Skip to main content

tv   Squawk on the Street  CNBC  December 20, 2016 9:00am-11:01am EST

9:00 am
>> and for all the noise, the financial community all running out of london, nonsense. everybody wants to live in london. >> visit london, hang out. london for christmas sounds pretty good. >> fantastic, it's beautiful. >> wet. >> thanks, martin. >> thank you for having me. and that does it. make sure you join us tomorrow. "squawk on the street" is coming up next. ♪ good tuesday morning, welcome to "squawk on the street." dow 20k watch will not quit. futures suggest we could come within 60 points of that or so at the open. europe mostly green. bank of japan leaving rates unchanged. oil inventories of course are tonight. our road map begins with futures point to another day of gains as the trump rally continues. dow 20,000 in sight. tim cook defending his
9:01 am
appearance at the president-elect's summit last week. ray dalio on why he's bullish about a donald trump presidency. later on, the latest on the deadly attacks out of berlin. the dow is looking to open within 100 points or so of 20k. unh has replaced cat as the dow stock of the year. nike tonight a laggard on the index. >> there are a lot of people that say nike has been downgraded so often, maybe there's something to be said about it. i look at it the other way. i want to be in unh. they are the winner. they successfully extricated themselves from the affordable care act. maybe they're the most ready to be in the new regime, whatever the redo is of that. it is an inexpensive stock because it keeps beating the numbers. i know it looks expensive on current numbers but i think there's more ahead. caterpillar is more problematic because we know it needs oil.
9:02 am
we have to get china back on the good list and that's going to be hard. >> shanghai, a two-month low today. >> they have some inflation running rampant, they have problems with how much money they really have in terms of their repatriation of u.s. dollars. their banking system looks bad. they're trying to slow some development because of the fact the air is so weak. caterpillar needs coal to do well. that's even universal -- coal just doesn't have the mojo. how about that for being really official. no mojo coal. >> your point all week and last week has been you can build the case to construction anything. >> yes. >> in this era that we're in, this year-end era. i notice another upgrade of invidia, of amd. >> i made a joke, if i see one more invidia, upgrade, i'll tear my hair out.
9:03 am
you can see what i did. now tomorrow, i which even know what's left to remove. like all the other upgrades, there's nothing here that we didn't know already. but this one is added to the conviction list. they probably didn't have conviction before, now they have conviction. >> 200% gain so far this year. best s&p stock for those who don't already know. do you think that leads to more chasing in the last few days here? >> yes. >> as a result, we'll be doing our dow 20k special in the days to come? >> i think it's certainly possible. now there's nothing in this nvidia report -- they're using a price target that's dramatically higher. it's got machine learning, artificial intelligence, gaming, auto, remember, i said this is the one, this is american pharoah to intel's secretariat. and this is by 27 furlongs this
9:04 am
thing, that's the lead it has on all the other semis. >> then you've got ray dalio, the bridgewater founder, talking about the modern american economy in a trump era. he said if you have not read up it's time because this new administration he argues does not suffer bureaucrats, slow decision makers, it's about deal makers, businessmen and women who are going to run this economy, this government. >> what can i say. i don't know ray personally. i thought this was the kind of thing that, yes, there is a turn against those who would redistribute capital and in favor of those who would say if we put more capital out, we'll get even more out. the pie is going to grow. very lyndon johnson model, by the way. i think the animal spirits that he talks are are driving things.
9:05 am
it's being able to payer for for something you're talking about. none of them had anything that we didn't know but they were framed within the context of, looks, things are good. there was a united technologies upgrade last week which said don't worry about 117 -- don't worry about 2017, 2018 is going to be good. i'm thinking let's say we did that with the broncos. do not worry about the broncos next year, they're out, okay. but 2018 is going to be your year. what would you do? you would say, don't you see, i've got a whole season. >> i've got to live through. >> if you told me the eagles were out next year, i'd slit my throat. but if you told me they had a shot -- no, forget '17, it's irrelevant, it's '18. carl, i can't do that. a month from now we're going to remember '17 and that's where the problem will come in. the animal spirits will last until we see that first quarter. if the numbers go down, it's going to be the same old, same
9:06 am
old. particularly if you see the dollar being so strong, numbers probably do have to come down. but when i read that 2017 is going to be the trough, don't worry, that's not good enough. that's like listen, they're going to get a first-round draft pick so don't worry. no. i want to see results and i want to see them now. >> by the way, your point yesterday about europe is reinforced again today as the euro gets to 103.611. that was another 14-year low. >> that was one of the most unpopular stands that i've seen. now, the tragedy in germany is such that you start thinking to yourself, okay, are we going to be in a position where there's nationalism somewhere. germany needs the eu. germany is the biggest beneficiary of the eu. i think germany needs to stop
9:07 am
spending. i think they're in good shape but no one wants to hear that either. anything those countries do over there is just loved. i think we just like to go to europe so much. brazil is making a comeback, nobody cares. russia, i hate to talk about them in a comeback, but the ruble is incredibly strong. you know, trump is going to put the wood to those guys so let's not forget that. >> were you surprised yesterday, we had the berlin attack, we had the shooting in ankara, right. >> yes. >> this underwater drone thing finally got resolved. no net impact it seems, right? >> what a great point. my executive producer and we were working on my top. i was going over the top and i didn't mention germany. the reason i didn't mention it is because it didn't hurt the market. and she said don't you think that you should note that it didn't hurt the market. geez, of course, what am i thinking. you know, we did this despite, because there have been a lot of times where it would have been front and center or what's the
9:08 am
implications of turkey/russia. front and center would be the possibility that one of these banks fails over there or the fact that deutsche bank does have to raise capital. but what was front and center a year ago is meaningless now. how about the fact we had people calling for four rate hikes. all that happens and bank of america goes higher. this is really one of those hope, it's a hope scenario. someone came to me yesterday and said, hey, have you seen man in the high castle? i said i loved the first episode. he said you won't believe the second one, i'm buying amazon. is it that simple? then i started thinking i better get on the case and recommend amazon. we are in the faith and hope mode. there is a dialogue on my twitter feed about how you can't find apple watches. here, sold, i got one for you. they're sold out. that doesn't mean you should buy
9:09 am
apple. but people don't care. people don't care. apple going india, buy apple. you can say anything and people turn it into a buying opportunity. >> that's true. we'll talk about cook and apple and things he said about the trump meeting a little later on. >> yes. >> regarding berlin, we do not want to take our eye off the ball on that one. jeff joins us live from berlin with the latest. good morning, geoff. >> reporter: good morning. i was just listening to you and jim talking about how the markets have managed to drive through this story but of course there is a huge human tragedy playing out here. just a few hundred yards down behind me, i think you can see chancellor angela merkel. she is here in berlin visiting the scene of these tragic events where this truck plowed into this christmas market late last night. we still have 48 people in hospital, 12 people killed.
9:10 am
we understand from the federal prosecutor and the chief of police that of those 48, 18 potentially have life-changing injuries. so the german chancellor is here. there is a lot of anger in germany. many point the finger at the chancellor over the immigration policies that have been pursued by this government as letting in asylum seekers that have come from the middle east with isis connections, potentially those who could be involved in the kind of terrorism that unfolded here late last night. so questions are being asked with the government's current attitude towards asylum seekers. just to bring you up to speed with the investigation, right now there is a man in custody, a 23-year-old pakistani man, but at this point the federal police are starting to suggest that he may not have been the perpetrator. so at this stage there is still
9:11 am
some concern that there may be a man at large with a handgun, because there was another body found in the cabin of the truck with gunshot wounds. it's believed that that man was shot in the cab. no gun has been retrieved at this point. and we understand that the federal police are taking this incredibly seriously. the country is on a very high state of alert and the federal authorities are saying that they are beefing up security around all christmas markets and all public events taking place here. now, as you would expect and as starting to ask serious questions about how this attack was allowed to happen. obviously it follows in the nice atrocity back in july where some 86 people were killed. why wasn't there more protection around this market. the federal prosecutor said it
9:12 am
is impossible to erect barriers around all of these christmas markets. they are a big feature of the holiday season here in germany. but of course they will be taking extra measures at this point. but still, questions being asked given that the federal authorities themselves issued a warning about christmas markets back in the early part of november and said they could be a target for isis-related terror attacks. just worth point out i think at this stage, no one has claimed responsibility for the atrocity committed here in berlin at this stage, which is why it's making it so difficult, i think, for the german police to decide whether the man they have in custody is truly connected to the attack on this market. back to you. >> geoff cutmore in berlin. geoff, we'll come back to you later for details on the investigation. our thanks to you. obviously a lot of security planning in urban areas all around the world.
9:13 am
jim, as you mentioned, the longer term effect on nationalist political movements everywhere. >> yeah. all this period is very reminiscent of the '30s where there was turnover, a lot of immigration. you don't want anything to be like the '30s since we know what that led to. berlin is an open remarkable city. i felt incredibly safe when i was there a couple of years ago but obviously the tenor of everything has changed since then. you listen to this and you just feel -- the tragedy here is that these are -- i mean is there anything more civilian than a group of people out at a km christmas market. >> a lot of questions about what we can continue to do here in major cities like new york. when we come back, what tim cook had to say about the trump tech summit last week. take another look at the premarket and keep your eye on dow 20k. it shouldn't be too hard or too far a throw from the levels we expect to see at the open. more "squawk on the street" live in a minute.
9:14 am
hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.
9:15 am
9:16 am
a new cyber security report has been released that involves the siphoning of millions of dollars in ad revenue from major media organizations and
9:17 am
advertising firms. >> yeah, the firm that's releasing this report is called white ops. they're a cyber security firm and specialize in the digital ad industry. what they're saying here is that there's significant fraud right at the heart of the digital video advertising industry. they're saying they have found a massive botnet operating they believe out of russia that is defrauding major advertisers and ad buyers to the tune of $3 to $5 million a day. you can think of this as the high frequently trading fraud of the digital advertising industry. the digital advertising industry works by an automated exchange that matches buyers and sellers in realtime as users click on impressions. what they're saying in this new white paper that was out at 9:00 this morning is that ultimately the botnet here has been able to defraud the exchange by placing fake ads into the exchange and collecting money from advertis
9:18 am
advertise advertisers. so they are paying for ads not being viewed by real human beings here. they say as many as 300 million fake ad views a day are being made by this botnet so it's a massive fraud. we should note, carl, there's basically one firm here, white ops, making this allegation. we'll have to see whether other cyber security firms can verify this allegation and what the advertising industry has to say about it later on this morning. >> that's incredibly interesting. we'll see if we get necessiany e throughout the course of the morning. russi-- when you look at na 2000 and a lot of the web companies, a lot were inflated. eamon, this is not a new pathin. can it ever end? >> that's the question. there have been allegations in the past that there has been
9:19 am
fraud in this digital advertising industry because they havedising agare gated it. this is all done in milliseconds online. so now what this company is saying is that a massive russian botnet which they're calling meth bot has gameday that system. it's somebody with a deep insider understanding of how this industry works because to architect this would require someone who really knows this industry backward and forward. >> starting to think about venn diagram ts between this and fak news. it all seems to come from one place. >> i think we underestimate russia's mischief. every time china does good, we correctly identify they're doing something wrong. no free passes for russia.
9:20 am
i have not seen anything out of russia that should make us feel anything other than they really want to restore their status of the cold war. they really want it back. if they want it pack, we ought to think about giving it back to them. >> eamon, our thanks to you. >> just one point on that. if folks in russia have a very detailed and nuanced understanding of the weaknesses of american systems both politically and now even something as obscure as digital add verdicvertisi advertising, they are exploiting flaws that people in the west didn't even know existed. >> we'll talk to you later this morning. >> i'm so glad you mentioned the fake news. i think the younger people -- we grew up knowing there were these edited news sources. my kids get news from facebook and from reddit. well, you get what you pay for. >> absolutely. when we come back, we'll get cramer's mad dash, count down to the opening bell and take another look at the premarket this tuesday morning.
9:21 am
more "squawk on the street" in a moment. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. a winter weather emergency... governor has declared announcer: soon, insurance companies won't pay for damages, that is, not if they can help prevent damages from happening in the first place. at cognizant, we're turning the industry known for processing claims, into one focused on prevention with predictive analytics... helping them proactively protect the things that matter most. get ready. because we're helping leading companies lead with digital.
9:22 am
9:23 am
several minutes till the opening bell, let's get cramer's mad dash. pretty busy morning for earnings. >> we had various numbers from darden, but october was better than november for olive garden. and then general mills, light revenues and light earnings per share. even though it does yield more than 3, it's not enough. yoplait yogurt is doing quite
9:24 am
poorly here as is pillsbury refrigerated dough. not enough to make it up. old el paso very good. now here's the problem. if you're general mills, what do you do? you've already sold a lot of your stuff that is kind of old and tired brands. you're trying to move to natural organic. you can't get there fast enough. the conversion generates a lot of cash. but when you have numbers that are down 3% and 4% for sales, carl, even companies that you shed, i don't know the box. i don't know what ken powell is going to do here, who is a terrific ceo. but in the end i thought it was important to point out that not everything is done in fair weather. >> you mentioned that organic guide. prior was 2, now talking down 3 to 4. >> what happened here? i know greek gods yogurt. the yogurt category fizzled. i know greek gods -- the greek yogurt is a little bit better. but when you have something that you've really based your future on, which is that and some of
9:25 am
the nonpantry stuff and cereal is not doing that well, you just come back and say tired. it's tired. does it get sold? wow, that would be something. >> yeah. hard to tune the engine when you're going that fast. >> yes, it is. this is not nvidia. could general mills merge with nvidia? unlikely. >> we will get the opening bell in five minutes. don't go anywhere. as a supervisor at pg&e, it's my job to protect public safety, keeping the power lines clear, while also protecting the environment. the natural world is a beautiful thing,
9:26 am
the work that we do helps us protect it. public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. we want to keep the power on for our customers. we want to keep our community safe. this is our community, this is where we live. we need to make sure that we have a beautiful place for our children to live. together, we're building a better california.
9:27 am
9:28 am
you're watching cnbc's "squawk on the street" live from the financial capital of the world. s&p and nasdaq have actually alternated gains and losses for seven sessions. we have three inside days in a row on the s&p. it just shows you where we were the earlier part of the month. >> we seem to be able to rotate through anything. the stocks that i'm watching, i'm watching broadcom very closely because that has been the tell other than nvidia.
9:29 am
obviously we have to worry about alphabet. and then on the industrials, it's been disney that has been our leader here. some caterpillar numbers just came out that were just okay for the month, but we need disney to continue to power. but before that it was united technologies. before that we had ibm going up. i mean there's always something. j & j started going up. it's almost as if the market keys on a different stock every day and takes it up. that's why nike is so important. got to see nike starting to pull its own weight. >> worst dow stock of the year. coke is the only other dow stock down so far this year. earnings of course are tonight but 19% decline for nike in 2016. >> yeah. i think there's a lot of stocks to watch today that are nondow stocks. carmax looked okay to me, darden looked okay to me.
9:30 am
and then look at darden, it's up from the 60s in a straight line. and then you get these oils. resolute energy priced a deal last night. 3.8 million shares at 38. that's going to be hike diamond back which priced a huge block at 97 and that's up 8 straight points. every day there's a new leader. that's very bullish. >> there's the opening bell and a look at the s&p at the bottom of your screen. at the big board deutsche asset management highlighting its deutsche xtrackers etfs. 1 19,940. about 26 points shy of the highest we've been so far. >> there's so much that just changes overnight. first they hate them, then they like them. and then here's one that is just
9:31 am
striking. last night fred's, which is a very small drugstore chain, a specialty chain, bought 865 rite-aids making it so walgreens can do this deal. they are spending $950 million. the company is like a $500 million company. in this era of good feeling, i believe fred's will get the money, they'll be able to integrate and all i can say is here's another deal that's working out. working out. and then you take a look last night -- yesterday we saw a piece that wasn't even talked about, philip morris is going to buy altrua according to wells. so we are in this okay, so what. the era where someone can suggest a major takeout and people just yawn and it doesn't get talked about. >> does that worry you? >> there's so much good news that you're trying to slot it in. >> yeah.
9:32 am
some of our market discussions on air lately have been, okay, we know it's going to be good. how good is the debate, right? and that is a worrisome to some. the fact that the bear case isn't even being written. >> and we could set ourselves up for a january that's down. you know what i hear when january is down? well, jim, the first five days were the worst last year and the stock market is up big. everything is rebutted. no matter what you say, it is rebutted. hey, i saw some bad numbers for nordstrom but what about children's place. i mean people have -- it's like you're playing cards. it looks like you just keep pulling an inside straight in this market. inside straights. >> speaking of inside straights, nvidia up another 3%, that's going to lead the s&p along with trip advisor. carnival you mentioned earlier on but western dig right behind. >> western digital is classic. i had on last week and i think is such a great company.
9:33 am
western digital, goldman had a sell on it. so i feel bad. i would like to say let's not say goldman. they slapped a sell on. now, they say that flash is going to be better. but since they put a sell on it in august of 2016 and they just put it in there deadpan, the shares of up 52% versus the semi conductors up 20. that was just ill-informed. it was a suboptimal sell recommendation. i mean completely. this company is doing so well. it's blowing out the numbers. the acquisition they made of sandisk is great. whoever wanted to short it didn't understand the new view of the world. >> so those who say whether it's that or nvidia or any of these chips for the year, i was told to buy it in may, didn't do it. somebody said in november do it, i didn't. there is that feeling that it is too late. >> the reason i didn't like the sell on western digital, it was
9:34 am
selling at eight times earnings, now it's up nine times earnings. nvidia is more problematic as i look at the stock because it's selling at 40 times earnings. but it has all of the things that people want. people who remember the '91 to '97 run for intel will remember this very similar run for nvidia. that's when you saw andy grove just iteration after iteration of the microprocessor. remember, gaming is the fastest area, but artificial intelligence, virtual reality, they have the chips. it's amazing that no one else really came up with it. >> you've made the intel '91 pc -- >> nvidia is one of my picks of the year and i feel good about it. i dealt with some companies that said they can't live without it. take two has been a constant on my show not just because of
9:35 am
mafia 3 being maybe the greatest game ever, but strauss said once we get those chips, we can do things. the new games are much more life-like than you are. i feel very stilted versus that character, which is much more animated than i am. mafia 3 not really a values creator. grand theft auto i often felt was not a family values -- >> you'd be a good character in gta. >> there's no role model. >> 50 points away from dow 20k. >> so the special might be tonight. it would be the best night for it. >> keep your schedule clear. >> yeah. the wife doesn't want me at dinner until 8:00. >> not surprising, a lot of the losers, kellogg, coors, constellation, smucker, tyson, along with general mills. >> the soft goods are not where you want to be today. today is the day you want to be in the semis, probably be in the oils by the end of the day. this is very reminiscent of
9:36 am
other bull markets. but the banks are starting to come back up. and the biotechs are back. why? there was a deal, some good news, and it is an era where we craft daily. we craft new stories. oh, okay. >> absolutely. this morning neiler win of the upshot takes a turn arguing stocks are expensive. he looks at risk premium, margins under pressure if we get wages continuing to rise, obviously strong dollar, risks of tariff and trade war. those things are not illegitimate in your view. >> no. but what happens if i had sold fred based on that. fred has had a big run. it's up six today. what if i sold walgreens because cvs isn't doing that well. it's up huge today. what if i had given up on rite-aid -- how about advanced
9:37 am
micro and micron. if the numbers are good, you're going to look back and say why didn't i buy them. you're going to say why didn't i listen to ray dalio. he was saying things were good and he runs a lot of money. there is a moment -- the companies that are reporting, we spin them positive. i could have taken that darden quarter and i could have -- is darden going up? yeah, it's up 22 cents. i could very easily craft a negative story saying you mean to tell me your sales for olive garden where i use cargo pants to get those rolls because you can't fit them in regular pants to take them home, are you telling me november was worse than october, but other than coca-cola we tend to look through every negative. >> i assume there will be a turn, i'll be waiting for it, to where you say, all right, it's time to start cashing in. >> one of the things that i have
9:38 am
learn learned, there are stocks that give you enough. stocks that give you enough. at a certain point maybe we've gotten enough from nvidia. maybe that's enough. how much do we need from nvidia. can we just decide that nvidia can go to the sky like when my father bought national video in 1962, it went to the sky. or dome petroleum. at a certain point, hey, you know what, that was terrific, but we're not at that yet. i was crafting a story last night about home depot. well, you know their big season is the spring. and i find myself being able to craft a story -- when i was a broker at goldman, one time i went to see a very wealthy man, larry tisch. i think you ought to buy coca-cola. he said no? because it's at 90.
9:39 am
he said what does that do? i said stocks at 90 go to 120. then i say you should buy pepsi cola. then you know what he did at the end. he said which $90 stock next is going to 120. and i was being facetious. 90 goes to 120. >> as you're talking, jim, i have to have one eye on you, one eye on the dow. 19,961. caterpillar leading here. as to jim's point about the banks followed by american express, jpm, gs. >> caterpillacaterpillar, asia 11 versus 12. europe down 25 versus down 14. latin america down 32 versus -- buy!
9:40 am
buy! >> all-time high now on the dow. we passed 19,966 so never been higher than here. jim, we might have to start talking a lot about that screen that we're looking at. >> i'm speechless, although look at amazon. cvs goes up because walgreens up? no. carnival, people don't care about that guidance. honeywell, geez, they preannounced a downside and turned out it was to the upside. intel being dragged up by nvidia. i can play this game. united parcel, i'm getting a lot of parcels. >> apple is within -- it's been a while since we've seen a 52-week high on apple. >> boeing back all the way from where they reported that number, the defense stocks act as if trump never made that tweet. has trump tweeted today? >> he did. this morning he tweeted about president clinton and whether or not clinton called him to congratulate or trump called clinton, as clinton said.
9:41 am
i think it's about the past more than anything. >> i was hoping that trump would tweet about the dow or something. >> no, nothing about that. >> how about nvidia? >> not yet. it could happen. >> i think he should tweet that nvidia looks gooder. he should tweet that apple is going to break through a double top. it's crazy. >> if and when we get this today, jim, what's your -- does your lesson book change as a result of it? >> it's the end of the year and no one really wants to sell, they want to hold on. i think it's really hard. you can say that the banks are inexpensive. you can say texas are inexpensive but we have top line growth. that the oils are inexpensive if it goes to 58, 60. if bond yields stay here and don't go higher, you can say banks will still make a lot of money but the rest of the market is okay. if nike reports a good number, a dow stock -- >> that's a good point. >> or if people cover their short nike.
9:42 am
19,971. geez, it may make it there boy the time -- do we have to close above 20,000 to miss dinner? i don't really want to go to the restaurant we're going to anyway. >> they say a watched pot never boils, bob pisani, but we're going to watch it anyway. >> it's starting to boil. it is a jinx, of course, but we're getting close. the reason we're going to do this very quickly is there are very powerful market forces at work right now seasonally as well as momentumwise. it's starting to look a little like november because the banks have been doing well. they were up a little bit yesterday, they have doing a little better today. technology stocks are doing a little better, consumer discretionary doing a little better and the stocks that were laggards, consumer staples, real estate, they're falling back a little but those are smaller sectors. really the incorporamportant th the last two weeks of the year is one of the most powerful
9:43 am
seasonally. the dow is traditionally up about 70% of the time in the last two weeks of the year. usually 1.6%. these are statistics from our partners, so this very powerful seasonal force is moving the market up. but there's an even bigger and more important reason why we're going forward and that is the momentum is still on the side of the optimist, who still believe we can get an expansion of the economy, an expansion of earnings next year, partly on the economy improving, partly on the trump proposals on tax reductions and infrastructure proposa proposals. if you look at what the market has been doing the last couple of weeks, the market does not go down at all. what's happened is we topped out last wednesday and essentially we have moved sideways. but there's no stock for sale. there's no big blocks out there, people saying get me out here. big for sale, market moves down. instead what's happened is market tops out and it rotates. it moves sideways. so we've had these actually where financials and industrials
9:44 am
and materials were really big in november. technology started getting a little big at the end of november. then we had consumer stap 'les the first part of the month and utilities and real estate goes forward so there's this constant that keeps the highs without ever selling off. johnny carson used to joke there's only one fruitcake in the world and we keep passing it around. there's only 11 s&p sectors, but everybody just keeps rotating around. that's one of the reasons why, for example, the new high list has not been expanding. today there's only one dow stock at new highs, that was microsoft. the reason we don't keep hitting massive numbers of new highs is the market rotation. so you get financials moving down two or three days in a row. they go off the new high list. you get some of the tech stocks moving up like semis as they are today, suddenly they come on the new high list, but they don't all come on on the same day so there hasn't been any days where
9:45 am
i got 500, 600 stocks at the new york stock exchange hitting new highs. it doesn't matter. essentially we're at historic highs right now on the market and we keep essentially moving around here. even some macro events, even the assassination of the russian ambassador to turkey yesterday, it did drop the market about 50 points on the dow but it came back fairly quickly. even a macro event like that is not enough to really start any kind of significant selloff, so we're in the middle of some very, very powerful market forces right now that i don't see any signs of abating any time soon. the big question is once we start getting better numbers on the s&p earnings estimates in 2017. right now the optimists are just saying, guys, don't worry about it. all we know is we believe the economy will improve and we believe the effect of tax cuts, lower regulation and some kind of fiscal stimulus program is going to be a powerful help to earnings. yes, we won't know numbers until
9:46 am
the back half of 2017, but guys, everybody keep calm because it's going to be good. the pragmatist says how come you keep the market forward when you don't have any information on where real earnings will be. those guys are taking a back seat to the optimists right now. so take a look, 20 points away from 20,000. we'll be back with a recap once we hit that. >> 19, 18 points now. let's get to rick in the bond points. >> 16, 18, maybe it will happen while i'm talking here, that would be exciting. if you look at ten-year note yields, they're up about four basis points. two-year note yields are up about 2 basis points. we're getting a little steepening but really the story continues to be our high yield close a whisker under 260 from friday and basically we're right there. bunds, their yields are up 1 at 26 basis points, but consider the spread between our tens and
9:47 am
bunds is in the 230 camp. 230 basis points of separation since 1989, that is huge. we want to continue to monitor that. hey, we need to look at jgbs here because the bank of japan didn't really do anything but our fed is doing something and that's going to affect everything ultimately. they wanted to keep their ten-year closely pegged at zero. it's at 7 basis points, hovering at the highest yields at a meesly seven basis points since february of this year. strength in the dollar, weakest on the inside which makes perfect sense. and let's finish off with that dollar index as we continue to hover 19 points away from 20k. the dollar index yesterday made a new high. today it continues to even go higher. these are the highest levels in
9:48 am
the dollar index in 14 years. to be precise on a closing basis we're going back to december 20, 2002. so we want to monitor how all of the interest rates and interest rate differentials may impact things like getting the do you 20,000. maybe we'll draw capital like a magnet. carl, back to you. >> rick santelli, thanks very much for that. 17 points, the dow is up 99 points, by the way, as we're watching the blue chips, the nasdaq has hit a record high at 5486 helped by the likes of what we were just talking about. >> i was going over, i know a lot of people are expressing skepticism. i was going over the nasdaq 100 in 2000. as i thought, most of the companies were either d-listed or advantaged over the course of the next couple years. you've not going to see the likes of microsoft or intel or cisco vanish. these are real companies and they're going up and i can say that they're going up in part because you have corporate tax reform because of repatriation.
9:49 am
you've got deregulation and these things do matter. i think that when you speak with the ceos off the desk, what they say is, look, i'm quite excited about what it means to have repatriation or i had someone -- henry shine, there's a company that does dental supplies. at the end of the interview, the ceo asked me why didn't you mention about tax reform and what it means for me. and i'm thinking what does it mean for disney at 35%. there is an implication if they get these things done and fast track it that you're going to have to have bought stocks now. if they don't, i think we're in limbo. it depends on whether trump takes things by storm. if he does take things by storm, you'll say i should have been buying chevron the whole time. they'll be a big winner, how oil it accounted. i can -- when i say craft a story, i'm not being facetious.
9:50 am
i'm saying you've got a lot of companies that basically will have numbers go up if the agenda gets -- you know. >> you're alluding somewhat to a theme that dalio talks about in today's blog and that is that we're in the midst of this massive change from the white house and his question is whether or not they're going to be aggressive and thoughtful or aggressive and reckless. that's one line that separates bulls and bears. >> when you have -- the guy who was named secretary of the army, a fantastic guy from our business, was gary cone reckless, was mattis reckless. what you have are people who are part of this let's get behind business in every single case. cliff mason, who's my head
9:51 am
writer and only writer says we are in a period where instead of business fending for itself, we have a soon-to-be elected president who wants business to do better. and fend for yourself is a very important agenda because a lot of people feel that the ceos make so much money, president obama, why do we have to boost them? and then you have trump who comes in and says, listen, i'm going to boost you. just let me fire back to china. please don't offshore. and in return you guys are going to make so much money, you can buy all the stock back what you want, you can expand what you want, and it is a bargain that every ceo i speak to, every single ceo wants this bargain. >> not too many exceptions to that rule. your analog on nasdaq 5k makes sense to people, i think. >> yes. >> 10k was a process, right? we got above it in march of '99. >> right. >> and then we just fought with it for a long time. then eventually gave it up for years.
9:52 am
>> it would be -- yeah, it was a stretch. is this a stretch? again, this is all about politics and a belief that we have had a redistribution as president versus a growth president. those are very different things. i know that the market has moved up tremendously under president obama, but there is a belief that when you have the rules changed for banks, for instance, that they are suddenly unshackled and can make a lot of money. all we have to do is look at goldman sachs, a dow stock that has been a phenomenal leader, and say that's clearly reflecting the idea that we'll return to the old days where they can make a lot more money. i was going over individual dow stocks that all are capable of having price to earnings multiple because earnings could go up big in 2017. then we're starting to look at 2018, which is again a little strange. the ones that don't have a lot of momentum are the tech stocks because they were going to do well anyway and that's not what
9:53 am
we want. we want companies that will really start doing well because of the change at the top. >> speaking of which, some of the all-time highs, these are not 52-week highs, all-time highs, comcast, allstate, pnc, prudential, travelers, u.s. bancorp and microsoft at the highest since '86. >> rates go up so you can understand why financials will do well. they'll reinvest your premiums and do much, much better. microsoft i've been saying is a combination of pcs not doing badly. western digital told me on "mad money" last week and gaming, which is doing quite well. gaming being the fastest growing area of tech. you see a lot of catch-up. if microsoft is doing well, then you'll buy intel. if intel is doing well, someone wants to buy seagate. if these are doing well, you want to buy best buy. there's a lot of if this is
9:54 am
doing well, i want to buy that. drugs being left out and foods being left out because they're unexciting. people want to participate in the growth of what's happening. first one of the most exciting parts of tech is optical. and another part is machine learning and artificial intelligence. it's really coming out. this is the internet of things. you need so many chips. self-driving cars, you need so many chips. i have no idea how many nvidia chips are in a self-driving car. these are just huge. don't forget, we have things that are going back to where they were. the disney call yesterday, espn was not a factor. so suddenly we're talking about a movie that's making so much money. again, when you look at the dow, you can in every single case, i think, if nike reports a good number tonight, say that the stock is undervalued. >> pressure is definitely on nke to not spoil the party.
9:55 am
>> mark parker, don't take it personally. i was recommending 3m last night, why? because i was at an analysts meeting last week and it wasn't horrible. >> i've got a great table of the dow winners since we last regained 10k in '09. >> let's go there. >> top, unh. >> they took the whole country by storm with affordable care not being in it. >> home depot. >> they have had a change of leadership. the new guys are unbelievable and they have that share donor from sears and household information. >> and then followed by apple, visa and then there's disney and nike. >> right. >> which sort of reminds you that even though you can have an off year over, what, seven years -- >> i saw someone today saying apple hasn't done anything lately, i'm a seller. good, that's fine. get the heck out of that stock. visa has been a noted disappointment. that's what is a faux bank and people wanted to go into real banks. don't forget charlie sharp has
9:56 am
retired and he's one of the sharpest minds in the business. but people want go-go. notice that they do not want the foods today. they would rather own the banks. the banks have been downgraded, downgraded. the one to watch is wells fargo. if wells fargo can overcome the parade of negativity, then i think that almost anything can. watch also the airlines. they have finally gone from seven times earnings to eight to nine, to ten times earnings. all these stocks really undervalued on earnings are making a move. >> europe, by the way, highest levels for the year. here's a question. a lot has been written about the split between the dow and the s&p. the degree to which people are paying more for dow stocks than s&p. so does 20k mark a sign that people will then shift and start buying things off the 500? >> i think 20k brings out sellers. >> you do. >> yeah. i think people say that it's overdone. remember, there's always the
9:57 am
wise guys who say now it's on the front page so i've got to sell it. i think it brings out some sellers. but nothing for real because we still haven't heard from a lot of the companies -- we don't know how ibm is doing. we don't know how walmart is doing. remember, in five weeks, we will know. >> yes. >> and in the vacuum of knowledge, we're presuming great things. great things will come. and, boy, congress better act. they better like the day -- the swear-in, it's like, boom, we better have deregulation, repatriation and lower tax rates. we can't wait until q2 given the fact the dollar will put pressure on these companies. >> january is going to be -- you said it will be fraught. >> you've really raised the expectations to the point where a lot of these companies will not be able to equal the momentum of the stocks. that doesn't mean that they won't hit the earnings or they won't give a good forecast. they need a good forecast. it's hard to forecast well. look what happened when honeywell forecasted well and
9:58 am
people thought it forecasted badly. we need to see oil to go to 55, 56. that's going to be hard because the futures for oil out 2017 do not justify that. >> not to mention, we'll start to get real empirical data about supply and whether or not this cut is taking effect, is holding, right? >> i think we'll see a lot of cheating from the get-go. but a lot of the worries that had really befuddled us about loans. look at the recapitalization of a lot of these oil stocks. suddenly they didn't need the money. look at what deutsche bank can do. a lot of the worries have been solved and that alone has made it so you really don't have some big backdrop that's about to fall on your head. >> we continue to wait to see if the deutsche settlement comes this week. >> i think they're ready to pull the trigger on a big underwriting. people will be lapping that up. >> 14, 15 points from dow 20k. i know bob pisani, you're still
9:59 am
watching this on the floor. >> good morning, carl, yes. what's happened today and it's given us a little oomph is the two main leadership groups have reasserted themselves. we talked about the dominance of financial stocks in november. they have sort of fallen back in the last week and a half, many of them have gotten off the new high list, but again today, jpmorgan, morggoldman sachs, ev travelers in the insurance group, all of powerful today. that's a very, very big force in the s&p 500. the largest sector, though, are technology stocks. about 21% of the s&p 500 is technology stocks. the bigger the cap, the more important. so again today you have intel, you have microsoft sitting at an historic high. you've got apple moving up. these are three very powerful forces in the s&p and even in the dow jones industrial average. remember the dow is a price
10:00 am
weighted index so a stock like goldman, the biggest and most expensive stock, has disproportionate influence. it's very simple, you combine financial stocks being powerful with technology stocks being powerful and those two sectors are somewhat disproportionally represented in the dow jones industrial average and many of them are high priced stocks and you get a very powerful rally. now, what's holding us back a little bit from getting there right now is these consumer staple stocks that were laggards in november. procter & gamble, johnson and jauns johnson, but you have two powerful forces. the seasonal affect, the last two weeks of the year, and number two, the fact that the momentum is still very much on the side of the bulls overall. the important thing is there has no appreciable blocks of stock for sale for weeks now. you get rotation in the market sfed
10:01 am
instead of selling off at the top. you get people moving into other sectors. that's why we haven't seen any dramatic dropoff. everybody just keeps passing the sectors around. so financials were powerful, then industrials were powerful, some technology came in, they fell back and then consumer staples and utilities all moved forward. so we've got rotation, powerful movement, just shy of dow 20,000. back to you. >> thank you very much for that. if you're just joining us this morning, the dow 20k hunt is as heated today as it has been. we crossed above 19,966. nasdaq sets its only record high. sara eisen joins us this morning. jim is going to stick around because i know he does not want to miss the moment. art cashin joins us to talk about this. you're essentially there on a percentage basis but what is it going to mean to actually cross the firm number?
10:02 am
>> well, i think there will be a shy of relief. we might see a little profit taking here finally having achieved it. we're in a slightly beneficial mode. of the week after option exploration in december, the dow tends to be the most favorite index and it seems to be doing right up to par for now. i think it's almost irresisti e irresistible. at some point you can see somebody on a trading desk say, oh, hell, let's get it over with. >> let's take ibm up to 172. >> but if you look at the stocks that are adding the most points right now to the dow, goldman sachs and caterpillar, this is really the trump rally. industrials and financials considered big beneficiaries. to jim's earlier point, when does the hope have to get backed up by action and when would that stand in the way of a rally? >> well, i think i have some
10:03 am
concern about that because some of the people i talked to think that they may want to move toward appointing someone to fill in for scalia and that may take a couple of weeks. i think what you're really seeing here is that trump was to some degree an unknown quantity. what would he do, shoot from the lip. but the people that he's putting in or nominating for these roles are highly professional. you may not agree with what their status is, but each one is very, very capable and that has reassured the market in many ways. and they all seem to be stuck on that multiple theme of tax reform, deregulation and moving in. >> i think if you're right. i think if you deviate from that, i bet you get a rebuke. the people that trump is putting in, trump wants -- not unlike president obama. look, here's the troika.
10:04 am
you've got to buy in. free trade is not part of that. if you don't buy into what he's saying, you're not going to be in that administration and i think a guy like -- gary cone is a no mess around guy. when he got that top job as opposed to an academic, what that said to me is you need to understand that someone who understands power business is now in an incredibly important job. go back over to the obama administration, there was no one. there was no one you could pick up the phone and call. if you remember the tech conference where president-elect trump said, look, you can call me, you can call gary. wow, can you imagine trying to call anyone in the obama administration? don't bother me. >> he gets the markets, he's warned about currency wars. he's warned about the things that we hear about all the time. i think trade, also tax. we're all going to have to become tax experts. there's a lot of assumptions
10:05 am
baxd into a lower corporate tax rate and how much that's going to boost earnings. i'm not sure what's realistic in terms of a lower corporate tax rate. what do you hear? >> this is the art of the deal. you start at 15, you end up at 22, it doesn't matter. it's so much better than now. anything that drives numbers up. anything that makes it so we can come in and say i am raising numbers, american airlines dramatically sells at 8 times earnings, should sell at 12 times earnings and bingo, you have it. there's a lot of 13-time stocks that people have given up on because they had no top line growth. suddenly they will have top line growth and bottom line growth because of corporate tax. a lot of analysts will say i have no choice, i've got to recommend. >> once we are reminded, art, how hard it is to make policy in this country, how patient will markets be? >> well, so far, as i say, it is somewhat optimism. looking at the quality of the people going in, the high rate
10:06 am
of professionalism, so they have an expectation. and to some degree, the trump administration may be a slight variation of you're fired. these guys are coming in and if they don't do the job, i don't think it will take him long to pull the trigger and move somebody out. he has high expectations and he wants it done and i think the market wants it done too. >> having been in the board room for "the apprentice," i don't think that's wrong. wilbur ross really favors american industry. but if he gets off the bus and says we've got to be worried about free trade, it was really great, wilbur. you're fired. elevator, there's a limo outside, good to see you. >> i remember when we fired melissa rivers. wow, you didn't think it would
10:07 am
happen. look, that was not reality, but in a lot of ways, the people who are in here are going to be faced with a very similar situation if they're not on board. >> some viewers, art, before we let you go, are making guesses as to the time of day that this might actually happen. >> oh, geez. >> is there a tick by tick, minute by minute seasonality to the dow? >> not in that general strength. if i had to guess, the best shot would either be in the next 15 minutes or probably mid-afternoon when things quiet down after europe is closed. >> don't we sometimes get that buying surge after europe closes? >> that's when i'll come back. >> i'll take over wapner's show. he had a loss with the redskins, he's hurting. i'll jump in and run that show. i love that show. >> art, don't go too far. we've got an ankle bracelet we want you to wear. for more on the markets,
10:08 am
let's talk to brian jacobson, chief portfolio strategist at wells fargo. we also want to say thank you to jim cramer for sticking around in the 10:00 a.m. hour. dow 20k, what do you think would be the impact if we get there today? >> i'm not sure if it's going to be a huge impact or not. round numbers like this doesn't really matter that much to me. it might be like valentine's day. it doesn't mean a lot to me, but it means a lot to my wife so, therefore, it means a lot to me. if it matters to retail investors and they get excited about it, honestly i'm a little more excited about s&p 2300 and nasdaq fif5500 so that's what i looking forward to which i think we could hit quite easily by the end of the year. >> we're about 30 points away
10:09 am
from s&p 2300 and not too far away from euro/dollar parity. haven't seen that since 2002. >> that's right, lots of round numbers here. one of it is because people see these numbers and assume that it represents previous resistance we've seen in the past. as the s&p 500 approaches some of these rounder numbers, you get a little pullback. so if we approach 2300, we could encounter a little turbulence but people would view that as a very good buying opportunity, in which case 2400 isn't all that outside of the realm of possibilities within the first quarter. >> if you look at some of the sectors that are performing, and not everybody is included in this rally, red flags have emerged in the biotech industry where trump warned that he's going to cut down on high costs. this isn't just all inclusive, so what are you telling investors in terms of what to chase and what to avoid? >> well, you know, this is a
10:10 am
rally built on hope to some extent. therefore, valuations are extraordinarily important. so sectors that were undervalued, meaningfully undervalued by financials and you have one positive movement with respect to deregulation and higher rates, all of a sudden they pop. so i think that's what's going on in the marketplace. the biotech sector is still a very good sector from a growth standpoint, but people don't like growth at the moment, they like value. so in a rising rate environment, it's really about value, small caps, u.s. focused companies. >> mike santoli joining us for the watch. we are glued to that dow chart and we got awfully close. so what are you watching? >> look, you're obviously watching the industrials within the industrials. it's been a very dow centric rally just because of the fact that we have been privileging these cyclical stocks that do
10:11 am
power the dow. i think it acts as a reminder of how far the market has come. it's not just about some kind of milestone that you tag, it's a little more like we were at 1 155 -- the narrative is based on things that might or maight not happen next year. >> why does it seem, mike, like levels like this are tortured experiences? people are point to obvious ones, the nasdaq 5000, dow 10k. oil at 100, remember that? >> you spent very little time above 100 and spent four years hugging that line. i don't know if there's one of those observational effects. the s&p had a really hard time with 2100. it just didn't get as much attention because 2100 doesn't roll off the tongue. it's not that round a number.
10:12 am
>> brian, just to emphasize the point here about the levels, last time we crossed 10,000 again, post financial crisis, was 2009 in march. biggest percentage gainer since then from 10,000 here to near 20,000, united health group incorporated. second best performer, home depot, apple, visa. i just wonder if the next wave, if you are still predicting more dpanz a gains and more strength is going to be driven by the same kind of stocks. >> i think it will be somewhat more biased toward information technology which didn't participate quite as much in the rally here to date and also health care. i really do like some of the biotech stocks, even though they have been beaten down for a variety of reasons. i think there could be a little bit of a handoff as far as biotech and technology actually leading the way forward, at least in the near term here. as far as the significance of this milestone, thomas shelling, the great economist who just passed away recently, he talked about focal points and the importance of these.
10:13 am
even if it doesn't have significance on its own, it collectively develops a type of significance. >> yeah, i mean i think that's probably the best example of why it might matter out there because it's going to get attention that we've got to this level. i don't think 20,000 is quite like 1,000 on the dow, which was 16 years or something to contend with that. but it definitely seems like it's one of these numbers that not many people really predicted. and right now not many people are necessarily predicting big gains off of this level into next year. so there's really a lot of -- i think a lot of psychological dissidence about the fact that we are here and what got us here. i think one of the reasons that we do have this bias to the upside beyond just the seasonal factors is that all the reasons that you can tell yourself why you're buying and why the market is going up, you're not going to be proven wrong for months and that's one of the big things. >> although your point on targets is well taken, but i still see oppenheimer 2450.
10:14 am
>> is there anyone saying that's it, the rally is over? >> yeah, i don't think anyone is fully updated a lot of views. i think if you want to do real back of the envelope and say you know when bull markets end, when you're at 20 times peak earnings. well, 20 times peak earnings, that's like 2500 on the s&p 500. so you can pencil that in and say this is kind of where you culminate, but that's not there yet. >> all right. our thanks to brian and krishna. obviously very much appreciated. this seems like a relatively safe space to take a short break since we haven't been taking many for the past 45 minutes or so. 19,966. we'll keep our eye on this and come right back after a brief interruption.
10:15 am
10:16 am
10:17 am
welcome back. the dow came within 13 points of dow 20k. settling back a bit but obviously that dynamic will lead
10:18 am
coverage today as it continues to be a tease. meanwhile the nasdaq did hit a record high of its own as some money is flowing back into the tech sector. meanwhile we do have russia's ambassador to turkey, as you know, assassinated yesterday. richard engle is in turkey with the latest on that. richard, good morning to you. >> reporter: good morning, carl. so a team from russia has arrived here to investigate. russia and turkey are cooperating on this. they are stressing that they don't want this to drive a wedge in their relations. in fact they're saying they want this to help redouble their cooperation to fight against extremism, to fight against terrorism. there was an emotional somber memorial for the ambassador as his remains were loaded onto an aircraft in ankara to be repatriated back to moscow. we're learning more details about the gunman. this was an extraordinary event. i can't think of a similar one, where the assassin killed his
10:19 am
target in front of cameras at a news conference. and yesterday we only had a few images. today now that the dust has settled a bit, we're seeing all the different angles. and you can see exactly what the assassin did. he was an off duty proifolice officer, a young man, 22 years old. he was standing behind the ambassador before he pulled his gun out and moving nonchalantly through this art gallery looking at some paintings, trying not to attract attention to himself. then he very slowly eases his hand into his jacket and then quickly springs into action, pulls out the pistol and opens fire into the ambassador's back and then starts shouting about his motivation, saying that he's a jihadi and this was done to avenge the russian-backed offensive in aleppo and other parts of syria. >> richard, your point about the transparency of the event ill
10:20 am
well taken. the video, although jarring, is being widely circulated on social media circles today. i guess the most obvious question is where do russia/turkish relations go from here? they have been through a lot together, those two countries. how does this change that? >> reporter: well, if you remember, about a year ago russian/turkish relations were terrible. turkey shot down a russian jet and it looked like the two countries not necessarily were going to go to war but there was a high level diplomatic spat. right now they have been trying to reconcile. this art exhibit where the ambassador was assassinated was one of the diplomatic attempts to try and improve relations. but they're finding common ground in syria. i think turkey has realized that the united states is not the lead player in syria right now. it is russia. and turkey realizes that if it
10:21 am
wants to have a hand in the final outcome in syria, it needs to have better relations with moscow. so there is a meeting today in russia with the turkish foreign minister, iranian foreign minister and russian foreign minister to try to come up with a plan to go forward regarding syria. so this was a setback. but if anything, it could see an improvement in turkish/russian relations and get them more on the same page, particularly in regards to syria. >> certainly the entire world watching to see how that dynamic plays out. richard, thank you so much once again. nbc's chief foreign correspondent, richard engle in istanbul. my one question has been you put the berlin attack together with what happened in ankara, why it doesn't seem to have an effect on equities is many people's guesses. >> the market has, i think, in a way treated these as local eruptions of a global issue that
10:22 am
we've known is in the background for a long time. after 9/11, there was a time when the market really did respond to every report of a suspicion package and then at some point it built up these ca calluses against that idea. it just becomes kind of unfortunately part of sort of the background environment that we're operating in. >> although it could have an impact. we've got a german election next year, a french election next year. it also has a funny way of getting into asset markets. best performing currency this year is the russian ruble. the stock market has been on fire, up double digits since the u.s. election. its russian bonds have returned double digits as well. russia is considered one of the winners. yes, the price of oil has rebounded and that's helpful for a major oil producer, but the idea that sanctions could be rolled back and that would help the russian economy. one of the bright spots i would
10:23 am
say globally, yes, european stocks are hitting the highs of the year, but the u.s., the strength in the u.s. equity markets as we look at the dow flirting with the all-important 20,000 level has really been isolated in the world of emerging markets. in china, which we're watching. it could be tenuous here as the fed kicks in rate hikes. >> one thing you don't know with the dollar rallying too, that's kind of telling you that the united states is setting itself up as this magnet for capital around the world and at what point does that become a destabilizing effect in it is. but to your point, sara, that's one of the effects of all these episodes. >> which could be a domino effect and has implications for the markets, for the euro. >> it's just hard to see why today the market would start to price that in. >> isn't it interesting how people allege u.s. leadership is fading, whether it's on democracy or trade and yet capital, that's certainly not the case, at least right now. >> no.
10:24 am
the market says that the united states is kind of bidding for the rest of the world's capital. in fact some people are talking about how it's so expensive to hedge dollar exposure, if you're in europe you want to buy corporate bonds here, it's very expensive to do it in december and they're expecting in january a rush of new money from overseas to buy bonds here because of that reason. >> on this question of leadership of the u.s., there was a piece on how trump's pro-growth policies that he's talking about and getting republican backing on potentially should be an example for the rest of the world. we should start to see pro-growth structural reform in places like europe, in places like japan, if they want to get in on the rally and not have to suffer under the weight of a much stronger dollar and potential trade wars. if everybody sort of follows that lead, that could be a good thing. >> they might want to see how it works out first. >> it's just hope. >> no other body is telling the united states, you can't go out of these deficit bands or
10:25 am
anything like that. so we can experiment and see how it plays out. >> the dow up 82 points, 19,965, being led by caterpillar this morning despite some disappointing three-month rolling sales, stock continues to be the second best of the index for the year behind unh. back in a minute. ppening here? this is my new alert system for whenever anything happens in the market. but thinkorswim already lets you create custom alerts for all the things that are important to you. i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.
10:26 am
10:27 am
all right. we continue to keep our eye on the dow, up 0.4 of a percent. 82 points as we eye that critical level of dow 20,000. we were at one point just about 13 points away. we're off the highs of the session, but we are watching this market continue to rally. caterpillar and nike, interestingly, are the biggest gainers percentagewise on the dow right now. let's bring back brian jacobsen as well as krishna, momani.
10:28 am
notice that noik nike is taking the lead, the worth performing member of the dow, down 20% with earnings after the bell. at do you see for nike? >> well, i can't talk about specific stocks but i do find it interesting how it is that it has rebounded and is beginning to participate. maybe that's something we're going to see for sort of the next leg for the bull market here is those things that were lagging preelection could actually begin to outperform. before the election financials did not do well. now it's been rallying, but health care hasn't yet participated. i actually think health care represents some pretty good value, especially if you look at the beaten down biotech area. industrials have done incredibly well after the election, but utilities haven't done very well because of their interest rate sensitivity. i actually think that it represents some pretty decent value if you're looking for yield and i don't anticipate we'll see yields move materially
10:29 am
higher from here. perhaps we'll end 2017 with the ten-year treasury at 2.8% so that is a move up from here but it shouldn't decimate the sector like has happened so far since the election. >> krishna, as people start looking through companies and trying to screen out various liabilities, weaknesses, are you trying to avoid companies that are excessively leveraged to rising wages? big piece in the "times" arguing stocks are overvalued. one of the reasons is that whole margin story we were talking about for so long in '16 is still there, especially if wages continue to rise. >> i think you have lots of issues with the markets. it's good to be hopeful, but at the same time it's important to recognize that risks are rising meaningfully as well. a high dollar doesn't help margins for large companies that have international operations. high rates don't help margins for lots of companies out there.
10:30 am
so, you know, it's worthwhile recognizing that while if trump does all the things that he's going to do, the markets may go up. but risks are rising at the same time as well. >> 2017 s&p 500 earnings estimates are for something like a 20% gain. it's really an extreme hockey stick in terms of what the collective analysts' thoughts are. >> for which year? for next year. >> they're always a bit high and have to be ratcheted down so you're basically at the same valuation you were a year ago knowing now what you did. so if earnings come through i guess they support stock prices. if not, it's a problem. >> which is going to be interesting fedex after the bell today. >> fedex is like maybe the poster child for this market in terms of a beaten down
10:31 am
industrial transport levered to the consumer and business spending. maybe good tax relief. >> and not worried about trade. the life blood of fedex is trade. fred smith, the ceo, gave that speech and talked to us last week. we were in a quiet period so couldn't ask about earnings, but this is clearly a threat and investors don't appear to be too worried about it. >> not in terms of total volumes. obviously there's details to work out exactly how you're going to measure and tax various elements of trade. but in terms of boxes moved globally, i don't think they're concerned. >> brian, the other issue we've got to pay attention to are buybacks. i notice boeing is going to look for voluntary layoffs, trim some commercial airplane staff, just days after they declared a new $14 billion buyback, 14% div hike. can that dynamic continue to exist or at some point do
10:32 am
companies think their shares are fully valued. >> i think i would get worried if companies think their stock is overvalued. that's a definite red flag. i think most executives would think their stocks are typically undervalued and like to see the price go up. so it's just another way to -- for shareholder return, if we get some sort of repatriation change in the law, not just a holiday but a permanent change as far as with repatriation of profits, you could see buybacks increase, hoping to improve the earnings per share metrics and to create demand for the shares themselves. but i'm not hinging my forecast on expectations of the buybacks continuing, but i do believe that corporate tax reform is likely to push us in that direction where that could add a little fuel to the fire. >> especially if they get that repatriation tax holiday. thank you for joining us again and staying with us with the dow about 33 points away at this hour from that 20,000 mark. let's send it out to sue
10:33 am
here herera. good morning, everybody. here is what's happening at this hour. german authorities arresting a man overnight suspected of being involved in the attack in the berlin marketplace that killed 12 people and injured 48 more. he was from pakistan and had aplo applied for asylum. the suspect has denied being involved in the attack. police say a man found dead in the truck was a polish citizen but was not in control of the vehicle. russian investigators arriving in ankara to probe the killing of the russian ambassador to turkey. they were trying to determine whether it was the work of a lone gunman or part of a wider conspiracy. and a thick, gray fog and smog fell over beijing again today, choking the chinese capital and spurring authorities to cancel flights, close some highways to cut down on air pollution. the country is in the midst of a red alert, the highest level of its pollution warning system. after millions watched dallas running back ezekiel elliott hop into a salvation
10:34 am
army kettle after scoring a touchdown, there you go, the charity said online donations spiked 61%. now, elliott was penalized for that but he wasn't fined. he also says that he is going to make a donation to the salvation army. good for him. that is the news update at this hour. i will sending it back down to you, carl. >> all right, sue herera, i love that story. >> why did he get penalized? >> the nfl has -- >> rules about excessive celebration. >> excessive celebration is not allowed even though the red kettle was put at the end zone so that the players could touch it and things like that, but he jumped into it. and that was considered excessive. but necessity didn't fine him. they could have fined him quite a bit of money. >> sue, thank you very much. watching the markets right here, the dow is up 81 points. a busy day for earnings in the middle of the christmas season. you don't expect it on a day like today but we've got general
10:35 am
mills, darden, blackberry and tonight there's more to come. >> darden is an interesting one. the stock is up 3% right now. this stock was up 30% in the one month after the election. the numbers were okay as they were reported, olive garden seemed to be well. this is a sign of how this market wants to essentially bake in improvement on the consumer front right there. and of course no minimum wage threat an things like that. >> i can give you three things to watch in nike if you want because this one has some low expectations. the stock is up today, actually one of the best performers, but worst performer in the dow. it's been down pretty much all year long. watch the north american futures orders. nike always gives us a peek of what they're expecting. although the company says this is irrelevant now, we're selling more direct to consumer. everyone will watch it anyway because it was so low in north america last quarter, so we'll watch the u.s. business.
10:36 am
also watch guidance. a lot of analysts are expecting them to lower guidance for the full year. they would need to see a pretty strong bounce-back in business in the second half of the year if they want to keep that guidance. finally, nike doesn't comment on the competition, but by all accounts they're losing share to a resurgent adidas. got the kanye west collection working for it. they're really tapping into this whole fashion athleisure. it's not about athleisure anymore. it's about fashion. >> i was thinking when you brought kevin plank on a couple of weeks ago, the ability to shift share right now is better than it's been in a long time for competitors, whether they're european or american, right? >> absolutely. it's all about fighting over the shelf space in a tough retail environment. and that's been the bottom line for a lot of these stores for a long time. nike, under armour, lulu, they
10:37 am
were all insulated because athleisure was so strong and then the market so competitive and so crowded, everyone and their mother got into it. you started to see pricing pressure and under armour leading the way on that and that could be cutting into nike's margin as well. >> i also wonder if they'll have to answer questions about the tax implications of their goods produced overseas. what happens when they're imported to be sold here. that's a tremendous issue if in fact it goes as sketched out. >> national retail federation estimates 98% of apparel that is sold here is made abroad. so that could really offset some of the benefit of the lower corporate tax rate and you've seen that in the retail names lately. >> think of all your tags on your clothes that say made in sri lanka. that's going to get taxed. the european close less than an hour away. don't go anywhere.
10:38 am
10:39 am
10:40 am
the dow is up almost 90 points, just about 30 points
10:41 am
away from that key 20,000 level. it would be the first time ever. in the meantime let's send it over to the cme group. rick santelli, the post election sell-off in bonds continues. >> absolutely. stocks and the dollar as well. thank you, sara. i'd like to welcome my special off-site guest, ira harris. thanks for taking the time, ira. >> bank of japan, no real changes, but do you have any observations there you'd like to share? >> well, you know, we go back to what we talked about back in september when they did this and there's still, i think it's a critical error, but they're more concerned about the currency going lower because why else would they keep that plan of keeping to buy ten-year yields as they say around zero. i think it's a flawed plan. i thought so in september. but it's helping weaken that currency.
10:42 am
again, the dollar is much stronger today. they like the exact of this weaker impact. i think somewhere down the road it will fly in their face and they will pay a very steep price for it but in the short term that's what they want and that's what they're getting. >> but when it comes to foreign exchange, ira, i've heard mike santelli and others, smart guys, talking options mostly on the volatility, that cost makes it less advantageous. but i think it's a bigger story. i think capital is going to come to the u.s. partly because of trump and the new ideas that are going to be on the structural side and the fed tightening. i think we're pulling the world back. your thoughts. >> we talked about this. i thought that people make a false thing with reagan, but where this situation with trump and reagan become the same thing is that we know that tighter monetary policy, whatever that means, at a zero interest rate
10:43 am
with looser stimulus drives the currency higher. we had such a dynamic move in the dollar back in the early 80s that they had to go refix it the other way. are we at that extreme? no. but currency values are always relative and they're relative based on interest rates as well as geo-political events. right now the geo-political events are favoring the u.s. and the interest rate movements are favoring the u.s. and so you're getting the stronger dollar. >> i guess finally let's finish off with the notion, i see 230 basis points between our tens and european tens. if you were mario draghi right now, would be that, a, a happy thing for you or, b, a negative issue for you and what would you do about it? >> well, no matter what i thought, i'd create a counter factual to make myself right at some point anyway. he's happy about this. but again, you want to talk about the misappropriation of assets, as soon as the ecb's action, of course this is going
10:44 am
this way. they are in and they're in this week and they're driving european rates this week especially because, let me tell you this, we know they buy $80 billion a month in sovereign -- in assets. so they're supposedly finishing thursday. that's december 22nd. that's what they announced two months ago. they have got $26 billion left to buy this week, this short week, to meet their number. so i'm willing to bet that no matter what happens, let's see, today's tuesday. wednesday and thursday european sovereign yields will be lower because the ecb has so much buying to buy. he's ecstatic about this differential. >> we're going to have to leave it there, ira, but i know as great as lower interest rates may be, the financial sector and the transmission of their economy is going to have a tougher time. thank you, ira harris in arizona. now we'll go back to sara. about 27 points away from dow 20k, rick, thank you. the president-elect's tax and trade rhetoric setting off
10:45 am
some alarm bells among retailers. we're watching this group closely. our courtney reagan has more on what apparel companies in particular can expect here from any changes in the tax code, courtney. >> that's right, sara. so technology really changed a lot over the last several years for retail. going forward it could be fiscal policy, those. trump's tariff rhetoric has gotten a lot of attention but it's the house ways and means committee tax reform proposal that's scaring the pants off of clothing and shoe retailers. the plan was proposed over the summer about but became more of a possibility. so there are three parts to it. a corporate tax rate of 20%. that is certainly welcome since we often look at 35%. an immediate depreciation expense could also bow good. it's the third one that's the real zinger. border adjustments no non-u.s. manufactured goods. 95% of clothing and shoes are manufactured overseas that are sold here.
10:46 am
so here's an example of how it would change if the plan were adopted as -is. let's say the gap buys a sweater from overseas. they have $15 in other expenses associated with that sweater. a shopper ultimately pays gap $100 for that sweater so tax is calculated like this. you have the $100 in revenue, minus the $80 cost and the $15 in additional expenses associated with the sale. that's a $5 profit. say gap plays 35% corporate tax on $5. you get a tax bill of $1.75 for that sweater. under the proposal, assuming a 20% corporate tax, but also no allowance to deduct the cost paid to overseas suppliers, gap pays 20% tax rate on that $5 profit, plus 20% of the $80 cost of goods sold which is no longer deductible. that now means the tax bill for that sweater goes from $1.75 to
10:47 am
$17. that's more than three times the profit on that sweater. now, of course economists argue that the dollar will adjust, it will appreciate and that will make this net net neutral. not everyone believes that and the retailers are certainly scared. >> an excellent report on something that we have got to figure out and get more educated on quickly. meanwhile, the dow is within 30 points of 20k, vix remains below 12, the ten-year at 2.fay. the nasdaq said its own record high this morning.
10:48 am
10:49 am
10:50 am
tech has joined in on this party. morgan brennan is watching some of the movers up there. morning, morgan. >> that's right, sara. similar story for the big cap nasdaq, 100 as well. both amazon and apple, two of the biggest positive point contributors there. in general, tech stocks are a standout. the s&p technology sector
10:51 am
hitting a fresh multi-year high today, dating back to september 2000. chip makers helping to lead the charge there, particularly nvidia, micron and xilinx. biogen and celgene are the biggest contributors to the biotech balance, helping to offset lower sessions. some of the biggest laggerds here, kraft hooieinz, mondelez monster beverage. >> thank you very much, morgan brennan, over at the nasdaq. got to keep our eye on that one as well. dow, 20 point as way from the 20k. bob is watching this all from the floor today. good morning, bob. >> good morning, carl. why are we up today?
10:52 am
no specific catalyst happened today, no specific news event, economic news, macro event that you can point to. confluences moving the markets, number one, seasonally a very strong period of the year, the last two weeks of the year. it is well known, well studied historically, the dow tends to move, on average, 1.6% in the last two weeks. that's a very powerful move. it's up most of the time, more than 70% of the time. so there's number one. traders believe things are going to go up. number two is this powerful momentum we have been seeing since the election, that this believe in a combination of tax cuts, less regulation and a massive stimulus program of some type is going to translate into a better economy in 2017. some are arguing 3% gdp growth is possible and, more importantly, it will translate into higher earnings and revenues. this is hotly debated.
10:53 am
we have been noting there's a big debate between the pragmatists and optimists. instead of bulls and bears we have practicipragmatists and op. the optimists are saying you guys worry too much, you pragmatists. you worry too much. this combination we've been talking about is very powerful. it's good for the economy. we certainly know it should translate into better revenues, which close the lean and mean corporate structure, straight to the bottom line. relax a little back-to-ba. right now we're buying the market. those optimists are in control. that's why these powerful forces have been occurring. you notice the market topped out last week on wednesday essentially. instead of going down and everyone saying, guys, the
10:54 am
market is ridiculously overbought, and it was, they'll say i'm going to take the most overbought and rotate. i'm going to sell financials for a couple of days and then buy consumer staples. this rotation has been very powerful. the most important stock out there right now. the reason we are at the door of 20,000 is goldman sachs, highest price stock in the dow jones industrial average. it's responsible for about 22 or 23% of the entire reason the dow jones industrial average has gone up since the election. by the way, we moved, folks, about 16, 1700 points since november 8th and goldman sachs is about 22% of that move. that's what a price weighted index will do for you. we'll have more when we get to that 20,000. >> absolutely. post-election breakout stock. bob is on the floor with us all day. on the floor to talk about it, managing partner. do you fall into the optimist or
10:55 am
the pragmatist, as bob puts it? are you buying this hope rally? >> i would put myself more in the optimist category. i would also submit and recognize the fact that the markets got an awful lot in a short period of time. i do think the direction of policy, fiscal policy, regulatory policy and trade will be largely beneficial, i think, for the markets and also i think it largely takes off the table the chances of a recession in 2017 or even probably in the first half of 2018. i'm optimistic. >> jason, how do you square all that with the fact that we're starting at valuation levels that are not early in the cycle? we're trying to add on top of what's already been a grinding
10:56 am
recovery and bull market. do you see an acceleration coming out of this? >> well, you know, it's a good question. it's been a strange bull market that started in 2009 in that there's been virtually no retail participation at all. there's actually been net redemptions from mutual funds and etfs since 2009. in many ways it's been a bull market. market is expensive, by any historical comparison. by the same time, the market doesn't know that it's expensive and i think an awful lot of people are seeing losses in their bond funds that may be wondering why they're missing out on all the fun. i guess what i'm getting at is the market is expensive but there's nothing to prevent it from getting more expensive before this is all over. >> jason, we're seeing pieces being written, warning investors that no one is worried about
10:57 am
anything. that's obviously an over simplification. does the heart of it ring true to you? if so, how worrisome is that? >> i can say, carl, as somebody who has been out on the road quite a bit, it's institutional investors. i wouldn't say they're worried but certainly concerned that the market has gone up too far too fast. there's still, obviously, an overhang from 2000 to 2002 and the 2008 bear markets, which is there. i know valuations ended themselves expensive. i still think there's a lot of contingent on worries about things that are going on. some of it may be shifting more to what's happening abroad than what's happening domestically. for the most part, as far as the market is concerned, i don't know if i would make it too complicated. whether president-elect trump gets a lot of things he wants
10:58 am
through congress is one story but there's a lot of things he could do on his own, which i think are clearly in the right direction at least as far as equity market valuations are concerned. >> the dow is up 95, marching north again, jason. broader index, s&p. fifth third, high hopes for this new administration and new congress. where do you stand on the financial sector? >> we're bullish. overweight in august and maybe just a function of luck more than anything else. i think what was attractive to us then are the valuations there are still reasonable, i would say, even after this run-up. and i do have more of a bias toward the regional banks over some of the big investment banks.
10:59 am
i will say donald trump is not ronald reagan to the extent he is a populous. and there are things worth getting excited about. as far as investor banks are concerned, there could be surprises that investors and those stocks don't like. there has been some talk about bring i bringing back -- i don't know if that's going to happen. policy mix favors much more the regional banks than it might some of the big investment banks. >> jason, you know, we're referring to this as the trump rally. would it be better if it were less all about a trump rally or is it entirely there? i think one of the issues you can't really tease out is what would have happen ed in another scenario here? the character, the market, sectors seem linked to potential policy changes. are investors hinging too much
11:00 am
on potential policy outcomes or is it tone from the top? >> you know, mike, it's a good question. i would argue that at this point, it would probably be better for investors to think more about maybe the second iteration of the trump trade. companies that would immediately benefit from a change in administration. so, engineering, construction, stocks, defense stocks, financials to the extent you ease some of the regulations. i would argue that next year, it will be much more nuanced. i think particularly corporate tax reform is where you'll see the nuances take place. 3.5 million words in the u.s. tax code. it's very complex. it's going to take a long time to change it. one of the ways we've been telling people to look at it i

98 Views

info Stream Only

Uploaded by TV Archive on