tv Closing Bell CNBC December 23, 2016 3:00pm-5:01pm EST
melissa is always right. unless you got to watch the last hour of trading to see if i hopefully turn out to be right. >> you never know what will happen the last hour here. thanks for watching power lunch. thank you for joining us. >> "closing bell" starts right now. merry christmas. hello everybody. we are the "closing bell." i am kelly evans at the new york stock exchange. >> we got things planned for this hour. the so-called trump rally has not been able to get the dow over the key 20,000 mark that michelle predicted for today. will a santa claus rally get us there next week? the market holds study around 19,900. president-elect trump creating competition in the defense space asking boeing to
price out a comparable plane. a general says that can be a disaster for national security. pretty tough week for twitter. we have details of the company's latest ad snafu. and bridge water supporter looking to create a management machine described as making a brain into a computer. the man who wrote the story will join us. >> favorite story of the week. >> read it right now if you haven't yet. >> or read it after the show. let's start with president-elect trump taking aim at the cost of lockheed martin's f-35 fighter jet. trump tweeted based on tremendous costs i have asked boeing to price out a comparable f-18 super hornet. morgan brennan joins us now to compare those planes. >> that's right. happy holidays.
we are going to call this a fighter jet face-off on the heels of the latest from the president-elect. can boeing's fa-18 compete with lockheed's f-35 joint strike fighter? the short answer to this, no. i'll tell you what i mean. the f-35 is a fifth generation stealth fighter plane. lockheed says it plans to lower the cost by 2020. its f-35 can take off and land vertically. the fa 18 -- it does take off from aircraft carriers. the price tag $82 million. analysts say it would take years
even then this is not likely. that was a reason you take a look at shares of boeing. they are not trading higher on this news today. the two jets do face off for defense dollars and has limited the f-35 c-5s while boosting the budget for super hornets. last month we had canada announcing a deal after dropping plans to buy the f-35s for their military. you take a look at shares of boeing they are up slightly today. lockheed martin is trading lower down about 1%. >> helping answer a lot of questions that i had about this story. let's talk more about it and bring in general barry mccaffrey. joining us former defense analyst and now with zenith aviation. welcome to you both. is f-18 a viable competitor? >> the quick answer is no. on the other hand throwing a
scare into the defense industry probably isn't a bad thing to do. going forward the u.s. defense rests in many ways primarily on the f-35 coming out with a couple of thousand aircraft, 11 nations, army, navy, air force marines are counting on it. the last time we lacked air superiority over battlefield was 1942. so i think the f-35 is essential. it's been a troubled program. it's very expensive. you can't back out of it at this point. >> i wanted a raise and this is bigger, this issue than just two fighter jets. it is about cost overrun as it had been rampant for years. the government we are told has overpaid for our military for years. and the president-elect is nearly trying to highlight that now by trying to impose
competition between the two contractors. is that likely to have an impact? is he just putting the defense industry on alert right now? >> yes. he is putting them on alert and this is a carryover from air force one issue where boeing probably said we would be happy to talk about the tanker but would also like to talk about the f-18. i agree with the general that the f-35 is a superior aircraft. we are at a new era where best in class might not be the best solution. i think boeing as they put it forth says we are not a fifth generation fighter but we think we can get most of the way there and use the savings for other defense projects. >> carter, are there any other competitors? we had earlier discussed one of trump's old interviews where he talks about how he loves to bring in competition. where else could he bring in
competition from the space from? >> in this space you are not going to bring in anything else. there is the 18 which we will need. boeing would love to production rates are down to two a month. i know they would like to increase them. it will stay an issue between the f-18 and f-35. the f-35 would be highly unlikely that it would go away. i think i personally believe it would be wise to keep the f-18 going to the extent that the f-35 is delayed or fails in any way on its carrier based aircraft. >> let me add something if i may. it's almost impossible to back out of 15 to 25 year programs with billions of dollars. the last time president carter tried that and the litigation went on for 20 years and cost the government a fortune. i would also under score f-35 is a different aircraft.
it's a penetrating aircraft. there is no f-18 that is going to equal that capability. again, this is vital to the air force, the navy, marines and 11 allies. >> speak to this from the higher altitude that the idea that we got to bring costs down and that is something that donald trump is trying to achieve here by using the two jets as an example of that. where do you see where we can cut back on costs or the overruns that are so rampant? >> of course, we got to remember defense technology we are way out there on the cutting edge. having said that, there is a mountain of overregulation governing defense procurement plans. i think the trump administration can take a look at that and try to stream line the process, to me an industry never deals with another civilian contractor the way they do with d.o.d.
the far procurement act is a nightmare. i think overregulation is a productive place to look at. >> thank you. speaks of overregulation we will speak to senator richard blumenthal. he represents the state of connecticut. that is where the engine for the f-35 is made. we will ask whether politics play a role. let's get to our "closing bell" exchange for the christmas eve eve. dow up one point. we are trading at 19,919. joining us today andris fleming. there is steven at post nine. and we have rick santelli checking in from chicago, as well. happy friday. what is holding us back here? michael santoli used the rocket took off after the election but
we spent all the fuel and just hovering right now. what is causing that do you think? >> there is a couple of things going on. wednesday afternoon we had two serious technical levels break on the s&p 500. on the russell 2,000 that was 1,377. they broke side by side and we haven't come too close since. trading has been light. we are faced off with a pension fund rebalance that is larger than usual. every month we have rebalances to deal with. this time due to the run in equities we are probably looking at $35 billion to $45 billion worth of money that has to come out of equity market and move into bond market. >> would you looking at this pause that we are taking say to people it is a time to get into the market before the next move higher? how would you recommend people invest here? >> i agree with that.
i think short term you have pension rebalancing. i think after the first of the year you are going to see some capital gains taken. i think also as we get close to the inauguration we see a lot of effects, maybe there is reversion. i think the market has probably seen the peak for the year. i don't think the market is going to pull back a lot. i think a lot of people are waiting around for a pullback to get invested especially in certain sectors like financials. so i think we have run out of steam here for a little bit but i don't see a big pullback. >> we had the great technical analyst on yesterday. he sees this going to 23,000 on the dow before this thing runs out. he sees that in the first quarter of next year. it is clear that we have stalled here for a while. and maybe the holidays have something to do with that here. >> i don't know if i would use the word stall. i like are michael santoli's analogy. i think we have plenty of fuel
in the rocket. i think we are just orbiting. i think sarge nailed it. there is little doubt to rebalancing is affecting the psyche of traders that might have put it over the top in 20 k. that might have sent yields higher. consider this. i don't often talk about the tlt, etf for the long end. it has had a lot of aggressive buying calls. i believe the expiration is in february. it doesn't matter if you are out of money and the move starts before february it has a small delta. there are many that are looking for slight reversals. ralph is the legendary technician and i like that he is in agreement with our levels. i'm not sure i'm in agreement with his timeframe. if you call for 23,000 and you're wrong and in the first quarter you get to 21,000 i don't think there is tag days for ralph. >> you say you would stick with the financials here. we just learned that goldman and
key bank are leading financials up 50% this quarter. you going to stay with them? >> i think a lot of professional investors is still very under weight financials. so any pullback they are waiting for pullbacks to get invested in financials. the other reason is very little resistance. the big growth stocks have is every move up is an opportunity to sell those to rebalance in the financials. i still think people are under weight financials and that is going to push these things higher next year. >> we got to go at this point. more questions. we move on. thank you all three for joining us today. merry christmas and happy holidays. >> thank you. >> see you later. by the way, let me just mention behind us the harlem globetrotters will be ringing the closing bell today. >> if you see basketballs flying you will know what is going on.
we want to give it a shot. >> try it out. the dow is up a point and a half trading at 19,920. health care has been one of the worst performing sectors since the election. we will look at whether you should buy into the space. the world's largest hedge fund apparently wants his successor to be a computer algorithm. the report behind the fascinating story joins us to tell us the story. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter.
that's over 6 times faster than slow internet from the phone company. say hello to internet speeds up to 250 mbps. and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. the world's largest hedgefund has quite an ambitious goal. it is building an algorithmic model from employee's brains. >> looks at plans to use artificial intelligence to run his firm. what is this story really about? >> the world's most successful hedgefund manager is developing what he calls the boo of the
future. that is this giant software project that is going to automate management decisions, will tell you when to make a phone call, whether you are doing a good job or i'm doing a good job. >> they have been planning this for years. >> he is not just well doane as a gifted trader but also for his attitude of radical transparency in which all management decisions are known to everyone. >> for many decades he has collected millions of data points about the economy and used that to create kind of learning around it. now he is doing the same internally around performance and management and hired the watson guy who has been focussed on doing this. >> you can imagine many who have hired. they might say could you tell me what is going to happen with the ten year. instead says i would love for you to develop a way for me to rate my employees and to tell me
which are excelling and which we should sort out. >> we should point out that the culture, shall we say, at bridgewater is conducive to this. >> ray himself will say you either love it or hate it. the turnover is high. however, what bridgewater says is once you get past that barrier you really love working in this atmosphere where you can get instant real feedback. what if you can stop me and say this isn't working? we would save ourselves some time. >> so the other interesting thing about how this works is that bridgewater takes human resources so seriously. it is elevating the department to be the core of the firm. how are they going to know like psychology is real time metrics. it is saying we think the way we
run the firm is the way we want to keep running. instead of handing it to another person we will trust these machines can make decisions like you would. other cases firms have appointed a number two. this is really an admission by ray that what happens next will not be one, two or five people. it will be a repeatable process. >> stepped away. there were a couple of people who were involved in trying to run the firm and didn't run it in the way that he -- perhaps that added impetus to the move to perpetuate them. >> there is something beautiful about it. he had a plan five years ago. the plan did not work and he is willing to say that plan was not
working, here is the new book of the future. >> but the goal is to achieve a business that can produce good returns, the kind of returns that they are known for. >> ultimately bridgewater is only as successful as last month and last year. the fact of the matter is this last year performance has not been up to bridgewater standards. they will say look at us over long term and have been successful. the proof that this is working will be in the investment performance. >> and that is one area where they were a pioneer and perhaps will end up being a pioneer. very different trying to invest around trends versus replicating your founder's brain. >> i can tell you based on the reader e-mails some people believe he is a pioneer. >> hope everybody gets a look at
it. the wall street journal -- here in the house harlem globetrotters ringing the closing bell. before that, though, there is mike, the one -- there you go. nice. there is your photo optoday. well done. they will be shooting four point baskets. and it has been promised that we won't get rebounds our way. you never know. a lot of fun over the next 45 minutes here on "closing bell" at the new york stock exchange. way to go. in the meantime -- >> markets are inching. dow transports up 30 points. small caps doing pretty well. nearly half a percent of larger blue chips. twitter shares down 11%. now there may be more trouble
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twitter overcharged video advertisers up to 35% between november 7 and december 12. twitter says it has fixed the problem and prefunded customers. facebook had a similar issue last month. >> haven't seen facebook shares respond too much to that. >> big part of their business. >> it's the business. >> i know we are supposed to keep talking about twitter, but the globetrotters -- >> they have fancy dribbling going on. they are shooting four point baskets here before they ring the bell. come on. merry christmas. 35 minutes left in the trading session here. the dow is virtually unchanged as we head towards the close.
>> president-elect trump has said drug prices are too high. we will discuss whether you should avoid pharmaceutical and bio tech stocks under the trump administration. two major european banks agree to pay billions in fines in the u.s. over mortgage backed securities. we have the latest details on this massive settlement when we come back. anything is possible this hour. stay with us.
lepe's foods is a locally owned here in santa rosa. as a small business, we're always looking to save money, and pg&e was able to help us. i help the small businesses save money and energy. it feels great. we looked at their lighting, their refrigeration system, and with just those two small measures, they were able to save a good amount of money. i was shocked. i couldn't believe that i could save $1,500 a month. with the savings that we get from pg&e, we're able to pass it on to our customers. it's pretty awesome.
learn how your business can save at pge.com/businessenergycheckup. together, we're building a better california. we are in the last half hour of the trading day with the dow down. one globetrotter hade a 4 point shot. we were just talking you famously got out on the market two weeks ago and the markets have been going side ways since then. >> it wasn't really worried about missing a little bit on the upside. if we go over 20,000 maybe we go to 20,500 so i miss like 3%. i'm not worried about the small things. i captured some profits and i think we will have an opportunity to reenter the market. i'm waiting for earnings season to come out. i think that even if the earnings are good for the fourth quarter they are not going to
match where the stocks are trading. i think there will be equalization. >> i know you follow the s&p. the rest of us follow the dow. you can see another 3,000 points. >> i love ralph. i took his classes many moons ago when he was a child. i will have to disagree. there is a possibility for that if you look at the charge 24,000 would be a stopping point but i think it will be opportunities. i think sometimes markets will forget about the trend and will go with earnings. i think the earnings are not going to be able to qualify where they are. >> very quickly, two things you can think about that would be head winds for the market
anyway, first yearf a new presidency when the hardest work is done not conducive to growth and the fed starting to raise rates here. >> i think if you have positive data in the first quarter or first month you will see the fed raising rates fairly aggressively. i think they will get it out of the way early. i think by the end of next year i don't see 25,000 is easily possible. first quarter of the year i think it can jump back in. >> go try the four point shot. >> and it's time now for a cnbc news update with sue herera. >> here is what is happening at this hour. the u.n. security council passing a highly contested resolution today. it demands israel stop building settlements on palestinian occupied territory. the u.s. obtained from the vote in what is being considered a break in policy. that decision creating an uproar on the hill.
house speaker paul ryan says the decision to abstain from the vote was quote absolutely shameful and a blow to peace. the family of the berlin terror attack suspects wants his remains sent back to his home country of tunisia. the suspect was killed by an italian police officer today after a routine irks d check at a train station. he is suspected of driving a truck into a christmas market on monday. and president-elect donald trump trying to perfect his swing today with tiger woods in florida. no word on how the president-elect held up against the 14-time champion but he will be considered the best golfing president when he takes office with a handicap in the low single digits. >> i just want to know who is the third guy? not only that, they couldn't round up a fourth? >> don't look at me like i know
anything about golf. >> we got that picture from the the associated press, i believe. they didn't identify the third guy. he is the mystery third guy. >> he looks happy to be there. wouldn't you? >> i think, i think, yeah. >> that is a great beard on tiger woods. >> it could be the light. >> from the santa photo from yesterday if you saw that. anyway. >> you can be that fourth person. >> he turns 41 next week. would i want to be the fourth person? you bet you. >> next time. >> exactly. you never know. >> exactly. $12 billion how much two major european banks will pay to settle a lawsuit over mortgage backed securities. eamon javers has more. >> that's right. those are the reported settlements that we are hearing about here. let's walk through how the math
breaks down. deutsche bank is paying $3.1 billion in a civil fine. the rest of that is going to be $4.1 billion in consumer relief. credit swuisse is paying 2.48 billion in the civil fine piece and $2.8 billion in consumer relief. that will be paid out at some point over time for mortgage backed security allegations dating back to before the financial crisis. this is a major settlement just before this obama department of justice leaves office and will start the new year under a donald trump department of justice once he is sworn in on january 20. >> sounds like they are working to get a lot of these taken care of in the final days of the obama administration. i wonder what happens with barclays. they are kind of the one who hasn't -- >> the one who said they are going to fight this. they ultimately were in negotiations for a settlement, maybe a similar deal to what we
are seeing here. the department of justice sued them yesterday and barclays came out with a statement saying they are going to fight. they don't think the lawsuit has any merit at all. that will play out over several months. it will be donald trump's department of justice appointees who will be making decisions on how to finalize that case, as well. maybe barclays is betting on the trump administration having a slightly different view than the obama administration is having. >> and then the deutsche bank last september when the word got out the justice department asking $14 billion and spending half that amount. >> that's right. >> half of the money goes to the justice department and half goes to community programs. they have gotten billions from the banks and you do wonder where it is all going. >> i thought of that, too, this morning. let's go to morgan brennan again
with a quick market plash. >> take a look at shares of synergy pharmaceuticals soaring after the company released positive results for the second phase three clinical trial for treatment of irritable bowel syndrome with constipation. it echoed results of first phase three study. it is flat but risen almost 50% and it is up nearly 20% up about 19.5% so far today. keep in mind this is a small cap stock but a big move for a small stock. >> thank you, morgan. health care has been the worst performing sector this year down about 4% and president-elect trump has said that tackling high drug prices is on his agenda for the new year. >> how should investors position themselves ahead of the new administration? joining us now is tim chang, analyst at btig. is it safe to swim? >> i think 2017 is going to be
an interesting year. hopefully it won't be like 2016. i do think that a lot of the health care companies especially the pharmaceutical and bio technology area have to focus on value and volume. and my take is price aside i still think the pharmaceutical and bio technology segments have a good investment theme behind it. i do think there are good values in the space. >> which price are you talking about? stock price or drug price? >> i think drug prices i don't believe drug prices are going to escalate much further than what they have. i think some drug prices will start to come down. i think you are starting to see that this year. from a stock perspective stock prices have already weathered the storm for most of 2016. i do think there are good values there. >> clearly the president-elect is going after cost. he is taking on the defense
contractors now and he is talking about doing the same thing with the pharmaceutical industry. what can be done to cap price increases or bring them down. we have been talking about this for a long time. >> i think we need to have more competition in the united states from a health care perspective. i think a lot of americans in this country are tired of only having a limited number of choices for health care. we need to increase the number of choices that americans can have. i also think 2017 will be a year where a lot of health care system is going to -- >> you look at bio tech. it is good values and i think volume growth is going to be driven by space. that will lead to better
earnings. >> it is about obama care. it sounds like it is high on the priority list although it is not clear whether it is repealed or replaced. what is your base assumption? how will that effect the stocks? >> i think there is a feeling that obama care is going to be repealed. i think that in order for that to happen there needs to be other alternatives for especially a subset of the american population that is relying on obama care. i think the issue we really have here is that we are trying to provide some of the best health care in the united states at a reasonable price. and that's really hard to do. i think that under president-elect donald trump we will have a new plan and hopefully that new plan provides a more cost effective solution. >> we will see. it will be interesting year coming up. thanks so much.
happy holidays. 20 minutes to go into the close. stocks trying to stay positive. dow is a little negative. nasdaq up 7 and russell outperforming. >> americans are racing to get their last minute christmas shopping in. we have a live picture of the crazy traffic at the garden state plaza. over in new jersey.
down. both were strong enough. december sets up as the critical make or break month. whether the consumer has been trained to wait until the end of the season for the best prices. we get a surge in spending and whether more money is being spent on experiences and services like tips and secrets that don't show up. one possible upside for retailers, consumer debt rates are fairly low and savings rates pretty high. that means if folks see something they like they have the ability to stretch for it if they want. there is a moment of panic when it seems the grinch will steal christmas. they might have said in the dr. seuss story individual retailer may or may not thrive but santa and christmas seem to arrive. >> are we at a point now where the retailers are going to struggle? everything is in place now. low unemployment.
the jobs are there. taxes -- all things are going to go into place. we are wringing hands over what retail sales are going to look like. why is that? >> wringing your hands goes along with being a professional retailer. you got to do this a lot. there are two things going on. we have a secular trend and more sales go online. within the broad trend you have ups and downs of whether the consumer has money, whether they feel like spending, whether there are goods they are interested in buying for. i think you are right. the consumer sets up in pretty good financial shape. wages have been higher. jobs have been plentiful. the cyclical part is pretty good. for retailers who have brick and
mortar stores the secular part of that is not favorable. >> wage number yesterday was not that great. we have gone from 5% annual gain to 3.5%. and then the news housing -- it is so choppy. cephali will point out that you can have as many sentiment points that you want and do not translate specifically into dollars. that is not -- it correlates on the big changes when you have big recessions or big boom stuff and confidence numbers matter. confidence does not translate into dollars. it is more important that people have money and have a willingness to spend. i prefer much more tan that to have more money in people's pockets. the wage data is good. i'm not sure that november number is going to be critical.
>> great producer, lisa. >> now you said the right name right there. >> am i going to see you on nightly business report tonight? >> playing a benefit concert. my band is doing a charity concert. >> everybody should go. >> merry christmas. see you later. heading to the close. i am told that the s&p 500 just hit its session high. and the nasdaq, too. >> at least we have green across the board. we'll see if we can hang on to that. up next what he is looking for next week and this week's acronym is in latin. don't miss it.
they showed solid continued growth for the year. the health care sector led the market after being one of the worst performing sectors since the election. david dars you have brought us latin today. >> thank you. i want you to know i wore this tie last friday. president obama gave his news conference which knocked a bunch of us off. i have been wearing this nonstop. i had this on all week. a latin word for joy or joyous. i will go with a latin acronym. >> you didn't go with joyous because you -- >> f is the fed has said three interest rate increases, not two. this week we had industrial
production, late economic indicators all to the weak side. we will see if the market is okay with three. i don't know. they are dependent. the e is energy prices. they are up 2% for the week up 7%. up 36% for this year. that's a good thing. fes. the s is the strong dollar. you don't want it to be too strong up 16% against the yen this quarter. it's 8% against the euro. you won't have to slow down the rise. it hurts earnings of the u.s. we had a stretch for that one. i went with earnings, old word means hair net. hair net and that is being held
back. higher energy prices, higher labor prices. you have to watch earnings for next year. consensus is 7% to 8%. if that comes through then the market can rise. . approval and affirmation of the trump picks and policies thus far this year. which i sit on the committee is still overweight u.s. equities and overweight japan and emerging markets. that's one we are going to wait for things to play out on the italian crisis. we got a march 15th is -- and
april 23 is france. >> very good. >> merry christmas. >> we'll take a break and come back with the closing count down. and after the bell trying to say it is prepared for a show down with the u.s. what the trade war could mean for the economy and stock market is coming up. you're watching cnbc, first in business worldwide. [engine revving] ♪ ♪ is it a force of nature?
where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars. the dow -- typically the day before christmas the trading day is half a day. christmas eve is tomorrow and christmas is -- where is -- didn't polcari where those pants yesterday? >> he has christmas trees. >> we are all trying to -- look at that. >> it is the day before christmas. i thought tuesday is the day it hits 20,000. we came this close during the
day and got within 13 points of that magic number and then drifted as we have been doing for the last two weeks. the dollar index continued on its tear. got up to 103.60. on tuesday that was the it 14th anniversary of the day that it hit that level prior to that. the yield on the ten year up to 259 and then started a pullback. selling as we saw the buying do the same thing. that vix, the volatility index hit a 16-month low and got briefly on wednesday this particular case had a handle in the tens. it was a 1093 before coming back and finishing the week at 1153. bob pisani i guess we will have to wait until next week if it is going to happen. >> the same kind of problem we have been having which is there
is not enough leadership to push the market forward. we had stocks that were up this week and doing not much today or some stocks were down this week and not doing anything. up a little bit this week. all down today. you can't -- we can't get two days in a row of anything. remember that swing in november when the financials and industrial materials went up. a huge milestone. >> the only thing disappointing me on a limb. we hit it this week because momentum from the election. the market tends to rise in the last two weeks of the year more than 70% of the time it is up in the last two weeks. usually by about 1.5%. >> we have had no seasonal rally and maybe that rally was so strong it is pulled forward.
the party has already begun. >> thanks very much. >> merry christmas. 19,932. you will be hearing sweet georgia brown. merry christmas. happy hanukkah. second hour of "closing bell" up next with kelly evans and company. >> welcome to "closing bell." i'm kelly evans. here is how we are finishing up the day on wall street. looks like gains across the board. the dow rising to close around 19932. the s&p one of the -- s&p up about 2.5 points. 2263 is the level.
nasdaq to 5462. the small caps rustles nearly two thirds of one percent. having a strong session to close. the transports strong today with a 30-point gain. president-elect donald trump asking boeing to come up with a claim comparable to the f 35. we have been watching these shares. lockheed down on the close. coming up we will talk to democratic senator richard blumenthal who represents a state where the engine of the f-35 jet is made. here to talk about the markets today eric marshall from the hodge s funds. sandy villere. thank you for joining me. eric, start us off with thoughts about the market today. >> well, you know, we think that the market has been trading side ways here over the last couple of weeks as it digests the tremendous gains since the election. we remain relatively
constructive on things. we see opportunities in some financial consumer tiscretionary especially those tied to infrastructure. >> dow almost 20,000. i think people are not talking about the russell 2,000 which is -- s&p up about 10. all of a sudden you have more risk equals more return whereas the last two years you saw 2014 the s&p outperformed the russell 2000. i like that we are back to normal where more risk equals more return. >> we are showing some are your picks to you. the issue is the russell has been on a tear. how much more can it go? >> i think it has a lot of catch up to do. >> i think that the russell has further to go.
when you look at the interest rate landscape stronger dollar, good for domestic small cap companies, tougher for multinationals coming off of two great years. we have seen a great out performance. that is going to carry forward as you come into a completely new pro business landscape. i'm excited about smaller cap companies. >> what were you going to say? >> i would add that we see an environment where activity picks up. that should be good for small caps in addition to being probably the area where we are going to see the greatest reacceleration in earnings growth and some of the greatest beneficiaries of corporate tax reform. >> you have a couple of specific picks. why these companies. >> in the case of both of these we think there is unique secular growth opportunities. we like to look for companies that are the low cost producer
and that fits the case of building wire ffrer. there has been a lot of consolidation in their industry. we have seen wire prices becoming more rational and hill top is really texas bank that we see having a lot of leverage to higher interest rates as well as above average growth prospects. >> checking in from the nasdaq. look, we are going into christmas not having dow down 20 k. >> i think we will get the conversation which is about where is there earnings growth and where there are interest rate pressures. small cap land after the move we have had. mega cap tech this was a place to be very defensive when
worried about valuations and where we question global cyclicality. i think the nasdaq has more of that for you. >> so the big cap tech names haven't gotten all of the attention they would have gotten when they were the whole story. what do you think becomes the new story. can they keep going after gains like this. >> if you think about the dynamics that are blessings and curses it will be the strength of the dollar and interest rates which tell you there is global and pricing hower for businesses. global pmis are five year highs. the debate is staring at structural reform. i think if you are looking for places that have performed they will do up to the point that the dollar and interest rates choke
the economy. i think they are actually the safest trade. think about where we were on credit concerns. the same issues could be there for january. higher rates should be hitting high yield. those are things that scared everybody. >> you want to respond to that? >> i think that the areas that we really see the least amount of opportunities would be in the utilities and some of the fixed income, bond market, consumer staples and those areas for that exact reason. >> and also we have the issue with the european financials. just real quick is that -- you talk about the kind of bailout that italy is arranging. should they get involved in european. they have been lagging the u.s. and can make up the difference. would you recommend that strategy or is it u.s. fundamentals are so much better in. >> we are mainly focussed on domestic companies and take a
bottoms up approach. i think within a lot of u.s. financials especially regional banks you have a good degree of transparency and relatively simple capital structure. >> stay right there. let's get a quick check on oil which has been a big factor for the markets laltly and the oil rig count. >> good afternoon. baker hues reported that we added 13 oil rigs last week. that was eight straight weeks of declines. most of those weeks we have seen double digit increases. only 15 rigs down. oil see sawed. we started out negative but managed to eke out a gain. you can see we're stuck smack into the middle of the range. oil markets are tentative and watching equity market.
the holiday period can be difficult. people are away on vacation so this is a wait and see kind of period especially before the three-day weekend. i want to point out this has been a crazy year for crude oil prices. we saw 2% gain. and in the last year a 40% spike in crude oil prices. in 2017 will we see that rebalance between 60 and 70? that is what everybody is waiting for? >> huge trillion dollar question hanging over the market. financials and energy are basically the ones at 40% this year. have you looked at it. >> we are in louisiana so very conscious about the oil sector. we like it a lot. it's an equal weight right now.
we have a bottom's up approach. the larger multinationals are doing fine. we want to focus on the smaller companies that have opportunities for expansion and a lot more deregulation. >> let me stay with you for a second. the idea is more is staying online. they're not horrible. hesitant to take a call on where oil prices are going or do you think it is too risky to be involved in a sector for the time being or here the names that you would look at to invest in are that appealing? >> the companies that we like apache is one i like. very specific catalysts for those companies. i think oil will be range bound but if you can find good companies to grow nicely i think you will come out on top.
>> when it comes to who is going to be leading this market. does that continue. >> part of the position where are we on positioning? i think there are under weights in the financials. i think european financials if you take the balance sheet you have the conversation that's a fantastic balance sheet in a company that now that some regulatory stuff is behind them. i think you have to think about the things that were leading before election and then continue to be reflation trades and continue to be i think those sectors that won that value and not as much value in financials. there is not a whole lot of value there at all. i think if you start to impude upon what $60 oil has and in a normalized environment they are very cheap. you want to go for high beta oil
plays. i think 60 before 50 absolutely. >> that's a big if. calling the direction of the oil price but i take your point. >> i think the oil market is balancing right now or rebalancing right now. i think it is more in balance than people think and demand is stronger. that is a bigger dynamic. >> let me ask briefly before we go whether -- retail names pop up on your screen? >> i think you have to be very selective. there has definitely been a shift in leadership within retail. we think there are certain areas that you can really pick winners and losers. this is really a period in time to focus on active portfolio management and not just going out broadly and buying a retail
etf. looking at winners and losers in that space. >> to me it sounds like the gain. we think that you really have to look case by case given we found opportunities in things like j.c. penney's which has struggled. but we think that we'll make money in that stock over the next year. >> save your pennies at j.c. penney. they have very clever little marketing slogan. why the sell off in gold has gotten so bad it might be good.
>> trump asking boeing to come up with a plane comparable to lockheed martin's f-35. senator blumenthal, that is where the f-35 engine is made. one of apple's new products failed to get a recommendation from consumer reports for the first time. we'll tell you which one coming up. you're watching cnbc, first in business worldwide. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here.
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welcome back. russian president vladimir putin down playing suggestions there is a risk of a new nuclear arms race between russia and the u.s. eamon javers has more. >> a tweet from yesterday started off this talk of the possibility of a new nuclear arms race between the united states and russia. donald trump tweeting yesterday the united states must greatly strengthen and expand nuclear capability until such time as the world comes to its senses regarding nukes. that set off a series of back and forth commentary and a press conference in russia this morning and talking about this saying if anybody is creating a new nuclear arms race it isn't russia. he pointed out that the united states has been modernizing forces and positioning them in
various areas in europe. putin also making an interesting nuanced point here about what would happen if there is a new nuclear arms race given the last one in the 1980s bankrupted sth soviet union and was disastrous for russia. here is what vladimir putin told his audience in russia. >> translator: i would like to say that will never [ inaudible ] more than it can afford. >> putin not saying there wouldn't be an arms race but if there is russia won't -- >> president-elect donald trump also taking to twitter to put extra pressure. tweeting he asked boeing to price out a similar jet the f-18 super hornet.
morgan brennan joins us with a look. >> what is the best defense against twitter? that is what investors are trying to sort out. take shares of lockheed martin down out of control costs. prior to that tweet lmt stored 9% post election selling off last week before retracing some of that gain and falling again today on the heels of the second trump tweet. a similar chart, a top subcontractor for the f-35 which accounts for about 7% of the revenue. it has been better for boeing. the stock rallied since it was first the subject. that is when it is air force one. keep in mind all of these talks are still higher post election and overall the sector has had a
great run this year. the ita, aero space and defense etf up about 20% for 2016. that is in part because defense spending is expected to grow here and abroad under a more hawkish administration and because quite frankly the sector moves and we were due. the big question, how will that funding shake out? how much more risk sharing of costs will they be expected to consume. >> morgan. thank you. lockheed martin, planes built at a facility in fort worth, texas. the engined are made in east hartford, connecticut. senator richard blumenthal a member of the armed services committee. welcome. >> thanks very much. >> how much is at stake if the
f-35 program is cancelled for connecticut? >> the f-35 program means thousands and thousands of jobs, very high skilled jobs as part of our defense industrial base. these kinds of workers can't simply be hired as a result of a wanted ad in the newspaper. they have to be trained and skilled. that's why these kinds of tweets are in a sense a disservice to our defense industry which is so vital to the f-35, the fifth generation aircraft which has stealth and strength that is incomparable. >> the process here is about trying to bring costs down for this program. and in a way which would ensure a more viable future. what is the process for doing that? it is argued that the congress is standing in the way because of job benefits that comes. >> armed services committee
hearing knows we have pommelled the pentagon on the f-35 led by our chairman and we are seeking to lockheed martin themselves called a war on the cost. costs have been driven down 70% in the past five or seven years. and there will be further decreases in the cost especially if the scale of production rises and that creates uncertainty and instability in hiring and investment and expectation. >> let me ask you about the pentagon. we saw high level military officials meeting with donald trump this week. he spoke as they were leaving about them being good negotiators. is this a part of the negotiation between the pentagon
and congress and yourself. >> there is an opportunity to bring down the cost even more not only through negotiation but looking at the weapons systems more fundamentally, getting beyond 140 characters in the tweets. there is a need for reforming the procuring and contracting process here and we have focussed on that issue in the arms services committee but let's remember right now the f 35 gives the united states air superiority. and the russians and the chinese are developing their own fifth generation. if we sit back we will be disadvantaged and we will lose that air superiority that is so critical to our national defense. >> thank you for joining us. >> thank you. there is one retailer
dominating the holiday season. later chinese state media sounding the alarm for choice of white house trade council. what it means for the companies that could get caught coming up in the closing bell. ♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500,
collected between november 1 and december 16. and well beating rivals like best buy, target, wal-mart and macy's, none of which collected more than 4% of that share. chinese state media warning of a potential show down over trump's choice for trade council. impact on companies that rely on china and products failed to get recommendation. we will tell you why later on "closing bell." this is my reti. this is my reti. 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. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars.
welcome back. buying power on the close. nowhere near enough. s&p up a couple of points. the nasdaq up 15. time for cnbc news update with sue herera. >> here is what is happening. fallout from the u.n. security council's vote. it passed a resolution. the u.s. abstained from the vote in what is considered to be a major break from policy.
president-elect donald trump who has been against the measure reacted to the decision on twitter. he tweeted things will be different after january 20. israeli prime minister's office speaking out saying the country will not abide by the terms calling the decision quote shameful antiisrael. there is word president obama will hold his farewell speech in the windy city on january 10. sources say he will thank chicago and the state of illinois for launching his political career. and the radio city rockettes are scheduled to perform at president-elect trump's inauguration. apparently not all are looking forward. one posted she was embarrassed and cis appointed on instagram. the rockettes the organization that represents them says it is purely voluntary. so you are up to date. that is the news update.
>> same to you. thank you so much. merry christmas. china state media warning of a show done with the u.s. after president-elect donald trump picked peter navaro to head the trade council. >> what donald trump has said is that we are going to use tariffs as a negotiating tool to force countries like china and he has called him the biggest cheater to force trading partners. to stop the intellectual property theft that takes $300 billion out of our economy. >> and carl icahn was on halftime yesterday and had thoughts on a trade war with china. here is what he had to say. >> obviously you get -- sooner or later i think we are going to have to come to grips with that and maybe it is better to do it
sooner. that's not my decision at all. >> couldn't be better to do it sooner. what could that mean for companies reliant on china for trade? talk about the companies that might be caught in the cross hairs. what would your advice be? >> look at the large chinese names. they are dependent on the chinese consumer so i think the chinese consumer is just fine if you really wanted to impact china you have to go someplace else. >> what about the companies that expanded into china? seeing huge opportunity over there spending tons of money. a company like starbucks not exactly a trade but a service, what happens to companies like that? >> i think those companies are going to get hurt. we saw this with the fine imposed on general motors of almost $29 million. this is an indication, shot across the bow. you have to remember that these
companies put themselves into a state known for retaliating. although the u.s. should protect them there are other economic interests that need to be protected. because we have this $334.1 billion trade deficit with china last year, china doesn't really have too many things that it can do to retaliate at the end of the day because we can buy our shoes and toys and clothes elsewhere china cannot replace our market. >> i was going to say it is shooting themselves in the foot. if there is some kind of trade war which would mean what? it would mean escalating tariffs and would mean voluntary decisions not to export from one country to another. would that hurt china more or the u.s. more? >> it would hurt china more because china has built up this manufacturing platform and not just for u.s. companies but companies around the world so china is in global supply
chains. if china decides to retaliate against united states it is not only go going to go to war against american companies but will jeopardize the position for all manufacturers. china has a lot to lose if it goes that route. china's exporters are already in trouble because of artificially high. exports are down about 6.5%. this is not a good story for beijing. >> what about the u.s. consumer? especially at the retail level where so much of the manufacturing has gone to cheaper china? i would imagine any kind of trade war will mean retailers could pass along the higher cost. >> so the consumer at wal-mart where most pruks are made in china that is a concern. if i were wal-mart or major retailer i would be concerned about that. the fed is prepared for more rate increases. if the shopper isn't doing it and donald trump has to focus more on infrastructure and other
forms of spending to keep that gdp somewhere realistic in the broader sense because the world does see the u.s. as main economic engine they are going to be -- do they continue to raise rates or keep things where they are because the shopper is not going to wal-mart? >> not even to mention some of the tax changes that might happen at the border and effect the retailers. we'll see how companies navigate such a period. thank you both. no surprise the holiday season is key for retailers. you may be surprised to learn it is crucial to facebook. we'll tell you why after the break f. you are thinking about buying someone a mack book pro you may want to think again. those details coming up. i've invested a lot in this game
and the returns i get out are measured in reps, huddles,bright lights, competition and games played. at td ameritrade we believe the best investments are the ones that matter most to you. welcome back. it's really crunch time if you haven't finished all of your holiday shopping yet. let's get out to greg surgal in the middle of the action in a mall in garden city, new york. >> we are in garden city, the ninth largest in the country. one of the oldest opened back in 1956. today as you alluded to this 60-year-old shopping center is absolutely hopping. parking lots outside are almost completely full. we are seeing long lines of shoppers here inside. it all jives with estimate that
this is the third busiest shopping day in the year in terms of foot traffic behind only black friday and day after christmas. the good news for the last minute shoppers throughout the mall we are seeing deep discounts posted by retailers in some cases up to 50% off. one guy who loves this last minute shopping told me this is an exciting but also a very stressful day. interestingly, though a number of folks that i spoke to told me they don't usually like to wait until the last minute but this year for some reason work demands and family demands have pushed back the shopping responsibilities until today. retailers, of course, are hoping to see a lot more of that before this mall and others close tomorrow night in the hopes that this will be a very successful shopping season. >> are you an amazon guy or are you going to do it the old fashioned way? >> some amazon and some here at the mall.
get a taste of the human contact out here during the holiday season. >> it is nice as long as you are not fighting the traffic and the lines and all of it. something about this time of year. it's no surprise the holiday season is a huge boost to retailers but impacts other companies you wouldn't expect. >> thanks. we call them the 12 companies of christmas. we found exactly a dozen of them from the s&p 500 that have relied on the holiday quarter to earn more than 30% of annual revenues in each of the last five years. stores like macy's and kohl's and specialty retailers like l brands. amazon and best buy. these companies generally make sense but this is where it gets interesting. three companies that you would not expect to be up there, facebook and yum brands. let's start with monsanto, the
only company that has a real connection with the seasons of mother nature. december sells seeds agriculture products to prepare for planting season. facebook with them they are fundamentally an advertising firm and so much more ad spending happens in the fourth quarter to get you to buy these christmas goods. and then finally yum brands probably has the weirdest reason. the filings say the business is not seasonal. when you dig further you find out yum has a big fourth quarter because it decided to have a 16-week fourth quarter with 12 week quarters the rest of the year. that could be a future story how many companies are changing quarters. those companies are way up on the list. >> i can understand if yum was a seasonal business. to have the fourth quarter be stronger. facebook is interesting. did we imagine that a lot of advertising models do business
this time of year? >> you would think so. that is not on a quarterly basis. they are having that type of effect. when you look at bigger media companies they have a lot more diversified assets like run events business or whatever so don't just get ads only. >> i wonder if facebook evolves into middle model. >> does the fourth quarter become less and less important over time. >> monsanto. this is planting season. >> begins that quarter for them when people start planting season coming into the spring. they are the third biggest, third highest percentage of the entire s&p 500 of december based quarterly revenues. >> you look at the surface level and you think you know the story about why people are so strong. i would not have thought of seeds. >> you haven't bought them to get ready to plant them later. >> that would be part of it, too. when it comes to yum brands any reason why it is seasonal or
they just have this. >> if you look at it on a per week basis the revenues are basically the same. they have a little more revenue the fourth quarter. they would not explain to us why they do this. it is buried in their filings. by the way, we have a longer fourth quarter. there is no reason given. >> maybe kfc in the mall. >> per week sales are the same. maybe like they don't want 13-week quarters. a black eye for apple mac book pros. the investment firm getting 50% of profits to charity. the founder explains that strategy coming up. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be.
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welcome back. just ahead of christmas consumer reports is putting coal in apple's stocking. what is this all about? >> so that's right. consumer reports is saying that it will not be recommending apple's new mac book pros. the problem, the computer's battery life. consumer reports saying the mac book pro's battery life was quote highly inconsistent from one trial to the next. for example, one mac book pro model ran 16 hours in one test. another model enjoyed a strong 19.5 hours of battery life and then dropped to 4.5 hours in another test. bottom line here, these are the
first mac books not to receive recommended ratings from consumer reports. apple, of course, introduced these new machines in an event in october calling them the new gold standard in notebook computers, thinnest and lightest ever. patrick moorh tells me he thinks the potential problem could be a software glitch specifically something wrong with the power management software. if it is true telling me it could be an ease fix. apple is working with consumer reports to understand the data in this review. >> josh, stay right there. joining me here to discuss this cnbc contributor ed lee. alarming, annoying, where does this fall on the scale? >> it may not be the best laptop
but saying don't get this. >> reminds me of tesla. got these rave reviews and then more recently they had to withdraw some of the recommendations. >> what is interesting is that apple has been driven by the wow factor. they create a product you have to have. getting better and better. >> it's nice. it's more gimmicky than it is useful. i think if i play with it longer i might find more use for it. it's like they are tacking on these interesting gadget level things that doept change the game. >> you say the company's response is trying to reach out and it makes it seem like they have no idea. >> so i should point out that i reached out to consumer reports and didn't hear back. the company declining comment.
i think you did see such big variances in the tests that i would assume that tim cook already has his engineers very least here looking at this test at the data at the methodology so they can get a better sense of what would explain and hopefully get back to us with an explanation. >> if it is a software problem it is relatively easy fix. if it ends up being hardware problem it is a much bigger deal. >> what has changed so much? is it possible that there is new infrastructure that didn't exist? >> i don't know the guts of the machine but the machines are getting more complicated. they are stuffing more things into them to make them more useful. >> yet they are getting lighter and lighter. i think at some point you are maxing out. i don't think you can do much more than you have. >> these headlines unprecedented, alarming and to the consumer who might like that
gimmicky, does this just become, is it a problem? >> it's an annoyance. apple takes a slight reputational hit. bigger deal. right now, it does seem like a software issue. >> i would say the reliability of their laptops, they have owned the laptop category on the high end. >> and a lot of businesses now, they're issuing mac books as a way for their workers, as well. on system level, there is an enterprise benefit. >> and an enterprise risk. so they start to say, we're not sure if we give somebody a laptop and they're on the road for a period of time, what's going to happen with the battery life? >> a lot of startups, relatively small business, they're issuing mac books to all of their workers and might stop doing that. >> josh, we heard reports like this for any kind of laptops. if there has been a sea change out there, it would affect more
than just apple or perhaps there is something unique about their technology in this case. >> yeah, a couple quick points. ed is totally right. if it was a battery issue, if it turned out to be a battery issue, that would be a bigger issue. i did talk to patrick moorhead, long-time tech analyst guy. when he read the report, it didn't look like to him this had to do with an actual chemistry problem in the battery. again, appl at least not right now, not commenting to us. but you can also expect, you're going to keep hearing about these issues in 2017. battery issues are not going away. we saw samsung's debacle. lithium batteries basically controlled explosions, kelly. we expect the batteries to do more and more. unfortunately, you can pretty much count on more tough headlines in 2017. >> i wonder. although, ed, if i'm a company and i don't have the same problem, that becomes my biggest selling point. >> right, exactly. the phone that doesn't explode or the laptop that lasts longer
than three hours. >> how high our standards have become. >> exactly. >> iphone battery issues? >> no pat tree issues. i think in general, users complain you want the battery to last longer. for now, there hasn't been any issue. >> ed lee, josh lipton, thank you both. and any auto face for the world of wall street. the financial firm giving 50% of its profits to charity. the man behind that business model, next.
welcome back. and here's something to get you in the holiday spirit. texas-based firm, bridgeway capital management, donating 50% of its profits to charity every year. in fact, it's part of the firm's culture. joining us more to talk more is founder, john montgomery. john, welcome. thank you for joining us. >> thank you, kelly. >> so this goes back to your founding, right? i mean, people often think they have to do work on the one hand and philanthropy on the other, and family on the other. how have you managed to make this part of your business model? >> well, it's just an idea in
the beginning. there are more models of this today. we take it to an extreme, and we like to say at bridgeway, it's more powerful if you can mr. it right into the fabric of the organization. so people come to bridgeway, because of our mission, because of our generosity. and it's just powerful in every way. in terms of place to work, in terms of our investors, and in terms of the communities we live in. >> so let me be a scrooge, john, and say to you, all right, you give half the profits to charities, does that mean my mutual fund fees can come down by half? >> well, our fees are already on the low end of the spectrum, kelly. so we like to say we work really hard to keep those lolo. that's in the interest of our investors. but instead of doing other things we might do with money, maybe buying the next yacht, we do what we think is more powerful in gauging in communities, giving back and making a difference. >> you've done a lot to support causes in africa. we have got a number of these on the screen, as well. education, homelessness. we are actually at a very
difficult environment in terms of pressure across, you know, mutual funds and those kinds of companies. do you ever feel that sense of -- this might have worked for a while, but -- and in this brave new zero cost etf world, maybe it's not sustainable. >> well, here's the thing. in our industry, for sure, but i actually think this would apply in most industries. profit margins are such that you can always give back. there's not -- there's not the same need for investing in t capital. we don't have a lot of inventory that we have to rebuild for. so maybe a little easier for us than a manufacturing company. but every company can do something. 1% will make a real difference. >> absolutely. john, you left school in 11th y grade. i've been reading up on you. but not for the reasons people usually talk about. do you mind telling us that story? >> well, when i was in 11th grade, segregation was fresh in
houston. and people were being bussed around. and i already went to a private school. but i was very aware of the sheltered life i led. and approached my parents and said i actually want to withdraw from my private school, spend a year in the inner city school. so that made a difference in what i could see, what i grew up with, shaking it up with people that at that time really whether or not -- didn't grow up with me in my neighborhood. that gave me a broader view and something i'm thankful for. >> a pretty head-strong thing to do at that age. you have helped a number of causes. can you give us a couple of examples of ways you think this money has made a big impact? >> it has with a number of organizations. my personal favorite is engagement with peace-making reconciliation and ending genocide. we have done some dynamic work in africa by way of seeking to
end the longest running war in africa, the lra. so our contra lra effort and teaming with others there in africa. african union soldiers, people on the ground that are doing dramatic work. and then partners in the u.s. it's not just bridgeway, but we've partnered with howard buffered foundation, with others. and i'm a believer in community to do great things. so that's overseas. if you look at home, most recently, we worked with an organization called provision in our hometown of houston. one of our partners got involved with them and introduced them to a local rotary service organization. some of that is giving money, but more powerful when you engage directly with relationships. so our last corporate retreat, we actually went out on this urban farm, shook it up with some inner city kids, side by side, and relationship and empowerment and leadership is
awesome. >> service, leader shm, and i can tell you the employees have told me directly how proud they are to represent your firm, john. thank you for joining us and a very merry christmas. >> most welcome. thank you. >> john montgomery, the founder of bridgeway capital management. and merry christmas to all. that does it for "closing bell." "fast money" begins right now. "fast money" starts right now. live from the nasdaq market site overlooking new york city's sometimes square, i'm melissa lee. tim seymour, brine kelly, brian grasso and guy adami. gold having its worst stretch in 18 years, but the charts suggest it could be flashing a buy sign. and despite trump's love of it, twitter has lost 12% this week, prompting one analyst to call it, quote, unquote, toast. are any of our traders buying this stock? they'll weigh in. and later, one of the hottest trump trades showing signs of cooling off. we'll tell you what that is and how to profit. first, we start off with the losing streak that very few people are talking about. and that is the chinese stock market. check out shares of the