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tv   Fast Money  CNBC  November 2, 2016 5:00pm-6:01pm EDT

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madden, last night after receiving criticism on twitter for some of his decisions. thumbs up, thumbs down for his plan? >> would love that. >> all for being nice. >> i like it too. rob, stephanie, thank you for joining us on klobuch"closing b" "fast money" begins now. "fast money" starts right now. live from the nasdaq market site overlooking new york city's times square, i'm melissa lee. tim seymour, candlely, guy adami. the s&p 500 top technician says there is more pain for the sector. he'll explain. and bank of america's head of high yield michael con top allows. later, we are covering all the after hours action for wynn resorts and fit bit. those stocks moving. we start off with facebook reporting moments ago, that call kicking off.
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julia boorstin is monitoring it. facebook shares, we should note, volatile in the after hours session, down about half a percent right now. despite an earnings beat. the stock initially syrininking. this follows a tough day for the tang stocks overall getting hit hard. facebook is, of course, the last of the fang stocks to report earnings this quarter. so can facebook keep growing and is it signalling the end of the tech run? dan nathan, what do you say? >> as far as the move in the after market right now, the stock down 5% from the all-time high it made early last week. so i think it's pretty muted. they came in with a quarter people expected. they hit $1.8 billion monthly active users. here's the issue. you talk about growth. at some point, they can't grow monthly active users in a dramatic fashion so they have to squeeze out more from properties like instagram and what's app. we know they have other bets, working in the virtual reality. i suspect you start to see some monetization there, and that should offset in 2017 some of the user growth that's going to decelerate. >> it seems like this is a case
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where the conference call is really going to be key in terms of what they say about these exact items. the stock has had such a run going into earnings. >> the stock also pulled back. the stock -- in fact, if you look at the momentum indicators, the stock hasn't been this low on an rsi since brexit. i don't think it was such a great run into these numbers. i think the expectations were also pretty darn high. i think it's actually very impressive on this take that this stock has done what it's done, considering it's probably one of the last men standing. and if you this i about the fourth quarter comp. that's coming down the pike for these guys, i actually think these numbers were fine. i don't think that there's a -- right now we note the ceiling on their ad revenue. frankly, no one knows the size of the marketplace. they continue to dominate it. they dominate the smes, the small medium enterprises, which is hard to understand where the true value is. >> the low-hanging fruit already picked. we know we have this massive shift from desk top to mobile. facebook got way ahead of anybody else. and just crushing in this. to dan's point, now what?
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what's next? these numbers are fine. you can't really put -- poke a hole in these numbers. when i first saw the numbers, i was actually shocked facebook was down 4%. i think tomorrow, you have to be concerned or at least you have to watch for kind of a sell the news type of event if people don't think they can grow any more, this is a very crowded trade. so you can get an excaccelerate se selloff. >> mike coe saying the implied move in the options was probably a 5.5, $6 move, and we saw after hours -- >> percent or dollar? >> dollars. the percentage move -- whatever it was. >> the same, actually. >> with that said, i think it's at levels where it gets interesting again. i think -- if you look at the operating margins, 59%, is their growth slowing down? by definition i guess it has to. they will be able to pull, i believe, going forward. not least of which is this whole virtual reality thing, which they are at the forefront. >> when you go back and look at the history of technology and
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when some of these new platforms move geographically, you know this. we have seen this with mobile hand sets and that's when you get this splut absolute explosion. >> let's go to live tv. live video. >> right. and the ad market there. >> live tv is going to be huge for them. or live video, excuse me. when you think about it, what is the growth opportunity in china? not great. what is the opportunity in india where mobile penetration is really low, at least on broadband. they need to squeeze out some of the existing platforms, like what's app, oculus and instagram. we talked about this before. the guy who runs their messenger is the former paypal president. they're going to monetize messenger is probably not the way you would think. with advertisements. it may be through peer to peer payments. and that is a good thing, if you're worried about the growth overseas not -- as robust as in north america. >> it's a good thing for the company. no one has value on what's app or messenger. they have value. >> $300 billion market cap. >> 10% -- it's not that big a
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deal. if you think about the risk/reward for this company based upon where these businesses could be and the kind of growth. that's why, again, i agree. you can't get carried away here. but we're talking about put it in the context of tech names. and i think we framed this whole discussion about is this the end of the tech rally if facebook can't undo basic numbers. and obviously bigger market conditions. a fourth quarter comp.. that's the biggest thing. the valuation at 28 to 30 times, i mean, where do you think those multiples should be? dan, do you think it should be trading at a lower multiple because it's hitting that maturity? that's the only place you could say the stock -- >> i would say you have to think about it on a gap basis, too. it's much higher than that. so, you know, there's a dollar in eps, i think on the $5 number that, you know, does not show up on the adjusted. so just depends how you want to value these things. to me, i think people are willing to pay for the growth. but why were they willing to pay for google's growth basically trading 1x? >> it's obviously a lot more
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mature. if you told me ten years into this with google, their growing sales in the high teens, trading at one times that growth, you would have said, oh, my goodness. that's a steal. so what -- to me, facebook looks pretty expensive relative to google right here. >> well, it is. and google has run into their numbers was actually more significant than facebook. facebook's was not all that impressive. >> but more broadly, what does it say about risk appetite in this market? where people are positioned? >> that's i think -- i think that's actually the broader part. tim was alluding to. facebook reports this quarter on a tape that's been strong. let's talk about a tape we had a month and a half, two months ago instead of being down a couple percent. i think the stock is up a couple percent. so it just happened to report this quarter, and in an environment where technically, as carter worth is about to talk about, the market looks like it might be breaking down to levels we started the year at. with that said, it's really hard to throw stones at this quarter. they just rap to be reporting over the back drop of a market selling off.
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>> let's stick with tech and none other than the only chart master, carter at the smart board. >> we have a fairly rare circumstance where the top five stocks in the s&p by market cap combined equals the weight of the bottom 250. so you have people clustering in names that are still growing, where they believe are still growing. just to put the numbers in context, the top five names. they all happen to be tech. apple leading. followed by google. and then microsoft and then amazon and facebook. valued at $2.4 trillion and the bottom 250, the s&p at 2.6. when you have this circumstance, what happens at this point going forward? first let's look at a chart or two. this is a chart of those five stocks, plotted equal weight. and here is the trend line. it's pretty optically clear. we've been walking along this line and bounced over and over and over and over. but the point is, that after you bounce, you check back. you check back. you check back. we're due for a checkback and
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it's already starting. so i think the bet here is that these go lower, and actually, here's a little bit of the history of this circumstance. when the top five stocks, what ever they might be, whether it's big energy or big financials or a combination thereof, whenever the top five stocks equal the bottom 250 in terms of their value. on a one, three, six-month basis, that basket understorms the bottom 250 to the tune of 250 basis points. we're betting you don't want to be in these or reduce exposure. and they're all sort of putting up lame. facebook, we just saw, amazon and so forth. s&p 500, technology sector, right? it's the biggest sector in the s&p. you can draw lijs any way you want. one way we could draw them f we were to come back to this trend line. then implies about the 750 level. that trend line also happens to be the 750 level this way. so let's put them together. that's a pretty darn good
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reference point. back to about 750, that gives you about a 5% selloff from here. i think that's in the cards and i would play accordingly. as for the weighting in the mark market. we know this was a one-off. the sector, one of the parts composing the hole, was 32% of the market. right now we're at 22%. if you were to whiteout this whole point, this is basically the highest we have ever been. and that's something else to have in mind, as one proceeds with the clustering in these kind of names. finally, let's talk about the s&p. so look. people ask about levels. frankly, it's a lot of guesswork. my guess is not better than anybody else's. we know that -- not all gaps are filled. a lot of gaps are filled and two unfilled gaps in the s&p. you typically get them off of an impetuous bottom. if you went back and looked at the ebola low, there's a much
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more immediate gap coming off the brexit low. at 2036. and that is -- i would say in the cards. almost guarantee. >> almost guaranteed. should we invite carter braxton worth? sometimes we don't. but we shall. carter, come on over. bring a chair, please. >> come on. >> any way that the top five individually do better than the combined five? >> there's always that. and then you have to pick your one. probably at this point, we know that amazon is a bit steep and crowded. just fell on earnings. we know that facebook is struggling. it might be the big sleepy one that's not a growth stock is the place to be. that would be apple. the reason why -- well, fang is one of the great acronyms of all-time. think about this on national broadcasting corporation, nbc. or teenage girls omg, oh, my
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god. my point is that fang -- i didn't include netflix for a reason. it's only $50 billion. apple goes in the real bucket of the big names, it might be apple. >> let me ask this. i love the work you did in the s&p 500, talk about 500 stocks. let's talk about the nasdaq 500, 40% of the nasdaq 100. 40%. >> that much more vulnerable. >> isn't that the one you want to focus on if you're using one of these etfs as a hedging instrument? because you're going to get more bang for the buck? >> you could use the qs. what is important is that when economic data slows, and we talked about this before. what people should do, and principle history shows they do do, they find growth companies and cling to them or go after some sort of yield. what's happening now is the very growth is now in question. not only the starbucks and home deeps and nikes, but now the last few starting to be in question. that sets up a problem. >> so what does that set us up for? i know you said levels are guesswork. a lot of people at this point
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having broken the 2 jourks 100 level during the session saying once we break that, then it's flat to the year. so 2043 or whatever that level is. >> the concept is, if you look at that chart where after you break out to a new high, if you fall back to a level from which you broke out, you're into support. the thing about support is, that's the old high at 2130 or thereabouts. support is not a plywood board, it's a mattress. we're into support, and at some point, you will find support. you can sink further and go all the way to the box springs. >> which is well -- >> that's -- >> or maybe you crash through your neighbor below. omg. so, i mean, look, the brexit lows have got to be considered. 3, 4%, that's nothing. >> carter, thank you. carter braxton worth. a lot to trade here. >> a lot of letters. >> there's omg, apple. maybe being the best growth. >> abc, 123. >> so fantastic. >> maybe a short on the qs here.
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>> right. so carter is talking about exactly what we talked about in facebook. you have this crowded trade that regardless of the fundamentals, if the momentum starts to get to the down side, you have everybody in it and selling that gets selling. the other thing i would point out, carter is talking about a bearish call here. we're still talking about a 3 to 5% pullback. that's very normal in normal markets. we haven't seen that a lot in this day and age, but that is not unusual. that doesn't necessarily constitution the world coming to an end. it wouldn't surprise me to see that at all. >> given that analysis, does that make shorting the qs not worth it? >> 3 to 5% pullback? >> wouldn't short anything, though. you started this by saying, is the tech move over. in the context of is it -- no, i don't think it's over. but as carter just pointed out with one of those charts, we have seen pullbacks to the upward trend at least four or five times since 2011. and that's we're in the midst of now. i'll go back to the levels of the s&p. i do think now, given the fact
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we're below 21.30 for a couple days, there is a 75, 80% chance we retest the levels we started the year off, which is 20.43. >> i think you take the value within those top fives over the growth. owning google and owning apple over amazon and netflix or facebook to me is an interesting trade. >> all right. coming up, facebook is now lower by just about 2.2%. could mark zuckerberg get excited. and on the move in the after hours session. the latest headlines. and one part of the market investors are fleeing from and could mean big trouble ahead. we will explain. much more "fast money" right after this. this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade.
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welcome back to "fast money." we've got an earnings alert on wynn resorts. let's get to aditi roy in san francisco. >> that's right, melissa. the stock is down 5% after the company missed on the top and bottom lines. winn also missed expectations on revenue coming where it missed its opening casino in august. made $164.6 million in revenue
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from the new palace hotel there. the street was looking for $184.7 million. revenues from the winn macaw were also down 11.5% year over year. the company said its total investment was $4.4 billion, a $300 million increase from its initial estimates. today's earnings come after the latest numbers show macau's gambling revenues from up after being in the red for two years. here ceo steve wynn on the call talking about his newest property. >> since macau is in its -- the palace is in its infancy and just beginning to get rolling, i've got to remind you that the lead time on design development on a thing like wynn park is substantial. we spend as much as a year or two getting to the point where we can budget and start to break
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ground. >> some analysts have also been skeptical about the casino industry and macau, given in part china's crack downon cram gelling crimes. >> i thought we saw the wirs. is this a wynn problem or macau problem? >> macau has been the issue and you're up 8.8 on gaming revenues over the last -- in the last month when expectations were much lower. having said that, look at these names. crown up 50% off the lows. the valuingations don't necessarily justify this kind of a move. i would take some chips off the table. i do think that macau is back. and remember, big brother was part of the story pushing around macau, growth and comps very difficult. part of it was china being very concerned about payments. and cash flow and things that i think are now more under control. i think the story has life. but i wouldn't buy it here. >> guy? >> if you look and tim knows very well, because he had a successful short position earlier in the year.
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it's between 90 and 105 now, a number of times. and i've got to tell you something. if they can't break it through 90, when i say the pronoun "they," it means the shorts piled into this name in a major way. so if it pushes to 90 bucks and told three or four times normal volume, there is a risk/reward to get back in on a long side and look for a subsequent move higher. steve wynn put his money where his mouth is all year since the start of the year. >> i take issue for regulation, corruption crackdown and a supply issue. they had all these things coming online here. i'm not sure weak demand, you know, really needs a whole heck of a lot of new supply. that could be part of it too. you may see this moderate. >> it's the same four or five people that run them all. they're still dividing up the same pie equally. still ahead, check out shares of facebook now down more than 2%. we hear from ceo mark zuckerberg on what he thinks wall street missed. that's later. i'm melissa lee. you're watching "fast money" on cnbc, first in business worldwide.
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here's what else is coming up on "fast." that's how fast investors are running from one part of the market. and it could spell big trouble for stocks. a top strategist at bank of america is here to explain why. plus -- >> fear. is not real. >> okay, maybe if you're will smith. but if you're not, our traders have four fearless trades that might help you sleep better at night. much more "fast money" still ahead.
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welcome back to "fast money." another down day on wall street. the s&p 500 posted its biggest losing streak in five years. we're all over the action
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tonight. facebook, qualcomm, fit bit, whole foods very volatile in the after hours. we've got full team coverage of the company conference call. julia boorstin, josh lipton and susan lee monitoring whole foods. we've got the one and only bob peck here, listening to facebook on the old red phone. the stock down nearly 5%. he'll give us his thoughts. less than a week away from the election. cnbc's bob pisani with the market's biggest warning signs. bob. >> you know, melissa, what's very interesting, the vix spiked from 14 to 20 in the last few days as the presidential election has tightened. the real market mover has been the fed. the fed again failed to send an unequivocally clear signal. but the market is sending plenty of warning signs that it's going to happen in december. first, the overall market, it's already lower. the s&p down 80 points, 4% off the high.
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and the small cap russell 2000, more sensitive to interest rate hikes, down almost 10% off of its historic high. interest sensitive, telecom stocks down 9% this quarter, the lowest level since january. reits are down 8%, the lowest level since going back to february. and the hyg, the high yield etf down seven days in a row. you need more? bank stocks, the kbe up over 2% this quarter on the higher rates, though it was down today. elsewhere, the dollar has staged a significant rally in october, though down in the last couple days, as well. so the bottom line is the market is increasingly acting like a hike is imminent. in fact, down here, there is some debate that the actual event, when it finally comes, will be a sell the rumor and buy the news kind of event. particularly if the market continues to correct like this. what's abundantly clear, the fed will be moving at a glacial pace. one rate hike a year ago, one rate hike in december. anything slower than that, and the fed will be on hold. it won't be hiking.
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we'll all be in retirement by the time we get anywhere near a 3% fed funds rate. i can't wait for the election, and the fed rate hike to be over, and we can all move on with our lives. melissa? >> hear, hear. bob, thank you. bank of america, merrill lynch highlighting the biggest obstacles. we have the head of high yield strategy. always good to see you. >> good to see you, as well. >> the bway bob was talking, i hope want to go to the bunker. >> volatility is up tremendously. and obviously, any time we're dealing with risk assets, whether that's high yield or equities, volatility is going to hurt. and with an election in a few -- just a few days, with an opec meeting in november, with a fed that could hike in december, there is certainly a lot of obstacles ahead for markets and certainly something i'm looking at. >> so you've got three top risks right now. to high yield. negative interest rate policies and the elections and crude trades below 40 and stays there. >> yes. >> which is the highest risk?
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is there a chance all three happen at the same time, and what is that? >> yeah, well -- yes, all three could happen at the same time. obviously, the election is going to happen no matter what. and that's going to happen on tuesday. so opec, you know, this is a big meeting in november. i mean, they have indicated that they want to -- they want to cut. they want to freeze production. obviously, they didn't get to an agreement this past weekend. oil prices have fallen 12%. just in the last half month or so. this could be a big problem for high yield companies. these levered firms that have gone out and basically issued risky debt, and if oil prices fall below 40 and stay there. that's the key. falling below 40 is meaningless. it did that in july and bounced up and got to into the 50s. so you have to stay below 40. if you stay below 40 for any period of time, that could be trouble. the last one you mentioned, melissa, and i think it's the big picture. the longer-term horizon. central banks getting off the negative interest rate policy. if the ecb and the boj say we are damaging our pension funds
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and, insurance companies and banks by being negative and you have a flow of capital out of the united states because they acknowledge that, and now countries can invest in their own home bias, their home base, that's going to hurt risk assets in the u.s. that, i am worried about. and the fed is part of that play, as well. >> i'm wondering if some of the high yield market is getting ahead of that. what we have seen in the last week, maybe longer, the hyg, right, which is the etf, the high yield etf has been trading below its net asset value. suggesting that sellers are pretty much selling indiscrimina indiscriminately. do you see that from your desk? >> certainly see it in hyg. i think it's down 2.8%. very, very quickly. the line is going straight down. if you look at cash bonds, which are slower to move, because the hyg is an etf, faster to move. cash bonds are slower to move. it took a while for that price action to catch up. what we have seen in the last -- since october 25th, the last week, is that cash bonds have widened over 50 basis points so we are seeing that pressure in
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my market. >> first of all, good call. you came on the show kind of in between february and where we are now and said i think there is a trading buy. and i think we got that. high yield went straight up along with other risk assets. so good call on that. but how much of the move we've had over the last couple days is built on the expectations of trump is basically tail risk. but the reality is gdp was 2.9%. growth is better. you were fearful of growth before. doesn't look so bad. >> very fearful of growth. growth doesn't look as bad as in january or february of this year. no question about it. 2.9% gdp. earnings growth had been the worst you had ever seen in a nonrecessionary period for the five quarters leading up to this year. growth in q1 and q2 is 6.5% on earnings. not bad, right? totally agree with you. the problem is that growth is so good that the fed is actually going to hike more aggressively, right? then that's a problem for companies who have issue debt reliant on low interest rates. it's kind of a catch-22. unless you can grow into your
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capital structure, which the growth has to be pretty phenomenal, you're going to be in trouble either way. >> so if high yield overall has all of these potential headwinds facing it that necessarily means that stocks will go down, as well. >> no. certainly not. and i think that there is still trading plays to be had within high yield also. and within the leverage finance market, i mean, leverage loan mutual funds have seen a lot of in flows over the last several weeks. and with libor higher and the fed indicating their going to hike floating rate product could do well. that's a leverage asset class akin to high yield. bonds could do okay because they're not as rate sensitive. and tim, if you have a bit of growth, that helps single b bonds. it doesn't necessarily mean that stocks are going to sell off. but i think it's going to be hard for the two to decuple. if one goes lower, the other is likely to go slower, as well. >> nice to see you. >> nice to see you, as well. >> guy adami, how do you use these pearls of wisdom? >> it gets back to the question, are rates going up for the right
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or wrong reasons? that's a long conversation, probably not for this show. if the debt service for these companies gets out of hand, that's a real problem. something bk is alluding to now. i think there is a problem for rates going higher, for sure. as bk pointed out a couple weeks ago, i'm not getting crazy bearish in the bond market until it breaks that trend line, which by the way, may have briefly touched and pulled back. i still think rates go lower. >> we have seen the yield and tenure go from 1.3 to 1.8. the fed funds rate, we were at 2.25. so rates aren't shockingly going higher and the other thing, the headline today, the s&p down seven consecutive date, down 2%. we're down 4.5% -- >> it is horrendous. >> i understand. that's actually bullish. so what i'm saying is, i don't think we're going to fall apart any time between now and the end of the year. and all these things that michael is talking about, if we don't have the growth and then we do have higher rate increase
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expectations, then 2017 has got problems. >> well, the one thing about the end of the year soeneasonality,e market is diverting. so watch that. >> all right. so lots of fears out there in the market. let's get some trades that could hold up in the face of fear. what we are calling tonight, fearless trades. tim, kick it off. >> it's airlines. they have been trading like champs and trading like champs because the valuations. delta had weaker passenger revenue per available seat miles. which is something that basically dictates how disciplined they are. they are very disciplined. or at least as disciplined as they have been seven and a half times 2017 at, you know, '16 at around 550 a share. the valuation still there. >> when i look at the election, coming out of the u.s. election, i think gold is the winner in both particular cases. so if you look at it this way, if hillary clinton wins, you're going to likely have janet yellen in there, she promised to run the economy hot. if trump wins, then you have a
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fear trade, which should boost gold. so for me, gld. >> dan. >> i like e. payments. in times like this, i like stories that are secular shifts that are going on. that's one we have talked about in paypal. square today just put up a good number and actually guided higher. you know, there are some issues about valuation and jack dorsey running these two companies. i think this is one where you see it back at 11:00. i think it's a buy. these stocks should act well in a volatile market. >> banging an old drum. defense stocks. you go back -- just go back and do yourself a favor. reed the lockheed martin earnings report and see what's going on in terms of earnings growth and backlog and you understand it. here's the sector that continues to grow. valuations may be stretched but continue to grow interim. so defense stocks specifically lmt. >> let's switch to emerging markets. rallying more than 13% this year. some traders betting the run could be over. so, dan. >> this fits into that whole conversation we were talking about. rising dollar, rising rates.
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emerging market, eem, the tracks this stocks. obviously heavily levered to china. bob had a reversal today, a big component there. the stock banging up against support at 36 bucks. there an air pocket down to 32 if it doesn't hold. put volume, one big trade. it looked like a buyer at 20,000 of the june 2017 paying 278. those break even down about 8% from the trading level. listen, again, we know -- never know what it's against. could be an outright bearish bet and nothing interesting to you people at home. but interesting levels to look at in place since january. >> for more "options action"s, check out the full show, 5:30 eastern time on friday. a very busy night for earnings. qualcomm, fit bit. facebook is one we're watching very closely, down near session lows. 5.8% is the loss right now. we'll hear the comments on the conference call that had the stock ticking lower.
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ticking lower as we speak here. and the action. look at fitbit. the latest headlines from these calls right after this. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
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welcome back to "fast money." facebook taking a divlower in the after hours just moments ago. we're sitting here down by 6.1%, just off session lows, despite reporting what looked like a strong quarter. julia boorstin joins us with the latest. >> hey, melissa. facebook's guidance seems to be concerning wall street. david weiner just lowered the company's expense guidance range, projecting nongap expenses will grow between 40 to 45% for the full year. that's 5 percentage points lower than the prior range. but he also warned while ad load has been driving facebook's growth, it will be a less significant factor going forward, so those ad revenue growth rates will decline. while he and mark zuckerberg talked about h2017 will be an
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aggressive investment year has it invests in hiring. >> we want to continue to invest aggressively to accomplish our goals. which is why we're hearing, especially in engineering. which is going to be one of our top priorities going into 2017. >> on the q & a session, a lot of talk about the company shifting to put video front and center in all of its apps. zuckerberg saying they want to make sure the business model works for the people who produce content to share on facebook video, as well. >> one way we're putting video first is through live video on facebook. since may, the number of people going live in any given moment has grown by four times. and people have gone live from all seven continents and also from outer space. >> zuckerberg has talked quite a bit about how they're working to improve the infrastructure to make the video experience better both for people sharing and for people watching. and talked about how they're putting video as a key part, not just to facebook but also instagram, messenger and what's app. as for analysts' questions and concerns about the slowing ad
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revenue growth, which we see weighing on the stock now down nearly 7%, cfo weiner saying they're continuing to innovate to work on the growth rate, though they have seen quite a lot of growth in ad load so far, which is one reason they won't be able to continue so much in that arena. guys, back over to you. >> julia boorstin, thank you. bob peck has been manning the red phone and joins us with the word on facebook. bob, julia mentioned a host of reasons as to what could have contributed to the selling between slowing ad growth to a heavy spending year for 2017. why do you think the stock is down so much? >> the quarter itself was fantastic. users have grown, engagement has grown, monetization of users. and all of that on better incremental margins around 70% or so. and they einar row down the cost. so why is the stock down? really is about guidance. they talked about increased heavier investment. what's interesting here, this is somewhat big for the street. the street looking for 40% growth next year, '17 coming
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down from 50% and also expecting some margin degradation, looking for 300 bits of degradation. a lot of this is baked in. the real question will be about magnitude, how much is that investment which we don't know and also this is an investment versus, say, cost. and they talked about some of their investments, vr, video, et cetera. so the magnitude will be the important point. >> so sounds like you will be willing to say at this point to buy this stip, or is it too much in the conference call? >> we have a buy on the stock. the quarter was phenomenal. we think it's prudent to be vesting long-term. five-year plans, ten-year plans. one thing you realize, you don't continue to innovate and invest. ultimately, you're into a problem. we like the fact this is an investment that should gain an roi for them. >> so investment versus cost. there is -- people have to wrap their heads around that difference. >> yeah. investment is something where you could get a return on your money going forward at some point in the future. things cost more and don't necessarily get a return.
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when they get the returns, it will be a prudent investment. >> bob, keep us posted. what do you think? >> well, it's exactly what we were talking about. the investment thesis to me seems to be broken. for the growth story right now. so now you have to shift and say, okay, they're going to invest. and it's going to be a three to five-year time. i think the investor base in facebook is probably not in it, and that's why you're seeing it down 6%. >> i'm not particularly positive but i don't think the investment vehicle is broken. there is another ceo out there that is taking a page out of bezos book. and i think it's zuckerberg and i think he cares. he's going to do what they think they're going to do. do you remember how stupid it was when they paid $1 billion for instagram. i guess my point is, like, you know, let's give him -- his due. he's doing what he wants to do and how he wants to do it. and don't -- i don't think he cares what he gives -- >> you have investors in there for growth. some of those investors -- >> i don't think this is shaking
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them out. >> this is talking about margins. wasn't talking about growth. >> spending on the business. >> ad revenue growth. >> yeah. >> but what are we talking about in absolute terms. ? relative terms, even. this isn't that big of a slow down for a company that is still growing substantially more in this digital ad space than anybody. so, i mean, 118 on the stock is a very important level. i think if this stock holds tomorrow, there is absolutely a trading call and these other people saying it's an vesting call, because it really probably is risk/reward when you consider what's app and messenger not priced in. >> what's interesting, though, talking about the algorithms, there was one -- they saw the word "decline" or the machine saw a decline. you saw a stock that went from 125 down to 118. that was pretty much a straight line. we can argue what that word means. i think to tim's point, you're still talking about a company with 40, 45% growth. what it was expected to be. still pretty significant. >> and the multiple not terrible. >> 118 is a big level,
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especially if you go back and look at a trend line over the last four or five years. >> who is buying it, raise your hands? >> i'll play the hand -- >> only one. >> i think the market is going lower. and i think based upon that, i don't want facebook tomorrow. still ahead, the after hours market from qualcomm, fitbit and whole foods. much more "fast," straight ahead.
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welcome back to "fast money." a very busy night for earnings. full team coverage. josh liptop all over qualcomm and fitbit. >> well, melissa, qualcomm's call just ending. a few big themes. first of all, qualcomm executives saying they are working hard to sign the licensing agreements with chinese smartphone vendors, collect those royalties on the call. qualcomm executives saying they have signed licensing deals with nine of the ten largest chinese oems. they called out oppo and vevo, said they're in negotiations with another large chinese oem right now. interesting, they are standing by their forecast when it comes to handset growth. analysts had questions on the call and said, listen, third party researchers are more down
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beat than you guys. but qualcomm executives saying they like what they're seeing in china and confident about what they could see in new markets like india. and finally, about that big nxp deal, investors like that nxp deal because it's accretive and could diversify qualcomm away from the market. executives saying that deal could close sooner, pending regulatory approvals. and finally, call your attention to fitbit here. fitbit shares are plunging. about 30% in the after hours. the wearable fitness maker gave fourth quarter forecasts that was well below expectations. that, of course, considered a key quarter, given the holiday season. fitbit also reported lower than expected quarterly revenue and eps that was in line with estimates. in the company's release, ceo james park saying we continue to grow and are profitable. however, not at the pace previously expected. fitbit, remember, went public june of last year. debuted at 20 bucks per share. that stock has now fallen almost
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70% since then. it's now trading at around 9 bucks per share here in the after hours. melissa, back to you. >> all right, josh lipton, thank you. should we go to qualcomm, or the disaster that is fitbit? >> i thought the fourth quarter was fantastic. dan nathan would agree. the problem with the stock now, the first quarter guidance was -- not good. in two words. not good. so how do you trade the stock? well, i've got to tell you something. if it trades back down to 65, it's basically retraced the range of the last year or so. 50%. and valuation wise, to me, 14 times earnings, given their balance sheet, which, by the way, putting to use, i think the stock sets up well at 65 bucks. >> and i think it really is a story where if it does pull back to where they were -- rumors they were going to buy nxpi, they were in the largest semiconductor deal ever announced, $47 billion. they are putting that cash to use here. they're going to have to lever up, it's going to take some time, i'm sure there will be regulatory review. i expect this stock to be banging around with a six handle
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without a whole heck of a lot of up side for the time being. >> who would be a buyer of fitbit, be down 30%? >> not a shock. no way. i think if you're in fitbit, it's time to move on. listen, they can't sell. you go to any best buy, there's all kinds of competition out there. i don't think they're going to be able to turn this thing around. >> this is an iron man telling you this. you've got an iron man telling you -- >> no fitbit. >> but i wouldn't be short this stock. they have a lot of cash in the balance sheet. they're not going out of business. >> right. >> the competition is so ridiculously high in this space by the biggest players in the world. and i think ultimately they are a takeout play, probably not much of a premium to this. i would not be short this stock. >> whole foods also moving around after announcing leadership changes. let's get to susan lee in the newsroom. >> melissa, earnings relegated to the under card. a beat on the bottom line for whole foods. really the management shuffle, the management change. that's moving the stocks of whole foods now eliminating the co ceo structure and making co founder, john macke, sole ceo going forward.
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here's walter robb, speaking on the changes on the earnings call. >> we have a very optimistic view this coming year and i think the board has decided -- john and i are on the board -- that moving to a more streamline structure is the right thing at this juncture to lead the company forward to the next level. and i will be here to continue to cheer that on, and i think that, you know, that's where we are. >> okay. so as you heard, walter robb staying on the board. he's going to get severance payments, a lump sum, and get even a lifetime 30% discount at all company stores in the future. not bad, right? whole foods has been in a slump with shares close to their lowest in half a decade and speculated tab a takeover target for brokers. competition in
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let's get the final word on facebook from bob peck. >> the discount $142 target, grate b. >> "final trade" time, tim. >> bank loan bklm. >> beakers. >> gold is the way to play. gdx. >> dan nathan. >> retail still heavy, xrt.
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>> guy. >> game seven tonight, mel. i know you're watching, aren't you? who do you like, quick? >> the team with the "c." >> hold 65. >> our thanks to bob peck of suntrust. i'm melissa lee. thank you for you tomorrow. "mad money" starts right now. my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to make you some money. my job is not just to entertain but to educate and teach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. it seemed like a lock at one point. our minds were made up. we pretty much figured thicks out, even gotten comfortable with the results.

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