and the two officers he killed were all white. hillary clinton stopping at an early voting location near ft. lauderdale, florida. supporters were waiting for her in a mall parking lot where they
eagerly greeted her. clinton now is on her way to las vegas for another rally. china's state media reporting that at least 33 miners were killed after an explosion at a coal mine on monday. only two miners survived. preliminary investigations showed the mine had insufficient and malfunctioning equipment and poor ventilation. and for the first time in centuries, scientists exposed the original surface of what is traditionally considered the burial site of jesus christ. the marble slab is covered for centuries with many christians believe is the tomb of christ. for 60 hours last week, the slab was pulled back to allow scientists and national geographic to have a look. the inside of the tomb has never been filmed. historic stuff. that is the cnbc news update this hour. i'll send it back to you, michelle. >> empty, right? that would disrupt a whole line of thinking. >> it certainly would. they didn't know what they would find in there. it would disrupt quite a bit,
actually. >> thank you, sue. >> you're welcome. >> final trades across the day, gold tracking $1300 for the first time since october 4th due to the weakness we're seeing in the dollar. buy it no matter what. is it going to go up, whoever wins, due to, i don't know, post election, stocks just off their session lows, dow lower by 53 points. the s&p lower by 11 1/2. as we wait for the fed decision on interest rates. the election is getting closer, small business owners are getting more nervous. the national federation of independent business puts out a monthly uncertainty index and that's hitting a 42-year high today. kate rogers is here with more. >> it is not just the nfib that is finding small businesses are concerned. a separate poll from the pepperdine school of business and management finds anxiety among small companies is climbing. so look at this. the data shows 38% of small
companies say they're very concerned about the impact of a new president on their business. compare that to just 19% of small companies who say they're not at all concerned. this survey also looked at which candidates small businesses believe will best handle key issues. now on social issues, hillary clinton was more favorable among small business owners, 59% trust had her on gender equity pay, 58% trust her more on family leave and 5 9%. but had you turn to fiscal issues, look at this, donald trump took the lead here. 66% of small businesses say they support him on taxes. 64% say he will best handle regulations. and 65% better trust him to give more access to capital. neither candidate has put out much detail when it comes to small businesses. hillary clinton more formal small business plan on her website and trump addressed it but hasn't released anything formal. expect the anxiety on main
street to continue to climb. >> kate, thank you very much. let's bring in two small business owners, ryan gillian, owner of pediatric behavioral sciences in jacksonville, florida. and arvind gandhi of gmm nonstick coatings. you just heard kate's report. how do you feel? are you personally nervous? >> i'm not really nervous in the sense of as a father and ceo, there is always problems in business and i think that this ang decide that she mentioned is because we have the most extreme election in decades. i think if we get a firm decision on tuesday, i hope we do, i think people around the world and in america will just calm down and this might be contrarian, but i think a spirit of bipartisanship could emerge. i think that will help anxiety abate. >> what is your view, ryan? >> i hope he's right. i really do. >> you think he's right or you hope he's right? >> i think he's right. as a business owner, you're going to always have
uncertainty, that's what we sign up for with no risk, no gain. however, right now, i'm really excited for this election to be over so we can get back to business as usual. >> do you see a slowdown in business in your business because of the election do you think? >> right now, for us, it is really important because the affordable health care act really dramatically impacts our business as far as policies within it. the lifetime caps that the medical practice that we are are extremely important to the clients we serve and the employees that we pay. so we're looking for hillary clinton win. because donald trump unfortunately has not put out any clear policies or plans on how he's going to, you know, not just repeal it but replace obamacare with something that will maintain the services and revenue that we produce on a weekly and monthly basis. we're looking for hillary clinton now. >> i'm not sure if your business is contract based, but are you seeing a slowdown in orders at
allnonstick coatings? >> no, i'm happy to report we're having our best year ever right now. i think this goes in line with the ata points that ryan was just talking about. i think for us we expect our health care costs to go up 30% next year, which is bad, but i really do believe that once the election occurs, there will be a fix, a grand bipartisan bill to close the loopholes, get the costs down and i think it is going to be a good thing. >> if they don't and your health care costs rise by 30%, then what? >> well, i think we're going to have to deal with it. i think that in the end, there has been too much extremism for the last six years. a lot of people want to tear this wall down and i think once people realize this is settled law, i think there will be smart people on the right and on the left who get locked in a room and will be forced to actually fix the aca. and what i like about it is that we actually have gone and said,
here is what the legislation is. and costs have gone up. on people like me. and i'm not willing to ditch it. i want to fix it. >> i get that you get revenue as a result of the affordable care act. but do you have any sympathy for ravin who is footing the bill? >> no, we're footing the bill too. we have employees we have to cover health insurance for and short-term disability and everything else. >> have costs gone up in ensuring your employees? >> yes, our costs have gone up. but also, a tremendous amount of people have been helped. we can't all be about capitalism at some point in time we have to sacrifice for the better good of everyone. i think that's really important in our society. as business owners and as citizens. >> ravin, it sounded like you wanted to say something, go ahead. >> i want to defend capitalism. i'm for helping people. so i think that -- i want to get on record saying as an entrepreneur as a ceo of a
company, you know, we always ensured our people, i want to keep, you know, insurance very robust, but i still think that it needs a fix. i don't want to ditch it, i want to fix it. >> what about taxes? where does that fall, ryan? a lot of talk about health care. also a lot about taxes. >> yeah. blu based on economist estimates under mr. trump's plan, the economy is going to suffer greatly and possibly lose trillions of dollars. where does it benefit me because i don't pay any taxes if people can't afford our services? if we can't have clients that can afford our services, doesn't benefit under mr. trump's plan. so i just don't see it working long-term, even though i get a tax break. >> i'm glad to hear you're a successful guy, should be proud about that. if your taxes are going up, you're probably in the income strata, that has in some ways -- we're going to take the 1%,
whatever. i assume you're probably also in that group. have you done the numbers? how much do you think your family's finances may be impacted? >> taxes, i think, on successful businesses like mine will go up under secretary clinton. i'm with maybe with the warren buffetts and mark cubans on this point, we're all about strengthening the middle class. i think that is what is most important for the economy and as a citizen i'm willing to pay a little more if it helps the country be what it is. this is the greatest country in the history of mankind. part of that means that successful people are willing to kick -- >> a lot of suppositions in there. >> and i might be diluted, but optimistic. >> both happy to help. ryan and ravin, we appreciate your insight. thank you. good luck. take care. do not go anywhere. big news from the fed out in minutes. will there be a surprise hike ahead of the election?
and a check on stocks, where we stand ahead of that decision, bouncing around here, we're just about off session loews, 299 is where we are now. "power lunch" is back in two. for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade. [ that's a good thing, eligible for medicare? but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans,
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less than 20 minutes away from the big fed decision on interest rates. rick rieder at blackrock. good to have you here, rick. anything that could move the markets
today? are you in consensus like everybody else, nothing today and signal something about december. >> yes. i think that's generally right. however, there are a couple of interesting things to watch. one, do they explicitly state anything about december? that will be interesting. interesting to see whether they talk about the conditions have further strengthened, that will be interesting. one of the ones, there were three dissents in the last meeting. i think that what is the
discussion and is there a compromise, a meeting going to december, going into december, and what happens with those dissents. interesting to keep an eye on those. and other markets. interesting in terms of rates of rally the last couple of days. >> is it bullish or bearish if the fed says a rate hike in december and they use explicit language? what does a market -- what do bonds do if they put that language in there? >> very surprised, i think first thing markets will be surprised because the fed tends to react, you have two employment numbers left to come, a significant amount of more additional data coming. a big election coming. so i think that would be a surprise and you could certainly see some backup in rates if they say december is on the table. that would be out of character and i say would introduce some uncertainty for sure. >> how much of the fed's december move, assuming we get one, is already baked in? we have seen yields across the curve. rates go up 20, 30 basis points.
how much is priced in? has the market done the work of the fed? >> your point is right. the market has done about a 75% chance that it is going to move. by the way, 20 or 30 basis points because of how long, how interest rate sensitive the markets are now because rates are so low, in price point, it is very big deal in terms of those moves. second point i would make is that the markets the last couple of days started to evolve a bit, similar to what you talked about in the equity market around more uncertain election, pulled back some of that. so interesting to see how the fed and the election. >> why do you think yields are rising? we had one market participant today talk about risks of inflation. is that what it is? are we going to see some maybe? is it because we think europe is going to be less aggressive and therefore backing away from negative interest rates. if they go up, we have to go up
too? why are interest rates rising? >> two points. one, inflation is tankably rising and we think that will move inflation .1. growth is pretty good, not great. the third i think is even more important, and that is you're seeing a change in the dynamic around central banks. saw it in the bank of japan, started in terms of moving away from negative rates. and the fed keeps describing a high pressure economy, let the economy run hot, and then by transnation, that means let it run hotter. that concept if you let rates move up, let the yield curve steepen up, you can help the banks and the pension fund. that change in philosophy is a big deal and that's i would argue the bigger driver. >> given the volatility we have seen in the bond market, specifically, how low do you think yields can go surrounding the next seven days or so? >> so if you got a -- what the markets have done recently, priced in more of a surprise,
could you move back to a 150 ten year, you could. you could see that dynamic. the natural direction of where we're going assuming base case and growth continues, you'll see a higher rate paradigm. back to 150, ten year on a surprise outcome and more volatility and more downtrade in the equity market, yes, you could. >> that's short-term. back to the previous idea about a monumental shift in the way of thinking of central banks. is that priced in? have people noticed? to me, the ten year should be moving higher. should people get ready for that? >> so we have to get through news over the next couple of weeks. but, yes, i think things are different. we talked about on your show and the last two years, yield curves should flatten and should flatten and long on interest rates could come down. they have come down a lot. not only come down a lot, the shape of the curve moved a lot. could you move significantly higher? yes. however, i would say that the demand from overseas because -- we think we can move back
certainly, you can get back 30, 40 basis points, pretty hard to get further back in that. but like you said earlier, 34, big move in terms of prices now. >> donald trump, does that factor into where you see rates going? is the notion that you spend, spend, spend, borrow, borrow, borrow, ask does that enter the equation at all? >> it has to. we'll see more spending, more borrowing, treasury issuance higher. >> either way. >> but your point is well taken. more accentuated and markets will interpret it as such under that scenario which pushes it further. >> thank you, rick. good to see you. >> thank you for having me. 15 minutes, 14 minutes until the fed decision. look at the s&p 500 sectors right now. we're seeing most in the green. financials won that, sitting at session lows now. we're seeing utilities as well as energy, telecom, not faerg well faring well in the association.
stay tuned. so what else is new? how's your mother? umm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird. now that fedex has helped us we could focus on bigger issues, like our passive aggressive environment. we're not passive aggressive. hey, hey, hey, there are no bad suggestions here... no matter how lame they are. well said, ann. i've always admired how you just say what's in your head, without thinking. very brave. good point ted. you're living proof that looks aren't everything. thank you. welcome. so, fedex helped simplify our e-commerce business and this is not a passive aggressive environment. i just wanted to say, you guys are doing a great job.
happy fed day. we're ten minutes away from the federal reserve and janet yellen. will they surprise pretty much everybody, pull an ali and shock the world and raise rates. probably not. it could put out a very hawkish tone about the december meeting and, remember, it is not what they do almost, it is what they say. so let's get a check on the markets prefed. bob pisani, rick, the cubs will win today, rick at the cme. bob, you're first. >> i'm with you on that. no rate hike. but what you see here is the markets have done a lot of work for the fed in raising rates and the stock market clearly reacted to the recent rise up in rates, more than 20 basis points in the ten year. look at, for example, telecom and real estate investment trust. two rate sensitive groups. down nearly 10%, telecom lowest level since january. real estate investment trust down 8%, lowest level since february. that's the clear effect of
higher interest rates in the last six, seven, eight weeks. high yield stocks, they held up well. look in the last seven days, seven days in a row, russell 2000, underperforming, small cap stocks underperform during periods of higher interest rates, that's what we're seeing, the markets are reacting to what they think the fed will do in december. brian? >> all right, i'll take, bob, thank you. to rick santelli at the cme. >> as you look at the five one week charts, they look very much the same. twos, tens, bunds, gilts. they should look the same. basically all central banking policy is the same. as richard fisher says, it is it isn't very popular no matter where you go. one thing i will disagree with is if they paint the hawkish statement, put december squarely on the table, then they might as well just raise rates today. if they do that, the effect of the market is going to create
volatility. just the issue richard fisher says the fed will go out of their way to avoid one week before the election. makes no sense to me they would do that. i think instead they'll try to thread the needle and then in between meetings they'll give us the clues that they can't give us today. michelle, back to you. >> our whole next discussion is all about that. rick santelli, the latest fed decision is just minutes away. eight minutes and 7 seconds to be precise. we'll bring it to you live next. ♪ approaching medicare eligibility? you may think you can put off checking out your medicare options until you're sixty-five,
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five minutes from the fed decision. let's bring in our fed panel diane swonk, scott minor. stellar fed panel. let's start with the baseline scenarios we can understand when the minutes come out what is in line and what's not. danielle, you can kick it off. >> i think there will be too risk averse to put anything to
shake the markets. i'm just going to be counting the dissent. >> i think three. i think three. >> the same three. >> i do. >> same three. >> scott? >> i think they're going to raise rates by 100 basis points and the market will completely -- i can't believe you did that. >> walk it back. he said i'll do it and he did it. >> double dog dare. >> what do you expect? >> i don't. they're not going to do anything. going to be looking for the language around december. i think they're going to say something that basically says rates are going to go up in december. >> so they're going to really commit, like they did a year ago. >> exactly. and to -- >> what is the market reaction for that? >> i think daniel is right, we'll get three dissents and i think janet yellen is starting to feel the pressure and i think
she'll basically promise something for the future, as a way to sort of satisfy the hawks. >> you know, i argued there is no doves or hawks, just fed chickens and pithens, wandering around, not knowing what they're doing and too afraid to do anything. let's say we get this innocuous boring statement, that doesn't give us a clue about december. dovish, then what? >> i agree, except i don't think they're going to put that december language they did a year ago. it is not a year ago. even though i agree with scott, they're going to move in december and the pressure is huge on janet yellen to do it, majority of people in the room wanted to lift off in september. so this is hard on her. that said, this is not a year ago. the uncertainty surrounding the election, even though the fed doesn't play into that, i think the plain vanilla scenario is three dissents with a statement that more resembles last month's statement than it was not nuanced to be honest with you, than one that is more nuanced in
october 29th a year ago. i think that is where the difference is, we all agree on they're not going to move today. but it really is important whether or not they signal and i think there will be a reluctance by janet yellen, if she did signal, you might not get as many dissents. >> that's the interesting thing. i was reading various assessments of what the fed might do. we have gotten so crazy about picking apart every word, one analyst was asking maybe they will remove the word roughly from the statement roughly bound. that's where we are on this thing. >> i wish i could refute what you're saying, but the truth is, if you look at transcripts, they'll spend an extraordinary amount of minutes and energy focused on individual words in the statement. so it is not crazy. >> and their communication is horrible. >> but they know -- i don't know if they know that there is algorithms. >> isn't a guy like you, a guy like scott, running over $250
billion, will you look at one word and go, sell 10 billion in bonds, they took that word out? >> no. hedge fund manager, i might do it. >> not saying you, scott, but people that are running money, people do that. >> are people out there going to-lito look at every word, if roughly is removed or the number of articles that are too many, they'll interpret something. >> calendar reference is put in, isn't that a signal to sell? >> i don't think so. >> you don't think the markets will react very sharply to a distinct dissent, painting themselves in the corner no matters what happens to the elections. >> when they always have the -- what i call the kitchen sink paragraph, which is we're going to do this, if everything else is supportive. i don't think they'll, you know -- >> all the stars align all at once. it is kumbaya, let's go in december. >> let's find out.
we talked about it, roughly. we got 20 seconds left. the dow is down 38 points. the dollar is at 111 per euro. market sell-off, oil may be the big reason. >> in the ten year at 178. >> 178. we have scott, everybody get full reaction. we have bill gross as well. down to steve liesman with the fed decision on rates. >> federal reserve leaves rates unchanged at one quarter to one half point. it repeats the case that -- repeats the case for an increase in the fed funds rate continued to strengthen. but now it wants to -- just some further evidence of progress towards its objective, putting that word some in there, rather than just further evidence. the vote was 8-2 with loretta mester from cleveland. the federal reserve says inflation increased somewhat, but still running below the 2%
objective. market based measures of inflation, it moved up. it said they remained low. upgrading to the sense of inflation. it removed a line that said inflation is expected to remain low in the near term. now they just say it is expected to rise to 2%. the economy pretty much the same, the jobs market seems to strengthen, job gains solid, the economy picked up from the modest space, slight downgrading of household spending. saying that it is rising modestly last time it said it was growing strongly. investment remains soft. it says the near term economic outlook appear roughly balanced the way it did last time. very much the same report it gave last time. except for 8 to 2 on the vote, little more concern or outlook for higher inflation. and then, again, signaling the case for a rate hike continues to strengthen. brian? >> relieved to see roughly still in there. >> okay. when steve gave the dissent,
which is what daniel, you said you were looking at, this is weird. we had three dissents last time. now two. does that mean eric rosengren thinks the economy is weakened enough that he saw the case for rate hike a few months ago, but suddenly doesn't? how else was he on vacation? >> it makes no sense. justification has always been more on the financial stability arena and he's been concentrating less on the macro economic data in his public statement. i don't see commercial real estate being any less frothy than it was before. >> i think a lot of fed officials felt like even if it is time to raise rates, doing so ten days or what is it six days before the election may not be the right time to do it. eric rosengren would have backed off for that reason and was perhaps happy with the language. the language bought him off in a sense. if you do this next month, then go ahead, i'm with you on it. >> diane? >> i want to underscore that. the language was a little more,
you know, we're moving, we're inching, we're getting there, leaving optional ty open, not repeating a year ago. but that little bit of more move was just enough to take him off the fence and get him off the dissent. i think this is a unique election. so many accusations of interference, the fed wanted this to be a nonissue. >> how about the fact they upgraded their expectations on inflation. that's their core mission. >> one placating factor for rosengren, it would have been that they removed the sentence in front of it and now they fully expect to see inflation rights at the 2% level. >> rosengren's concern is about the excesses that are building up in lending markets. specifically commercial real estate and starting to see it in corporate debt. but here is the risk. let's forget about the burdenality and we know the paraable that the tortoise wins the race. in this case, the fed is a
tortoise. is there a risk before the tortoise can get to the finish line it will get run over by the steaming tractor trailer truck of inflation because if inflation does pick up at this level, scott, do you think they have got the policy tools and the guts or the will to stem it. >> if inflation picked up 2.25, 2.50%, i think that janet yellen would argue that in the high pressure economy that she's advocating, we should live with it for a while and let employment continue to fall. >> go back to john williams' paper who was under janet yellen at the san francisco fed and the paper he came out with that said we need a higher inflation target. >> we're starting to see that move -- >> part of the -- part of the upside down world we live in here is one where normally when a fed says that inflation is on the rise, that would be a time to run for the hills and to be very concerned. in this particular world we live in, where the fed is striving,
almost to create inflation near 2%, this is sort of a sign of confidence in the sign that things are kind of going the way they want them to go. so i don't think i would fear this level. i think what scott said is right, that yellen would be happy to live with this 2.25, 2.50%. and tell me if i'm wrong, but the market will dictate how fast the fed has to move on this. if the market gets very concerned and starts pricing in ever escalating inflation they have to act. the problem has never been that the fed lacks the tools to solve the equation problem. it lacks the tools to fight the deflation concerns. >> that's right. i agree with you. i think the key is that the market reacts with the yield curve starting to steepen, that is long rates rising more than short rates. that is going to be a sign that the bond vigilantes are back and they're trying to -- >> want to add one point here, that is i think this is all exactly right, we're on the right track.
the election does matter. we have two open board seats and depending how the election comes out, and not only who wins the presidency, the senate, the house, will stay republican, but how it all falls out will determine how the seats are filled and if janet yellen raises rates and you get a lot of democrats and moving less in the senate, after the election, she raises rates in december, elizabeth warren and bernie sanders will not be happy with her, will want to put on more dovish. trump has said, you know, i want more hawks in there. so we have got a division in the fed about whether or not the high pressure economy is the right model between stan fisher and janet yellen, top of the fed. and layer on top of it, what could be a change in composit n composition. you can't fire her, but the way you push someone out is with more hostile fed governors on one side. >> why would the fed funds futures rates be all in for december? shouldn't there be a layer of
uncertainty given what is up for grabs? >> i'm a little flummoxed that we haven't seen a little bit of a down tick. we have two thirds scertainty they'll pull the trigger in december. >> i think the fact it is not higher is telling us there is a minority position that believes the rate hike is not going to happen. >> how about the point that diane brings up. the federal reserve could be so dramatically different depending who gets the presidency, who fills those two seats. >> in congress. this is important. the senate approved those. >> it all comes down to the senate. >> yellen -- yellen's tenure goes through january 18th. you still have a year or so of that. but i just want to point out that the -- there are still several milestones to get to before you get to that december rate hike. as diane said, the election matters. could be potential market consequences out of that. but more so, two jobs reports.
there is cnbc rapid update, 2.3%. but there is a ton of data to go, even before the third quarter in the bag. we'll see what happens. i would watch very carefully the unemployment rate. if we do 150,000 jobs and don't inch down to the unemployment rate, it will give support to those on the fed who think there is a big pool of labor slack out there and the fed should run a hot economy. >> scott, if trump wins, do you think the fed does not raise rates? >> we don't know what he's going to do. let's hold off. i think the probability is that we will see turbulence in the market and that they will try to slow down. >> define turbulence? gentle turbulence, please put your seat belts on and then turbulence, like, oh, my god, we're going to go down. >> i heard people project 10 to 20% decline. >> do you believe that? >> underline this, you're talking about the most risk
averse of all time in 5%. >> we are seeing a market reaction. it was pretty quiet for a long time. on the nasdaq, we're down by 1.1% now. we're just about at session lows. s&p 500 down by .8%. we did decline here. we're at 2094. just about a 2099 into the decision. and financials are at session lows. financials are at the -- down by 1.2%. >> not sure they're going to raise rates. >> because of the uncertainty. >> and to that point, we don't know how much markets will be roiled. brexit vote, had a big effect, and then everyone expected cataclysmic outcomes. that's the way we have to think about uncertainty. whoever wins, that uncertainty will not be resolved on november 8th. >> want to ask scott a question. if you're in a market, 80% of the people believe one thing, 20% believe another.
then the statement comes out on the 20% of the people go and they get religion with the other 80%. that could move the market in a negative way. what i mean is that they may have been some holdouts who are taking a low probability, high return bet that the fed got more dovish this time. they did not get more dovish. so the only people who are moving are those from a dovish side to the hawkish side here. >> i agree with that. they didn't get -- they didn't get everything that they're looking for. and one thing i want to point out here, i think this is key to look at, you know, for the moment, this level where we're trading on the s&p is support. if we breakthrough this in a meaningful way and we don't recover -- >> we will lose the next level will lose all the gains for this year at 2040. >> the financials as a group are up 4% over three months. best performing groups, do you think part of the market bought
in this fed rate hike in december theory? >> absolutely. >> that's why they may tick down. they bought ahead of it, they're speculating. >> i think that everything that we're talking about is the uncertainty of the market trying to digest. and with being six days away or whatever we are from an election, i think that between here and there we're going to have to deal with the uncertainty. if you look at the vix, the vix contract is inverted, meaning longer term volatility is lower, nearer term is higher. market is sending us a signal they expect some kind of volatility. >> diane, danielle, scott, steve, thank you, all, very much. >> thank you, brian. >> as we were saying, stocks hitting session lows following that fed decision. bob is at the nyse with more details. >> we're down a little bit. i don't think it is on any certainty that interest rate hike is coming in december. you can't get that impression looking at the statement here from the fed. look at the s&p. down about 11 points as we went into the 2:00 meeting.
we're now down about 15 points. everybody here keeps talking about this key sentence. the case for an increase in the federal funds rate continued to strengthen. committees decided for the time being to wait for some further evidence of continued progress. that's not an indication of a clear rate hike. but if you look at the kbe here, the bank index, melissa pointed out, that moved down a little bit. you can see it moved up a little bit. it is moving at a small range here. no indication that a rate hike is imminent at this point. i think one thing interesting, a lot of people down here feel we may be moving no a situation where you essentially sell the rumor and buy the fact should the fed actually raise. after all, i'm looking at the s&p down 80 points, just in the last oh, month or so, off the highs. about 4% decline. the marx ket seems to be doing work already here. i think a legitimate question is how much impact the market would have already if we did get this
rate hike given the declines we have seen already in certain sectors of the market. back to you. >> thank you, bob. rick in chicago with the bond market reaction. what are you looking at? >> twos didn't move much. little volatility. bob's right on the stock market. the stock market are the inmates. the warden is the fed. they all know there is going to be a breakout. all going to try to escape. it almost doesn't matter what the fed wants to do. the markets are unhappy. no global prosperity if they keep rates too low. and things are going to change. why put up with the volatility. why have the calories if you don't get to eat the cake? they're going to have the volatility, they should have raised. one dissent less means it is all a group effort, trying to figure out as a group. you can look at who dissents who doesn't, they're trying to come up with the most comfortable way to extricate themselves for a situation that has absolutely no
solution. the dollar index back to where it was. i fully suspect the markets globalry will slowly give up ground. we all know it's coming. the warden will be on board or the inmates get out but nothing is going to stop the ladder. >> rick, thank you very much. all i can think about is the shaw shank redemption now. >> you nailed it, that's it. >> that is it. we're going to slide down a pipe. thank you very much. oil slides, speaking of, continuing right now. crude oil down 3%. we have gone from 51 bucks to 45 in oil in just a couple of days. that is a big market story. more on the close of trading with oil coming up. and bill gross will join us with his reaction to the fed. who's with me? i'm in. i'm in. i'm in. i'm in. ♪ ♪
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breaking news, the federal reserve leaving interest rates unchanged. although they did say the case for rate hike continues to strengthen. joining us is bill gross of janus capital. your take on the federal reserve nondecision decision and subsequent statements. >> well, today is the fed's day, but it is really not about the fed. i think markets know bund investors know that we're looking at normalization slow pace, 25 basis points perhaps per year. why does that affect the stock
market and why does it affect high yield bonds like it is doing at the moment. earnings recession and had been for five quarters. and the fact is, sounding like a politician here, but the fact is that 1% to 2% real gdp growth and near zero perfect interest rates which lowers margins for financial companies, basically doesn't produce much. those are the considerations to look at going forward. can the economy grow faster than 2%? perhaps the election says something about that. but basically the fed already admitted that productivity is zero, 1%, and labor force is growing at half a percent. and we're stuck in this zero to 2% rut and not good for financial assets which are overpriced for four to five to six years. >> what does matter now? is it that lack of growth? is it politics?
is it something else? >> well, lots of things matter. real growth does matter. it would be nice to have 2% to 3% real growth in the united states. i don't think it is going to happen. inflation does matter to the extent that it moves up towards 2%, that's a bond negative. and perhaps not so negative for stocks. the things that matter are really structural. they don't take up headlines or make for interesting conversation, i guess, on tv. but structural problems such as demographics and high debt levels and leverage and china for instance. technology displacements of labor, deglobalization. >> bill, bill, you know me. i think those are the most interesting things to talk about. i know they're big and not fit for three minute sound bites, but let's go to that first one. demographics. we talked about extensively,
given the demographic profile of the united states, is there anything any politician or anybody can do to get us to 4% growth? everybody is promising it. i look at the demographic profile, i think, really, how do you do that? everybody is getting old. >> i think that's good. i can tell you, one of the reports from the fed district that produced the paper few weeks ago, doesn't mean it is gospel, but they produced a study that said because of the -- that demographics have critically lowered the growth rate for the united states by perhaps 1 to 1.25% over the past ten years or so. so the aging of the populous and the inability to replace them with younger and more productive workers is a critically important aspect of the economy going forward that most investors, you do, but most investors simply refuse to
acknowledge if only because it is so slow moving. it is a turtle. and nobody wants to observe a turtle. >> the second turtle reference in the last ten minutes. more 25-year-olds than 55-year-olds in america now. the millennials will add on. that's a ten-year story. i know you don't want to dip into politics, but do you think there is a different market move based on any outcome? >> i think so. only because trump is represented by uncertainty. and not only in terps of his personality, but the politics that he's promoted. i do think that if trump wins it is a dollar negative for developed countries. it is equity negative because of the potential volatility, bond market negative because of the spending and the tax reductions in terms of potential on higher inflation. if clinton is elected, you know,
much like you said, i think donald -- bond neutral and equity neutral. >> that's interesting. my thinking, just this is why you do what you do and why i do what i do, i can't do what you do, which would be, hey, if trump wins, there is nervousness, should we buy long bonds? you're saying that's the exact wrong way to think because of the future spending plans? >> yes. i think so. it is critical in terms of what he can get passed, of course. he's -- he's a bigger spender than clinton at least in terms of his tax cuts and his potential policies. and he's attacked the fed over the past few months. and that's not necessarily a positive in terms of independence for the fed and potential for inflation going forward. i think trump is bond negative. >> all right bill gross, a
pleasure. always interesting topics, especially turtles, thank you. makeup, data and health care benefits, a trio on the good, bad and ugly. we'll look at the latest numbers from predict it, a site where people can bet on who they think will win the presidential election. right now, you are to bet 69 cents on hillary clinton to get a buck back. 35 cents on donald trump will earn you a dollar. you can see the big moves in both the charts, trump is narrowing the gap in most polls out there.
for the good, the bad and the ugly in today's trade. we kick it off with the good. wage works up 9.3%. they help other companies manage their employee benefits. it is buying adp consumer health spending accounts for an undisclosed amount. to the bad, that would be estee lauder, down 5.5% in this after earnings came in short of estimates. an absolutely ugly day. tableau software, shares down by 12.6%, missing third quarter earnings estimates and giving adisappointing full year outlook. somewhat it disappointing market day pew febut for gdf ho. we're going to talk to the
i'm sue herera. here is your cnbc news update at this hour. iraqi special forces going house to house in eastern mosul, searching for islamic state fighters. searching the road for explosives and booby traps left behind by militants driven out the day before. the curfew has been imposed in neighborhoods in iraq -- that iraq has taken. british prime minister theresa may mistakenly congratulating opposition leader jeremy corbyn on the birth of his granddaughter, provoking laughter in the house of commons. >> can i congratulate the right honorable gentleman on the birth of his granddaughter and -- i'm sorry -- in that case, mr. speaker, can i just say that perhaps one should never trust the former chief. >> forbes magazine reporting that taylor swift was the highest paid woman in music in 2016 with earnings of $170
million. last year came in second to katy perry with 80 million. adele was second this year with 80.5 million in earnings. that is the news update this hour. it is a lot of money any way you slice it. melissa, back to you. >> thank you very much, sue herera. 30 minutes after the fed's decisions and markets are holding steady. we're off the low of the day now, with the s&p 500 above that 2100 level at this hour. down 8 points. in terms of the price of oil, we're seeing that continue to slide and precipitously, to jackie deangelis at the nymex. >> we saw crude oil dip under 45, we did rebound to close over that level. but a big slide today after the doe reported that 14.4 million barrel bills in crude oil inventory, nobody was expecting that. imports were up 2 million barrels. that accounts for some of it, but certainly not all of the surplus. u.s. production up for three consecutive weeks. that's what tends to happen when prices go higher. 45 still the critical support,
but as you see today, we tested under. and traders will look to close under that level, triggering a new range. final stat here, ken shell analystics shows which crude drops more than 10% in consecutive trading days, you can expect it to go lower 2%. not necessarily saying that this won't see some volatility, but certainly could go lower from here. some traders saying if opec can't get its act together, we'll be back in the 30s. >> big move. all right, jackie, thank you. chinese data center gdf holdings launching an ipo at $10, well below the expected range of 10 to $14. it is the sixth chinese company to list on the nasdaq in 2016. and this one notable for blue chip clients like alibaba and baidu. shares are trading higher by almost 5% today. $10.46 a share. let's talk to the chairman, ceo and founder william wong in a
"power lunch" exclusive. congratulations. you raised $192 million today. what are you going to do with the money? >> we'll keep the capacity down and hold china to keep -- continue to keep stronger position in china. >> are you disappointed at all that you priced at $10 per share rather than the 12 to 14 that people were talking about? you hoped to raise 300 million and instead you raised 192. >> no, i'm very happy to go to ipo. we are -- our stock trade up. we're very happy. and this price, it is decent price. i think it is in line with all the u.s. comps. >> what is the total addressable market for cloud services in china now. what is the current penetration? >> sorry in. >> what is the total addressable market for cloud services in
china now? and that is the penetration at this point? >> i think the cloud computing in china just a thought. and we are very excited. we are -- currently almost 50% of our backlog is from the major cloud service provider. so we are -- that's a key driver to drive the future growth. so just -- >> china has come under intense criticism during our election here. i'm wondering if chinese company, are you encountering any of that while you're here in the united states? are you feeling that? is that evident to you? >> no, i think it is -- we are focused on the whole market business. so i think we know -- i'm noticing news from the u.s. election. but i'm not focused on that. i'm focused on my business.
>> are you afraid of donald trump? >> no. i think it is not my business, first of all. i say it is less impact to -- no impact of ours, the whole market. >> why did you list here? in the united states? >> very interesting question. i think a lot of internet giants not only the market. a lot internet giants cloud service provider, also in china. their confidence is great. we want small chance transparency to our client, number one. number two, i think u.s. markets, a lot, it is a very knowledgeable -- a lot of knowledgeable events. who can understand our values.
>> okay. thanks so much. chairman and ceo of gds going public today. congratulations. >> thank you. >> coming up in street talk, analyst downgrade after a weak earnings report. what is different this time that the analyst admits to being too late and we watch the market reaction to the fed nondecision decision keeping interest rates study. dow industrial average down 34. oil the bigger story, down a few percent. ck and bond model, with little in alternatives. yet alternatives can tap opportunities that traditional assets can't. and even though they're called alternatives, they're actually designed to help meet very traditional goals. that's why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. translation? goodbye 60/40, hello 50/30/20. ♪ yeah. well, we gotta hand it thto fedex. glasses. they've helped make our e-commerce so easy, and now we're getting all kinds of new customers.
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time for street talk. analyst recommendations for the stocks you need to know about. we kick it off with square. on the heels of a stronger than expected earnings report, $15 price target. more convinced of scaleability of its business and the money losing hardware sales. square has a strong secular tailwind. the payment for patient, particularly for small businesses. >> what a ride. 8, 16, back to 8 bucks. now middle 11. frustrating for dorsey and company to try to become a trading stock. >> yes. >> really a financial company, but trading, like, you know, like a low end biotech.
>> think of how frustrated it is for dorsey. this other company that is also doing -- >> can't run two. stock number two, completely the opposite, norfolk southern, the train company, argus research upgrading to a buy from a hold, they like the fact that they're undergoing a sizable restructuring, $104 target. 13% upside. latest in a string of positive analyst on norfolk. a few days before that, seaport global securities began coverage of the buy and a $101 target. hasn't helped. stock down 5% this month. but three pretty positive analyst calls in five days. >> have been coming around to the rails lately. up next, weak earnings, pullback, pfizer, downgrade to market perform. analyst admits the downgrade is probably late. the company decided not to split. but now it is clear that head winds are stronger and there is
more uncertainty around the pipeline, specifically because of terminated development of the cholesterol lowering drug, a class of cholesterol lowering drugs that had such promise and decided to pull the plug on that. >> you sent this out this morning and i looked at ed ed a chart, i didn't know pfizer was down. dow component, that's -- >> big dividend yield. 4.4% dividend yield here. >> down 12% over a year. final stock, smaller cap name, providence service corporation, stanford, connecticut, they do things like nonemergency medical transport, also youth offender rehab. upgrading to outperform from market perform. they note after the recent sell-off, investors are being appropriately compensated for the risk. finding a proper valuation is somewhat difficult, but either way he runs the number, the current valuation is too low, the target on prsd is $46.
that's about 15% upside on a company i have never heard of prior to this call. >> that's one tough chart there? it is. stock is hit by six times earnings. that's what the analyst says after the -- >> street talk down. now time for trading nation. traders do trade better together. let's look at high yielding stocks. pfizer. they had a rough couple of months. chad morgan, chris johnson. it is interesting, chad, maybe focus on pfizer or something else, i understand yielding stocks looked less attractive in the face of a potentially higher federal funds rate if we get one in december. does it justify the move down that many have seen in. >> it is a case by case kind of issue here. look, investors had been looking at high dividend paying stocks as a bond-like alternative. as the federal reserve raises interest rates, slowly, we're expecting only two rate hikes in
the next 18 months. that will apply pressure to the companies' performances like utilities. also energy stocks. so we would be avoiding those type of companies. what we would be buying in companies that are dividend growers, top line revenue growth is robust, where predictability of operating margins and gross margins are substantial. >> such as? >> such as pfizer, for example. even though they came down, that is a high dividend paying stock. >> do you buy more because of the drop? >> i would. long-term forecasted growth rate on the top line of 3% to 5%. that's all you need to hit a price target of $40 per share. another name you may want to look at is a church and dwight, they're a consistent grower, top line growth of 5%. dividend growth roughly of 10%.
you may want to look at a lost health care companies that do pay dividends that are consistent growers. i think there is a tremendous team of opportunity within the health care sector as the headline risk has come into the market. >> church and dwight near my house, best known for baking soda. very exciting product. chad likes it. a value guy. craig johnson, how do you chart the demise of the higher yielding stocks and how does it look it you technically? >> one thing you can do is look at the proxies, like the xlu. this is an index already violated the uptrend support line that's been in tact for the last 12 or 18 months and starting to put in a series of lower highs and lower lows and coming back to a pretty po important area of support. we're seeing what i've been hearing since i've been traveling all around the globe talking to clients, the inflation trade is starting. a lot of money needs to come out of these areas such as health care, such as the utility
stocks, and going to rotate to other areas like financials. whether it is a citigroup or bank of america. they all look like very attractive starts, starting to turn higher. you continue to see that trend continue as we see the -- >> pro financials. >> correct. >> craig -- >> we're officially -- >> go ahead, finish your thought. >> we're neutral on the financials. but definitely starting to improve. it is one of the stronger areas from our perspective. >> you're closely watching it as perhaps they say. >> correct. >> by they, i mean me. thank you very much. >> thank you. >> for more trading nation, closely watch it, couple more segments after day, go to trading nation.cnbc.com. an hour away now from the other big financial event of the day. facebook's earnings report, all you need to know, all the expectations, what is the stock likely to do. we'll figure it out when "power lunch" returns.
now, the latest from trading nation.cnbc.com and a word from our sponsor. >> different sectors of the market tend to do well during different periods of the economic cycle. when the economy is expanding, industrial and technology stocks have outperformed the broader market. when the economy contracting, with utilities and consumer staples tend to outperform. so when choosing to invest in a particular sector, be sure to consider where we are, and the economic cycle.
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comcast business. built for security. built for business. facebook shares up 21% so far this year. several dollars from its all time high. company reports after the bell and julia boorstin joins us with more on what you should be watching for in their report. julia? >> well, the big question is whether facebook can keep up its winning streak. after the only ad giant bigger than facebook google reported strong results, analysts are bullish. now, they expect facebook to grow 54% to $6.9 billion. earnings per share predicted to grow to 97 cents. so facebook has beaten earnings expectations each of the past eight quarters. what happens with facebook shares after the bell? it will hinge on whether it maintains its ad revenue growth over the past two quarters of more than 60% once adjusted for
foreign exchange rates. investors will also examine users engagement to make sure that snapchat isn't eating into facebook's dominance. it will be calculating a key number, average revenue peruser. also listening for guidance on could start boosting its bottom line, and we'll see if facebook is seeing any impact from the rise of snapchat, which analysts say is proving a formidable force in social. melissa? >> julia, thank you. facebook has yet another good quarter. this is a stock that has been a performer, but it is just about, what, 7, $8 off its highs right now? this smells like a company that not only needs to deliver but really needs to beat on most metrics in order to keep this up. >> you're right, it has been an impressive run for the stock, and i do think fundamentals are strong. one of the things we like about
it is it's a broad-based revenue where users are growing and the monetary use is improving as well. they have lots of different ways they can keep winning. i do think they need to have a good quarter, but from a valuation perspective, the stock is really not that demanding in terms of valuation. it's trading at a multiple that's well below its growth rate, and usually that's a sign that things are pretty stable. >> how granular are you going to go in terms of the dimension of the user or the specifics of the users? a lot of people will say snapchat has the younger users, the one-third of users. their user pool is much smaller than facebook's, granted, but it's that 18-4 demographic where 15% of facebook's overall falls into that very young demographic. does that matter at this point, or do you just want to see it put up the numbers? >> it does matter.
if user growth slows down a little bit now, it's not really going to impact revenue now, but it's going to be an important leading indicator of what might come in the future. it's really impressive that facebook can grow its user base with as much money as the company has, and we do think there are some competitive headwinds starting to build, but facebook is such a force, and the engagement, as i mentioned earlier, is improving. the user base has been incredibly resilient over time. if that does start to slow down a little bit, that will matter for the stock and we're a little nervous about that, but it hasn't happened yet. >> this is where, mike, i'm going to sound like the old man. "get off mily lawn." its market cap is greater than exxonmobil which has 200 billion in annual revenue and the market
at 700 billion in annual revenue. if you buy facebook, you're paying for a lot of growth. what is the single biggest risk to that growth? it is maybe not priced to perfection, but it seems rich. >> relative to growth, i think the multiple is fine. and you're right, the growth rate is very high. this is a huge company that's still growing its main revenue stream by almost 60% which is super impressive by how big the company is. ad budgets are still shifting away from television and print in a big way. facebook is the prime beneficiary of that shift. google is probably number two. google is bigger in terms of market share gains, but there should be a good amount of runway left, especially when you consider that facebook has some really big properties where the billion users each, they're really not tabulating much yet.
valeant moving on the day. it's exploring the sale of its eye surgery equipment business. that again according to sources familiar. those sources say it could fetch $2.5 billion at a possible sale. the sale of that valeant eye business, the discussions are still preliminary and that valeant got tho tat eye business part of a 2000 purchase of bausch & lomb. >> this potentially, if they sold both these units at these reported prices, this could be about $13 billion for valeant. >> correct. and that's why people say the stock -- it did get the bounce
prior to today, but we're looking to see if this has an overall move on the stock price since they've unloaded about $13 billion of assets, possibly. this is a smaller deal in the grand scheme of things. if that salex business does go, which they mayor m or may not b selli selling, what that will do. >> as it faces potentially -- >> a criminal investigation. not a civil investigation, not we're sniffing around, literally a potential jail time for its ceo and another -- >> their formers, right. >> absolutely. we'll continue to watch this again. valeant shares down 8.5%. "check, please" is next.
getting your quarter back. fountains don't earn interest, david. you know i work at ally. i was being romantic. you know what i find romantic? a robust annual percentage yield that's what i find romantic. this is literally throwing your money away. i think it's over there. that way? yeah, a little further up. what year was that quarter? what year is that one? '98 that's the one. you got it! nothing stops us from doing right by our customers. ally. do it right. let's get out of that water. rick, you made it just in time to pick up the tab. >> you know what i did today? i went bowling. >> he's not joking. >> i went bowling for work. for my "how i m"how i made my "" story. we bet $100 a strike. we went into the last frame. he was up a hundred and i bowled a strike.
we bowled even and i won the bowling match. tylus, not tyler. >> we should go to that. >> no makeup, right? >> no makeup. like alicia keys. no cocktails served at this time. it was a little early. it's a nice place. >> i love "how i mad mi me my millions." >> i want to star in "how i lost my millions." i used to be rich and now i drive my pinto. >> years ago we had a show called "high worth." after the market crashed, we changed the name. >> recession lows is what we should watch. health care quickly also. some of the top performing stocks in the s&p 500 are health care stocks, names like express
scripts, amerisource. >> does this make you trust me any less as a trusted media personality? >> yes. i trust you less. thanks for watching "power lunch." "closing bell" starts right now. hello, everybody, welcome to "the closing bell." i'm kelly evans at the new york stock exchange. >> i'm wearing makeup, okay? stocks coming back a bit after declining when the fed announced they were leaving rates unchanged. that happened about an hour ago, the feds saying it seized it for rate hike strengthening, but with the fed just six days away, they're also following the latest poll numbers and we'll bring those to you in