Skip to main content

tv   Power Lunch  CNBC  February 5, 2018 1:00pm-3:00pm EST

1:00 pm
schwab. >> it continues to go up. >> ebay down 6%, the quarter was really good, all of this investment over the last couple years is starting to kick in. >> so you would buy? >> yeah. >> cme >> that does it for the halftime reporter thank you, lady and gentlemen. "power lunch" begins right now. here's what's on your monday menu, a market with more ups and downs than last night's super bowl after years of almost no worry, why all of a sudden volatility we'll debate wells fargo taken to the woodshed is it time for the ceo to go has anybody seen jim cramer? the eagles are the super bowl champs congrats. the question is who won the "power lunch" stock strap? "power lunch" begins right now.
1:01 pm
bitcoin extending its bid slight, falling to around three-month lows, below 7,000. broadcom is higher, rising its takeover to 82 a share, but qualcomm shares falling after a research note says apple may drop the company in favor of intel for its next generation of iphones. michelle will join us in a couple minutes it's "fast money" trader guy
1:02 pm
adami, who will be with us for the entire show, but we'll begin, as we obvious do, where the action is, with bob pisani. >> hello, tyler, quite a yo-yo of a day traders are trying to figure out the bottom where to look for it in a market bottom first. >> sellers are exhausteds, you want to see the selling stop and then if buyers have some kind of interest i would say right now we're in an indeterminate moment. they tried to rally, but there really wasn't enough buying interest and then we drop below the low of the day, and then saw volume pickups for most of the etfs that are out there. now i think you see a small attempt to rally, and then move back down here a look at the vix, same thing, went to 19, then back to 17, and then back to 19.
1:03 pm
you see, this is -- they're trying to figure out where we're at, and declining breadth is one of the clearest signs of a market top it was 10 to 1 on friday, 3 to 1 is bad, but we have to see it consequenceantly the volatiles looking for a level. that's 2716. that's not far away, folks, that would be a 6% decline in the market, guys, back to you. the nasdaq is faring better, in fact earlier the nasdaq briefly went positive 689 bertha coombs is tracking that action at the nasdaq. >> that's right, brian it's been a bit of a seesaw today, and mark cap has what kept this market on either sides of unchanged
1:04 pm
we're basically seeing red all around in terms of sector. large cap the best performers, biotech the worst performers apple started on the with a low of about $158 a share. that crossed below the 200-day, very weak there for apple, but then it bounced from there we are now off of well off those highs, flirting with unchanged, nonetheless, depending on where apple moves and holds, we could see it perhaps move out of the correction territory that happened with that lift we saw earlier today, but even as apple is moving forward, it is putting pressure on apple suppliers. chip stocks have been the worst performers today qualcomm likely to continue the takeover, but the idea that apple may be moving its chipset to intel, also hitting a couple others, amd a big loser.
1:05 pm
a look at lamb researc research. some of these are make a big turn around, but so far it's not holding. it's going to be one of those up-and-down kind of days, it looks like >> and we are right now at session lows on the s&p 500. thank you very much well, the boogeyman of this market is being painted as interest rates. rick santelli, are you to blame, rick -- not the bond market, rick, but you personal already are to blame for this? >> do i look like a central banker to you? >> not yet. >> a lot of traders on this floor, what you mentioned is what they're looking at. the first print in the dow, that was the low. we just went through it. the s&p 500 did it about three months ago
1:06 pm
and the fact that both those markets kind of dabbled, almost touched and were breedly in positive territory, that is negative for a tech nix. s. >> if you look at the hyg, the barometer are linking credit, you want to pay attention here it's getting close to testing a low. its first print was 8613 it's toying with levels we haven't seen since march it's all about inflation and interest rates and the fed moving in a certain direction the ten-year break-eek, highest since -- finally the dollar index, the one-week shatter shows a key area we traded it in on tuesday, if it gets through that to the up
1:07 pm
side, look formore buying. tyler, back to you. >> the dow hit lows down about 370 points let's dig beeper gabriela santos at jpmorgan funds and enginejeremy pea is as jeremys, there are selloffs, and then there are selloffs that actually signify something more. how do you tell the difference between a garden variety pullback and something that might be signaling a longer term issue for stocks >> we think it's the former, a normal bull market correction. what we have seen so far is uninterrupted gains the first three weeks of the year, up 7% really since the election of
1:08 pm
president trump up 35%, so the pace of those gains were unsustainable, so it's much more normal when you see some correction come into the equity markets. some works, so given the left of the dow today, we should expect two days a year of 500-point declines overall, how do we know? no one knows in advance when you get the pullbacks if there is a bigger drawdown or the end of the cycle, but in our view, this is very unlikely given the end of the cycle. >> you understood completely what i was droofg at making the distinction of a garden-variety pu pullback and mismore significant. gabriela, take me through your
1:09 pm
thinking this is obviously something we haven't had in a couple years. >> yeah, so it's really just going back to level of volatility what would be normal is maybe a 5% pullback, a 10% once a years, and to your question about when does it turn into something more sinister it's about something actually fundamentally changing in the economy, right do we see a recession in the horizon? that's when you would switch and thing -- we don't see that >> you don't see that, but you do see rising interest rates >> rising interest rates listen, i'm in that camp as well, but i'll say this, bull markets end on a crescendo of good news. you said something wednesday last week that stuck with me. >> i can't even remember last wednesday. >> markets like to test new fed chairs that's exactly what's going on now.
1:10 pm
kudos to brian sullivan. i don't think it has anything necessarily to do with rates going higher i think what it has a lot to do with, finally good news is bad news that's a fundamental change in what we've been seeing. >> 400 points down gabriela, if i have fresh money, should i be nibbling at domestic markets to buy >> it's always about the starting point, right? then definitely adding even in the u.s. would be something we would do, given that fundamentals haven't changed, but if you're an investor, that's already very concentrated in the u.s. market per se, we would definitely be adding much more to europe, even to latin america, right there's a lot of good stuff out there. investors are still underestimating the strength. >> guy adami, thank you, and i'll be nice to you on "fast money", but jeremy, listen, my friend and frequent skit hire
1:11 pm
scott mine ar of guggenheim sell bull markets don't die of old age. they're shot in the head by central bankers. i understand your point, i hope you're right and that we were simply too bullish however, to tyler's initial point. how do we know that the new fed is not going to screw this up, for lack of a better term? >> i think for one thing, the reason that the es economic cycle ends is when they see inflation causing a problem. i think wield eight or nine year of 2% to 2.5%, the core key is -- the cores pc empty, so it seems unlikely that the fed will be overly aggressive given the absence of aggregate broad-based inflation. >> gabriela, your thoughts about -- one of the points i
1:12 pm
think jeremy meat in the note is last year you had a couple things working, higher earnings, and you had higher expanse of multiples. people willing to pay more for each dollar, do you expect that that's going to happen again in 2018 or are we at that point where it's really going to be an earnings driven market as opposed to the expansion of p.e. >> it should be much more an earnings driven market, and there was some multiple expansion last year, but it was really an earnings story if we look at earnings expectations for this year, of course, very, very solid, 16% earnings expectations right now. yes, you get that one-time tax boost, but revenues also very, very solid, growing at around 8%, so the backdrop should continue, but -- >> i know we have to go, but janet yellen dropping the hammer sort of on wells fargo, she also
1:13 pm
said that stocks were priced high how do you feel about a fed chairs saying, yeah, the market is overvalued, oh, go thea go? >> the fed has noted yeah, the multiples are above average, but that's exactly why we can't rely on multiple expansion and it is looking solid. >> got to leave it there thank you very much. appreciate it. well, as tyler noted, the dow hitting new lows and moving lower. wither now down more than 400 points we have lost 1,000 points in the last two trading days. investors in wells farceo are losing billions themselves because of fed coming down hard on that bank, taking unprecedented action should ceo tim sloan step down or be forced out we'll discuss wells, discuss that, and continue to watch these markets selling off in a
1:14 pm
big way once again at ally, we offer low-cost trades and high-yield savings. but if that's not enough, we offer innovative investing tools to prepare you for the future. looks like you hooked it. and if that's not enough, we'll help your kid prepare for the future. don't hook it kid. and if that's still not enough, we'll help your kid's kid prepare for the future. looks like he hooked it. we'll do anything... takes after his grandad. seriously anything, to help you invest for the future. ally. do it right. seriously anything, to help you invest for the future. anything worth pursuing hard work and a plan. at baird, we approach your wealth management strategy the same way to create a financial plan built to last from generation to generation. we'll listen. we'll talk. we'll plan. baird.
1:15 pm
1:16 pm
shares of wells fargo today, including placing a limit on its balance sheet growth will ford forrest is here. >> ceo tim sloan maintains that
1:17 pm
the company is still open for business and the limit on growth will only cost $400 million, less than 2% of last we're's earnings but there's been sharp selling, now the consent order from the fed comes 19 months since the company's oversight issues first became public, on janet yellen's final day in office and with no new wrongdoing uncovered many are thus questions whether the fed was too slow to act or had alternate motivation it also questions how much of company has done to improve. ceo tim sloan has regularly talked up the changes he has made in the past >> what i can promise you is we are absolutely transforming this company, fulfilling the promises and obligations we made.
1:18 pm
we've reorganized the company in materials of centralizing many of our risk and control companies and we're building a better wells fargo i do think the worst is behind us the fed saying wells fargo has yet to correct previously identify identified -- the stress test, the quality at a timive pardon, and third by september 2018, they need to have submitted the third-party review to the fed relating to this consent order, as we've discussed, the to be is down 8.5%. if they have to constrain the growth of their balance sheet, that's how banks actually make money, what are they going to do all things eagle they can't -- but to make sure they can
1:19 pm
continue to do loans is sell off certain securities, that what tim sloan means, that would cost them $400 million in earnings this year, so that, he says, they're still open for business as they would want to. >> they're a huge mortgage lender, does it means i can't go to wells fargo and get a mortgage. >> it would if they didn't do balance sheet engineering to create room elsewhere. so total assets alone is an -- if all things are equal they can't -- but they can shuffle things around and get rid of some of the non-core assets so they continue to operate as normal, but clearly there's an impact the reason the share price is selling off so much more than the $400 million figure would suggest is people are concerned about too many things. one, do they not sort things out, and they have in the this
1:20 pm
is a quaint tiesive number wilford, thank you stick around he hit the key question, do you believe it would do permanent damage to wells fargo's brand and ability to build a business going forward? >> not in any way, shane or form, number one number two, you better better issue every the fact if you want a mortgage from wells fargo tomorrow, six months from now, a year from now, you'll get it there will be no reduction in the ability of this company to lend money, take in deposits or operate the way they have historically if you lee at the balance sheet
1:21 pm
over the last six quarters, you will see it hasn't groan it's un$9 billion on a $2 trail bronze balance sheet in my view this company will be shrinkingen balance sheet going forward for the next couple years. if you look at the earnings impact it's de minimis if you're looking at -- on multitrillion, so the -- will the customers walk away this 17 months ago we put a tell on the stock on the theory the customers wouldn't walk away the government really didn't do anything to them, either in addition, if you look at this latest move by the fed, they're not penalizing the bank in terms of hitting them with a big fine or rep raise or anything of that nature so my view this is 1,000% political, has nothing to do with the economics.
1:22 pm
>> i hear you, why did the market wipe out $28 billion in market cap the kb bank indense is down wells fargo is down 11 is that an infair sell-off >> there's never such a thing as an un -- >> in the sends -- i think the market is going much lower, but, you know, when the market comes back, wells fargo stock is likely to move up sharply higher, so the net effect is i don't see this as being economic in nature. >> you heard what dick bove had to say, but you loud you were year estimates, and you sound pretty negative on the stock what do you think? >> yes, i've been bearish on the stock, i think this is a big headwind i've seen in the past banks try to get out consent orders, and it takes quite some time to do that
1:23 pm
when you look at the fundamentals, they have not grown earnings in five years i compared thoism to their peer banks, they have the slow ex expected loan growth, so when i compared an investment in wells faro to some of the peers, especially now with the consent order and they cannot grow, i struggle with investor deciding an investment in wells fargo is -- >> even with the stock being hammered as it has, that's still not priced in everything you have just discussed? >> absolutely. when i look at the 4.p multiple at wells, that's in line with b of a and jpmorgan the with wells fargo, i have a low degree of
1:24 pm
confidence that's a level of risk >> all right, gen, we're going to wrap this up. dib bove, mr. long, thank you. the dow and s&p 500 hitting session lows both the s&p and the dow down 5% from the most recent report highs. is this the beginning of a biller pullback, or is a bounceback coming first? we'll be looking at the charles when "power lunch" returns well jd power did just rank them highest in investor satisfaction with full service brokerage firms... again. and online equity trades are only $4.95... i mean you can't have low cost and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.
1:25 pm
mom anit's not it's mine. mine. mine. and it always will be, forever and forever. the new rx 350l with three rows for seven passengers. experience amazing at your lexus dealer.
1:26 pm
of emerging markets obsolete? at pgim, we see 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. everyday our 1,100 investment professionals around the world search out opportunities for alpha. partner with pgim, the global investment management businesses of prudential. gglobal bonds, and high-dividend strategies. sure, these are investments. but they're not what people really invest in. what people really invest in, is what they hope to get out of life. but helping them get there takes a pure focus. because when you invest their money without distraction, hidden agenda or competing interests, something wonderful can happen. they might just get what they want out of life, and maybe even more.
1:27 pm
welcome back to "power lunch. this ishares etf that tracks -- is down around 200 are% works, on a two-days losing streaks they were the fund is now more than 4% to 5% below its record high now, later on in the next hour we'll leek at some of the stocks in the overall market that's taken deeper pullback, with the dow down about 440 points right now near its session lows. we'll like at that and more after the break. thank you so much. thank you! so we're a go? yes!
1:28 pm
we got a yes! what does that mean for purchasing? purchase. let's do this. got it. book the flights! hai! si! si! ya! ya! ya! what does that mean for us? we can get stuff. what's it mean for shipping? ship the goods. you're a go! you got the green light. that means go! oh, yeah. start saying yes to your company's best ideas. we're gonna hit our launch date! (scream) thank you! goodbye! we help all types of businesses with money, tools and know-how to get business done. american express open. to get business done. well, it'sonce again.eason >>yeah.
1:29 pm
lot of tech companies are reporting today. and, how's it looking? >>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.
1:30 pm
president trump and first
1:31 pm
lady melania trump departing for ohio, where the president will deliver a speech on tax reform, while the first lady will speaking about the nation's responsibility to the opioid epidemic. eight people are hospitalized after being injured on an am tra train that crashed. two people were killed more than 100 were injured in the weekend crash. bad weather causing a massive multiple vehicle pileup that shut down a busy -- in the 30-car pileup on interstate 44 in conway. the windchill temperatures this morning hitting minus 3 degrees. and a team from massachusetts got the selfie of a lifetime ryan mckenna was at the right place at the right times and he took a self we with justin timberlake the picture went viral on the
1:32 pm
internet brian, back to you. >> he and justin brought selfie back i wouldn't say that -- >> you just said it. >> i missed, brian i have missed you and your puns. >> you're the only one, sue. thanks gordon charloff, to tyler excellent question is this how do we know if this is just a, a healthy correction, or b, the start of something bigger and more worrisome. >> that's the question of the day. >> we brought you on for the answer >> we're trying to figure that down here. i'll give you the scenario what are we seeing right now in the absence of a reason to reverse a trend, then the trend will continue. what we're seeing is what we saw
1:33 pm
on friday, just a continued correction talking about the yeels, bond rates, maybe even some discussions we've been hearing, what is it going to take for us to find a level and explode to the up side awhat would bel telltales? it's when you start to feel that emotion come into the building, where you start to get that sense that guys are looking to hit bids, regardless of where they are, and that they're going to be aggressive to the down side, and then you're going to start to say, look, we're at a level where if things move 1,000 points, 2,000 points on a percentage basis, that may not be a real significant move, but
1:34 pm
emotionally when people start to see things in the paper, we went down 1500 points or something of that nature, then people start to check that are personal portfolios, and then decide their own level of comfort there's a lot of risks in this game sometimes it's easier to buy stocks than sell them. he we talk about the president's state of the yule, have we enter that or still a ways away from there? >> no, i like that point if you look at the tax bill specifically, you talk about the repatry yates of funds, and what that will be, and now all of a sudden people are talking about the debt ceiling, so yeah, it's the perception of the news,
1:35 pm
which is changing, and it might be indicators of this market starting to pick up momentum. >> thank you you finished second with netflix and tesla. >> thank you, what are you going to do? what are you seeing technically? the point at which i get concerned here, they were 6% and 5% and then more technicals if you break there, that's when
1:36 pm
i see you. >> it's going to be a zone if that happens. >> i'm going to try to buy there. anything else? we are in a period of increasing volatility here. the s&p 500 and the vix, it's been rising for some time. if you look at all significant market corrections, there's about a 9 to 20-month period where ranges start to sxakd.
1:37 pm
if the history is any guide, we will continue to see expansion that's the bestivity, get ready to trade. the high to low range, around to range, it hit the lowest ever in the dow, are we getting back to normal no, we're way oversold, so again, i think 208 will be a volatility
1:38 pm
i would say they let us up do we take any queues? i really also as much as -- i think we're seeing a macro -- the dollar tarts to find some port obviously the tax consult will help so the underperformance of the russell is because of that weakness it's got to hold a lot of people have been sag hardly every happens hour, they went up together for 30 years.
1:39 pm
board sell off i don't know what the take away is the other thing, if you look at a chart of the 30-year bonds, we are starting to break -- we're seeing a four-decade breaks. >> are you charting the price of the bond or the yield? >> price of the bond, if you go from 1982 up to the very high ex just straight up we're that's more than i don't know if the fed starting to get more hawkish there's something going on could it be they're just not going to buy as many >> central banks don't have the desire anymore if bonds and stocks are not
1:40 pm
inseriously correlated as is often thought of, then there would be more selling in stocks? >> very possibly i don't know it's kind of scary to think about that just coming back from such low complacency, and we start to normalize that would be a real source of volatility we're seeing it all right. thank you so much. brian, back over to you. >> quelly, uy, is there also the bull case where the federal reserve could pull back on rate hikes if the market keeps going down >> 100%, but is it their job to bail out the economy or bail out the market that's what mr. powell has to ask himself. >> that's a good question. the dow is down 475 points when we come back, we tackle this market plunges. we are at session lows we have lost over 1,000 points in two trading days.
1:41 pm
today, the new new york is ready for take-off. we're invested in creating the world's first state-of-the-art drone testing facility in central new york and the mohawk valley, which marks the start of our nation's first 50-mile unmanned flight corridor. and allows us to attract the world's top drone talent. all across new york state, we're building the new new york. to grow your business with us in new york state, visit your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today.
1:42 pm
liberty stands with you™ liberty mutual insurance. and i recently had hi, ia heart attack. it changed my life. but i'm a survivor. after my heart attack, my doctor prescribed brilinta. it's for people who have been hospitalized for a heart attack. brilinta is taken with a low-dose aspirin. no more than 100 milligrams as it affects how well brilinta works. brilinta helps keep platelets from sticking together and forming a clot. in a clinical study, brilinta worked better than plavix. brilinta reduced the chance of having another heart attack... ...or dying from one. don't stop taking brilinta without talking to your doctor, since stopping it too soon increases your risk of clots in your stent, heart attack, stroke, and even death. brilinta may cause bruising or bleeding more easily, or serious, sometimes fatal bleeding. don't take brilinta if you have bleeding, like stomach ulcers, a history of bleeding in the brain, or severe liver problems. slow heart rhythm has been reported. tell your doctor about bleeding new or unexpected shortness of breath any planned surgery, and all medicines you take. if you recently had a heart attack, ask your doctor if brilinta is right for you.
1:43 pm
my heart is worth brilinta. if you can't afford your medication, astrazeneca may be able to help. welcome back, joins us is coach o'leary and tim seemo. this market sell-off obviously has us rethinking that, and because it is so dominant in the headlines, but kevin, you took the stop stop. congratulations. >> thank you your picks were boeing and apple. boeing did great, apple did fine until the last couple -- what made you pick them, and in what's going on today, how do you apply that thinking -- >> four years ago i heard the first reference to the idea of smart beta
1:44 pm
it was a time when i had over 50 employees running mandates for me i met ftse russell, you could tell us how your manager manage, and we will take art and science and create an index for you that will do what you're paying all these people to dos and fire them all, and this will work better, you know what? it's better. index called ousa. i said this moment what are the most heavy-weighted stocks in the ousa, and they told me going with apple and boeing, go with those, boss. this does not capture 100% of the up side of the market, but on days like today, that's why indexing works >> so you're going in and rebalancing automatically. >> and you're doing it based on
1:45 pm
real management's decision, just like a man or woman worked for mer, i want high o.r.a., or cash flow, i want to be 20% less volatile you could never do that with an index before, the very fist kay science they can build human beings for you and you pay them a lot less. >> so we've become obsolete, tim? >> speak for yourself. bottom line, great job to kevin. i think the message is ultimately it's been proven that indexing and picking some of the best of brie in those industries work form the reason boeing worked is because of free cash flow if you think about the yields in this company why this is a company that could be defense i w was.
1:46 pm
>> i think it's very healthy the thing is, when i see a sell-off, i always ask myself be the rational investor. is anything that's hall in the last two days of selling or last two months changed my mind that stocks are the best asset to own? interest rates haven't moved must have to make me derail nigh stock thesis if i want to put money to work today, i would rather put it in a group of stocks that are more conservative in nature, because i like cash flow that's what matter dash flows saves you on days like today that index is a lot less than the market is, because it only owns cash flow in stocks it doesn't have to be that concerned, it's just looking -- i want to point something out in this context we were not allow to do included our dividends, no return on
1:47 pm
capital. >> you are always complaining about this >> and i'm whining profusely about that >> but -- >> pal, chief, there you go. >> when they actually make me on a day like today make me move into capital that's a credit, or get me 4.5% on a govy. we're so far away from there the ey villain of this market. but it's not innocent, either. i would say that would be
1:48 pm
insane >> and they're going to lose lots of money. they were tending to push people in their -- it's a lot of fixed investors that i thinker investing in higher-risk products i think you get -- it becomes very attractive. what's the number? >> i don't need to joe if, the -- i will say this, look around the word, best since 2012 european, so the world is a different place, and some nance is very constructive >> correlation is not causation, so i'm wary of historic at stats. however, on friday, bill miller who we had on set noticed
1:49 pm
something interesting. when we have big jan wears, we tend to have lousy februarys if you believe some historical thing, bill miller says, tim, relax. evident and we have add extraordinary january, at the end of an exterior run in 12 months you keep pouring gasoline in the form of a fiscal, you know, policy stimulus to the market at a time when we were already at cycle lows on unemployment we were growing above 3%. >> you would need a ten-year at 4.5% to actually get capital to move there instead of equities you can make -- >> where does that number come from from? if you have money to work today, and you're saying i'm willing to put a portion of that port for the i don't to underperform, i have to put the rest into something that's going to go up
1:50 pm
at least ten to have that mandate most of them are 5% after tax. >> and fixed income is just that >> it's is just that, a fixed return >> an underperforming asset if rates are rising and you own long-duration paper. that's horrible. >> i agree, but you get to a place where investors start to look at where we have been in terms of the last couple years, real returns, because we don't know where inflation is. but the reality is as rates go higher, fixed income is a lot more attractive to people who were not invested in it. >> if you have been in tips over the last couple weeks, you made a ton. >> if you have been in them for the last four or five years, you made practically no return >> guy, i think this is where you're going, if not, jump in and correct me >> we can disagree >> a buyer and a seller. here's the point
1:51 pm
i think we made a lot of money the last few years, guys, so yes, i understand the argument about bonds, but at the same point, when somebody has doubled their money in five years by investing in the market, does it make them a little quicker to pull that sell trigger because they have already felt like they have done well >> lock in the gains >> exactly >> and tim has talked about this at 5:00 for the last few weeks relative strength index are at levels we hadn't until recently seen for years >> overbought, extended, boom, boom, boom >> ridiculous, and the market was cheap when interest rates were low now that cheap valuation market by the day gets a tad more expensive. and i'll put this out there as well boeing, we talked about boeing for a long time on our show. i'll say one thing a few weeks ago, boeing was trading close to 30 times forward earnings they trided higher and it's still 25 times higher earnings which is not cheap for boeing, especially if interest rates start to rise. >> look at the quality of the earnings >> 100%.
1:52 pm
it matters at a certain point. >> you also have to think of the stability of the cash flows. that avionics business is a thing of beauty. i mean, it's an incredibly high margin business that's really giving you a lot of stability in those cash lows. >> stock up 70% since july good stuff for you, but at some point, you have to assess whether that is something that's in the price >> would you rather own the airlines or the guy who makes the bus? >> if we're talking about higher gdp, i think the airlines look very interesting, especially after a pullback >> mr. wonderful, congratulations. >> thank you i won't gloat. i won't gloat, and i'm still unhappy i'm not getting my dividen dividends. >> thank you thank you to you, too, tim >> it's not just that stocks are sliding. bitcoin continuing to sink it's down more than 60% from its highs in december. the latest on the crypto crush coming up next at schwab. oh really? thank you clients? well jd power did just rank them
1:53 pm
highest in investor satisfaction with full service brokerage firms... again. and online equity trades are only $4.95... i mean you can't have low cost and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.
1:54 pm
1:55 pm
the big focus on stocks today, but we're also continuing to watch some of the crypto commodities slide, particularly one bitcoin. seema mody at the crypto desk with more on this slide. >> we have seen a precipitous decline in the price of bitcoin, now down over $1,000 in today's
1:56 pm
trade. the broader picture, bitcoin is down 65% from its highs hit back in mid-december. overnight, china intensified its regulatory efforts going as far as banning offshore cryptocurrency and ico websites, making it more difficult for the chinese to trade digital currencies back home, a number of u.s. banks halting purchases of bitcoin with their respective credit cards, citing price manipulation as a risk that's complicated matters for consumers who may be trying to buy on the dip meantime, u.s. regulators are getting ready to testify in front of the senate banking committee with china, south korea, and india cracking down on the space investors are anticipating some type of regulatory framework from jay clayton who will be in the hot seat the hearing is set for 10:00 a.m. eastern, and those comments will likely be market moving, michelle >> the whole crypto world has that on their calendar for tomorrow thanks another big selloff on wall street
1:57 pm
here's what everyone wants to know just a blip and the rally is going to resume or is this the start of something bigger? we're all over it as the second hour of "power" begins right after this break portunities. at ameriprise financial, we can't predict what tomorrow will bring. but our comprehensive approach to financial planning can help make sure you're prepared for what's expected and even what's not. and that kind of financial confidence can help you sleep better at night. with the right financial advisor, life can be brilliant. at holiday inn express, we can't guarantee that you'll be able to contain yourself at our breakfast bar. morning, egg white omelet. sup lady bacon! fruit, there it is! but we can guarantee that you'll get the best price when you book with us. holiday inn express. be the readiest.
1:58 pm
1:59 pm
but through goodt times and bad at t. rowe price we've helped our investors stay confident for over 80 years. call us or your advisor. t. rowe price. invest with confidence.
2:00 pm
i'm michelle caruso-cabrera, and here's what's on the menu. a really volatile day. the dow down triple digits pulling back at one point 5% from its most recent high. ditto for the s&p 500 even though we're off the low still, about 320 points. is there an even deeper correction coming? and is this really the market dip you have been waiting for? >> apple today bucking the trend. the stock bouncing back from friday's fraid and fallen to correction territory is now the time to buy >> jay powell sworn in as the next fed chairman. he's handed a stronger economy and a really difficult road to navigate when it comes to interest rates why we could end up with more interest rates than you think. "power lunch" starts right now and welcome, everybody, to the second hour of power i'm tyler mathisen the dow and s&p near but off their session lows the dow by about almost 150 points off the session low almost 500 points down earlier,
2:01 pm
was the dow. they're both off or have been during this session, 5% from their most recent record highs which was i believe january 26th exxon, pfizer, johns johnson & johnson, are powering the dow lower. apple and intel are the only ones in that index that are in the green, brian >> wow, good stuff there tyler, as always, thank you very much let's get to the markets and your money bob pisani at the new york stock exchange we have lost more than 1,000 points in two sessions been a while since we said that. >> yes, and we have a little problem. we have to find when the sellers are going to be exhausted and the buyers are going to start showing interest and frankly, i don't think we're there yet. let me show wru what the story is right now throughout the day, the volume on the upside has not been as great as the volume on the downside what does tat tell you simple technical analysis. selling is not exhausted let me show you graphically what i'm talking about. we hit the low of the day right
2:02 pm
at the open. 2736 or so, the opening low. then we had a rally. but when the rally happened, the volume wasn't very great at all. it was not enthusiastic, so the buying sort of died out around 10:30 or so, and we started drifting lower then we hit a new low just about 12:20. we passed the opening low. then we saw a sudden rush of volume to the downside, and then temporarily it was exhausted and then all of a sudden, again, the buying that mini rally we saw after the new low wasn't very strong. there wasn't a lot of volume behind it, and again, we started drifting lower once we pass that other low at 12:20 and hit a new low, forget about it the volume accelerated dramatically that tells you more sellers are out there and the buyers are still not enthusiastic let's look at the s&p intra day. breadth 4 to 1 declining/advancing. better than 10 to 1 on friday, but still awful. volume is on borderline heavy,
2:03 pm
take a look at the intra day, the only good news here is 2717, that's the low that was the 50-day moving average that art and i have been talking about since friday we did bounce off that technically, that's a good sign, but hardly great solace. and the volume, the rally in the last 20 minutes, not a lot of volume behind that either. be careful we still need to find a bottom >> thank you very much >> let's talk more about the markets and your money while most professionals are advising clients to stay calm, that this is normal and perhaps even healthy selloff, the big question is this whether this two-day slide is the beginning of something worse. mike santoli joining us now with more on that mike >> yeah, brian normal and healthy, maybe not pleasant, though everybody acknowledges that something like this was overdue. the market was so extended the dow was up 3,000 points from thanksgiving through last weekend. so clearly, we were ready for some kind of a payback it's happening in a more violent way, and i think you have to put it into a context.
2:04 pm
one is what else were we overdue for besides a 3% or 5% pullback? probably something a little deeper probably who knows if it has to be 10% right now, but something that brings us back to a trend that's a little more sustainable. where basically paying back for the overshoot we got in january. where essentially, you went straight up, and investors got very aggressively exposed to stocks we saw that by many measures i do think right now you can take some comfort in a couple things one is after you have seen one of these very long streaks broken, when you have not had a 3% pullback, we just finished the longest such streak ever last week, it is not typically the end of a bull market the first break is almost never the big ne usually it's a shake out like this, maybe a longer volatile period where we have to basically get back to some kind of a decent trend and find fundamental buyers, but ultimately, you have another rally attempt back up to the highs. i would doubt if this one reverses and in a v fashion goes back to the highs. we certainly could settle out
2:05 pm
relatively soon and start that process, i think, before we basically say look, something genuinely has changed about this trend. it would be a very strange year if corporate profits are going to be up double digits as by all indications they are, and the market was actually deeply negative i do think you can take comfort in a couple of those points, brian. >> all right, mike, thank you very much. from santoli to santelli let's bring in rick santelli hi, rick >> hi, tyler you know, something interesting is going on in the fixed income plarkts today. look at three 24-hour charts look at twos, now down four basis points look at tens, down two basis points 30s are unchanged. all right. that sounds a lot like curve steepening curve steepening with rates going down this is something we haven't seen a lot you think there's a fed implication there? in terms of maybe the fed's not going to hit the gas as hard at least that's the way traders seem to be trading, and finally, i normally talk about the dollar index.
2:06 pm
it's having an up day, but it's down well for the year, but year to date euro versus dollar might govern you clues investors like big numbers, and european economy, well, if we cough, they get pneumonia. nice round number, 125, the high on that chart. pay attention to that level on a closer basis at the end of the week michelle, back to you. >> we will, rick thanks so much let's talk more about today's market drop, where we go from here let's bring in michael and peter anderson, the cio of anderson capital markets. michael, why do you think the market is selling off so sharply? and what are you doing right now? >> it's simply this idea that interest rates are rising and inflation expectations are rising more quickly than expected so the present value of the future cash flows we have are being discounted at a much higher rate. and as a result, we're seeing rifg assets rerated. in terms of what you do here, i still think that the underlying fundamentals are strong. we have a good economy growing,
2:07 pm
corporate earnings are growing strongly rates and inflation are still low by long-term standards, and monetary policy is still easy. stay the course, stay invested in cyclical sectors with good revenue growth and good earnings growth >> peter, you agree with the assessment of why the market is lower and what would you do? >> i'm certainly not throwing out the playbook i have been using the last 12 years. it's important to put this in context. many speakers before me have said the same kind of thing in that this is just a normal return to somewhat usual volatility, which i welcome because if you have more volatility, you can snap up some of your favorite stocks at more attractive prices. and that's exactly what i'm doing. >> hey, michael. i have a question. i'm not suggesting markets going up, going down this is just a question. we always hear it's a buying opportunity, buying opportunity. i have been on tv now for i think a dozen years. i don't think i have ever heard one person say it's a selling opportunity. is it ever a selling opportunity?
2:08 pm
>> well, my view is, i tend to think about things, when volatility is rising and markets are falling over, it typically is a buying opportunity. the willingness to go ahead and buy then is at its most difficult. but things are on sale and from my perspective, it does present a buying opportunity so when is it a good selling opportunity? it's a good selling opportunity when markets are at their all-time highs, volatilities are at their all-time lows and you earn profits >> that was a month ago, so were you selling? >> that's the thing. i think that's where we'll probably disagree. i still think the fundamentals are still here you still have, if we look at the economy in terms of the numbers we're seeing, construction spending was solid. ism, both manufacturing and nonmanufacturing, job growth wages are growing at their fastest rate since 2009. revenues are growing about 10% we're halfway through earnings season, and earnings per share was cited at 15% to me, this is still a very good
2:09 pm
fundamental backdrop for stock prices it hasn't changed all that much. just the fact that rates and inflation has ticked up a little bit doesn't scare me all that much >> peter, from your standpoint, pick up on michael's point there. at what point does this healthy selloff turn into something a little less healthy? >> well, you know, first off, in terms of selling, i would tell you when i would sell is when fundamentals, you know, we get caught up in the technicals. what about good old fashioned stock picking where you find a company, uses of common sense, you look at these companies and say this is a great business plan, and it's a reasonable valuation. if the business plan gets flawed, and execution slows down, then that's a far more easy reason, i think, to argue why you would sell and not necessarily looking at all the macros fundamental analysis has kind of gotten a short treatment lately. i don't think that's the case. >> peter, i agree with all you just said, but some fundamentals
2:10 pm
have changed, right? interest rates are higher. and there are concerns they are going even higher. long-term interest rates that's a fundamental change. to michael's point, when interest points start to rise, how much you're willing to pay for future earnings goes down. >> that's correct. >> why is a rise in interest rate a change in fundamentals? >> a rise in interest rates given the correct reason, i welcome that what that means is the economy is heating up. most companies will be able to have pricing power they will bolster their top line give them more ability to finance, recapitalize, even in a rising rate environment, they might be -- the borrowing costs might be higher, but it will be offset by a higher ebitda, i think this fear of rising rates. we have been talking about this now for over ten years it's finally happening, and we're just getting on the verge of normalcy, so i don't necessarily think a rising rate environment is a bad thing for us certainly, there are some stocks
2:11 pm
that are not going to do as well in a rising rate, but i can mention tons of stocks that are almost indifferent to the rate environment because the common sense tells you the demand of those companies will persevere no matter almost whatever interest rate levels are >> in the last two days, peter, the rate sensitive groups, the utilities in particular, have outperformed the market. it's not like the rate-sensitive stocks are getting clobbered over the head by investors because of rising rates. middle-interest rates, middle term rates, five years, two years. they're more impacted by what happens in europe than here, are they not >> they are, and i'm glad you mentioned that, because they have been taking the new mantra, of course, is sell all rates because rates are rising you have to look more closely at that because not all reads are created equal. there are nontraditional ones such as american tower that as i said about common sense, those
2:12 pm
companies will always have a huge demand for the insatiable appetite we have for our cell phones and uploading youtube videos, et cetera. so i think it's a more detailed conversation we have to have when we're talking about reets, interest rates, what kind of reets we're talking about, and there are still tremendous opportunities i think, no matter what rates do in the next year or so. >> all right, gentlemen, we'll be watching to see what they do do thanks on deck, one stock that is higher on this rough monday is apple. it is gaining today. it is bringing itself out of correction oh, and close to setting a music milestone. we'll hit apple and thel you what that is >> plus, guy adami will give you his best trades r isarfoth mket right now. how could you miss that? stick around your joints... or your digestion... so why wouldn't you take something for the most important part of you...
2:13 pm
your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide. prevagen. the name to remember. wow! record time.s. at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies see it- and see it through-with digital.
2:14 pm
you know what's not awesome? gig-speed internet. when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him,
2:15 pm
ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. selloff on wall street we may still have a way to go before we hit correction territory in the broader markets, but a number of big names within the indices already in correction territory. >> we're about maybe up to double up the losses in the overall s&p before we hit the 10% down mark from record highs. let's take a look because the broader market overall, a number of stocks are already in the 10% correction territory range so we looked at russell 1,000 stocks, more than half of those stocks in the index have hit either 52-week highs or better in just this year alone. 2018 year to date. now, we used to say 72, with the
2:16 pm
last leg of the market, about 107 stocks within the russell 1,000 have now pulled 10% or more from those highs, if they made highs in 2018 some of the names are indicative of themes we have seen developing perhaps pullbacks from record high levels. caterpillar stock is now down 10% from the levels it was at earlier this year. retailers like nordstrom staged a comeback after a tough year last year, but that is down 10%. apple has been floating in and out of the correction territory, but with the last leg lower, we're now in correction territory yet again for the biggest company in the s&p 500, and the biotech pharmaceutical side thing, amgen down 11%, and chevron shares now down 14% as well so brian, as we talk about the number of stocks that are doing this, it's important to keep in mind that even if we aren't in correction territory overall, some of the individual names here are, so they may represent opportunities for some traders and investors out there. >> diving in i love it. as always, dom, nobody does it
2:17 pm
better than you. >> apple rallying today, pulling itself out of correction your next guest says why worry he's still bullish the market today agrees. rob is guggenheim analyst, and he joins us. rob, it's interesting. apple, as we say in basketball, couldn't buy a basket in the last couple weeks. here we have the dow down a couple hundred points and apple is up. why? >> apple has already been under pressure for really a month or more, as i think people started appreciating this kind of big supercycle, so to speak, driven by the new iphone x, maybe would be an upcycle but not a super cycle. i think it's digested that and obviously got sort of the final piece of it when they reported earnings last week now i think the stock personally will start doing better because that kind of froth is out of the unit expectations and people can still see, though, that apple is still starting an upcycle here, which would be their first in three years. >> why, though everyone is freaking out about iphone sales, the x is not going
2:18 pm
to do this, the 8 is not going to do that here you are talking positive stuff, rob what are you seeing that the bears apparently aren't? >> well, it's all relative, for one thing. they are coming off a year last year was flat and the year before was down. so apple has pretty easy comps here for their iphone growth i'm not looking for tremendous growth i'm looking for low single digit unit growth. but the bigger kicker is the higher prices. and so higher asps for iphones driven by the x, but even the 8s, i'm looking for their double digit revenue growth this year, virtually all of that coming from higher prices and so higher prices plus even modestly higher units, you should have the best again, iphone revenue growth, you have seen in the last few years >> what percentage of revenues does services have to be for apple to get a different multiple instead of being a hardware company multiple to maybe a consumer -- well, just a services multiple?
2:19 pm
>> so that's the narrative they've been pushing for a while. i think it's still going to be a while. i don't know what the number would be, probably over 20%, maybe. but it's starting to help. i mean, services, i'm estimating, are still going to be just 15% of revenue by calendar '19 so the number is growing but keep in mind, with apple, really, their services are driven by their hardware so they're not really mutually exclusive. i don't think apple will ever be seen truly as a services company. i think it's a product company, but they're smart enough to try to drive a services element because that is a recurring revenue stream for them. >> any other drivers to be had with all of that cash? do you see that cash as a risk or we have seen people say maybe they're going do some transformation deal which carries risk or is it possible you get big fat check down the road >> i certainly don't see the cash as a risk i mean, they have said they want to spend the cash. they don't want to sit there with $125 billion after their
2:20 pm
net cash after their tax payment. they want to use that. i mean, i think we'll definitely see a bigger buyback we should see a bigger dividend. maybe m&a is in the cards. keep in mind with apple, the company is approaching $300 billion in revenue so it takes -- it would take a lot to move the needle and it may be that we're seeing them look at getting into new businesses so media is one of them. they're starting to create some original content and there's a chance, you know, something like automotive. part of that cash may be something that gets them into completely new markets >> that's where i thought maybe some people thought there were risks. rob, thanks so much. we have to get to julia with a news alert on facebook >> michelle, facebook is looking to make a move more into youtube's territory. this according to a new report just posted on saying that facebook has talked to media buyers about expanding watch. that's facebook's top devoted to professionally produced shows which launched in august
2:21 pm
facebook is reportedly looking to expand it by opening the platform to more individual creators and making it ad-supported, sharing the revenue with creators rather than the current model which has facebook paying for many of its shows. facebook has declined to comment. certainly an interesting move for the company. back over to you >> everybody getting into everybody else's business there. >> should be great >> these companies are all certainly competing for ad dollars and consumers' attention. >> you bet thanks we're all over this big market selloff now it's the biggest two-day drop for the dow since brexit set to become the biggest and most powerful rocket launched into space in more than four decades. morgan brennan is live at the kennedy space center in florida. hey, morgan. >> hey, that's right we're actually inside the launch pad right now. this is something that the space industry is waiting for for seven years. the launch of this rocket. and by the way, it's carrying some very unusual cargo.
2:22 pm
we're going to give you all the details when power lunch returns. its technology was engineered to see... (beeping) while its design was meant to be seen. experience the new 2018 lexus nx, and the nx hybrid. experience amazing, at your lexus dealer.
2:23 pm
when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.
2:24 pm
2:25 pm
spacex's elon musk calling it the most powerful rocket ever to be launched and there's a lot riding on it, literally. morgan brennan live at kennedy space center in florida. morgan >> hey, brian. that's right elon musk and his privately held spacex are hoping to once again make history this time with falcon heavy. if everything goes according to plan, this new rocket will make its highly anticipated maiden flight about 24 hours from now so we are inside the launch pad right now, and i want you to take a look at this. this rocket stands more than 21 stories high it's got three boosters on it, including two that have already been to space. 27 rocket engines that are generating 5 million pounds of thrust, basically, this is three falcon 9 rockets combined. this is poised to become the most powerful rocket in use in the world. and just to put that in a little more context for you
2:26 pm
we haven't seen a rocket this powerful attempt a launch since the saturn 5 took american astronauts to the moon decades ago. missions that, by the way, took place from this same complex at 39-a the cargo on here, the test cargo, tesla is musk's own tesla roadster this is happening about 24 hours from now we're watching it closely and reporting it to you live >> very exciting >> morgan, thanks very much. >> we're now down 499 points we were down about 500 do i hear 504? do i hear 508? we had 508 just a few minutes ago. that's about a 2% slide on the day. it is jay powell's first day on the job at the federal reserve he begins with a bit of a dilemma when it comes to how many rate hikes need to be applied this year. as we head out, check what's dragging down the dow today. energy, health care, exxon, j & j, pfizer, chevron, those are the biest se, ygglorsasou
2:27 pm
see, right there
2:28 pm
oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, only with td ameritrade.
2:29 pm
hi, everybody. i'm sue herera here's your cnbc news update at this hour. secretary of state rex tillerson
2:30 pm
concluding a three-day visit to argentina by meeting the president at the presidential residence on the outskirts of buenos aires he's arriving in peru later today. >> the father of otto warmbier will be mike pence's guest at the olympic ceremonies he was returned to the u.s. in 2017, and he died days later the results of being beaten and tortured by the north koreans. >> joseph yun, the u.s. special representative for north korea policy meeting his south korean counterpart in seoul that meeting comes amid tensions that are easing as a result of pyongyang's decision to participate in the winter olympics >> nfl commissioner roger goodell joining officials from minneapolis and atlanta in an official super bowl handover event. atlanta will host super bowl liii next year at the mercedes-benz stadium. you're up to date.
2:31 pm
that's the news update back to you. >> i can guarantee it will be warmer >> absolutely. it couldn't get any colder >> thanks, sue >> the selloff is picking up steam. the dow plunging 500 points. it's the biggest two-day drop for the dow since brexit it's the worst three-day losing streak for the nasdaq since february 2016. the industrials lower by 540 points s&p lower by more than 51 points this is a decline of 1.8%. nasdaq lower by 96 points, a decline of 1.3%. another index that's been soaring, more than 40%, at its highest level since june of 2016 is the vix which was in the middle of the brexit selloff when we were here last bill joins us from the nyse along with guy adami here on the desk what do you make of this guy, what do you make of the selloff? why is it happening? >> what's interesting about today is open lower, rallied, unchanged, slightly higher gave that all up we haven't seen something like that in quite some time. historically, the last four or five years, a move like that to the upside would have
2:32 pm
exaggerated to the upside and continued to move. we didn't see that you have a series of lower highs and lower lows none of that's good. what do i look for on days like today? look for stocks that are outperforming. i can look at two right now. i'm not suggesting mr. wynn did something wrong or right, but look at wynn resorts today, higher on a lousy tape, on a stock that should be getting throttled, it's not. target is the other name if you like walmart at their valuation, you have to like target at theirs both those stocks green on a lousy day, suggest there may be something going on that's bullish. >> bill griffeth, you're on the floor of the new york stock exchange and you and i both remember 1987 when 508 points was a much higher percentage >> when it meant something >> when it meant something i should point out moments ago, we did dip below 25,000. we're now at 24,980. bring us some historical perspective on moments like
2:33 pm
this >> you know, i don't have to go that far back, tyler, because i was just looking at a chart. the last time we were at this level was a month ago. and when we hit 24,980 and crossed 25,000 for the first time, there was euphoria going on here on the floor and elsewhere. now, we're back to that level again and there's panic. but the vix now up to 25,000 i was asking some of the traders if they had any 24,000 hats, down 24,000, and we can't find any. so nobody is panicking down here you know, this has the feel of a textbook pullback. it's about time, i think, is the sentiment that you're hearing right now. you know, i was off all last week, and before that, though, the thursday and friday before i took off, we had these late buy programs come into the market that were just incredible. and bob pisani kept saying how it felt like there was a euphoria that could not be sustained. i said alt one point, this won't last not that i was expecting this
2:34 pm
kind of a pullback, but it's textbook in the way it's carried out as we keep testing new levels that just a month ago we were cheering on >> yeah, less than that. these milestone numbers, guy, feel a lot better on the way up than they do on the way down and when you jump into a cold shower, it's a shock at first. this is a cold shower. >> like putting a frog in a pot of boiling water thing i digress. i'll say this. this is also sort of market psychology stuff everybody wants to buy apple at $160, but they want to buy it at $160 when it's trading $178. when it gets to $160, it's there for all the reasons you could have never thought of. that's what people have to get away from. take the emotion out of this if stocks get to levels you have been waiting for, it's never the reasons why they get there it doesn't matter the reasons why. take emotion out of the game >> we're sitting right on our 50-day moving average, guy, for the dow. if we could do the dow and bring up a 50-day moving average, i know i'm asking for a lot quickly, you'll see we're sitting on it. we have tested it four times in
2:35 pm
the last two years and every time, you know what's happened we have bounced off it to the up side will that happen again >> in a meaningful way -- i wish i could give you that way. if i could, i probably wouldn't be sitting here. i would be on the beach somewhere. you mentioned this, great january, februarys are typically lousy. go back to february 10th, 2016, when we bottomed out and saw the subsequent move. i think the low on the s&p that day was 1810 look what we did subsequently. maybe we're on the verge of doing something like that, getting a big washout, the day you're looking for is the day we're down huge like today, but a day where the vix doesn't move you're obviously not seeing that today, but you will see it, i think, in the short term future. >> it will come as no surprise to the people on the floor of the stock exchange watching those moving averages like hawks. so they're all very, very aware of where the indexes are relative to their 50-day moving averages or the 100-day moving averages because they'll trade those in a meaningful way.
2:36 pm
we're watching those carefully >> stick around. steve has joined us. he's going to join us in a sec meantime, let's find out what's going on in the crude markets where prices are plunging. oil closing for the day. jackie is all over it at the commodity desk >> good afternoon to you crude prices losing about 2% today alongside this equity slide. but not as steep of a loss as one would think on a day where stocked have been so voltive the session low was $53.59 the close was $64.15 they think oil is going to hold over $60, this is part of a new normal for oil, but several i spoke to today said should the equity selling become disorderly, the commodity market could change course quickly as well we have to see how they work together in tandem, guys >> thank you very much >> bill, what do you make of the rise in interest rates over the last couple of weeks we're going to get to steve
2:37 pm
liesman in a second, but considering your perspective and how long you have been at cnbc, people are freaked out about it, yet they're not very high relative to where they could be? >> not very high, but it's as always pointed out, the pace of the rise, not just the level of the rates at that point. and the pace of the rise suggests this market psychology is changing from where we have been for the last few years of a disinflation or a deflation period to the markets expecting an inflationary period the expectation that the fed is going to raise rates, oil has been going higher here lately, testing the $70 range. so that seems to be what's going on here, is the market psychology clearly has changed in the last couple weeks here. >> can i ask my good friend tyler a question >> what? >> because you, too, have been doing this for a while >> a long time >> absolute respect, which is this >> haven't we all? >> can you remember any period of time like the last 18 months where the level of bullishness,
2:38 pm
all-time high on every single metric, all the confrjss you go to, everybody was bullish. all the reallocations, everybody buying stocks. everything was at a level of heightened bullishness, tyler. >> 1998. >> the price, 1999, 2000 >> should we be surprised by the pride before the fall, perhaps >> i think it is -- it does mimic 1998, '99, into early 2000 it certainly mimics 1987 where 1987, actually, steve might know from history, it was a very strong january. you also had a new fed chief coming in who was raising interest rates just pointing it out >> we're going to have that discussion right after the break. bill, hold on. they're making us pay the bills. >> a bad friday and a worse monday >> got it, that will be a tease. dow off 537 points we're back after there bak hi, i'm bob harper,
2:39 pm
and i recently had a heart attack. it changed my life. but i'm a survivor. after my heart attack, my doctor prescribed brilinta. it's for people who have been hospitalized for a heart attack. brilinta is taken with a low-dose aspirin. no more than 100 milligrams as it affects how well brilinta works. brilinta helps keep platelets from sticking together and forming a clot. in a clinical study, brilinta worked better than plavix. brilinta reduced the chance of having another heart attack... ...or dying from one. don't stop taking brilinta without talking to your doctor, since stopping it too soon increases your risk of clots in your stent, heart attack, stroke, and even death.
2:40 pm
brilinta may cause bruising or bleeding more easily, or serious, sometimes fatal bleeding. don't take brilinta if you have bleeding, like stomach ulcers, a history of bleeding in the brain, or severe liver problems. slow heart rhythm has been reported. tell your doctor about bleeding new or unexpected shortness of breath any planned surgery, and all medicines you take. if you recently had a heart attack, ask your doctor if brilinta is right for you. my heart is worth brilinta. if you can't afford your medication, astrazeneca may be able to help. the markets change... at t. rowe price... our disciplined approach remains.
2:41 pm
global markets may be uncertain... but you can feel confident in our investment experience around the world. call us or your advisor... t. rowe price. invest with confidence. let's recap this big market drop, as you see now, off 543 points that's 2.1%. 1200 points in two trading days. we have now lost about 80% of
2:42 pm
the dow's gains through the high on january 26th. and today, what is it, february 5th, right it's the first day for the new fed chair jay powell what a day this must be for mr. powell, steve. >> some greeting, guys way to open the door listen, by the way, this is not unusual. we went back and looked at what we call the first day fed chair blues. and it's kind of normal. >> really? >> there you go. >> bernanke, look at that. >> we can't update that chart fast enough on powell. we started off, it was down 1% when we made the chart now i'm not saying this in a laughing way, but down 1.9%, i think we're down more now on the s&p. i don't think it's very meaningful in terms of why i think what's happened here and i think we kind of have memories like goldfish in a way we forget just a month ago, we didn't have a tax cut. now we have a tax cut, and they went into conference in that tax cut, they ended up
2:43 pm
pulling forward a lot of stimulus what you have is you have to deal with this situation of a lot more stimulus in 2018 and '19. you have this issue, is it a full employment economy, and ask how the fed is going to react. i will say, if you look alt at the fed probabilities, the totality of the declines in the market is starting to weigh the other way. what's happening, and just this morning it happened, is the possibility of the third cut has gone below 50% so the thinking, i think, for the people further out in the curve here is the more this goes down, the more it may potentially drag the economy down, and the fed may not end up hiking that third time, at least we have been sort of on the bubble here. but look, you have a situation where, you know, the hibernation period for the fixed income investor seems to be over. i guess i disagree with my colleague kevin o'leary on this notion i think 3% is a number that gets
2:44 pm
your attention you're shaking your head >> i think it does it's a risk-free rate of return, 3% >> the key to investment the last ten years has been i have no choice but to go into equities for any return. now, i have a choice and we have this process, again, let me quote my good friend joe kernen, this idea of strong hands. you have to move stocks into those hands that feel strong holding stocks at a 2.8%, 3% ten-year yield level, and that takes a little time to find who holds it at that level >> let's bring in doug, chief investment officer at ab fixed income welcome. good to have you with us why don't you pick up on the conversation with respect to two things when do bond yields become attractive in and of themselves as investments to buy and maybe to hold? that's number one, and number two, where are you on the idea that this fall off in stock prices might stay the hand of
2:45 pm
the fed so that you don't get three rate hikes this year but only two >> so let me start with the first question, tyler. and the notion that 2.5% five-year, i like to look at the five-year note better than the ten-year, because it's a little less direct interest rate risk and i think mom and pop investors, if they could have bought a 2.5% note years ago, they would be falling over themselves to buy that now they can, and yet the momentum is still scaring them away so i think what's happening is that you'll see a greater level of interest, as we get greater levels of volatility in the equity market and other risk assets like high yield and bank loans and maybe even emerging markets. but the way things are working today, i think the equity market is the third deriskative i think interest rates are the
2:46 pm
first derivitive, and qe stimulus to now we're moving to a qt environment, and i think that changes the roles of the game from what we have been used to in the last seven or eight years. >> doug, is that why interest rates are going up, or is it other people argue no, it's because the economy -- >> it's a good thing >> the economy is getting better or is it inflation, or are the bond vigilantes fearful about all the debt being issued? >> i think it's a combination. we had a lot of debt, big deficits when the qe was alive and well, interest rates were falling. and so now we're going to have greater growth there's no doubt about that. we can argue about inflation i would argue that actually we did see inflation that was caused by qe we just didn't see it in the consumer price index or the core pce. we saw it in asset prices. and everybody now is worried
2:47 pm
we're going to start to see some goods price inflation or some service price inflation. i think that's probably appropriate at this stage of the economic cycle >> but the question, guy adami, is how do you factor in what seems inexorable, which is what's going to happen to earnings and also what michelle talked about, which is the economy. it looks like we're ratchetting up a 2.5% economy, compared to a 2%, maybe even a 3% economy. all the earnings have been outstanding, and all the other stuff, to my mind, guy, is noise compared to the actual earnings and the earnings outlook >> i agree i don't think the stock market -- the fall in the stock market over the last couple days should not affect earnings at all. earnings have been strong. they should continue to get stronger look at what the gdp forecast went from 4.2% to 5.5% >> no, it didn't it's a stupid forecast >> stupid forecast, not stupid forecast >> totally stupid, but go ahead. >> it wasn't my forecast
2:48 pm
>> so don't repeat it. >> fair enough the economy seems to be getting better you have ism numbers through the roof you have optimism through the roof so why should the stock market selling off have any effect whatsoever on what mr. powell does >> it's important to say, because you have had an important wealth effect from stock prices you have seen it in a variety of places and people have been spending. you have seen the savings rate come down. >> dow off 607 points. >> you do have an economic effect from lower stock prices you have a tightening of financial conditions that does have a macro effect, and powell will note this it is part of the playbook of the federal reserve that when equity prices decline, financial conditions tighten, and it ends up doing some of the fed's work for it, if it's trying to break the economy. >> we agree the stock market is not the economy. they are different things. >> a reflection of it. >> what is the relationship? do we -- because you mentioned that the odds of four rate hikes maybe being pulled back to maybe just three, which leads us to
2:49 pm
think that mr. powell andthe other fed chairs would indeed be looking at the equity mark, but some others might say no, no, that's just a side story you've covered the fed forever how much do you believe that in their quiet dark moments, they look at stock prices >> not quiet and dark anymore, brian. in the old days, the stock was something they looked at but didn't say they looked at or admitted more and more, the stock market is seen as a conduit of federal reserve policy and that was a big part of what happened in the financial crisis >> it seems risky. >> it is risky now they're seeing tightening. the fed is going to take a step back we're looking at the percentage change from the top. the fed's going to look at the percentage change from a year ago. and they're still going to see lots of wealth in the economy, lots of stock wealth and by the way, people looking at their portfolios say, i was up 30. now i'm up 25. not too shabby still
2:50 pm
>> the dow is off 611 points at the worst moment there guy adami, weigh in on that and also what mr. peebles was saying earlier, which is that you did have inflation you had asset inflation happening under the federa reserve, under quantitative easing maybe the cpi didn't move very much but asset prices like stocks moved if they are going to tighten, essentially, by not buying as much fixed income, doesn't that just naturally seem that you're going to have less support for the stock market >> it would stand to reason, yes. but remember, steve, right, 72% of our economy is driven by the consumer i think that's -- that's about right. >> good number so, if you have rising inflation, that's some sort of invisible tax. you also have a falling dollar until recently the dollar sort of stabilized. rising inflation, falling dollar, that's an invisible tax. >> and rising rates. >> and rising rates. at what point does that weigh on the consumer
2:51 pm
do they see that at some point >> i don't do one side of the balance sheet. i also have unemployment at 4.1% i have 200,000 jobs being treated every month. i had a 2.9% year-over-year wage and i got income tax - >> 638 points. >> so, i think -- i'm feeling pretty good about the prospects for the consumer i'm feeling good about this. i think the market wants to adjust to a level. i get back to this, this idea that doug was talking about earlier. the most important derivative is the interest rate outlook. and i think what we're going to see the next time the inflation numbers come through, if they come through in a quiet way, i think a lot of relief will come out of the market. >> the dow is in the freefall. once touching660. >> can we show the heat map. which shows 24 stocks out of the 500 are up today this is not your garden variety selloff. this is a real blood bath. >> joining us now is michael
2:52 pm
bipis at hightower advisers and matt miller. 666 points lost on friday, almost that today. we busted below that 50-day moving average breaking all kinds of technical levels when do you see an end to this selling? >> well, i'm looking -- it's funny. 50-day moving average was compelling put the 100-day moving sarchlg more important on a near-term basis. after we broke above that line right after the election, we have not gotten below it not once not even on an intraday basis. that's the key level you look what happened in january. i think what happened is the market went too far too fast some of these risks, these moment momentum-driven trades took the market higher given the tax plan now we're seeing the other side of that as interest rates have moved up we have to calm down a little bit. some of this is artificial moves, artificial trading. keep an eye on the100-day -- >> some is computers i'm sure the algos
2:53 pm
but it's not all those are you getting clients -- you're a private wealth guy -- who are selling, sell it, i've made enough money, sell stocks somebody's selling. >> i agree, this breather is healthy. >> are your clients selling, though >> our clients are not selling we refocused them on earnings. 80% of companies that reported earnings beat street estimates that's the focus earnings, long term, this breather is healthy, stay the course >> but you're willing to pay less for earnings when interest rates are higher, right? i mean -- >> correct absolutely and rates rising -- rates rising is positive for the market they can't shoot straight up >> we saw stocks and bonds rally together for 30 years. why couldn't we see them both sell off pretty sharply for a while? >> we could. but again, refocus on earnings the earnings are driving these companies higher the earnings are driving the economy higher and this is just
2:54 pm
a little blip on the radar. >> market went up for five or six years without particular willy -- you didn't have revenue growth, you had earnings growth. you did have a market that basically went up for seven years on the back of what was tepid earnings it stands to reason, don't markets -- i'm not suggesting anything, but don't markets crescendo typically with the heightened good news, which we're seeing right now and a number of things, not least of which is repatriation, president trump's state of the union, earnings through the roof, those types of things? >> yeah. you could see it pull back a little bit but the future is strong earnings. the future is positive for stocks right now the future is positive for the economy. we can't get caught up in these one, two, three, four day moving averages going up and down keep it long term and refocus where the attention should be. >> i want to keep it short term because that's what we do in cable. that's what we do every day. matt, are we seeing the puke moment, you know what i mean, right? when the selloff is so sharp, you get a temporary, at least short-term bottom because so
2:55 pm
many people have thrown in the towel. does that feel like this today to you >> yeah, you're getting close -- >> matt? >> yeah. friday the volume wasn't big at all. it was just kind of an orderly disaster, as you might say today we're definitely seeing more of a -- kind of a capitulation move. that's when you want to buy. the one thing that is so vitally important is for people to have in advance what do i want to buy and where do i want to buy it? i know you talked about that with apple computer a few minutes ago. that's key when it gets to that level, you don't want to be the one panicking and selling at the exact wrong time when you're prepared in advance, that can keep you from -- enable you to avoid is that panic move. look at what you like best work with your financial adviser. and i think that's what's going to help you play out this whole debacle right now. >> by the way, it's the only -- 2% back-to-back drops we have had since august 21st and august
2:56 pm
24th of 2015 that was a friday/monday as well that's why the days weren't butted up next to each other again, we have these - >> turn it around. >> you think we're going to get a turn-around tuesday? looks like we're maybe approaching, to michelle's point, the puke point. >> yeah, it could very well be people kind of panic over the weekend, dump on monday. >> what makes me nervous, sorry to jump in, is we tried to rally today. i'm almost prefer technically a day where we had steam going we tried the bulls gave up. and then the selling accelerated. technically that does mean something. >> and what happens in days like this, when you get that fake rally, the bids just disappear that's why we're getting this cascade move rather than a more orderly move those are the types when people are panicking that tend to be good opportunities rather than times to be selling. >> matt, michael -
2:57 pm
>> at least on a short-term basis. >> thank you >> thank you, matt thanks, mike. >> it's interesting, we associate -- again, this is not a market commentary, just a language thing we associate panic with selling. i could argue buyers panicked for the last month and a half, two months why is it selfish to panic when things are going down. >> 700-point decline in the dow jones industrial average momentarily. 2.7% >> dom chuo is with us >> one of the things we wanted to talk about, at least a little bit, was this idea that even in this -- it's want not a panic situation. this idea that traditional safe haven trades, we haven't seen play out during this kind of move normally we'd see gold prices higher normally we'd see things like the u.s. dollar gaining strength normally we'd see the yen gaining strength normally we'd see bond prices going higher and yields going sharply lower every time there's a panic or some kind of a safety trade in the market. we haven't really seen that kind of a trade play out. treasuries are lower, yields are lower today but maybe by a one
2:58 pm
or two basis-point mark. not a lot perform gold prices haven't done anything. but they are lower over the past week we haven't seen anything real in terms of the tlar -- >> a lot of people -- the most modest, nice guy in the world. a lot of people don't realize you were a mutual fund manager in a previous life. >> i was in a previous life. >> in a previous life. if you were still that dom chu, what would you be doing today? would you be looking at stuff you might want to sell or would you be looking at stuff that, hey, we want to buy on a discount >> this is a great question. the reason -- when we talk about fund managers putting money to work on the long-only mutual fund side of things, a lot will be driven by investor flows. >> hold on the dow is now down 3% a 3% move today. much bigger than what we saw friday down 674 points. the freefall continues. >> this is something important here if investors -- a lot of traders start putting the sell or redemption orders in for their mutual funds, etfs, that sort of thing, that's when traders will
2:59 pm
have to raise cash that means selling things. they will have to pick and choose what sells. if you look at the methodology some traders use, that's a huge part of whether or not people pile onto this -- >> and we know that -- again, don't want to get too wonky in the weeds. we have had record levels of bullishness, leverage, lack of short interest everybody was long by every metric so, if you went long on margin, you're getting called right now which means you have to sell to raise money to meet redemption that's why selling of this magnitude can -- >> that's correct. >> i would also say this guy maybe knows more you talk about what happened in january. we saw billions of dollars flow into u.s. stock nundz january. people were getting in as of just last month as well. something to keep an eye on. >> the last word is yours as we bring in bill griffeth and kelly evans. >> the price action, why isn't
3:00 pm
it good in every time the market rallied, the last six months we see it rally, we're not seeing that we're seeing lower lows, higher his, something we haven't seen in the stock market for quite some time. >> this has been an mazing day, bill and kelly, because we were off out of the gate and down sharply. then came back nasdaq was positive very briefly during the session the dow almost was, as i recall. and nowwe're heading for what looks like it could be an 800-point decline. kelly, bill? >> i think i hear their mikes. >> i hear you now. there we go. >> we're getting our act together as we watch this selloff. >> that's quite all right. >> thank you, guys. >> the market, we're down 2% on friday one of the biggest point declines we've ever seen today is worse it's rare you see a back-to-back drop in the market like this you add it up, we're only talking 5%, retracing th


info Stream Only

Uploaded by TV Archive on