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tv   Closing Bell  CNBC  October 27, 2017 3:00pm-5:00pm EDT

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with 15,000 miles is in the minimalist styles, black leather, silver and titanium finishes has the motorola-issued car phone inside, going to be put up for auction at an icon sale. >> buy it. >> thanks for watching "power lunch. >> k"closing bell" starts now. >> have a great weekend, everybody. hello, everybody and welcome to "the closing bell." i'm kelly evans at the new york stock exchange. >> welcome back. you missed nothing it's been very quiet week. >> no major earnings, no big market moves. >> not much going on this week. >> any parts of the country declare king independence. >> no, no, none of that. today, what a day, big story is technology the nasdaq soaring today the dow is not telling the whole story at all amazon, alphabet, microsoft, intel, we could add to that list as well. all hitting highs today. is this the all clear for
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technology investors with these kinds of gains after stellar earnings last night? it was unbelievable. we've got a story on that coming up in just a moment here. >> you guys had your hands full. >> it was a rollicking hour, i hear >> it was. meantime, a rollicking deal through the health care space. cvs is pursuing a major deal to buy aetna and former aetna ceo john rowe will join us in a cnbc exclusive to discuss what that bid could mean. >> what a fascinating story that is can't wait to talk to john about is. also look at oil today, trading higher, brent is back to $60 a barrel and wti is at an eight-month high however, chevron is falling. what's behind the move and whether this is a buying opportunity or not we'll talk about that coming up in a little bit later. >> is pretty sharp moves in oil today. let's go back to the big rally in tech stocks, thanks to strong earnings from a trio of tech giants. deirdre bosa is all over amazon's results for us.
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josh lipton covering alphabet. jon fortt is covering microsoft. deirdre, let's kick things off with you. >> amazon shares surging more than 13% last time i looked above the 1,100 mark to all-time highs bringing year to date gains to 45% and'sly taking its market cap over the half a trillion dollar mark less investors, as usual, willing to accept lumpy profits especially as more consumers enter the amazon ecosystem subscription revenue including prime membership signups grew nearly 60% in in the quarter and its profit engine, aws, saw its profit margin expand that may be the riskier bets amazon is making in unproven businesses like groceries, hardware and content look like short-term pain for long--term gain during the quarter, amazon closed its whole foods acquisition, contributed $1.3 million to revenue and first time amazon broke up physical store sales with cfo telling
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analysts during the call that expansion into brick and mortar is on the way. to top it off, guys, amazon gave upbeat guidance going into the all-important fourth quarter holiday shine. back over to you >> unbelievable. i mean, this has been a watershed year for amazon, and, by the way, let's north forget, deirdre, with this gain now, jeff bezos is now the richest person in the world. once again >> in the world. >> just over $90 billion the size of his fortune. thanks. >> $1,100. >> beating out gates again. >> yeah. thank you. shares of alphabet -- it's not just the earnings, it's the ware the way these stocks are moving today.alphabet, up 5%, new awetime high for that company today. josh lipton has an runthrough what's going on overright, kelly, alphabet moving slightly higher after the company reported a clean beat across the board. one number that spoke out, revenue from google properties
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jumping more than 20%, these properties that it owns such as search, youtube and maps that number comforts bulls giving increasing competition from areas like an don mazon ins such as profit search. also dealing with the headache of increasing regulatory pressure specifically in europe, but revenues from the region that includes europe were actually up 23%. another worry, traffic acquisition costs or payments that google makes to partners for traffic, investors care about tech because it can pressure margins, total tac did jump more than 30% but operating margins net of tac actually clocked in at 35%, and that was the best since q4 of 2015 brent till of jeffries is an alphabet bull, points to one blemish in the quarter, capital return company still has more than $4 billion remaining in its current buyback program, but bought back no stock in the quarter. certainly has the freedom to do so alphabet now sits on a cash mountain of $100 billion guys, back to you. >> oh, yeah, we were all over the tac story last night.
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>> i'm thinking about it's such a wonky phrase >> that's okay >> when you got to buy your traffic, i understand why people are focused on it. >> makes you sound smart when you can talk like that >> i think of tic tacs, too. anyway, thank you -- >> thanks, josh, see you later zblechl zblechl then there's microsoft, the granddaddy of all technology companies. >> granddaddy. you're right. >> jon fortt breaking down those results. >> maybe the great uncle ibm's older. yes, microsoft up about 7.5% at this hour. the commercial cloud business officially on a $20 billion annual revenue run rate, a year ahead of schedule. that along with an assist from a surprisingly buoyant consumer-facing business helped the company to a beat that pretty much worked across the board. the stock's up, as i mentioned, 7.5% at all-time highs significant here, ceo nadella didn't get here through aggressive discounting capture the usage data to build
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products people love and charge for premium software and services so far that seems to be working. nadella said on the call office 365 commercial has 120 million active users, linkedin has 130 million members and azure was up in constant currency commercial cloud growth margins, profits there were 57% what's next? microsoft plans a continued push into the cloud and hand-to-hand combat with amazon there and office 365 appears to be pretty healthy, so perhaps room to run, kelly. >> maybe it's aging backwards, the benjamin button of tech. jon, stay with us. will the surge in tech broadly continue let's bring in dan ives, and jason ware guys, thank you both for being here dan, you know, what do you make of the stock price moves today that's what strikes me the most. i understand the company said strong earnings and, you know, we're still seeing that even as big as they are, these are huge reactions pushing these companies' valuations just ever higher what do you make of it all
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>> yeah, this was the home run quarter across the border. trifecta of earnings some bears holding out for soft results from some of the stalwarts. all the secular themes, cloud, e-commerce, mobile, look at social you got everything last night. obviously on retail with amazon and some of the whole foods worries that were overblown. so this really, i think, gives a full green light to looking at tac into year end. i think you're going to continue to see multiples expand and really look across the space, even laggards like twitter had strong earnings. i think it speaks to the secular themes and that's why this was really a go sign for investors to look at tech and, you know, a huge bull sign in terms of going to year end. >> is jason, what do you think has tech -- big tech found another gear or are -- could this be signs of a blowoff right now? >> well, i agree with much of what your previous guest mentioned. these are secular growth themes, high quality secular growth
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themes and the leaders in their individual spots within technology i think one of the elements that we're seeing today and the reason the stocks are responding the way they are is a consistent theme is accelerating performance within these companies, accelerating revenue. this is the best revenue growth for google in three years, for example. so we're continuing to see analysts and investors trying to catch up to these stocks, despite their year-to-date returns being so great already, the performance in these companies continues to improve in in such a way that folks have to continue to pick up their estimates and the stocks are responding in kind >> john, i wonder if this invites more of what the biggest risk seems to be for tech right now which is regulatory reaction i mean, it's hard to say that these companies don't have massive market power when they're demonstrating that with these results. >> actually, kelly, i think it's the opposite here's why in intel's results, they talked about how they were able to actually stay profitable in the cloud. you would think that if cloud players like amazon and microsoft had too much market power, they'd be able to
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pressure the margins of suppliers like intel then you've got amazon jumping into the same markets that netflix is in, jumping into the market also with apple on content. so, so many of these giants are fighting with each other, arguably to the benefit of consumers. i would point out even though it didn't report earnings last night, apple is up 3.5%. part of what's coming off the table for many of these companies is doubt there were doubts about the iphone x, but with preorders appearing strong, demand wise, that could happen to be why that stock is up as well. >> jon, let me ask you, that's such a good point. so why is it in that kind of combat environment you're describing that all of these stocks are doing so well if they're all winning without hurting the market, for example, who are the losers >> reporter: well, i think the loser is legacy technology in this case, kelly enter this age of cloud, not everybody has been able to successfully make that transition, but the common thread through all of these companies that reported last night and did so well was that
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they were able to profitably move into the cloud by leveraging their old strength in new ways whether it's intel with fpgas, programmable chips, whether it's amazon being able to use the infrastructure that built the retail business and repurpose it for the cloud, so that's going to last for some period of time. investors will have to gauge how long they think that is. then eventually it's going to start to become zero sum for somebody and then somebody moves. >> it all right. gentlemen, thank you i have to go move on. just an amazing day. jon fortt thank you as always, dan, jason, thanks for joining us today. we got new details now on when president trump could announce his fed chair pick. eamon javers joins us with those details. eamon? >> reporter: yeah, hi, kelly, white house press secretary sarah huckabee sanders wrapped up her briefing over at the white house and in that briefing, she confirmed for the first time that the president will announce his pick for fed chair next week. previously, the white house had suggested the president wanted
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to do the announcement before his asia trip on november the 3rd but they hadn't pinned it down to specifically confirming it would happen next week. some aides had even suggested to me privately that the announcement could slip until after the asia trip. that suggests to me that something has firmed up behind the scenes now that the white house is willing to go out and publicly confirm that the president's going to make that announcement next week now, who will he pick of the potential fed chairs you know, you see the list there, janet yellen, kevin warsh, gary cohn, john taylor and jay powell all have been mentioned. the white house says officially all of them are still under consideration but when you talk to white house aides about gary cohn, they say, well, he's doing such a good job on tax reform, we really need him in the trenches for that. might be the wrong time to make a switch for him the president had said nice things about janet yellen recently, but of course, she was appointed by barack obama. that might be a sticking point for the president who might want to make a clean breast of things as to which of the remaining candidates are out there, it's
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anybody's guess at thisfinfitiv here but confirmation that we're going to get this announcement next week. >> eamon, what exact language did they use i mean, is it definitive or how did they talk about this pick coming next week >> reporter: sarah huckabee sanders said in the briefing that the president will make this announcement next week. we don't know what day next week, but she said he'll do it next week. that's different than the language they've been using before where they said simply he intends to make the announcement before he lee leaves for asia, you know, suggesting privately that that could slip now they're saying he's definitely going to next week. >> that's pretty definitive. thanks, eamon, see you later. >> yep, you bet. >> we're not finished here we have new developments apparently on tax reform ylan mui stepping in with those. what's going on? >> bill, house ways & means committee chairman kevin brady now saying lawsuit make ining m raising limit for 401(k)
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contributions potentially to $20,000 or more. brady said he's met and spoken with the president, excuse me, at least twice so far this week and the goal is to get people to save more and save earlier now the kuscurrent limit on thoe contributions is $18,000 and just earlier this week, lawmakers had been considering lowering the limit to $2,400 this would be a stunning reversal if they do decide to increase it. it just goes to show you how difficult some of these tax reform decisions will be one unanswered question is how lawmakers will eventually raise the money they need to pay for tax reform that bill is due out next week we'll see what those details look like, guys. >> wow as well meaning as that is, that is counterproductive if they're trying to close the deficit gap. that's for sure. >> that's the interesting question, ylan, sounds like the biggest pay for is still getting rid of the deduction for state and local ftaxes. if this becomes a new thing that weighs on how much this bill
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costs, how does that affect what's going to pay for it >> these hard decisions have yet to be answered what we've seen so far is republican lawmakers under a lot of pressure to keep some of those really popular provisions that cost a lot of money like the state and local tax deduction. like the tax-free contributions to 401(k)s and so we don't know yet how they intend to pay for this. they've got a $4 trillion wish list and only $1.5 trillion hole that they can allow. >> they do plan to unveil this when, next, on president 1st >> on november the 1st right after halloween. >> that would be next week as well right after halloween. >> the fund industry, retirement industry, will be cheering if this thats. >> that's the case. >> if you're going to talk about incentives to get people on the right footing for their own futures, increasing the amount they can do, tax advantage to save, is a lot better move than dramatically reducing that which
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would upend the entire thing. >> $2,400 is pretty draconian, that's for sure. ylan, thank you, see you later. next week shaping up to be fun as well. >> the economy growing by a much better expected 3% we found that out today. up next, how you should be investing in that kind of growth environment. we'll talk about that. plus what a big story this is, cvs reportedly in talks to acquire health insurer aetna coming up, we'll talk to aetna's former ceo john rowe get his take on what this deal is all about coming up. and we always love to hear from you folks reach out to the show as you know on twitter or facebook or send us an old-fashioned e-mail. you'reating wchcnbc, first in business worldwide welcome back, kelly. alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets.
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welcome back. here's a big tech player not moving higher today, tesla is lower on a report it plans to slash orders for parts for the model 3 sedan by 40% the report says the electric car company will cut orders to just 3,000 sets per week from 5,000 sets starting in december and that's due to a bottleneck in the production for the model 3. shares were lower by about 2%. >> what has the bigger bottleneck, the iphone x or tesla model 3? >> good question from what i've heard today, getting that iphone x is a re
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real -- if you're trying to pay for it monthly, good luck to you. >> right exactly. yes, with e wee were just havin conversation. let's get to our "closing bell" exchange, all about technology today let's talk about that. andy caprin, director of research at region atlantic is with us at post 9 today. keith bliss, senior vice president at president. and jack, co-founder at ucx is joining us from the cme in chicago. what a day what a week. >> what a day. i tell you what's truly interesting about today, maybe one of those rare days we're on an absolute dollar amount or about lu absolute point amount where the s&p might be higher than the dow which is a very odd occurrence we've seen it vacillate back and forth primarily because amazon, google, amazon and alphabet, are in the s&p but not in the dow. >> it's on the screen, so everyone can see the s&p up 21 right now. the dow up 36. it's not often you see -- >> almost never. >> yeah. >> almost never. and then, of course, the impact
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of those names, bill, if you take a look at the nasdaq, the nasdaq is up over 2% i think, you know, for me, watching those names report yesterday, and two other tech names that didn't get a lot of the headlines, bidu and intel, two major tech names. >> intel is up big today, too. >> outperformed tremendously well yesterday on their earnings report it speaks to the underlying strength of the tech sector, we were nervous about it, nasdaq was getting a lift from the five or six names the crows have come home to roost. >> it's interesting because this comes as we got the 3% gdp number this morning. a lot of times people were piling into tech, it's look, we want to go where the growth is and not anywhere else. it sounds like the growth is there and the namesdisrupting and still winning. can it be both and can they both succeed? >> i think it can be both. really what this quarter is about, this is the show-me quarter. such a big rally so far this
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year, so much confidence in the economy, so much kconfidence in the stock market but have to have proof to know that this isn't the end, this isn't a bubble and we got that in spades today. this is the big week for earnings reports just about everybody that's come out this week came out big. >> so this is not as good as it gets >> i think it can get better, but i doubt it >>. >> okay. does that mean you're -- what are you going to do, hold these stocks, going to buy some more here what are you going to do with them >> so as i look at the u.s., i see a fully valued market. what the market has been doing is proving that it's worth what it is today, but it's going to be hard for it to really exceed expectations forever as i look abroad, emerging markets, europe, asia, i see a lot of markets where they still have a lot to prove, and actually they're delivering on those promises that's why we're seeing the chinese stock market exceeding the u.s. stock market so far this year, and the current quarter, japan -- >> germany. >> everywhere. in spite of spain, europe is doing great. >> yeah, and jack, maybe that's also the question, do you have to pick one or the other places to invest here in this kind of
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synchronized global growth environment? >> well, if you think about it, you know, you've had the -- the euro had its worst week this year a big flow of capital coming in there overseas when you talk to european fund managers, they don't know where else to go they're not going to invest in spain. france has got some problems god forbid they go to turkey with erdogan there you're left in a bit of a dilemma. the real problem is, this is, kelly, something we have to talk about, the bonds are not trading like we're talking about a 3% economy here the dollar is. stocks are there's something still struggling with that bond market ten-year yields still struggling with 2.4%. you would normally see a rotation, you would see a spike in yields on a day like this and maybe it's because we're starting with these slow-motion meltup we've seen in equities over the korcourse of the last o three months this is one of the days we felt euphoria in the buying that came in and maybe that's starting to signal maybe a bit of a top or fear, especially among bond traders.
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>> how much of it, though, do you think, jack, is the feeling of who the president's going to choose, announce next week for the federal reserve? i mean, is it likely to be someone as dovish as jachnet yellen has been? >> bill, i think if it's anybody other than warsh, the market will probably take tas being dovish quite frankly, none of us will know until that decision is made the reality is this, whoever gets into that position cannot take us out and unwind what has happened over the course of the last eight years immediately it's going to take time to normalize. and then normalization is going to be very disruptive and very painful. >> all right gentlemen, thank you all today >> thank you, guys. >> andy, keith and jack. so, here we go 37 minutes left in the trading session for this mementos week the dow, pish posh, that's up 32 points nasdaq, a 2.25% gain. >> oh, my gosh. >> now with a gain of 138
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points. >> it's roaring. >> suspect that amaisn't that ag >> i mean, we're talking about 6,700 for the nasdaq talk bing about -- you never know it's extraordinary how it's quietly been hitting these new round numbers. we haven't even been talking about this year. but anyway. when we come back, another huge story, former aetna ceo john rowe will talk about whether he feels cvs' move to potentially acquire his former company, aetna, will be enough to stop the potential threat of amazon moving in on the prescription drug industry that's coming up plus, moving the other way today, jcpenney plunging after the department store slasheding rivals penney's down 15%. mac macy's down, too we're going to talk to an analyst about whether penney's problems can be turned around. [ male announcer ] eligible for medicare?
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call now to request your free decision guide. this easy-to-understand guide will answer some of your questions and help you find the aarp medicare supplement plan that's right for you. welcome back another mover to e er today, gor falling after reporting third quarter earning results in line with expectations. tire company which operates
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three chemical plants in texas says its sales were negatively impacted by the hurricanes this quarter. so the stock is down about 4.7% right now. >> just weird. if it was a one-off thing, you wouldn't think it should be revalued. >> i would think -- nothing is unchanged today, by the way. >> that's true. >> either moving up big or it's down gig. >> huge, look at expedia, so many huge movers today. >> retailers. >> exactly. how about news update? let's get over to sue herera at this hour hi, sue. >> hi, kelly, hi, bill here's what's happening at this hour, everyone attorney general jeff sessions today outlining plans to combat the opioid crisis after the president's remarks yesterday. mr. sessions saying he will go after the criminal organizations, the doctors and the pharmacies exploiting the crisis sessions also naming the one drug that he thinks is the biggest part of the problem. >> fentanyl is the number-one killer drug in america, you know that more than 20,000 americans died of overdoses involving fentanyl
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last year. one-third of the deaths from overdose were fentanyl deaths. that wasn't happening ten years ago. walmart trying out shelf scanning robots in 50 of its stores the robots are going to zip through the aisles to find missing items and wrong prices company says by getting machines to do these repeatable, predictable tasks, its human employees will have more time to help customers. and tiger woods today pleading guilty to reckless driving. he was arrested on suspicion of dui in h may as part of the plea deal, he'll enter a diversion program, have a year's probation and pay a $250 fine. he also already completed the community service through work with his foundation. you're up to date. that's the news update this hour bill, kelly, back downtown to you. >> thank you very much, sue. see you next hour. you know, aetna is giving back some of yesterday's big gains despite the report cvs is in talks to buy the
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health insurance giant bertha coombs look as at whether this potential merger could spark other deals. >> certainly going to be disruptive a couple years ago the deals were about insurers and drugstores want to get better. all of those deals were turned down on antitrust grounds. this deal would be about vertical integration, basically trying to bring together the medical benefits and the drug prescription benefits all under one roof to drive down costs something that united health already does, but this could really shake things up because just last week, anthem signed with cvs to try to bring its own pharmacy benefit unit to life starting in 2020 it's unclear whether anthem now is going to want to compete, or work with cvs, cvs is going to effectively be a competitor on the insurance side the other big insurers like cigna and humana, they're leerily of working with united
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health for that reason, would they be worried about working with cvs and aetna would that prove to be an a advantage for the one standalone firm, express scripts, which today is actually higher it's been under pressure of late because everybody thinks express scripts as a standalone is not a great proposition, but in this environment, they could be especially when you consider the threat of amazon possibly entering the pharmacy space. that is going to put pressure on all of the players when it comes to price, particularly the pharmacy benefit managers, but also the drugstores, themselves, the drugstores one of the things that gets people coming in is cheap co-pays on generics. what is walgreens going to do now, are they going to try to maybe merge with a pharmacy benefit manager and try to build up that muscle or maybe try to work with an insurer lots of different players, it's going to mean a lot of different moves compared to the merger dance that we saw last time around a couple of years ago
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>> it's -- i mean, b it's really interesting. >> i love this story this is amazing to watch this happen >> right. >> c vrks srkvs had a lot of op- >> yeah, bertha, it's had a lot of things to look at. >> ultimately the benefit of it is when you get to the pharmacy benefit, you'll be paying a lot less it's hard to imagine on some generics you pay less. there are some generics now you go and it's only a $2 co-pay but that is the goal to get consumers to be able to use the most cost-effective care >> is this the free market trying to solve the problem of rising drug prices we will see. thanks, bertha, very much. see you later. let's zero in on the potential deal now with a man who knows a thing or two about aetna. joining us exclusively is former aetna chairman and ceo john rowe john, welcome to the program. >> welcome back, john. >> good to be with you. >> so what was your first thought when you saw this announcement that cvs may want to buy your former employer?
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>> well, i was a little surprised. there have been some suggestions over the last several months that the failure of the prior attempts at merger, as bertha outlined, between large pharma and another large pharma, large insurer and another large insurer, that those failures would lead to attempts of so-called vertical integration where people go across the sector in health care and so here's a large insurer potentially merging with a very large pharma, pbm. but this specific deal had not really been discussed, to my knowledge, in the media. i find it amusing that every analyst immediately came out with a note saying that they had suspected this all along, when in fact, nobody suspected it all along at all. >> right right. yeah, and many are saying that this is a response to amazon we're finding that they have applied in 12 different states for a license to be able to sell
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prescription drugs how would an alliance between cvs and aetna effectively compete with an amazon in the drug business? >> well, turns out those applications were approved last week for amazon, but those are applications to sell medical equipment directly to providers. amazon -- >> same question, though >> amazon -- same question, exactly. amazon's strategy is not very explicit yet, but they obviously have potential distribution ports in their whole foods acquisition, they're famous for being able to deliver things by mail instantaneously and they're very, very effective at keeping costs down. so they are a looming threat of uncertain style. i think that this will help cvs because it will help them lock in a very large number, score a million members of aetna this will increase their
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pharmacy volume, which will increase their leverage with pharmacy wholesalers i think it also provides them an opportunity to provide other services to those aetna members through their minute clinics or so on. >> and john, let me just ask you, you said they're going to lock in those aetna members potentially, that's 4 million people does that mean they lock out everybody else who's insured through somebody else that might steer them to their company? >> that's 20 million people. i think no, i don't think they're just going to turn out to be the drugstore for aetna members. i think other people will go there as well although they'll incent aetna members to go and get their drugs at their drugstore versus a competitor. >> they'd only -- you're telling me they're going to buy aetna and not require aetna customers to go to q qv . >> cvs >> they'll provide them with incentives. >> i think they can buy it for a number of reasons. but i think that from the point
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of view of the retail pharmacy piece, you have to remember they also are going to be controlling the entire pbm which can be very advantageous to them and they're going to be able to provide other services to aetna members, either directly in their pharmacies, or indirectly. they have a home infusion program now. they'll be able to put those aetna members through that home infusion program that might be a very substantial economic advantage so i think there are several advantages here. >> all right i bet you wish you were still in the game, john >> well, you know, it's very, very interesting and i would just say very quickly that i think bertha's observation about the government, former rejections of those other deals, is really, really pushing things in this direction. >> oh, sure. you just wuonder if this? what they'll end up satisfied with. >> thanks, john.
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>> pleasure to be with you thank you. >> john rowe. let's talk about apple again, shall we? iphone x plreorders selling out in minutes we'll discuss whether a limited supply of the blockbuster phone, could be, will drive customers to the iphone 8 or even to rival phone make if rsyou can't get your hands on one. right after this you start trading. >>yeah, 5 years already. 5 years, hmm. you ever call your broker for help? >>once, when volatility spiked... and? >>by the time they got me an answer, it was too late. td ameritrade's elite service team can handle your toughest questions right away- with volatility, it's all about your risk distribution. good to know. >>thanks, mike. we got your back kate. >>does he do that all the time? oh yeah, sometimes he pops out of the couch. help from real traders. only with td ameritrade.
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not to be overlooked with all the other tech giants jumping today, apple's up 3.5%, one of the best performers in the dow which is only up 167 poi 1 points right now anyway, preorders of the iphone x sold out in ten minutes this morning. apple told cnbc, "we're working hard to get this revolutionary new product into the hands of every custer in who quantities one as quickly as possible." stores will have the new phone in stock next friday one new iphone x is up on ebay now with a $60,000 price tag. >> that's nonsense nobody is going to pay that. >> i think it's a confirmed preorder, it's somebody who at 3:00 a.m. got the phone but is selling that option. >> somebody thought of that at 3:00 in the morning then they woke up at 8:00 and i'm sure they're rethinking that. >> you think they're rethinking it >> i don't know. >> for $60,000 >> nobody's going to pay $60,000 for an iphone x. >> going to pay anything north -- if they don't pay well
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north of retail price, i would sell mine in a heartbeat. >> i don't know. you know, this is a problem for apple. they introduce the apple -- the iphone 8 then made people wait for the iphone x and we're fi finding out sales for the iphone 8 are sluggish. >> right. >> surprise. because they're waiting for an iphone x that they can't get their hands on >> if this is a mistake, why are the shares up 3.5% today trading where they are i can't tell if the market likes the fact it keeps creating this culture -- >> nice problem to have. >> until it backfires. >> will people be patient enough to wait? as you pointed out, are they going to go another phone, the iphone 8 h i don't know here's your solution remember blackberry. >> speaking of old companies, shares of jcpenney sinking today after cutting its full-year forecast is that the beginning of the end for big retail we have an analyst to weigh in on that with penney down 15%, after this and we always love to hear
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before we start, over here, vinny. what is going on today what is this i don't know. >> hall-o-weekend. >> i know we're tight on time. in the booth they're going nuts right now, what is he doing? we're tight on time. come back begin. all right. >> yes, party city will be ringing the closing bell today as we head into hall-o-weekend. >> this is shahall-o-weekend >> yes. >> shares of j prkcpenney down earlier today. they were in the $2 range early on after they cut their 2017 full-year forecast nordstrom, sears, macy's, kohl's also trading lower on the jcpenney announcement. >> big moves for a sector that's already been hammered. paul is here from deutsche bank to talk more about it. jcpenney is such a cheap stock right now, what is it pricing in in terms of outcomes >> yeah, i mean, certainly the stocks are battered, as you mentioned, but the earnings have come down in line with the stock
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prices so arguably, the department store as a sector is not necessarily considered cheap even at current levels. >> right >> significant markdowns and liquidations taking place. >> and that was the issue -- for jcpenney, it was the fact they have to mark down their women's clothing so much. >> correct. >> that was part of the problem. >> correct it was an acceleration of them altering their overall, they're looking to be a little more casual versus high exposure and penetration of dresswear they're trying to position themselves better into the holiday. obviously on the heels of ama n amazon's results -- >> right. >> -- there's a lot of concern from investors about the department store sector heading into the fourth quarter. >> i'm going to sound like i'm picking on you but i'm not you have a hold on this stock and price target of $3. >> correct. >> really? we're there. i mean -- >> correct. >> why not just sell this thing? >> so, we don't recommend any department stores, we do have a sell rating on dillards who we think is certainly kind of worse
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position across the channel. we also have a number of sell ratings across the number of the mall-based retailers to your point, certainly we continue to not recommend this space and certainly we've taken our numbers down, you know -- >> what options -- >> a-- given the release this morning. >> sorry i'm thinking again, a company whose stock is trading perilously close to zero, what options does jcpenney have now does it have real estate options, online options? what if it signs a big deal with amazon what should this company do to save itself? >>. ♪, again, just because of the dollar price point, i don't want to suggest their material liquidity concerns that are imminent all right? still outlining free cash flow at $200, $300. we're modeling a similar result next year. really right now it's about stabilization of the top line along with our gross margins
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they're going to have to continue to push forward and showcase to the consumer that i have exclusive products of value. that's challenging to do in this la landscape. >> yeah. >> paul, thanks for joining us. >> no problem. >> happy early halloween. >> same to you. we're going to take a quick break, with 13 minutes left in the trading session, the dow is up 22 points but it's the nasdaq that's getting all the attention with a gain of 2.25% today. >> just huge huge moves this morning, we got big results, not just from the tech companies yesterday, but today it was chevron, exxon and phillips 66. we're going to break down some of the moves, debate the oil stocks and talk about the challenges facing big oil in this post-hurricane season when we come right back stay with us
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oh, we do have time. okay art cashin just told us, get this, $700 million to buy the market on close orders so that's why it's started to come back here the dow almost turned negative a little bit ago now it's starting to move higher with a gain of 30 points but, again, it's all about the nasdaq today with the huge gain we're seeing there. >> not all about big tech today. how about shares of chevron which are lower after reporting a fall in u.s. production? the shares down 4.5% right now anyway, that drop in production was in the third quarter even as
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oil prices have been rising. we talked about it hitting highs today for both the u.s. and the international number >> let's bring in caleb from wittier trust and andy lipow, lipow oil associates to debate whether there are opportunities in big oil right now caleb, what are you saying right now, yes, buy, sell? >> is sure, so chevron is a cash flow story, so the stock reacted today because cash flow came in light. the market was expecting $5.8 billion in cash flow came in at $5.4 billion. we believe that's transitory and that chevron still has an inflection point here where they're going to increase cash flow, they're going to be able to cover the dividend without a problem and these large-scale o&g projects that have been a huge drain on cash flow are going to be a tailwind in the future >> all right >> okay. andy, you're here to make the bear case on big oil how would you do that? >> well, i would do it because when i look on the production side, even the oil prices are rising the cost of production is going up given that we've lost a l
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tlot of the labor force and oil companies are scrambling for drilling crews and truck drivers, so their costs are going up and you're seeing pressure in other companies in the production area like hess order m.e.g. energy. >> but the cost of oil, itself, is going up. in fact, another analyst told me the other day he believes that the saudis are going to do whatever it takes to make sure that the price of oil moves higher going into the aramco ipo next year and darn if that isn't happening right now. andy, what about that? brent is back to $60 we're at $53 now on wti, an eight-month high if it continues high e doesner, that benefit these companies >> it certainly benefits them on the production side. no doubt the opec countries are trying to get the oil price higher with these higher oil prices, what that does is gives them more likelihood to cheat on their production quotas and bring in more shale production
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to temper any future rises >> caleb, you want to respond to that >> yeah, i mean, clearly, it's a tailwind, and we'll see in november at the opec meeting if they continue to push out the output cuts in march that's very likely to happen it's one of the reasons that oil is rising today and brent's over $60. >> are you bullish, caleb, because of the higher price of oil? >> no, we're bullish because the world consumes more and more oil every year, and next year the world is on track to consume 100 million barrels a day. that's 14 million barrels a day more than it did in 2010 and that happens to coincide with the tesla ipo so in the developed markets, we're seeing a shift toward electric vehicles, but in the emerging economies, consumption continues to grow. >> andy, just real quickly, though, we are seeing people move away. industrial companies move away from their alliance on oil, petroleum, right i mean, doesn't have to be a
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huge number in electric vehicles for it to make an impact, right? real quickly. >> i think it's going to take a number of years, maybe five years, to make an impact on fossil fuels but these companies actually have other businesses than production like refining and petra chemicals and that's where we're going to see pressure i think in the next couple of quarters especially on the petra chemicals, a lot of capacity has come online the raw material costs is up if one were to look at propane, that price is up 60% compared to this time last year. so investors when they're looking at chevron, exxon and phillips should be aware there's other business es other than production >> andy lipow, caleb silsby, thank you both appreciate your thoughts today on oil and the oil companies we'll come back with a "closing countdown" to perhaps up wh wrap up what's been a crazy week after this ed manufacturing that brings big ideas to life. and cutting-edge transportation development
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what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online. about two minutes left in the trading session sheer on a closing out a crazy week and usually we'd show you the dow and it did this week, but we've got to give nasdaq its due. this huge rally especially at the end of the week after the big blowout earnings from the major technology companies so the nasdaq is going out at an all-time high, at 6,700 with a gain this week of about 1%
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they pulled the week out with this gain today. wti, an eight-month high now as it continues trading higher as opec continues to tease everybody, talk bing about their production cuts and maintaining those. the ten-year yield bumping up against 245 this week and then failing to continue above that now we're back down to 241 and keep hearing maybe we're going to hear who the new fed head appointed by the president will be next week we'll see what the market does with it at that time worst week of the year for the euro against the dollar. continues lower. the problems in spain essentialessential certainly not helping now with the catlania region declaring independence and the prime minister of spain saying they're going to suspend that parliament and call for a snap election in december we'll see what happens there seema mody, what a big week.
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>> did you see what happened with online travel, many times categorized as high growth tech, when earnings miss -- >> expedia was an example. >> exactly what we saw with exped expedia. those earnings coming out over the next two weeks let's see what we get from that sector travel a big component of the u.s. gdp, something you don't think about but it really is >> thank you, seema. that's it for this first hour of "the closing bell. stay tuned for hour number two to get you ready for another busy week coming up. kelly evans, all yours have a good weekend. thank you, bill, welcome to "the closing bell," everybody i'm kelly evans. looks like we're going out with record highs on the close here let's start with the dow which was the underwere foperformer. weakling today 2,342 is the new record close there. that is not a record high for the blue chips the s&p 500 very different story. gain of about 20 points today to
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2,581. that's a new record closing high nasdaq composite, look at this 2.2% gain. that's one of the biggest gains we've seen for the nasdaq in quite some time. we'll have much more on the big tech results that contributed to that shortly also closed above 6,700. 6,701 for the nasdaq, a new record close russell 2000, they're about four points below their all-time closing high next week, we are going to get more results out of the big tech space when facebook and apple complete that. facebook and apple shares both up about 3% to 4% today. we're going to preview facebook's earnings and talk about whether they'll be able to carry their positive momentum forward with these faang names that are just unbelievable performers here. so far joining me today is cnbc's senior markets commentator michael santoli, cnbc contributor evan newmark on a friday john augustine from huntington bank welcome to everybody michael, first of all, to me, it's interesting, you know, you have the overall markets, you
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wouldn't know really until you look at the nasdaq. >> yes. >> just how insane some of these moves have been today. >> otherwise pretty calm day 2.2% move in the nasdaq is big by any stretch especially on a day when the rest of the market was mostly sitting -- i will say this morning, it was almost nothing, but the big nasdaq stocks over the course of the day, it did broaden out a little more and all the indexes turned green clearly a buying panic in these faang stocks which people had been actually de-emphasizing over the last couple months. seems as if their earnings last night just reminded everybody of what growth machines they are. and it was, as i say, a buying panic at least for a few hours today. >> by the way, guys, the nasdaq, best day since november of last year going positive for the week. thanks to those earnings last night. there's a look at it alphabet, amazon, microsoft, all soaring to all-time highs today for their part, evan. >> yeah. a very -- kind of a weird -- a weird move given we got a very good gdp number earlier today. the bond market, i don't know whether it's because of the
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dovish sentiment in europe or it's because of -- it seems very likely that mr. powell, the next head of the fed, and he's probably leaning more dovish than john taylor, anyhow, that's my interpretation of why the -- otherwise the bond market -- bond yields should have gone up today. it's kind of bizarre that they didn't but the moves in these tech stocks are huge they're really -- they're really unprecedented. i think you'd have is to to go t the 2000 tech bubble days to get moves of this magnitude. amazon's market cap was probably up close to $50 billion. those are huge moves i don't think if you're an investor chasing that, maybe not a good idea. you know, what it's tending to do, it's bringing a lot of the future return forward. >> john, it is interesting to look -- you know, these are not small cap new names, you know, these are companies that are so huge already and you have alp alphabet putting up 40% revenue growth on the year, 33% earnings
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growth i can understand, and in a way, it's still cheaper probably than procter & gamble john, what do you make of it all? >> right we agree with you, and we agree with mike that a lot of money came into these names, quick, obviously, but the earnings, to us, say it's legitimate. these companies are growing earnings in the sector at 33%. so this, to us, is a legitimate move and the p/e multiple on the nasdaq still isn't that high only 25 on the triple qs so these companies, that was outstanding th ining this week. we'll see what facebook and apple do next week. >> see amazon closing right at $1,100 let's dig deeper into that with the stock passing that mark today, up 47% this year. subscription revenue, that includes prime memberships, that was about 60% this quarter amazon web services saw a profit margins expand the whole foods acquisition added about $1.3 billion to revenue. amazon gave strong guidance for the upcoming holiday season with it growing so much in so many
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different areas. you know, again, we raised this with jon fortt last hour, but do you guys think it starts to create more negative attention on its size and market power >> i think amazon is and has been for a couple of decades now the vast exception versus the other tech stocks in terms of pinning its valuation to parameters that, you know, certainly the average investor could get comfortable with it has been unusual. i see no reason for that to change at all in the near term and until amazon makes a giant misstep, i think people will still continue to give them tremendous credit. it's a well-run company. >> they're talking, mike, about this sort of consensus -- whatever that's worth has it going upwards of $10 million within a couple of years. >> sure. it can probably try to take that path if they choose to right now the net income number, the profit number, tends almost to be this residual, like money
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was coming in the door too fast, couldn't put it to work quickly enough to your question of whether it's getting too big, it's starting to feel as if the shadow of am zu amzon is reaching these other areas right now. i mean, you talk art the kind of health care life science tool stocks selling off today pharmacy stocks selling off today. it's all because of this imagined or genuine threat from amazon i don't know that that means it's going to create some counteroffensive and regulators or somebody else is going to come in. i think at some point if they legitimately pursue all of these at once, they're going to stumble. it's not a manageable company. >> i want to point out it's a great incredibly well-run company, but remember their efforts in the phone space hardware -- >> they're not afraid to fail. >> that's right. >> by the way, i'm not -- my only point is when you look at a lot of the justification going back, not every one of their efforts is a home run. >> for sure. >> the phone was not a home run. the -- what they're doing in video, which i think has been good compared to netflix -- >> trying wardrobe services.
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>> stl i think the market right now will give them the benefit of the doubt on anything they want to tdo. >> john, let me ask you, which of these -- are these companies you're invested in here? >> yes we have them all in our growth portfolio. our equity team likes amazon because of the investment and the future cash flows that it will return and they continue to spread their tentacles out in new businesses so, yeah, to answer your question, kelly, we are across these in our three equity portfolios. >> all right let's talk about jcpenney how, and of course, this all goaes back to amazon, too. penney's shares down 15% expected to come in just between 2 to 8 cents versus the 40 to 60 cents expected comp sales expected to be down 1% versus flat jcpenney bringing the rest of retail down with it today. anybody from nordstrom, macy's, target, all lower today. in order sonordstrom down 3%.
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target down 3%. >> and kohl's. that's kind of the flip side, obviously, of this enthusiasm that amazon can do anything. this is a group that everyone kind of knows it's in slow decline. when you have reminders that really the business is not within management's control when it comes to a jcpenney, i think you have people say, look, it's uninvestable for me. doesn't mean they're legitimately uninvestable for the next couple years if they get to a certain price i think that's the kind of trader response as you get to year end as people are going to be dumping stocks for tax loss purposes and all these other overhangs. >> what would you advise, evan, for these companies? >> i think mike touched -- it's an uninvestable sector in the sense that if you stand back and people, it's not hard to envision -- >> what if they all -- let me just say, walmart just last week everyone saw walmart's doing everything right, the shares are up, they're buying this and investing in that and the shipping and they got a robot thing going on today if walmart just rolls up everybody else into its retail distribution universe, does that give these companies a place to go >> i think the problem is one of
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real estate and space, and there's just not the need -- i mean, you don't need big department stores taking up space anymore. i mean, walmart, i believe there will always be a market for a large location to a business like a walmart, but people, you know, does anybody b miss sears? i mean, nobody misses sears. >> i was in a sears this week. >> you were probably the only person you were -- you know, you were -- >> buying a drill. >> you and a half dozen -- >> problem with sears is half of sears is kmarts, okay? that's the problem with sears. >> that's true and martha stewart. john, real quickly before we move on, would you invest in anything in retail >> we use t.j.maxx slightly, use some ross stores, we use small specialty retailers along with the amazon, you have to be in the amazon so, kelly, we are cautious on the sector as well for our portfolios. >> is all right. let me ask you about expedia as well, another huge mover to the downside today, down 16% its earnings missed expectations last night the ceo talked to "squawk on the street" this morning saying the
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stock decline is a concern but still incredibly optimistic about the future of the business expedia down 16%, john, is that an opportunity for you >> it is somewhat of an opportunity. we talked with our equity team today. they own priceline which didn't come down as much. came down slightly but what we're wondering is what else went on at expedia? because margins went down, top line went down, bottom line. is it a market share story that's what we're trying to figure out at our shop right now. >> who would they be losing it to, then, do you think >> the pricelines, so to speak, or what we saw today, actually, was some of the hotels go up so is there some direct booking going on is there indirect market share loss as well those are the things on our mind because the whole seconder didn't go down today. >> sector didn't go down today. priceline, balance of power swinging back to the hotels, themselves. let's hit gdp, number came in at 33% despite two hurricane.
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likely to push the fed to raise interest rates in december we're awaiting the next fed chair appointment. sarah huckabee sanders had this to say on the issue of the fed appointment earlier today. >> i can confirm that the president plans to make an announcement on that next week but beyond that, there's -- i don't have any other details to add. >> he plans to make an announcement on that next week, evan you say? >> i think the market already thinks -- i mean, i could be wrong and the market -- everybody -- >> it changes every couple of days. >> it really doesn't change every few days >> yellen's up, cohn's up -- >> that's a bunch of journalists -- who's changed >> the odds, the predicted odds. they keep changing based on who's -- >> as far as i'm concerned the number-one thing that the president has going for him is the stock market right now, and he knows that. >> and he said that. he said that about janet yellen, he said we make a good team. i don't know everyone took those comments to dismiss the possibility that
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she'd stay, michael. didn't sound to me that he was totally saying -- >> no, he didn't close anything off. it's not journalists saying this or that. it's getting people in the white house, in the room -- >> is that too pesrsonal >> -- who are telling i think he's leaning this way. that's who it is, sources who have no clue what he's going to do. >> those people have any real clue -- >> because nobody, the decisionmaker might not have a clue. >> exactly sort of feeling it out. >> i think the bottom line is, it doesn't matter. yellen or powell, market's fine. i think the market feels like that's kind of the continuity choice. >> right. >> taylor's not. but i think up of the reasons the gdp didn't move the bond market today, first of all, the yields were already at their highs for the week i don't think anybody's extrapolating 3% real growth and 5% nominal gdp growth as far as the eye can see. got to wait and see. >> we got to go, but john, you have a preference in this pick >> no, continuity, right you look at yellen, you look at powell and you get that conti e continuity what we're interested in a little bit, who's going to be
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the vice chair that might be the interesting one. >> it can you mean if taylor pops in there, some sort of compromise. >> yeah. >> is all right. we'll see. >> that will be interesting. >> thanks for joining us today john augustine from huntington bank. >> thank you. as we mentioned, the economy growing at a much better than expected 3% pace in q3 that's about the impact of president trump's tax cut proposal up next, larry kudlow tells us how strong growth could be with that tax reform in place. plus, could the move by cvs to discuss a merger with aetna force rival, walgreens, to make a move we'll ask later on "the closing bell." and we always want to hear from you, contact the show with your thoughts via twitter, facebook, or send us an e-mail, by the way, it's mailbag day we'll read your best responses at the end of the show be sure to stick around. you're watching cnbc, first in business worldwide omes to inves, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this
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hey? i paused it. bam, family time. so how is everyone? find your awesome with xfinity xfi and change the way you wifi. welcome back the economy growing at a much better than expected 3% pace in the third quarter and that's despite the impact from hurricanes harvey and irma steve liesman has the breakdown for us steve? >> yeah, kelly, while three hurricanes had hit the u.s. devastated lives, devastated properties, the economy looks like it shrugged them off. q3 gdp at 3%, a half point better than expectations several economists speculated growth could have even been higher if not for the storms led by stronger business
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investments, better trade, and inventory building, they all led the er consume spending could have been depressed by the storms let's take a look at how we got here, the contribution to gdp and this is going to more or less add up to 3%. residential or housing took away .2%. followed by the consumer which added 1.6 percentage points. inventory building, 0.7. business investment a half a point. trade, 0.4%. added. all that is how we got to that 3% growth. rdq saying "there's more tha enough here to keep the fed on track for a december rate hike and no doubt many in washington will make too much of the 3% reading on growth. probably already have. question is how much the fed makes of the 3% growth if it sees it as a one-time blip, probably not much, but there could be a change toward more rapid rate hikes if the rate hikes are seen stoking inflation.
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kelly? >> steve, larry's already dismayed stay right there as we bring in h the senior contributor, himself. what's the problem >> the problem is growth doesn't cause inflation. and by the way, this report, i mean, up until steve's last sentence, i was with him the whole way. the last sentence was just a killer for me. dagger in my heart listen, this thing is -- >> hold on, larry, don't kill the messenger. don't kill the messenger >> you were messaging. >> it depends how the fed takes it if the fed -- i did not make a subjective judgment in that case, sir. >> okay. i'll try to process that later on, but the big leader here is business investment. business equipment we're seeing it in a bunch of things durable goods orders factory orders gdp report that's the supply side that's going to produce more goods, more productivity, and higher wages. >> without the inflation >> that is correct i mean, look, the inflation numbers are terrific
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the pce, 1.4%, to core pce, 1.3%. >> how does a powell fed process this if people say it's a continuity pick, is yellen, powell, anybody up there going to wait to do anything until the inflation number changes or does this other stuff matter, too? >> you know, that's really the important question of course, we discussed this the phillips curve, the federal reserve models show that higher growth and lower inemployment cause higher inflation, except it didn't. it just hasn't and miss yellen admitted as much now, i have read some of the speeches from jay powell, jerome powell he doesn't say much. i went through a few i didn't see disagreement with the phillips curve or miss yellen some of my pals on the street are saying if he's just like yellen, why don't you leaf yeyo yellen in there? >> right >> i don't know that it's jay powell this is a good report. this is about growth look at the trends in the market mike santoli gold down.
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dollar up. commodities up this is a growth trade stocks up. there's going to be more this coming and real interest rates will go up >> but here's the thing, the way the fed defines it, steve should weigh in on this, they think that policy is still very accommodative right now, so you can still be raising rates for a little while and still not get to a point where they're thinking at they're truly restraining growth. >> mike -- >> you're right. >> mike, i think -- >> i'm sorry. >> i think there's a bigger discussion around this that begins with what the fed believes the neutral rate should be >> yes. >> i think the more intricate part of what i didn't say at the end of my hit, if you get 3% growth numbers it's possible that the fed believes the neutral rate is higher and anyothen it will believe it needs to go a little further in that regard to get to a neutral rate and i think that's really the story here i think it's going to watch the behavior of inflation. i think the way that the fed will bias this, though, is not to get too far out front and watch the market, guys it's really the market that will
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tell us if they think the fed is behind the curve the market -- >> behave in that way in any way, shape or form not just the stock market. >> i mean the bond market. >> you have to look at a cluster. have to look at the bond spreads. >> right. >> have to look at the commodity baskets. >> there's no indications, larry, unless i'm missing 124i7k. >> you have to look at the exchange rate. i had this thought, the fed has a case to be made, bump up a quarter point in december. i'm okay with that on the strength of the commodity rally. but, you know, i kind of like them to take down the balance sheet and retire reserves before they go full head -- >> through the whole balance sheet? >> well, no, stick to their modest schedule. they operate through a fed funds rate target. >> right. >> we don't know if that's the right target yellen said in her speech a couple weeks ago, we do it because we're more comfortable with it, seven sheven she acknowledged -- >> it what do you think it will be >> i think the funds rate is
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going to 2% in the next year oar whatever again, i wouldn't lurch. i wouldn't lunge i agree with steve liesman i think a new fed chair should really switch from phillips curves and growth cause inflation, use market prices they look forward. now, i don't mean every day. >> larry -- >> hang on i want to -- >> try to find trends. >> been very quiet >> i want to -- >> the little face you just pulled. >> i want to know what, if anything, does the flatness of the yield curve actually indicates? if the bond market believed this -- >> for every low inflation. >> 4% growth, everything is zboeng going to be perfect for the future if they really believed they would get -- they would supercharge growth, the yieldstt is basically saying you're never going to be back to the days of 4% real growth. >> basically, i'd keep an eye on the yield curve, i agree with you, it has flattened. the ten year got to 245 today. that's a good sign that's can what what it ought t.
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the yield curve is something they should watch with respect to policy. i don't like it when the fed manipulates interest rates. >> go back to 2005, 2006, steve, i'll let you weigh in on this, too, the yield curve started to flatten that whole period. >> while the fed was raising rates. >> they shouldn't have raised rates at all during that whole period >> i want to make myself number one or number two in the larry kudlow fan club, and always have been. >> number two? >> well, number one or two i don't know, maybe i believe his fabulous wife is number one. but let me just point out. larry, i'm with you on a different framework. i'd still like to know how that framework would lead to a different rate structure than we have today the way i see it, for what it's worth, is the apple cart's kind of going along on this little rickety path we're on here i wouldn't do very much right now with this gradual reduction of the balance sheet, these gradual rate hikes, to really upset the apple cart very much >> i -- >> i don't know what that alternative framework would yield. >> you want to know the truth? the truth is i agree >> okay.
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>> the truth is, things look, to me, about where they ought to be as this growth trade moves ahead and the prospects for the tax cuts look better okay things look to me about right. it's funny so, no, i don't have any particular -- >> what do you do with a taylor model that would give us 2%, 3%, 4% rates right now >> i would parse through it with john everybody has their own taylor model. cnbc is running something on the front page, 3.7% is simply not true that's a number pulled from the air. >> all right we'll take your word for it. >> i don't know -- >> gentlemen, thank you. >> they're doing it about right. >> that's why we'll see what he does with janet yellen larry kudlow, steve liesman, always a pleasure. thank you very much. >> pleasure. tech sector has soared more than 30% this year getting a huge boost from amazon, alphabet and microsoft, those were just in the last 24 hours coming up, we're going to look at what to expect when facebook reports earnings next week, see if that can add more fuel to the tech rally or halt it. preorders for the iphone x starts today
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will it force customers to hang up on apple and maybe even turn to rivals? that's still to come on "the closing bell."
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earnings yet but up 4% riding the tech rally higher. on wednesday, we'll get their quarterly results and coincidentally the same day execs from facebook, google and twitting are going to capitol hill to testify on social media's influence on last year's election joining to talk about facebook's big week ahead, kurt wagner from recode
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welcome. >> thanks for having me. >> there's a lot of pressure on them, right? what happens if facebook doesn't show the same kind of growth everybody else has >> yeah, won't look good, right? especially after twitter and google had good days yesterday i would be surprised if that happens. i mean, facebook just kind of routinely comes in and really delivers and there's nothing really that we've seen so far that i -- at least for me, would say that they're not going to be able to do that, but you're absolutely right, it would certainly look bad if they were the only one to come out tomorrow -- excuse me, next week and not deliver. >> we have the juxtaposition of that earnings report and their exec on capitol hill they didn't send sheryl, didn't send zuckerberg. are those headlines potential potentially -- could they overshadow whatever happens with those earnings >> i think this was pretty strategic by facebook, right i mean, so congress calls facebook to testify, shortly after facebook says, hey, we're having our earnings on the same day. that means our ceo and c.o.o., you know, won't be able to go to washington and talk about this obviously, we'll be waiting to see do they say something on the earnings call about kind of what
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facebook's been dealing with with all of these russian ads? i don't know if they will. i certainly think this is strategy here, right so all of a sudden you're going to be having facebook's earnings on the same day that everyone's going to be seeing what they say to congress. i think that was definitely done by design. >> i mean, kurt, i know for a fact that they did report third-quarter earnings on this exact first wednesday of november last year, but maybe the scheduling of their congressional hearings was negotiated separately. i just do wonder what investors are going to be looking for in these numbers that might give any evidence that perhaps something about the trajectory of ad growth, or other practices that they're now employing, might have impacted the actual business maybe it's going to be too soon to tell. >> i think it is going to be too soon to tell i mean, a lot of the different kind of self-regulatory things they talked about aren't really going to be relevant until next year especially on the political ad front. i think that what we're going to probably see is that the revenue growth is going to slow a little bit. it's been trickling down quarter after quarter.
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they've been saying that's because they're running out of places to show people ads in that main news feed. what i would love to thaer ihea, what are other fringe businesses doing? instagram is the top one testing ads in messenger i want to know outside news feed, how are their other business operations going? >> we have a lot of questions. hopefully they can answer those and all of congress' next week kurt, thanks for joining us. appreciate it. >> yeah, thank you. >> kurt wagner from recode. we have a news alert on merck here meg tirrell, what's happening there? >> hey, kelly, we're watching shares of merck after hours after the company said it's withdrawn its application in europe for approval of its big cancer drug, kitruda, in combination with chemotherapy to treat a form of lung cancer that spread to other areas of the body the company not given information for why they've withdrawn this application essentially saying they're still confident in the clinical data that was supporting the application. they do have sort of accelerated conditional approval for that indication here in the united
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states but this drop after hours comes after a big drop today after the company reported earnings. merck closed the day down around 6% the company said they were going to delay some results from a confirm toir study in lung cancer this further news pushing it further down after hours, kelly. back to you. >> since this morning the shares are down -- >> what i find interesting about, you know, this is not the only drug stock that's had big issues celgene in particular over the past week. is that when valuations rise, when they get frothier, the cost of disappointing whether it's a new drug or everything gets magni magnified. and so it's just a little bit of confection for everybotext for a tech stocks -- >> traded at half the price it did now, it would have only fall fallen by 1.5%. >> the biotech stocks had huge runs and disappointments get magnified. >> it's a huge product for them. >> my only point is it's interesting, we've seen -- i
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mean, celgene's stock created, what, $15 billion in market value, was wiped out those are huge moves >> i mean, that's all true, merck ee merck's been sideways for a year merck's not one of the stocks that's been flying and got a lot of puffed up expectations. >> why do you mess with my argument my argument was going so nicely. >> five to ten-year horizon. >> my argument was going so nicely until you interrupted. it's time now for our cnbc news update with sue herera. hi again, sue. >> hello, again, kelly here's what's happening at this hour, everyone spain's prime minister firing catalonia's government and dissolving its parliament. a large crowd in barcelona booing that announcement they had been cheering earlier today when catalonia declared its independence from spain and they removed spanish flags from government buildings. two sailors rescued after five months at sea the women left hawaii for tahiti on may 3rd their boat's engine flooded on may 30th and they've been at sea until this week when the u.s. navy found them.
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the women and their two dogs survived thanks to water purifier and they had packed a year's supply of oatmeal, rice and pasta on the boat. it's a white halloween in moose lake, minnesota. a major snowstorm falling and the whiteout conditions are causing several crashes. and president trump hosting some trick-or-treaters in the oval office today. the youngsters are the children of the white house press corps >> i cannot believe the media produced such -- how the media did this, i don't know >> well, we are capable of some good that's the cnbc news update this hour kelly, back to you >> oh, man thank you, sue. >> you got it. >> sue herera. time now for "fast take" today, shall we? we begin with one of the big stories this week that shouldn't get drowned out by earnings. the morningstar mirage, with a ba bombshell report, mutual funds
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by in large is not a good guide to future performance. the company responded on cnbc yesterday. >> we're always looking at our ratings systems, one of the things you would notice is we made enhancements over time and furth furth furthermore introduced the analyst rating that can augment the star rating i should say when you take them together, they can be quite powerful in putting investors into funds that they're more likely to succeed with wooe we'll continue to evaluate it. if we think changes are warranted, we'll do that as we have in the past >> what do you guys think of all this >> i didn't even realize this was a news story only insofar as i've assumed the morningstar ratings meant almost nothing. i understand from -- >> people still invest because it's a aaa versus single "a. >> they shouldn't have and shouldn't. >> what would you recommend in place? you have active management for every person -- >> i think that's the problem. i did a piece when i was at the "wall street journal" with the guy who gave leg mason, gave bill miller's thing five stars and gave five stars as the fund really went from the best
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performer all the way down to the worst performer. >> then probably would have had the equivalent of one star during its ramp-up the entire way since. >> the way active funds are managed, almost impossible to create a ratings system. >> as far as i'm concerned, it's transparent how they're calculated, it's a quantitative measure of cost and also past performance. so if you want to be the type of investor says i'm going to buy one-star funds, they're the ones ready to come back, you can do that but brokers and advisers think that it covers them if they're selling highly rated funds. >> it's true a bigger problem -- we got to move on. the last thing i'll say, five-star funds do worse over time, one-star funds tend to stay worse over time. >> that's right. they definitely converged bul d fives did better than the ones anyway up next is the wave of mega merges of chemical companies is over axed a $20 billion merger today that would have created the number two chemicals giant after the ouster of meister. the mega deals like created dow dupont, a low-growth economy
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with little pricing power. guys, that is not the case anymore. we have high-growth economy, talked earlier about pricing power on chemicals, especially what does it mean for the dealmaking >> it could be that the decision to do the deal was based on t t that, you know, kind of former logic industry environment i do think, though, too, a couple things, you need a two-thirds vote to improve a deal in switzerland. that helped the activists here for sure and the activists have a plan for hiving off non -- so in other words they feel there's a way to unlock value that's better than maybe overpaying for hu huntsman. >> by the way, where do you think we're at in the overall deals cycle? we've seen big ones. if growth starts to pick up a little bit, i don't know -- >> it's weird. the people that can -- you know, w when stock prices get elevated super quickly, it's much easier to do deals and the weird thing is the companies like the facebooks or alphabets or amazons, their ty're the people don't need to be doing deals but they're the people who the market would perceive as being
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best to do deals it's a weird dynamic if two chemical companies trying to merge, it's harder to make the numbers work. >> yeah. finally this caught my eye after i almost wore my old ugg boots to work today. ugg, parent company, deckers, exploring a sale as we know. the company said yesterday it can find a buyer this caught my eye felt out 90 potential bidders. so instead it's increasing stock buybacks will explore sharehold shareholder-friendly options as it goes solo with no one wanting to buy the company, the investors are still valuing it at a 52-week high. >> i think it's important to say they didn't find a buyer at a price they would find attractive given where the stock is already trading. >> true. >> i feel as if basically the public market is not necessarily undervaluing this company. maybe there's strategic moves to make. >> look, 72, 73 bucks a share. >> like ten times cash flow. not like private equity would come in and pay for it at these prices, either. >> a curious twist anyway, i'm going to be wearing those ugg boots all winter. if cvs gets the green light to acquire aetna, it will be the
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largest health care deal in history. two analysts weigh in on what that means for the industry and if there are more deals. ers ose deals. maybe there will be more of them in the health space. we'll get into that, next. >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.
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welcome back that's not a single stock ticker that's the whole nasdaq up 2.2% today with huge jumps in names like amazon, alphabet, and microsoft after their earnings reports. meantime, cvs health in talks to buy aetna for $66 billion, that's 200 bucks a share, in what could be the largest health insurance deal on record how could a deal like this impact the consumer? and the health care industry overall? joining us are obsidas from capital street, and ivan welcome to you both. ivan, what do you make of this deal and how much it might force a walgreens or express scripts and the like to do deals of their own? >> well, looks like that they're going to be a lot of transactions they're going to put the payer together with the service provider and try to surround the customer from all angles to be able to deliver pharmacy benefits, acute care and provide the service that pays for it >> the interesting thing to me is if it had been the other way around, if aetna was buying cvs, i could have wrapped my head around it more easily than this version.
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what does that signal to you >> well, i think cvs -- >> go ahead. >> okay. no worries this is an interesting merger. we actually do think that the bep fit benefits do outweigh the risk. not a horizontal merger the with the way we saw with health plans buying health plans. a health insurer, pbm pharmacy joining forces as far as the consumer is concerned, look, go into any one of the 9,000. >> sticky. >> aetna shares were down. >> cvs at $51 billion in debt and to buy them for another $65
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billion or $66 billion, they're probably going to have to issue about $40 billion in debt and about $25 billion or $26 billion in new stock >> wow >> so i really am skeptical that the deal could even get done. >> michael, they seem pretty desperate. >> there's a -- to a large degree, it seems like a kind of a defensive move i do wonder, when it comes from cvs' point of view, how do you think or how do they think their other customers, their other health plan customers for care mark pbm service are going to appreciate them owning their own? you think that they're basically going to assume customers will stay with them or do they not care >> i wouldn't say they don't care you could see a little bit of shifting around. the other benefit that i would also mention as far as cvs/aetna is data. data will really be a game changer. we'll have claims data, pharmacy claims and i think that could actually lead to lower because of additional volume, lower co-pays, lower drug prices, at the wholesale level.
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so really you have this all in one clinic situation, and you have this data that really is robust and quite powerful for overall patient care >> yeah. evan, i keep thinking through the fact that cvs in my lifetime will have gone from the place you buy candy and trashsy magazines to your doctor's office effectively >> that's weird, the reason -- one of the odd things about these deals is from a consumer perspective, it's like the amazonification of our, you know, our lives. these things will be good for consumers in the end they make a lot of sense for consumers. i'm not sure for the investors and for their profit margins if they make sense. if you're a consumer, can do this one-stop shopping with a lot of prescriptions, why wouldn't you >> i agree could benefit the consumers. it could bring down co-pay, especially if you were to be a cvs customer and join aetna as your service provider. but the real thing that we're interested in here is how do the shareholders benefit and i think it's really going to be hard to create shareholder
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value. at least in the beginning. >> all right, guys, thank you both fascinating stuff. i' we're looking forward to hearing more about this deal apple trading higher as preorders of the iphone x sold out in minutes today we're going to break down those numbers and look ahead to its earnings next week coming up. we also want to hear from you. contact the show, share your thoughts with us do that on twitter, facebook or via e-mail by the way, it's mailbag day so your message could be read on air. that's at the end of the program. you're watching cnbc, first in business worldwide at fidelity, trades are now just $4.95. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.
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welcome back the iphone x went on sale today and sold out in minutes. but that doesn't mean it was necessarily a runaway success. we'll explain that next. coming up on "fast money," media stocks sinking today one technician has a dire warning about one name in particular 'lbeig t hr. wel rht back. stay with me, mr. parker.
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still talking about prescriptions. but the iphone x became available for preorder today, a week ahead of its actual launch. the preorder stock sold out in minutes. there have been some questions about the initial supply how big is it? who can actually get one of these phones
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how many are they actually making josh lipton has the details. josh >> reporter: kelly, fans will have to wait a while before getting their hands on the new iphone x apple says, "we can see from the initial response, customer demand is off the charts we're working to get this revolutionary product into the hands of everyone who wants one as quickly as possible." delivery time is now at six weeks, due to strong demand and supply constraints rumors were circulating that there were production issues with the device, although apple said some of those reports, like the one from bloomberg this week, were completely false. it typically takes apple three months to come into supply/demand balance with the new iphone analysts think it could be closer to four months with the x. do consumers opt to go with the 8 or even the 7 or switch to
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rival devices and put 2018 estimates in jeopardy? or do they wait patiently until the x arrives? the truth is apple will need all its phones to sell well if it hopes to meet the street target of selling 242 million iphones in fiscal '18, that would be a jump of 12% from fiscal '17. kelly, back to you >> thank you, josh i know people who didn't get the x so they ordered the 8 instead. then, well, if i can wait, maybe get the x next year. maybe they'll sell two phones in this cycle >> they could. the real story was, such as a massive installed base of iphones ready for update, that are three and four years old, that you should see this rush. instead it's being staged out. i don't think it's necessarily a bad thing. it's not something that's going to be immediately visible from the outside. >> josh mentioned they're
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looking for 242 million of these things moved does it matter to them like it would for most retailers how much of that falls in their holiday quarter? >> i don't think it matters for them it's not a matter of, if you didn't buy one for christmas day, you won't get a phone >> i can't figure out whether this is a marketing gimmick, restricting the supply creates buzz around it the price point is quite high. i don't know whether that's what's going on here you know, i could use my own experience, which is, i would never do the upgrades, especially in a timely way, so i can't really tell on these things at all. i've been using the iphone 4 right now. >> they would be much more worried if the reviews for the x were bad you would rather have this problem. >> there's some questions about the facial recognition technology and how that works. i don't know >> i feel the same way about this as i did about the ear buds >> i love those ear buds >> come on >> no, i love them
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>> oh, god >> you're hands-free they don't fall out. they last with a charge for a long time. >> did it bother you when you didn't have a corded phone against the wall >> i would rather have a different inner ear structure than most people >> i am getting you that for christmas. >> how about when you're hanging from your legs, doing your situps from the bar in the closet >> i don't know what you're talking about. >> you know what i'm talking about. >> i never had an issue. we asked you for your feedback one of you is voicing your opinion about that gentleman over there we'll read your messages in the "closing bell" mailbag
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welcome back and it is time to close out the week with our "closing bell" mailbag. iphone x preorders start today, it's already sold out. dave says, my family has five macs, five iphones, two ipads, plenty of ipods, three apple watches, an apple router we already subscribe to apple music. why would we switch? we love apple. >> is he brainwashed
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>> signed tim. >> by the way, a lot of you are shocked by bill's blackberry is bill serious using a blackberry iphone 10 equals huge apple margins. greg said, i didn't even know blackberry still existed bill griffeth really using one >> i'm not doing it. >> this is for the right hand side i've got the left one in >> you better have enough purell to clean it out. >> i want you to do your i couldn't be side down situps >> that's not coming out it feels quite secure. >> i'm telling you >> if i ran with it, i'm not sure >> you can test that out after i don't run with music >> i'm going to run from the stock exchange all the way to the upper west side. >> we have to take these off now because siri is trying to help us out see, it's not all hate mail.
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robert e-mails, i love evan newmark's commentary, especially his facial expressions the interaction between him and larry puts a smile on my face. >> my mother told me, you've got to stop it with the facial, with the hands. she was very critical of me the last time i was on >> she's a smart lady, her feedback is spot on, because it's usually negative. >> very pro-kelly. >> that's why she's brilliant, we appreciate that she watches all the time we have facebook earnings coming up, apple earning, trump's fed chair choice potentially coming. >> is there a fed meeting as well just the fed choice. also jobs number on friday i do think it is going to be all packed and the testimony among the social media guys in d.c i think earnings season, aside from the two big bellwethers,
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facebook and apple, may cool off a little bit the market feels like we got it, earnings are in place right now. >> i think the one thing i'm going to be interested in, won't be here next friday, but wage growth the one thing we didn't talk about when we were talking about the bond market earlier. >> you'll be running with your air pods keep the mailbag coming, thank you both, that does it for "closing bell," have a good weekend, everybody, "fast money" starts right now "fast money" starts right now, live at the nasdaq market site overlooking new york city's times square i'm melissa lee. tonight on "fast," tesla is nearing a bear market, 8% from its 52-week high it could be flashing a major buy sign plus a slew of stocks reporting earnings next week one name the chart master says


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