tv Power Lunch CNBC August 31, 2015 1:00pm-3:01pm EDT
years ago because they're so global. i'm just going to ignore it and ignore tech calls. >> the opportunity lies in those that have already gone through earnings season, delivered. when they get sold off unjustly, those are the buys. >> you are good at this. >> thank you for being here. that does it for us here at kwf half time." "power lunch" begins right now. >> announcer: "halftime" is over. i'm brian sullivan. tyler is off today. we are living and trading in volatile times, no boabout it. the dow was down nearly 200 points earlier today, now down just 53 points. a big part of that is because oil is surging. this move in crude oil -- wti, west texas intermediate is now up nearly 6%. that's one dramatic intraday chart. check at the spite at 11:30 a.m.
target practice. given all the volatility we've seen, are wall street strategists' s&p targets about to change. do you have an answer, mandy? >> theat least i have some very smart people joining me through the course of the hour with their answers. welcome back, brian. we missed you. begin with the wild swings in oil. those prices were down big-time earlier but we've seen a massive rally to the tune of about 6% now building on the two previous big up days, keep in mind. but crude has now completely obliterated all of the losses it saw in august. it was down about 20%. jackie deangelis joins us with more from the nymex. what was the major spark in this turnaround? crude, jackie, and do people believe in it? >> when you look at session lows, 43.60, we're up more than $4. no one was looking for it in the morning. but the headlines came out that producers are now willing to talk about production globally. opec saying that it stands ready
to talk to other producers about the market but that it wants to do it on a level playing field. also coming out of the kremlin, that venezuela and russia will also have conversations to stabilize global oil prices. add to that, the eia data shows production declined in june. it sends these prices higher. black swan events, mandy. back to you. stocks are just only slightly to the downside now. the dow is only down by about 50 points on this final trading day of august. we've cut those losses substantially. haven't we? we were down triple digits. >> it is odd to see oil react so violent violently. a lot lf traders are skeptical on why the market moved up like that. 1:1 advancing to declining stocks, we were notely declining to advancing early on but that rally helped drags stocks up
into positive territory. volume the low side of heavy. we're heavy for a day in august, last day in august. but compared to last week, decidedly moving to the moderate side. volatility has been very narrow, only three-point range in the vix. that would have been a lot two weeks ago but still elevated today. the xop, apropos what jackie was talking about. you'll see the big rally we've had in the last few days, we were up almost 20%, but particularly strong today, up 2.7%. a lot of strong exploration and production companies started risely very quickly this morning on some of these vague discussions on opec that they should be talking to other countries about oil. oasis, consol, denbury, northern oil. some of these are up 15%, 20% in the last several days. nobody group going green today, global industrials. why they would go up on the oil is not clear but they rallied in the middle of the day. these stocks have been dramatically oversold, most down
double digits in the month of august. finally, i'm seeing a lot of end of month volume in some big what you would call s&p sector names. industrial, energy, financials. you can buy the whole market with these essentially. volume is very heavy. like 250% of normal. we're only half-way through the day. this tells me there are guys at the end of the month who are probably out selling these as a hedge against positions they already have. that would make sense when -- considering the declines that they've had. >> feels to me like you are pea a little skeptical about the overall move today, the comeback. >> opec says well maybe we should be all talking to other countries. up 10%? that's a pretty violent move. a lot of people think is that really sustainable, can they make a deal with somebody else. >> we'll get back to you later on. domini chu has a quick "market flash." >> mandy, technology is the second-best performing sector in the s&p 500 today just behind energy. the only positive sectors on the day so far. chip stocks are among the
winner winners, sandisk, micron and intel almost all up 3%. most of the tech stocks are down by 10% or more. this is up from 97% last week. some stocks in technology catching a little bit of that bid. we'll see if it continues in the next hour. we got pretty gbig news out of google. trying to woo android owners with an app that works on the iphone. josh. >> brian, in the smart watch wars, remember apple has enjoyed this relatively strong start. but now google taking aim at its big rival in cupertino. today google announced it's created an ios app for android wear. iphone users can now use android smart watches. the app, free. rolls out today to apple's app store. when the android-wear smart watch is connected to the
iphone, users can get notifications, voice queries and google created apps like google fits. there are though some caveats. the app only supports the lg watch urbane, along with all future android wear watchers. users need i phone running ios 8.2 or higher. third party apps won't be supported at least right now. according to idc, apple shipped 3. million watches in q2. in all of the last year acorpsed to a tech research firm, only 700,000 android wear watches shipped. the question is whether this news today will move that needle for android. brian, back to you. >> unless you build more outlets in your home it could be hard to charge one more item every single day. . big kudos to our own steve leisman. comments by fed vicestand stanley fischer to steve in jackson hole, wyoming over the weekend.
>> earlier this week, near fed president bill dudley called the case for a september rate hike less compelling. would you agree with that? >> i think it is early to tell. in the change in the circumstances which began with chinese devaluation is relatively new and we're still watching how it unfolds. so i wouldn't want to go ahead and decide right now what the change -- what the case is more compelling, less compelling, et cetera. >> i didn't get a chance to interview bill, so my question to you then is -- did you find the case for september previous to be compelling? >> there was a pretty strong case, but it was not a conclusion yet. it was a case. >> when we had a chance to chat in february, you were fairly blunt, as sometimes you are,
said it's time to raise rates. >> i said that? >> you said that. i can get you the quotes. but my guess is you wouldn't disagree. do you still feel that way? >> we're heading in that direction. what's happening in particular with the labor markets and we'll have to see if that continues when we get the data next week. has been impressive and the economy is returning to normal. we're not certain we're there yet. >> wouldn't you think there would be an overwhelming case though, one way or the other, that you would be sure and confident that, look, there's this unimpeachable case that it is time to go forward? >> when the case is overwhelming, if you wait that long, you'll be waiting too long. >> so it's always a bit of a confidence -- >> there's always uncertainty. and we just have to recognize that we're beginning a process that we anticipate, when we do it, will be relatively slow, and
that the first move presumably will be from 0 to 25 basis points, to 25 to 50. we're not moving from a wonderfully extremely expansivi monetary policy to a tight one. we've been adjusting slightly and we'll probably wait a while before doing something else. zblm let >> let us now bring in that guy, steve leisman. credit where credit is due. nearly every market research note that i got this morning, strategy piece, whatever, referenced that interview. great work, as always. the stuff that he said about, well, if you wait too long you've probably waited too long. that is interesting. >> i'm going to just back off that. kudos to fischer. he wanted to talk and i thought he was really interesting. and if you do nothing else but listen to those -- what was that, minute and a half, two minutes of sounds, to understand where fed policy is going in
september. i thought he was a pretty clear. i'll just say i was the guy that asked a couple of questions and got out of him some really interesting answers. he said, i'll paraphrase, if you wait for perfection, you've waited too long. so many notes i got this mornings referenced this is hawkish, this is indicating a bias toward a september rate hike despite everything that's going on. would you read it that way? >> in the first instance it is reality. right? the data you are getting now is data in the rear-view mirror. to me when i look at that, brian, it tells me about the decision the fed has to make. it is a judgment call. here we are in the middle of this, congress wants it to be a rule. but what fischer is saying -- he's the guy who wrote this textbook on monetary policy essential essentially. he's saying at some point you have to take a leap of faith in the impressive u.s. economy, in the direction of inflation, and in your belief in what the right policy is and that's the way it happens. >> awesome interview, as always. >> thanks, brian. >> let's bring in joe into this
conversation. chief u.s. economist for deutsche bank. do you think, joe, the market's hawkish reading of fischer is the right reading just because he didn't rule september out? >> he just basically laid out the fed tendency on where rates are going. the market thishnks there's onla 40% chance the fed goes in september. i thought fischer played it right down the center. to me dudley's comments are more interesting, because less compelling means obviously the probability in his mind a september move has declined. dudley has given a lot of interesting speeches over the years and he's tended to be very consistent and predictive of the general committee. >> here is a way of putting it. how do you think the financial markets are going to behave between now and the september fomc meeting? and if they are rocky, how much do you think the fed is going to take that into account? >> based on data the fed should have hiked a while ago. but your question on the markets is pertinent because that will determine whether the fed moves.
if the market doesn't have it priced -- or sake of argument with be say the market goes down to 30%. fed will have a real communications problem raising rates even if the fundamentals warranted if the financial markets don't expect it because this fed has been loathe to disappoint markets. it's been their tendency and this -- >> it almost feels like those 0% rates are more in the interest of the stock market. >> or the bondholder. >> steve? >> i was just going to say, i think that's exactly why fischer spoke and why he said what he said which was to redirect the needle back to the center. if it moved towards not moving in september after dudley, what fischer said moved it back toward the center. maybe it is a 50%-50% chance irrespective of what those fud funds futures probabilities say. the reason is because if they do decide to move in september, they do no the want an outsized and negative market reaction. by talking about the case and the situation right now, he moves them back to the center, gives them flexibility to move.
>> steve, look. i had them going in september. i hope they go in september. the point is, why we're arguing and debating this move is to me such an insignificant -- it's remarkable. the intellectual company tal that we've dispensed as an industry on the fed's first move is just totally absurd. fischer should have basically said, yes, we're going to move. i don't know why we're debating these 25 basis points. >> because, joe, the federal reserve is kind of like sports radio. right? the predictions for the next season's super bowl winners start the day after the last super bowl. we have been talking about the federal reserve for months. i was joking with steve that if they don't raise in september i may not shave until we get an interest rate hike but i don't think i'll be allowed to do that. >> as long as you shower. you can maybe not shave. the thing is, employment rate is 5.3%. everything i see says it is going to be below 5% by year earned, yet the fed is still
worried about market reaction to one or two hikes. >> unemployment rate was me, 64. now the unemployment rate is man mandy 5'3". >> to what degree does the seasonality make it a little bit misleading? >> i wrote a piece over a month ago that talked about august being historically soft. i said i hope the fed has the courage to look past it. i'm not so sure. thank you very much. >> i think stably was being a grown-up, looking at the market turmoil and saying, you know what? this is not decisive for us. looking at the data and saying we have to make a bold step here. >> if the fed was reliant on market moves -- big hedge funds can move the market around and directly affect the fed. that's the problem. that should have been gone a long time ago. >> and it was reliant on the height of anchors with which to make decision on policy, we'd be in big trouble. >> it's come down to that. by the way, bottom line, you
expect september as well. >> i still have it. >> mandy, joe, thank you. steve, thank you as well. it has been nearly a month since puerto rico's historic debt default. appears things could get much, much worse. morgan brennan is on that story. >> that's right, brian. so more pain for puerto rico. there are three key deadlines looming. we're going to break down what investors need to know. that's as tropical storm erika moves out and the fiscal storm moves in in for puerto rico. more when "power lunch" returns.
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welcome back to "power lunch." phillips 66 moving higher today. warren buffett's berkshire hathaway disclosing a roughly 11% stake. phillips up 10% this year despite oil prices. today it is up by nearly 3%. planet fitness is also on the move today with jeffries beginning coverage of the fitness chain with a buy rating calling it a well managed company that continues to gain market share and expand its profit margins. shares up by 5.5%. if there wasn't already enough going on around the world, do not forget about puerto rico. we are coming off a big weekend for puerto rico's debt crisis. let's find out why with morgan brennan. >> thanks, brian. as the heavy rains of tropical storm erika are pounding puerto rico, the commonwealth is calling for a "rain delay" in its debt restructuring proposal which was supposed to go to the governor's office yesterday. the governor's chief of staff
extendeded deadline to september 8th. investors and analysts had been eagerly awaiting this proposal by the u.s. commonwealth's $72 billion in debt was called unpayable. a month after that announcement on august 3rd, puerto rico failed to make the majority of a $58 million payment issuing only a small partial payment on its public finance corporation bonds. flashforward to this week. today there is a deadline for the island's water and sewage authority to make a $90 billion bond payment. this is on the heels of a failefailed $50 million bond sale. then tomorrow this will be the biggest deadline to watch this week. prepa, the port rekae electric power authority must have a restructuring deal with its creditors. this isn't a payment. but if a deal isn't reached, the creditors, including bond insurers, assured guarantee and
mbia as welling a some hedge fund heavyweights could head to u.s. district court which could trigger even more financial pain for the dead-laden u.s. territory that cannot declare chapter 9 bankruptcy. we have a lot of deadlines looming this week to keep an eye on with puerto rico. forget san francisco, guys. this american city is turning into a red-hot place for start-ups. plus, a number of stocks are in bear market territory off 20% or more from their highs. we'll look at some names that you might be interested in at these levels. you're watching cnbc, first in business worldwide. don't change the channel. . 7 ♪ [ male announcer ] andrew. rita. sandy. ♪ meet chris jackie joe. minor damage, or major disaster, when you need us most, we're there. state farm.
shares of online home furnishings retailer wayfair are sinking after sit krcitron rele report saying this is way below the current price. despite the decline, shares still above the october ipo price. wayfair declined to comment on the report. to the bond market now where rick santelli is looking at all the action at the cme. how are things shaping up at the start of the week? >> it's a lot like the discussions going on with the fed. half the people think they're going to do one thing, the other half think they're going to do another. with the yield curve, the front
half like the following intraday of 3-year note yields, have been higher. it's been a flattening day. when you on long end, there's some doubt. an intraday of 10s. but i want to point out that 10s and 30s which really lagged early, or at least moved up in yield toward unchange, 2-day dollar index. yeah, down about one-eighth of a cent but we're off the lows that we idle waiting for the data on what to expect with that september meeting with the fed. >> gold prices getting ready to close. slightly to the downside. currently sitting around $1,132. down by 0.1%. over the course of the month gold is up 3.5% for august. the dollar meantime, the dxy, is down. that's on track for a monthly loss of about 1%. moving in opposite directions there.
dxy at $95.93 as we speak. you can forget san francisco and silicon valley. who cares? another american city is firing on all cylinders when it comes to new business start-ups. one could say it is a true lone star. kate rogers here now with that story. >> well, it's austin, texas. at age 14 isabella rose taylor is one of austin's rising small business stars. this year she was awarded emerging lone business woman of the year. she graduated high school at 11 and went on to show at both new york and austin's fashion weeks even landing her clothes in nordstrom's stores. >> it all started with art for me. i've been painting since a really young age. that led me to fashion through way of sewing. i was doing a lot of mixed media incorporating fabric into my art. so that led me to an interest in sewing. i took a sewing class and fell in love with the world of fashion and haven't stopped since. >> isabel's gotten things off the ground thanks to austin
based dell through the company's women entrepreneur network. >> partnering closely with entrepreneurs is really important. we started out as a small business 30 years ago. it's always been really core to who we are pass a company. we also know though that small and mid size companies around the world are creating the vast majority of jobs. up to 90% in emerging markets. when you think about the fact that there will be 600 million people that need jobs by the year 2020, the entrepreneurs and growing businesses will be the ones to hire them. >> isabella is now working on her spring line looking to pitch to more retailers. brian, she's already in college studying fashion marketing at parsons. so impressive. >> a true underachiever. >> underachiever. >> what were you doing at 14? i definitely was not in college. >> i'm not even sure i was in high school at that point. thanks, kate. start-ups may be booming in austin, but the established austin-based companies not performing well in our exclusive power city indexes.
year to date, the austin pci down nearly 8%. big drops in shares of retailers whole foods and solar winds dragging down our index. austin is in fact one of the worst performing of our nearly 40 power city indexes so far this year. what a wild end run to a pretty crazy month. dow going in and out of correction territory. that's even just today. a monster rally in crude prices though today. now raising their losses for august. a rough month for tech. a ton of well-known flames in bear market territory, off 20% or more from their highs. we'll give you names you may want to be looking at, maybe even buying at these levels. that's all coming your way here on "power lunch." don't go away.
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greenland melting at the faster rate than previous years. they believe greenland is a good barometer of what might happen to other parts of the world if gas emissions continue to rise causing an increase in average temperatures. netflix ending its partnership with cable movie channel epix as it focuses less onnen non-exclusive content. epix films will move to hulu in a december that begins september 1st. day after mcdonald's declined the idea of a peace burger in honor of international peace day, denny's says it is willing to team up with burger king on a new sandwich. it wants to combine elements of its bacon slam burger with bk's whopper. >> i don't know about that. that's the cnbc news update at this hour. >> i don't even know how you would get your mouth around that. we could give it a good go. >> i think it's really messy. but probably --
>> the egg right down your front. thanks a lot for that, sue herera. dominic chu, what are you watching? >> i'm watching cal didn-maine. the egg producer stock was raised from buy to hold saying its recent pull back has created a buying opportunity. they held inindustdustry confer. eggs for that slam burger/world peace/whatever burger, denny's and burger king are trying to put together. >> thanks for that, dom. the markets are back sliding a little bit off the best levels of the day. we were down by triple digits earlier in the dow, we got up almost towards break-even, now sliding back down by 88 points on the dow. the s&p is down by 11 points. the north dakoasdaq down by 23.
you were voicing your skepticism earlier on today. how much of this is just due to short covering in oil? >> yes, that's what's going on. much of this rally in the morning was due to energy stocks moving up dramatically. want to show you the xle, the main etf. we were moving. you even prior to these comments from opec. they wanted to talk to other countries. also even prior to the production numbers from the eia, monthly numbers that show small production lower for june. i think that gave some people hope that maybe, maybe oil production would finally start dropping in the united states. but you see the move up in xle. these small-cap e and ps when the eia numbers came out and opec commentary came out just starting moving up dramatically. they've been up almost 20% in the last two days. i want to show you oasis, for example. these stocks were trading like they were going out of business. oasis was $50 in october. it was $8 and change last week.
all these names looked like they were going out of business. now they've sort of come back to life a little bit. u.s. uso is another etfs that's been trading terribly. a basket of oil month futures contracts. it's come back in the last few days in very, very heavy volume. commodity etfs have very heavy volume today. south africa which is a commodity play, there's a global energy etf and the u.s. dow jones energy etf, all of of these are almost 300% of their daily average today. playing around with anything in commodities today. >> thank you for that, bob. will september be a better month for investors? joining us now, investment strategist and economist at lpo financial, and rob lutz. rob, start with you. even as we surged in the stock market in the latter half of last week, i didn't meet a
single person who say, whew! glad that's over, we're out of the woods now. do you expect another leg down from here? >> we certainly do. i've seen a lot of volatile markets over the years. this one clearly was off the charts. i think it is really telling us the markets have an instability factor. i think it is related to 0 interest rates for seven years. this poll is like getting the rudder and stabilizer in the wrong place, you get incredible turbulence. that's what we're getting in the markets today. we think we'll retest in two to three weeks. when we retest, it will be very important to see how low we go on that retest. if it is shallow, we think we could get a nice move toward the end of the year. i think you could get to 2,150 rally if we get that really u.s.s.ful rete f successful retest. the u.s. economy singles us out as the place to put capital this year.
>> am i reading you right in that maybe all the concern about china, while an excellent excuse, if you want to put it that way, was maybe more of an excuse for the market to sell off as opposed to what you think is the real reason, that's nervousness about the candy bowl being taken away by the fed? >> i just think you can't run the economy on zero interest rates. lots of negative things can happen. china is a factor, i don't think though it is the number one condition for the markets. i think interest rates with the fed in control is a big problem. >> what do you thunk is going to happen from here, john? >> i think rates at 0% are there for a reason. they are below zero because you can't make them below zero. that's why they dp kwaid kwauque easing. i think the fed does want to raise rates this year. given the jackson hole meeting, think the market's still as confused as they were before. i think the message from the fed
over the weekend was we really want to raise rates but we haven't quite seen what we need to see yet. i think that's adding to some volatility here. it's been a long time since we've had a 10% correction. it's been since 2011. normally you get one a year, so i do think we're probably in a mode now, september, october be those two months send to be volatile anymore. it will look a lot more like for example, 2011 than it did in october 2014. >> real quick, what's your read on valuations in the u.s. market at this stage? i still meet people who are saying despite moving off the highs since may, it's still not that compelling and that maybe you can find better value if you've got the stomach for it in places like emerging markets. >> depends on your time horizon but right now valuations on the u.s. market are about fair value and that tells you over the next 10 to 15 years you're going to get average returns on stocks which are 7% to 9%. now you're way undervalued in
places like the emerging markets, especially in china. and so that is -- again, if you have a long time horizon, that might be the time to dabble in emerging markets. but between now and the end of the year i'd still think there is a lot of work to be done there before you can say, now is the time to wade back into emerging markets. >> john and rob, thank you so much for joining us today. you can go toll powerlunch.cnbc.com to see what rob is avoiding in this market. staying away from. not touching with a barge pole. brian, back to you at hq. jcpenney getting a couple of analyst upgrades today, including one from deutsche bank. another one from evercorpeverco. oppenheimer has a hold rating on the stock. brian, when i was looking at the deutsche bank note. it suggested 3% growth assumptions after 4% to 5% this year.
do you think those kinds of comparable sales targets are achievable for jcpenney? >> i do. look, i think low signaled low, maybe even mid single-digit type growth is doable for jcpenney. that's very consistent with our view that the business model has stabilized. >> everyone loves the ceo, marvin ellison, from an prap operational perspective. they went back to more traditional retailing. you just said they can go 3%-plus in comp sales. why the perform rating? >> right down the income statement. okay sales growth. i still think gross margins could be a problem for them. the company tends to drive sales through aggressive price promotion so that works against gross margins. then i don't see a whole lot of opportunity here to cut costs from the sg and a-line. the net result is that, when i think about jcpenney and i think about my model, i have a difficult time seeing the company turn substantially profitable in the foreseeable
future. >> thups ts the perform rating shares of jcpenney. more on that deutsche bank call in the 2:00 hour in a segment called "street talk." the dow swinging in and out of correction territory. the number to watch there for the dow is 16,516. if we get back down to that level we will be back in correction territory. as for crude, that big green square at the end of your board is currently up by over 6% at $48.08. rallying for the third straight session. of course, we will have in the second hour of "power" the close for crude. but next, the way home builders do business could be changing drastically. diana olick has to story live from washington. >> hi, mandy. that's right. they are the hoped buime buildes bread and butter, subcontractors. but that relationship could not be at risk. why -- next on "power lunch."
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welcome back to "power lunch." the s&p 500 energy sector is positive on the day as crude erases its monthly losses on positive production data. among the big winners are newfield exploration, consol energy, conocophillips and chesapeake. natural gas and oil all up between 3% and 5%. energy a stand-out sector in today's trade. >> thank you very much, dom. the way home builders do business could be drastically different by a new ruling from the nlrb which could make them responsible for what their contractors do. diana olick is taking a look at that potential impact. what have you found? >> mandy, it is a major change to the government's joint employer status which could now put builders on the hook for issues involving everything from labor violations and union negotiations with subcontractors. now the nlrb declined our request for an interview but in a release said the board's previous standard has failed to keep pace with changes in the
workplace and economic circumstances. while the ruling covers all employers from fast food companies to health care to high-tech, it is particularly profound for nation's home builders because they rely heavily on specialty trade contractors. that's your roofers, electricians, framers, they're calling it everything from unnecessary to crippling. >> this ruling really if it is applied to small businesses, applied to the home building sector, really shows no understanding of 80% of the marketplace. it's just impossible to comply with and use the same business model that has been working successfully for 200 years. >> the builders can't fight this ruling until there is a specific case brought against them by a subcontractor. i spoke with the ceo of home builder lennar, stewart miller. he says he thinks his business is highly differentiated from this particular case. but he admits he is alert to the ruling and watching. lots more quotes online,
realtycheck.cnbc.com. big-cap technology stocks have been like the market, extremely volatile lately, especially after last week's roller coaster. in over just the last month, the s&p sector is down over 12%. qualcomm, paypal, ibm, all down over 9% in just 30 days. david katz and eddie merkin. are you using this weakness to buy any of those companies? >> if you look at the technology sector, there have been the haves and the have-nots. the haves are the facebooks, googles, netflix. the have-nots are the ones you mentioned -- ibm, qualcomm, companies that have long good-term prospects but have been beaten up pretty badly. we'd pick up some of those high-quality names that are out of favor. we like qualcomm here, microsoft we think has done a great job turning the business around. you are getting it at a very
good valuation. they should be raising the dividend this month. we would be buyers but understand that you aren't going to get a quick recovery. you need a change in sentiment. that's really a 3 to 12-month time horizon. >> eddie, why do you not like ibm? some calling it a value play. >> i think ibm is in the ha have-no have-nots. in technology we spend a lot of time debating what's the best approach. i think in the tech sector you want to favor some of these mega trends, whether it is mobile advertising or the semi-content in automobiles. that's the way to position within tech. the problem with being a value investor in technology is book value is never a very good metric for these stocks. so ibm has been growing earnings but they've been doing it through buying back their own shares, cutting costs. at some point that growth algorithm runs out. >> david, you look at these names and some of the names that you like, if you had to pick one
that you thought was, hey, a pretty good value with some growth thrown in as an extra cherry on top, who would it be? >> key connectivity is a play on more and more electronics but sells at a very reasonable valuation. they just closed a deal allowing them to buy more than $3 billion stock in the next year. we think it has good business and stock price momentum and you are getting it at a great price. >> eddie, same question to you. >> one stock that i think both growth and value investors can like is google. the stock trades at a modest premium. but when you net out their $70 billion of cash, net that out of the valuation, it is about 15 times earnings. similar to that of the s&p 500. yet you get 15% to 20% earnings growth out of google. you get the play on the mega trend of mobile advertising. and who knows what? maybe some of these other initiatives like driverless cars eventually pay off for them as well. >> and a name change, i suppose. thank you both very much.
i saw an amazing stat, 72% of tech this morning at least was in correction territory, or more. but that's still better than last week's 97%. as for the dow, it's creeping closer to triple-digit losses. we were down almost 200 points earlier on today. we're currently down by 95. in fact the dow is on pace to close out its month in more than five years. will next month be a september to remember or one to forget? plus -- >> mom, i got to go. cnbc's here. >> hi. i'm sara at etsy's headquarters. coming up on "power lunch," i'm going to show you all around our fun creative office. for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great.
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since its ipo price back in april, etsy is down about 7% since the first day of trading. however, e-commerce site is down more than 50% since then. but as part of our own office envy series, we are looking beyond the stock and inside the office culture. cnbc went to the brooklyn headquarters of etsy. >> hi there. i'm sarah starpoli.
engagement and culture manager at etsy. come on. etsy is a marketplace where people can buy and sell unique goods. hey, carter. are you enjoying your sandwich? our front desk has some pieces of found objects. here alone there are several different engineering teams, all the folks that work on mobile, our legal teams, all different folks sit in their teams around in an open space. >> this is our unofficial mascot. his name is mr. grit. this is his consciousness coming out of his forehead. sometimes if you're not in the office, your teammates will make sure that you're still around. ahmed was away on vacation. but now he's here. hi. all of our conference rooms are named after music meets food. this is celin teche dijon. this is just an area where people can get their work done. we wanted it to look like a
family den. we don't have phones on our desks, therefore we have phone rooms throughout. twice a week we get locally sourced food. one of the places we can eat it is in this wonderful greenhouse space. this is my desk. every new employee gets a $100 gift card to spend on etsy. this lovely lady is something that i feel only i can love. no, i love her very much. thank you guys for coming. but i got to go. i have to call my mom back. >> okay. for more on our office envy series and get more tours, head over to powerlunch.cnbc.com. >> don't you want an office close to celine dijon? i think that's brilliant. oil is rallying today. crude has now erased all of its losses for august. tropical storm erika wreaking havoc on puerto rico's debt deadlines. they're calling for rain delays and the governor's chief of staff extending the debt deadline to september 8th.
strict new labor rules for home builders. builders will be held responsible for their third party vendors. those are the "power points" for the day. let's just say you've got the worst mark tiet timing everd you only put money into stocks, etfs and mutual funds. the day before massive history making market drops. we'll introduce you to someone named bob. you might be surprised how he is doing now. "power lunch" back in two minutes. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you. call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company.
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. welcome back to "power lunch." you do not have to be a shark to make money in this market. and you can even have the worst market timing ever. say you only put money into stocks, etfs and mutual funds the day before giant history making drops. eric knows someone who's doing something like that. he's with us today with a lesson that i guess we could could call "buy and hold"? >> that's right. you can call it buy and hold. this is the story of a friend of a friend named bob. he's the at timing the market. he's only made four trades with his entire life savings to that point. the first one was in 1973. right here he bought the top of the market when the s&p was doing a good job.
he was chasing a bull run, then it went all the way down. he lost about 35%. didn't make another trade again for almost 15 years. he waited until 1987. of course we know what happened there. there was a giant market crash. right after 1987 so he had been saving up for 14 years, put all his money in there, lost again. but he never sold. so he has his money in from the '70s, his money in from the '80s. he did two more trades. in 2000, and in 2002007. we know what happened. the market went down 50%. both of those times. if you actually add it all up, he put in $200,000. but if you calculate it out to today, it's over $1.2 million. so even though he lost money in the short term, he made money this entire way up because he never sold. it turns out bob is not a real person. it is a fictional character we came up with by ben carlson, an author, an investment manager. he actually went through this exercise to show that if you don't sell, especially in times
like we're having right now when you just hold on, you will make your money. in this case, bob made six times his money despite being the worst at timing the market. >> which is good to know, right? even though bob is a fictional character, i'm sure plenty of people out there can identify with that bad market timing. thank you very much for that, eric. of course you can read a whole lot more about this story right now on prl powerlunch.cnbc.com. >> thank you, mandy. melissa lee joins us right now from the nasdaq. mandy, see you tomorrow. thank you very much. welcome, everybody. it is now almost 2:00 on wall street. about 1:00 in kansas city, missouri. we'll reference that in a moment. i'm brian, i'm glad to be back with you. just joining us, the wild ride for stocks lately continues. the dow is down headed lower again, well off session lows, however, which was more than 200 points near the open. the big story is oil. it is up more than 7%. it is close now to breaking even for the month. it was down 3% today. it has been a massive intraday
swing. crude oil down nearly 20% for august just since last monday. it has manually broken even. let's start the show the only way we know how, to jackie deangelis live apartment the nymex for more on the big turnaround. >> afternoon to you, brian. yeah, remarkable turnaround in crude oil prices here. $5 off the session lows. the session high right now, $48.93. actually a trader just before this telling me if we break $48.90 he expects to see $50, possibly today. so this is really dramatic. a little bit of explanation about what's happening here. a couple of factors. you've got big producers talking about the pro tension for everybody to sit down, not just opec members but everybody that is a big producers, to talk about what's happening with oil production. the eia out with monthly production numbers from here in the u.s. this is the second month we've seen a decline so it is starting to be more convincing that the u.s. numbers are going down. for june we saw 9.3 million barrels a day.
fin finally, a fire at an oil sands project in a canadian city cause for a halt there. if we bring in less from canada even temporarily our inventories will go down from here. multiple factors nobody could predict at this point. course keeping our eyes on the situation with saudi arabia and yemen as well. >> jackie, thank you. a few minutes ago i reached out to bp capital, boone pickens' company. this is what one of the traders there wrote back to me. new eia production methodology was out today and showed a decline in production starting in may which certainly helped get things started." he also mentioned volatility as well. the guys at bp capital changing those numbers. if you don't like the data, change the way you get the data. either way, thank you to bp capital for that. big-name investors making big bets on oil related stocks.
warren buffett's berkshire hathaway taking a nearly $4.5 billion stake in phillips 66. freeport mcmoran is the seconds-performer in the s&p 500 over the past year. let us bring in managing director of energy at sun trust r robinson humphrey. what do you make of the massive turnaround, more than 10% swing for oil just today? >> it really is remarkable. i think you have two things. one fundamentally i've been hearing from some of my companies for a while now, guys that operate in these plays, i don't think some of these agencies have it right how much we're starting to roll over. guys out there in the field. i'm not surprised to hear the eia say that on fundamentally. then psychologically when you hear the last, shoot, three turnarounds up cycles to me have
all been driven by opec saying something. although some can argue opec doesn't have the sway it once did, i'd argue different. i think once they come out and say something to the public that they have to do something here, they have to step in, even if just a few hundred thousand, i think that signals that they have really changed their market, how they're going to address this. >> here's my beef with the media. thus, i'm beefing with myself, if you will. there will be headlines tonight and tomorrow that say oil recovers 6% or 7% to $48 or $49 a barrel. here's the problem. when oil fell to under $50, it was the end of the world. now we're back up there and suddenly everything's fine. everything is still not fine. these bond companies are trading at 60 and 70 cents on the dollar, trading 30 cents off par three months ago. >> i agree. that's why i think your point is dead-on about looking at icahn
coming in, looking at warren buffett. i think you look at two things right now with energy sector. one, with the big private equity owners. energy's completely underowned. it is an underweight sector right now versus other sectors. two, your point is spot-on. a lot of my companies are down 30%, 40%, 50%. even if they recover 10% or 20% these last few days, they're still down 30% to 40% for the year. i think you see a lot more bottom fishing. >> quickly, pdc energy, gulfport? you think they can withstand it? >> it is tough to say in the next week or month. do we go to $55 or back to $35. you have to have those names and have the optionality. i think you have to have some that have the optionality to be
able to do that. >> i just read the notes. those are your names. outside of oil, apple and sysco making some kind of deal. josh lipton? >> brian, these headlines just dropping. let me bring them to you. a new partnership here. apple and cisco announcing a partnership. apple and cisco aiming to encourage sales of ios devices. iphones, ipads to business, cisco plans to aid apple devices on corporate networks. looks like apple's ceo, tim cook, be in a statement saying, together with cisco, we believe we can give businesses the tool to maximize the potential of ios and help employees become even more productive using the devices they already love. apple and cisco say they're going to work together to make the iphone an even better business collaboration tool. backdrop brian, we know under tim cook apple has been moving
hard and fast into the enterprise, into the workplace. that partnership with ibm to have specific apps from banking to helalth care. we know apple's working with developers who specialize in enterprise related apps. you look at i.t. spending, $3.5 trillion this year. no surprise tim cook wants a bigger piece of that. >> breaking news, josh. again imtake just thinking off the top of my head here. wash blackberry. they've owned that enterprise market for a while. that whole byob device movement has hurt blackberry with everybody using their iphone or samsung or android device. when we look at a big enterprise deal where they are looking to put more apple devices on your corporate network, you have to look at blackberry as possibly not benefiting positively from that news. that stock is actually up right now about 2%. turning back to what's
happening in the stock market. the dow has wiped out a nearly 200-point loss earlier today. we're still down today. let us get some sound practical advice on what's no doubt a scary time for investors. katy nixon, chief investment officer with northern trust wealth management. prior to the program you sort of referenced this is actually a relatively calm time for the equity market. doesn't feel that way. >> well, we have had four years of extreme calm with volatility about 35% below what would be considered normal. so we've had a couple weeks here of above-average volatility. but it's off a very, very low, low bottom. >> i guess the criticism of sort of strategists is that there is always an upward bias. like when do you not say buy? is there a time that you would not say buy? >> you know what, brian? that's a good question. if you envision two things happening, they would be precursors to a bear market, i would a time obviously you
wouldn't want to buy. those two things are either a systemic risk coming from bubbles. clearly we had that in the housing market in 2007. china doesn't look like a bubble right now. valuations certainly on the hong kong market look reasonable. we don't think that china's going to have a hard landing. we've never believed that gdp was in the 7% range. we're in the more of a 4% to 5% range. the market has also taken the 7% gdp with skepticism. we think china will availed a bear market. second condition in place to pull back from risk would be recessions. our base case is china's going to avoid a hard landing and certainly the rest of the world looks pretty good from an economic growth perspective. stuck in a low-growth channel, but it is positive. >> most firms have a year end to price target. you have a rolling 12 months. so at any point the price target you guys have is going to be 12 months from that day. you ratcheted yours back a little bit on the tp s&p 500?
why? >> a little bit. valuations have gotten really stretched. when we look 12 months forward we are really looking at fundamentals to drive equity returns going forward. if we have a 5%. 12-month forecast for forward earnings and put a 12% dividend on that, we can get a sort of 7% return. py hearken back to a fake "bob." >> fake bob is dumb. >> it highlights the perils of trying to time the market. short-term market movements are notoriously hard to predict. having a long-term strategic perspective is always going to be the most prolific from a return perspective. >> there is some statistic, something like half the returns in the stock market the last 30 years have come on just 90 trading days. >> right. >> i think you get the point. >> directionally you are very correct there. i think what we saw last week is a case in point and kaecautiona
tale. we did see equity outflows on monday and tuesday. for those investors who sold their stocks into the belly of the beast early in the week really missed out on some really good days later in the week. >> big gains last week. katie nixon, thanks very much. great insight. brian, let's bring in the president of delphi management. scott, always great to speak with you. after we've seen this correction, you still think the markets are overvalued? do we need to see a further correction in order to actually correct valuations? >> i'm not a technician, but if you look at the s&p as a proxy for the market, it finished 1988 on friday. $111 in operating earnings. that still puts it at almost an 18 multiple. fact is that earnings are trending down. we started this year with a forecast operating earnings above 1.30. the 1.11 figure is basically 1.5% down from year over year. normally you need rising earnings to have rising multiples.
if you think it is bad in large cap, it is worst in small and mid cap. they're between 21 1/2 and 22 times earnings. you have to be selective but the market as a whole are still expensive. >> you'd like to see the s&p somewhere like 16 times? >> no. that's with the market. we normally buy stocks at 13 multiples of low and forward earnings or we buy assets chief relative to the discount value. there aren't so many. we did a lot of math math matt screening. one company that's really been smashed that we owned three years ago, we sold 110s back in
20 14b a 2014, the stock's come down from $146. boston properties. the implicit cap rate is 6.6%, 6. % cash on cash for the next 12 months. they grew the noi at 11% clip. they're always a really well run franchise. >> you aren't worried about headwinds when rates actually start to rise against this group? >> i'm not because they're not really that dependent on interest income and dividend. there's only a 2.2% yield. if it were a high yield like 7% or 8%, of course i would worry. but i think a lot of the interest rate hike is baked in to it. as an ongoing concern, it is a very good business. they have a solid credit rating. they are an a-1 under s&p. the coverage ratio's over 3:1. they have a good pipeline coming along in the next three years. >> pacar you like also. is that one you bought amidst the dip? >> yes, absolutely. the company is selling at about a 12 pe on next year's earnings. it continues to grow on the top
line this year 10%, next year 5%. they earn 22% return on equity, 15% on total capital. even though they have a financing arm, they generate a lot of free cash. they generate over $450 million in free cash in the first six months. and they really are a good factor worldwide. they have over a 25-share in either the ten-ton or class a diesels in the united states. looking long-term, paccar is a well run company and a reasonable pe. >> scott, thank you for your time. scott black of delphi management. up next we are checking in on our exclusive "power city indexes." in fact, only one city in all of ameri america's stock market's up. is it your town? with today's drop, the dow on pace to close out its worst month in more than five years. will next plont bemonth be a mo
but your dell 2-in-1 laptop gives you the spunk for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great. i'm a customer relationship i'm roy gmanager.ith pg&e. anderson valley brewing company is definitely a leader in the adoption of energy efficiency. pg&e is a strong supporter of solar energy. we focus on helping our customers understand it and be able to apply it in the best way possible. not only is it good for the environment,
it's good for the businesses' bottom line. these are our neighbors. these are the people that we work with. that matters to me. i have three children that are going to grow up here and i want them to be able to enjoy all the things that i was able to enjoy. together, we're building a better california. [extracurricular activitiessands help provide a sense of identity and a path to success. joining the soccer team... getting help with math... going to prom. i want to learn to swim. it's hard to feel normal... ...when you can't do the normal things. [announceto help, sleep train is collecting donations for the extra activities that for most kids are a normal part of growing up. not everyone can be a foster parent... ...but anyone can help a foster child. stocks were the top story all last week. i suspect right now to start this week, oil might be that top story because crude is up nearly
8%. oil market closing in less than 15 minutes. we'll bring you that as soon as it happens. crude oil not high by any means. $48.58 is your trade. but it was down 3% earlier today. we've had about a 10% swing in the price of crude oil in just today's session. wow. as stocks sink overall, most of our exclusive "power city indexes" have gone down with the markets. in fact, of the 38 city and metro indexes that we built and follow, only one is higher over the past month. any guesses? no? kansas city. though it is only up .5% over 30 days, kansas city the is only power city index that's higher in that time. gains by sprint, h&r block and others are helping. the worse t performing power city -- miami. none of the 12 stocks in the miami index are higher in that time. declines by carnival cruise line, mastec sending the pci to
a one-month drop of more than 9%. still, darn good weather. analysts noting goldman sachs and morgan stanley are barely trading at book value. bank of america shares trading lower. is now the time to buy financials? bill stone is invest chefment strategist at pnc asset management. bill, i'll start with you. did you use the pullback last week to add to any of your positions? >> certainly for some clients we did. we do like the financial names. if you're a believer that the economy continues to move along here, as we do, we think they will end up working out even though financials underperformed last week. >> jason, it is interesting because the financials had gone up during the year on this notion that the fed was going to hike interest rates. the fed will raise interest rates eventually and analysts at
evercor make the point we are entering a seasonably strong time for the financials. at the same time are there any concerns on your part about emerging markets exposure for any of these names? >> by and large the u.s. banks are highly concentrated in the u.s. to the extent concerns overseas in china can slow global economic growth, you keep and eye on it but generally speaking a is the u.s. economy continues to grow, so will u.s. banks. with respect to energy, for some of the smaller regional banks overly exposeded to that segment, on the short side certainly bears watching. for larger banks, it is a relatively small part of what they do. it is a positive consumer as lower prices at the pump placed more cash in their pockets. >> if you take a regional that operates mostly in texas or in the south, that are more exposed to energy and energy loans, does
that strengthen the consumer offset perhaps non-performing assets in the energy portfolio? >> for the regionals, we'll see how it plays out. for the top 20 banks, energy loans are no more than 2%, 3% of loans. in that instance i think lower oil prices on the consumer side more than offsets any negatives on the corporate side. >> guys, got to leave it there. tomorrow morning, 7:30 a.m. eastern time, mike mayo joins us on why he thinks combining the bank of america ceo and chairman roles would be bad for the financials industry as a whole. let us stay on this breaking oil story because the oil price continues to gain. joining us now is kyle cooper of iaf advisors. kyle, thank you for joining us on the line for such short notice. to what do you guys ascribe this dramatic turnaround today in the
price of crude oil? >> certainly the market is over extended. a report came out that putin is willing to meet and talk with some of the oil producing members for russia, maybe join along with opec to kind of start looking at supplies and maybe try to curtail those a bit. >> do you believe that russia, as big as it is, and venezuela have the power to move the global oil market the way they are right now? >> yeah. i don't believe they cut but this market has been so extended. let's face it, this market has been in free-fall since the end of june. no market goes in one direction forever. market was way overextended. it hit a record streak of consecutive down weeks. it was due for a pullback. this is just the fire -- just little spark on what was really a lot of smoldering tinder ready to ignite. >> 20% gain for oil in a month. do you think we'll be sewing short coverings among the oil contracts? >> yeah, that's definitely going on. you see just selling and selling
an selling. some of those guys are probably more than willing to take a profit. even with it up here, you're still in really good shape. i would look forward to the next few weeks though as refiners begin to start maintenance. i think you'll see crude supplies build. i'm not convinced the $37.75 for last week is our low for this move. >> kyle cooper. a if advisors, not convinced we've seen bottom recently. appreciate that. right now the dow is down triple digits, a little more than 90 minutes left in stock trading. we're down 119 points. still recovered about half of what we lost at the open. oil is soaring as well. we've had a wild august. as we go to break, why don't we look at what's ahead next on tap for your money. we have a september playbook that you cannot afford to miss on deck when "power lunch" returns.
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nbut your dell 2-in-1 laptoped gives you the spunk for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great. welcome back to "power lunch." i'm jackie deangelis reporting from the my nenymex. wti currently trading just under $49. some actual production decreases in the united states and also
perceived global production decreases. powers that be come together and can put a plan together. we're going to see what happens in the close. coming up in six minutes. guys, back to you. >> thanks, jackie. domini chu has a "market flash." >> watching oil prices. we're watching oil refining stocks as well rallying for the most part as crude briefly tops the $49 mark. valero, marathon, phillips of 6 higher at warren buffett berkshire hathaway discloses that stake in the refiner. back over to you. 90 minutes left before we close out august with the dow on pace to see its biggest monthly drop in four years. beware of the september swoon. >> historically august and september are the worst months of the year for stocks. september could be especially tricky if the fed and interest
rate speculatiospeculation. we went back 25 years to 1990 and find out what has historically held up during that so-called september swoon. may help to think of the back to school theme. kids back in the classroom spreading germs nor easily. think health care. the sector has outperformed the s&p 500 historically in september. humana, mylan and patterson hold up well. the s&p footwear subindex has been a major outperformer over the last 25 years trading positive 75% of the time. if you're looking for one name in particular, look no further than nike. it's the best dow stock over that period historically far outperform being the other components. there are also a few stocks and sectors you may want to avoid that go against that back to school grain. i'll get into that in more detail on "closing bell." you may be surprised at one name in particular.
as the month comes to a close, the dow is trading down about 6% since the 1st. where are the buying opportunities? our next guest, patrick becker, president of becker capital management. he joins us now. patrick, people -- the question i get probably the most is, why don't you ever talk about selling opportunities? the reason is because it is hard to short sell a stock. mom and pop aren't going to go out, find a share, borrow it and pay it back later on. let's talk about good old-fashioned i'll give you money, you give plea a share of a stock. what looks good to you, patrick? >> well, this correction that we've gone through at least for the value sector of the market really started almost july 1st. consumer discretionary -- energy, industrial and technology -- have really had a tough time. if you look at the value indexes, the russell 1000 value is down about 7% year to date. yet the russell 1000 growth index is positive on the year.
if you go down the small caps, same thing. russell 2000 value down 9%. the russell 2000 growth, positive on the year. so that's where we would hunt for bargains is in those sectors. there are several companies that have already kind of gone through the correction that we think could be poised to rebound. >> patrick, sit tight just for a moment. we'll do the oil close. don't get up. don't get up. we'll come right back to you. down to jackie deangelis at the nymex. can't make enough of this huge midday reversal. >> you really can't. it is a $4 move on crude oil prices making new session highs as we speak. $49.30. i reported to you earlier that a trader told me when we broke $49.50 was probably the next stop. doesn't seem out of the realm. perhaps not today but in the near future. having said that, short covering definitely behind this and traders are out there who say this could just be because of some of the black swan events we've been talking about, these headlines pushing prices up. that doesn't necessarily mean that we are going higher from here. we could still go back and test
those lows. i'll explain more about that when we see settling prices. >> crude oil up nearly 9%. jackie, i have a feeling we'll see much more of you throughout the next hour and a half on cnbc. back to patrick right now. but in a few minutes, after the commercial break, i'm about ready to fire off a tweet -- some of the best performing stocks today in oil and gas are also the worst performers this year. take from that what you will. some might call that a low quality rally. let's go back to a high-quality guest, patrick, thank you for being so patient. as a value investor, kind of an odd question probably. as a value investor, what do you make of oil? do is does it factor into your daily decision making? >> we have a lot of conversations about it because it is an area that shows up on the value radar. any time you have stocks off 25%, 30%, 35%, that'sen a area that's usually good hunting ground for a value manager. in the case of oil, it is always difficult to predict oil.
that's tough i think to do on a short-term basis. we've done some work around production and production coming down and when supply and demand kind of equalizes out and that could take a year or two. but after that, production is offline, demand is still there, there could be some value. but you very much have to be i think long term to invest in that sector right now. >> the nine biggest western oil companies, six in america, three in western europe, have lost over half a trillion -- with a "t" -- dollars of equity value over the last 12 months. i hear your point. we're still a molecule nation. in fact, lower oil prices damages growth in alternative energies that might be used to then replace oil. so have you dipped into an exxon, a chevron, a conoco? have you found value in any of these names? >> yeah. we own chevron. we like the balance sheet. they've stated publicly that they're going to continue the dividend there. with all these names you get solid dividends. they're willing to borrow money
to keep those dividends going. kind of get you through this shallow period where oil prices don't really represent what we think demand will be with all the production coming on. if you look at a chart on production, it is a cliff coming off right now. it is just a matter of time, a year or two, before we get that all settled out. >> patrick becker of becker capital management from portland, oregon, appreciate your time today. let's get a "market flash" with dom chu. >> we're going to talk a little bit about these oil stocks. conocophillips, hess, exxon-mobil, chevron, all the large, more integrated players. as crude rallies for a third straight day, a lot of these stocks are getting a bid of a bid here either working from lower levels back to flat, or maybe even taking a peek at least at positive territory. nonetheless, whether or not you believe oil is a longer term sell or buy, some of these oil stocks are at least catching some interest from value
players. >> thanks so much. brian, it is a dividend you are just talking to patrick becker about, chevron, for instance. you can like the dividend but the underlying stock, if you're going to lose 35% over the past 12 months, it is sort of a difficult trade to make even still now. >> i'm sure you'll talk about it on "fast money" at 5:00 p.m. eastern, the best performing oil names today -- epe, goodrich petroleum, they're the biggest gainers today. they're also the biggest losers year to date. >> it's the junk rally in oil. >> it kind of smells, like bob pisani might say, like a low-quality rally. >> if you take a look at the s&p 500, right now 10-year yields are up 2.18%. there's about 225 companies in the s&p that yield higher than that now, and 50 of them or thereabouts have yields of 4% or more. none of them are oil companies
that are positive year to date. it just speaks to this idea that as you are looking for these yields, oftentimes these yields are a product of lower stock prices and not anything else. >> that's it. what you just said, dom, is literally graham and dodd type stuff. it is so important when it comes to investing to understand that if you do some yahoo! finance stock screen or whatever based on stock dividend yields, those yields could go away. they're simply based on the price and earnings and earnings and prices change. >> look at transocean. jackie deangelis, not quite $50 though at the close. >> not quite $50 at the close. just 10 cents off of the session high, $49.20. but a $4 pop on the day after the gains that we saw towards the end of last week. traders telling me annex dotally these things tend to come in threes and in fact they did. what was interesting when we started the session lower this morning, traders were telling me we're taking a pause, digesting some of the news. then some headlines nobody was anticipating, the fact that perhaps big producers will sit
down and come to the table to try to work on stabilizing prices. this is opec an others as well. the talk of the talk leading people to believe that production numbers will come down. add to that the fact that u.s. production numbers on a monthly basis did come down in june. 9.3 million barrels. we have some production setbacks in canada and this is what just stoked the rally here. although i will mention that it is probably a lot of short covering as well. people who just don't want to be in this trade right now. >> there was a goldman sachs note out this morning, jackie and everybody else, i sent out to the team this morning. it's interesting. goldman sachs, by the way, has been more right about oil than any other major firm because they called the $45 level when it was going back to $60 and everybody said goldman got it wrong. in their note they predicted higher production in the first quarter of 2016 because you look at rig counts, they're up one, down one, whatever. but based on deferral rates of rigs, et cetera, they think we could still get higher production. we just had someone on the news
line a few moments ago. he thought the $37.53 level could be retested again. it is not like people are out there who are wildly bullish. >> absolutely. i do want to reiterate that a lot of people are telling me the same thing at this point. that when we get momentum like this to push us up higher it doesn't necessarily mean we won't see those lows again. once this news calms down. if we don't see opec and other producers negotiate or have an emergency meeting, then the same supply/demand story really comes back into play and nothing changes. so having said that, it's not to say here that we're out of the woods or that necessarily we bottomed at that $37.75 number. >> jackie, citi was making a big deal this morning out saudi arabia releasing official oil prices, as to whether they'll defend market share, to drive others out of business or drive pra production lower elsewhere. is that the talk down there at all? >> everybody's talking about what saudi's doing and what
they're feeling. we've had some evidence that they. definitely are feeling the pinch which is why i'm not sbrurprise opec is saying they're willing to come to the table to talk to others. having said that, i think it was the first time in many, many years saudi arabia's issued debt. it is their social spending they have to cover and that's much, much higher, in the 80s to where brent is trading right now. >> one quick point here. we talk about the rig counts, high-frequency data every week from baker-hughes and whatnot. i get a number of tweets in the course of any given week on this idea that production cannot continue at this type of pace if we do not see those rigs come back online. after a while even though production is still near record highs those lower rig counts at some point do manifest themselves in production numbers. i don't know. >> i would argue the rigs
they've taken off. if they've taken off rigs that weren't producing that much in the first place, as one traders like to say, they take the cadillacs offline and leave the mercedes online. >> some of them are gremlins, by the way. there are three types of rigs. horizontal, vertal and directional. we are starting to see a change in the horizontal rigs because those are the fracking rigs. the thing about those rigs, they drain faster. the way that we frac extracts the oil out more quickly so that the reason people think production is going to go up is because as drilling rigs go down, the wells that are there that are producing fast, it is like having -- there will be blood, i drink your milkshake? some people have bigger strauss. so the draining out the oil faster so you can't look at established sort of well counts and say, we're going to stay at this level. this -- i may be making no sense at all right now but this is also where i remind our viewers and listening that the 25-year
average inflation adjusted price of a barrel of crude oil is $48. it's not $80. it's not $20. we're actually spot-on in the 25-year current dollar average where oil prices have loved to be. >> brian, i would make the point that nobody's talking about demand today. we're only talking about supply. when you think about sort of what triggered this recent turmoil in the marketplace, it was klein and the concerns of what's happening over there. we're not necessarily out of the woods and china is a big consumer. if chinese demand does drop off, if we do see u.s. demand drop off as we anticipate it will seasonally as well, again, these equations could continue to be out of balance. >> guys, thank you. meantime as we are watching oil rally up more than 8% right now, the dow is down more than 100 points. 126 to be exact. the s&p 500 is down by 16. more on the big oil rally we are seeing when "power lunch" comes right back.
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options for closing the u.s. military prison in guantanamo bay. spokesman josh earnest declined to rule out executive action as an option but says the best voice is a congressionally approved plan for transferring those prisoners. four advanced f-22 fighter jets arriving in poland, the first deployment to europe for that plane. it was announced by the air force secretary as part of a broad effort to support eastern european countries worried about russian aggression in ukraine. a fire at saudi oil workers compound in eastern saudi arabia has killed ten people. that blaze began yesterday in a sprawling housing complex that houses workers for the state oil giant saudi aramco. boxing champ floyd mayweather likes to boast about his earnings and he did just that on his instagram post today. he says he doesn't pack the way mere mortals do. when he travels he packs benjamins, as in money. and that x loo like it looks li
to be one big suitcase. that's the cnbc news update at this hour. >> now that's a rig count. >> yes, it is. absolutely. >> that is not flat week over week. that's up big. >> laying it out on the bed. stacking it up. >> if you didn't see the video, it was basically a giant bed full of stacks of giant money. may weather's throwing it into a bag. oil settling above $49 a barrel today. ari, i know we changed the topic on this segment about ten minutes ago. have you had a chance to chart oil or anyoil related stocks? >> let's chart the energy spdr. first reason we stay away from it, there are still some credit spreads widening in this group because of energy corporates right now. we are worried if the overall
market does continue to crack here, it is going to be because of this sector. for that reason we are staying away. looking at the xle, equities corroborate this view. xle's broken a 15-year up trend. let me repeat that -- a 15-year up trend. along with weak absolute price, relative trend is weak coming off a new relative low. at best we think this is sideways with risk to the downside. we are staying away. >> boris, do you agree with that? >> i think you got to take -- if you are a value investor, you got to take the opposite side of this. this is exactly the kind of conditions value investors like but you have to be a scaled-down buyer of all of the oil equities. you can't spend all your capital all at once. if you assume we are near equilibrium, that the worst case scenario is $35, if we dribble all the way back down, then scaled down buying into these positions will probably do the well over the next two to three years as everything begins to stabilize and rallies back. in the meantime you get
dividends. only with the blue chip names where credits are good. >> guys, we appreciate it. thank you very much. just reminder, folks, we do two more "trading nation" segments every day on our website, tradingnation.cnbc.com. we'll have more on oil's giant day after the break. west texas intermediate. that's oil, folks. up 27% in a week. we're back after this. >> announcer: and now, the latest from tradingnation.cnbc.com and a word from our sponsor. you totalled your brand new car.
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switch to liberty mutual and you can save up to $509. for a free quote today,call liberty mutual insurance at see car insurance in a whole new light. liberty mutual insurance. just moments ago we hit a new intraday low on nasdaq composite. we're now down by 53 points. 2,774 was the last trade. we had been as many as 50 points higher on the session. apple has turned negative on the session. just a couple of names out there in the oil patch you might want to look at today.
oasis, whiting, what's wl, goodrich petroleum, gdp. all the names leaders in the oil equity field right now. but these are also some oil sto rally. john kilduff joining us on the phone. john, you have been vocally bearish on oil. are you shocked by the magnitude of the move we have seen in the last week or so? >> volatility certainly the name of the day here, brian. i've been in this business a long time now. this is one of the most volatile periods i've ever seen. given the stock market, crude oil is having its day, as well. >> to what do you ascribe it? >> the market got incredibly bearish and ahead of itself to a degree in terms of the perceived glut that is expected to still occur later in the year here when refiners go to maintenance.
a hopeless situation with opec as they battle for market share. today things turned around with their own eia coming out with a critical report that showed our output is coming down quicker than they think the market realized. we are down to 9.3 million barrels a day as of june. if that's correct and accurate, we'll be under 9 early next year. that makes the story brighter for the oil industry. >> it sure does. thank you for joining us. if you beaut the uwti the last couple of days, three times bullish oil etf, take an entire family out for dinner because it's up 20% today. we'll get more on the big oil rally. here at td ameritrade, they love innovating. and apparently, they also love stickers. what's up with these things, victor? we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals,
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goldman sachs off that big upgrade we talked about earlier. that 2% gain dissipated. financials are a key part of the story. oil stocks appear to be showing weakness. more on the oil rally. joining us, managing director of princeton energy advisors. it's not just today's rally that's jaw-dropping, but a rally the past three days. do you think this is a bottoming process going on or just another opportunity for the shorts to layer back in? >> i would hope it's bottoming. it should be bottoming here. the markets have been skittish the last two months. we have the report from the eia which suggests shale production has fallen more than expected. i think investors are beginning to get confidence again that economics will prevail here and
shale oil production will turn over and supply will start to reduce. that's going to increase confidence in oil prices going forward. >> how much of this rally is predicated on the notion that opec will do something to bolster prices? >> i think it would make sense for opec to do that. i, myself, am not factoring that in at this juncture. i guess my read is more that shale is showing signs of weakening. that is making people feel better. opec is right now more the icing on the cake than the cake itself. it would make sense for them to do something at this point. >> is 9 million barrels a day production an important number we should be tracking? >> i don't think the number itself is important. the changes in the number are important. we would be looking for production falling about 40,000 barrels per day per week. and we bet more or lesson that
track. things will even out. that would take us down to a million barrels a day production by year end. >> brian, i'll see you at 5:00 for "fast money." >> "closing bell" starts right now, folks. >> welcome to "closing bell." i'm kelly evans. >> i'm simon hobbs in for bill griffeth. >> this is the last trading day of what has been a volatile month for investors. today no exception. we'll follow every move for you. today is oil taking center stage, seeing a major rally. up more than 25% over the last three days. we'll take you over to the nymex for more details. >> ukraine clashes