Skip to main content

tv   Power Lunch  CNBC  May 2, 2018 1:00pm-3:00pm EDT

1:00 pm
pete back here go ahead. >> industrials yesterday they are coming after puts there. i own puts this the xli. >> xlf because i think the nuances of the fed states will chain and drive rates back up. >> it will ride the code tails of apple's report and go higher. >> that does it for us "power lunch" starts now. >> i'm sarah eisen he's whaers on the menu. counting down to the fed a decision on interest rates dropping in just over an hour. no change expected but what will they say about inflation fears apple crushing the pessimists. a massive dividend hike, $100 billion stock buyback. why did analysts miss the mark on apple ordinary care snap shares of the social media giant hitting all-time lows. a redesigned flop, a weak picture. analyst down grades, can you still believe in your selfie "power lunch" starts right now
1:01 pm
♪ take a picture of myself. >> i'm melissa lee let's get a read on the market investors are playing the waiting game stocks are down but steady ahead of the fed decision. the dow would be lower if it weren't for apple. contributing 50 points to the dow by itself. snap is down about 20% right now. and sing dollar, that is on a tear, hitting its highest level of the year against a basket of major currencies gas prices of note hitting their lowest level since april 20th. rising inventories putting the pressure on those. >> melissa lee, thank you very much i'm tyler mathisen other headlines at this hour, what we at "power lunch" like to call the leftovers new clues about the american job market ahead of friday's report. companies added more than $200,000 jobs last month that was better than the forecast a bold move from macy's.
1:02 pm
it is buying a new york based concept shop called story. it's also naming the story's founder as brand experience officer for the department store chain. more on this one ahead is your package to get into your house by yourself? ups reportedly in talks to launch an inhome deliver service for larger goods, heavy goods, couches, treadmills and the like. >> our top story less than an hour away from the fed's interest rates decisions. >> the fed is meeting sarah. this is what is important as the back drop. a strong jobs report coming out this morning for the first time in more than a year it is meeting with its inflation target of 2% having been hit what does that mean for the policy outlook the pce price index topped 2% after spending hutch of the past
1:03 pm
year down or below target. now the fed hit the inflation starting and it's plow the long run sustainable unemployment adp kagan unemployment rate that will sink into the threes sometime on the. the bls estimate for friday, 195k the fed also will continue talking about the effect of strong fiscal stimulus at a time had he it wants to slow down the economy. the chief economist at grand thornton writing into. the fed is attempting to water down the puchbl and even take a few glasses away while the administration and congress are sneaking flasks of grain cho into the school dance despite the punch. here are the probabilities for rate hikes for the rest of the year that's a high.
1:04 pm
goldman sachs had a report saying this morning saying it now believes the fed could go further this cycle than originally forecast seeing upside to the prediction they would stop the cycle at 3.25, 3.5% it is a darkened outlook if the you don't like interest rate hikes. >> steve leishman from washington stocks are steady ahead of this decision the vix is at 15 and earnings are are helping a lot. tech has been up all day apple is the main mover. juniper as well as mastercard are both this this sector. banks have been holding up industrials have been weak the whole week but today they are doing okay consumer staples, general mills, kelloggs, a dozen of those names, 52-week lows no relief there. what do traders want from the
1:05 pm
federal reserve? they want confirmation that the inflation target is at or hitting 2% but most importantly they want reassurances they want reeye insurance that inflation will stabilize around that they don't want to hear that inflation is running too hot or that the fed is going to get more aggressive. simply they prefer three rate hikes this year rather than concerns there may be four >> let's get a check on the bond market ahead of the fed results. rick santelli tracks the action for us as he always does, cme. hi rick. >> hi tyler. one basis point higher than where we closed. tens, 2997, one basis point higher the rest of the curve unchanged. last fed meeting, 27th and 28th of march two year eeld note has been climbing yesterday was the first official close above 2.5 for the first time since '58
1:06 pm
ten year since last fed meeting darn close to the highs. yield curve, tens at 46. three basis points away from its april low, the flattest since september of '07 the flattest since 2008. the dollar index, everybody is talking about it as they you shhh one week stairway to heaven. it popped in all the right places, when it trade before 9212 where it closed last year it's now at the highest level since december 27. it looks like the twos and the tens for a change, it is moving in lock step with rates and presumably fed actions of the futures. let's go back to sarah >> stairway to heaven on the dollar the markets are certainly waiting on clarity from the fed. investors are sitting on the sidelines. according to the latest survey from the american association of individual investors they show that cash allocations are at
1:07 pm
16.6%, which is an 11 month high, that's the. >> laest level since may 2017. equity allegations are at their lowest level since last summer what should you do with your money from here. joining us kate warren and david kelly. cleerld, david, people are feeling more cautious. is it because of rising interest rates? is there really reason to worry from this point ahead of this fed meeting? >> i don't want think that's what it is i think people were shaken by the volatility this the first quarter and the other thin that's going on is pea are trying to figure out what are they supposed to do with stocks when you have extraordinary earnings numbers but it's hard to see earnings growth from 2019 and on. i think eventually investors will get comfortable with the idea of investing in stocks that are generating a lot of cash but not necessarily generating growing cash inthey will move back in right now, i think they are a little bit confused and a little bit nervous about volatility.
1:08 pm
>> there is some sign kate that companies are starting to warn approximate rising input costs and inflation. and assistance this is something that people who did except the fed to be more aggressive are worried about. do you think it is a cause for concern for investors? >> no. i think overall the fed is responding to signs of stronger economic growth as well as the uptick in inflation that we've seen that's very reasonable i don't think investors should be concerned about that. and i don't think they should have as much cash as they do although i certainly think that it makes sense to have a little more cash than long term picked income but i wouldn't be choosing cash as an alternative to equities at this stage. >> david i'm sure investors are going to be really focused on how the fed describes the inflation environment that we are in right now, which is different from where we were the last meeting if you think back to the beginning this period of volatility in the markets it started with the february jobs reports when they talked about wage growth, ie inflation. what is the best case scenario
1:09 pm
for stocks and what is the worst case scenario for stocks today. >> the worst case is if the federal reserve takes its last statement and makes all the adjustments to the inflation language to account for the fact they have hit the 2% target. they talk in more than one place about moving towards 2% without saying the word there. i think they may say we are at 2% but the outlook is balanced and there is not much danger of overheating. i think they have to calm thing down a little bit in order to keep the market calm ultimately i don't think there is an inflation problem. i agree with kate, i think we will see some increase, mainly a better economy it may increase between now and june for various technical reasons but it is not a inflation economy. i think the fed recognizes that deep down. >> kate what do you make of the fact that the earnings have been pretty good, the forecasts have been a little bit episodic, but
1:10 pm
pretty good, the forecasts for future earnings but the market hasn't saep it as a tonic. number one number two, what do you infer from the fact that so many companies that repatriated money are putting it toward stock buy backs or dividends as opposed to seeing a capital spending surge. first thing, i think that expectations for earnings were extraordinarily high, around 20%. even though companies have bet by a little more than the average beat historically, what we are seeing is an investor buffet where earnings basically are so strong the little bit of a beat doesn't really matter it matters a lot more to expect better than expected earnings when earnings growth is slow when earnings growth is strong and a lot it is due to the tax cuts investors sort of i don't have looked the fact in a earnings are really very good. the second thing in terms of your question on cash coming back keep in mind we have been in this extraordinarily low interest rate environment and
1:11 pm
companies have been able to borrow i'm not surprised they are using the cash that's been repatriated for difficult end increases and buy backs, both of which are good for investors but not so much for business expansion or capital investment capital investment picked up last summer and continued to be strong i think companies will allocate cash towards that but i don't think it is a traumatic uptick from what we've already seen it's still good news, though. >> contrary to what some of the politicians promised we will leave it there kate warren, and david kelly. apple shares moving higher after reporting another blowout quarter and planning to give billions of dollars back the shareholders up next, what tim cook had to say about once again proving the you had doers wrong. "power lunch" we'll be right back we use our phones and computers
1:12 pm
1:13 pm
the same way these days. so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet.
1:14 pm
you can get up to 5 lines of talk and text included at no extra cost. so all you pay for is data. see how you could save $400 or more a year. and get $200 back when you sign up for xfinity mobile and add a new line of unlimited. xfinity mobile. it's a new kind of network designed to save you money. click, call or visit an xfinity store today. ♪ i stay out too late got nothing in my brine. >> do you want a picture of a stock rallying there you have it. that is apple after a better than expected earnings report yesterday. iphone sales were disappointing if you can call 52 million sold disappointing in just three month and apple really wowing people with its cash, adding $100 billion $100 billion, to its stock buyback plan, raising dividends
1:15 pm
ten cents a area total dividend poi out $15 billion a year and they still have $45 billion in cash to respond josh lip ton soak with tim cook and joins us now from san francisco. >> it's interesting. i heard bernstein's tony sack naggy on halftime report with skochlt he notes, and he is right, the sentiment on the i-fooel phone cycle had gone from euphoric to something much worse. so you can forgive some traders and investors. cook also gave me historical context. he told me it's the first time since we split thelineup back at iphone 6 and 6 plus that the top model has been the top-sell model. he also told me that given the size of the smart phone market, tyler, he continued to think
1:16 pm
that offering this kind of broad product portfolio would make the most sense from entry level to cop level. one interesting point for investors is what they thawed thought the readthrough was on that print what cook could reveal in the september time frame is not a new and bigger phone, maybe a phone with $1300 or $1400. others think that $1,000 is the ceiling here i did also talk to cook about another surprise in that report, greater china revenue. that up 21%. koog telling me the iphone x was the most popular smart phone in all of china last year he also made the point it wasn't just iphone. he talked about other levers they were pulling there. services, wearables, and the mac. >> i know you talked to him about trade tensions with china. and he expressed optimism i think which is important for
1:17 pm
investors the hear because cook just met with the president last week >> he was optimistic i asked him a couple of questions about this one is i was interested -- because of those trade tensions, was he feeling any kind of backlash from the chinese consumer he said he saw no data to support that i also asked him -- i just wanted to know whether he thought he was in some way insulated from the trade tensions we hear this narrative brought up sometimes, could apple get caught in the crossfire between the trump administration and beijing. his response was that he would never want to suggest he was insulated but he pointed out the foot print they have in china, the people on the ground doing manufacturing to development saying they felt like they had become a key member of the community there. >> josh lip ton, thank you. apple impressed our next guest as well. waller piesic raised his
1:18 pm
guidance from 207 from 198 good to see you nm terms of what investors want to see, do we see a pathway for apple to become the services company from the hardware company when does that turn in terms of how people think about apple change has it started to happen >> 15% of wretch 17 to 18% of revenue next qurlt. even the phone business should be thought of as recurring income business. replacement cycle is elongated perhaps bottoming this year but their company is still able to grow units and even grow revenue. you have a very loyal base with 95% approval ratings so to speak in terms of people liking the phones that the company cites on every calling come back every time their phone ages. now the only question is, how long is that phoned aged when does that buying come in. you have that recurring revenue mick as well as the services
1:19 pm
business 1 to 20% of revenue. and growing very fast. it should enable investors the look at the valuation of the company in a different light. >> if you did a sum of the parts analysis on apple in terms of getting at a proper valuation metric given the services business if you were to say, a cord apple, a two thirds hardware and the rest services what kind of multiple should we have versus the 12 times 2010 ex cash than we have now. >> we are getting high multiples, five, six times higher than what people are willing to pay for them. if people are coming back month after moth paying for thing like cloud. when people talk about subscription, it's the also the dollar you pay for the cloud to make your phone work better, or apple care that's a low churn high revenue
1:20 pm
stream that should get a multiple. >> what does the extending of that refresh cycle mean to apple and other cell phone companies, samsung and lg and others? i think back to the time when radial tires came on the market. you used to have bias apply tires that you had to replace every $1,000 ridials you only had to replace every 40,000 miles changed the world. >> it means a couple of thing. first you add a large purchase cycle when the six and the six plus came out. there was pent up demand there those phones are getting older there have been smaller incremental improvements from that 6 and 6 plus. then you had a change in how people are buying the product, on phone payment plans so you are separating the revenue that the operator is getting. you are seeing how much your phone is costing you versus your services. >> exactly. >> with that said, your product is still old i think cook didn't talk about that on this call. he talked about that in past
1:21 pm
calls. at some point you are going to upgrade this product because it's the most important product in your life so you may hold on to it longer because it's really expensive but if you are staring at it however many hours a day it's going to be important to get a new one at some point. that's where the loyalty factor comes in and those customers are not going and buying android foins they are buying apple. >> the analysts that try to read the tea leaves from the supply chain in asia that are warning that shipments are going to be down how is that so wrong how does it are credibility from here >> there is no chance that sof our peers are going to stop using the supply chain as data points it changes week by week. a lot of these calls were come out earlier in the quarter you have no idea in terms of market share or what apple ordered before and we saw on the other side when we weren't recommending the stock and they were saying that the supply schan was talking about millions more phones than
1:22 pm
we thought it worked against them at that point. look, it is a valuable date point. you just have to put it in perspective and not necessarily generate an sbrir conclude on the fact that a couple of guys in the supply chain moved their numbers this particular week. >> was it valuable this time around walter? 4.5% was it valuable this time around it doesn't seem like it? >> it wasn't valuable at all >> completely wrong. >> you had calls from people saying we are only making 34 million phones in the june quarter. and the they are making north of 40 and everyone was ins requested the supply chain was telling them apple was going to tell them to make 34 million phones or sell 34 million phones in the june quarter that was way off as far as what apple guided to for the upcoming quarter. >> walter piesic btig. >> wikipedia and radial tires. >>. [ laughter ] >> i date my old stuff here.
1:23 pm
>> president trump sending his trade team to china in an evident to avoid a trade war we will have the latest. and elaine wynn is suing wynn resorts will wynn versus wynn be a lose/lose situation for share hold centers that situation is getting you willyier much more ahead on "power lunch. the digital divide is splitting this country. we have parents who are trying to get their kids off of too much social media and computers, and then we have parents who would only hope their children have access. middle school is a really key transition point, right. the stakes start changing. students begin to really start thinking about their futures. what i like about verizon's approach is that it's not limited to just giving kids new tools, it's really about empowering educators to teach in different ways, and exposing kids to more active forms of learning. giving technology is not a total solution. teaching technology, now that is.
1:24 pm
one second.
1:25 pm
barely enough time for this man to take a bite of turkey. but for cyber criminals it's plenty of time to launch thousands of attacks. luckily security analysts and watson are on his side. spotting threats faster and protecting his data with the most securely encrypted main frame in the world. it's a smart way to eat lunch in peace. sweet, oblivious peace. it's a smart way to eat lunch in peace. 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. we have getting word of anothersettlement involving th two gentlemen who were arrested in philadelphia at a starbucks
1:26 pm
last month this time between starbucks and dante robinson and ray shon nelson the agreement includes listening and dialogue and a financial steamed. the ceo says i want to thank dabty and rashawn for their willingness to reconcile i want to share learnings and experiences and starbucks will take actions that share our visions for the kind of company we want to be. the statement also says that further details will be provided in a mutually agreed upon public statement. last hour we told that you the gentlemen settled with the city of fill if for $1 as well as $2,000 for entrepreneurs within the city starbucks will close for an afternoon to hold racial bias training >> looking forward to that,
1:27 pm
hearing from rosalind brewer for the first time from sam's club. shares of shutter fly soaring to an all-time high. snap falling ton a all-time low. what's the real picture on photoa sharing and investing and how investors should be playing it coming up on "power lunch. people who rely on us every day to deliver their dreams they're handing us more than mail they're handing us their business and while we make more e-commerce deliveries to homes than anyone else in the country, we never forget... that your business is our business the united states postal service. priority: you ♪ wi'm really grateful that usaaq. was able to take care of my family while i was overseas serving. it was my very first car accident. we were hit from behind. i called usaa and the first thing they asked was 'are you ok?' they always thank you for your service,
1:28 pm
which is nice because as a spouse you serve too. we're the hayles and we're usaa members for life. see how much you could save with usaa by bundling your auto and home insurance. get a quote today. whai tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to for a prospectus containing this information. read it carefully.
1:29 pm
1:30 pm
le had. i'm sue herera here's your cnbc news update the air force says an air national guard c 130 cargo plane crashed in an airport near savanna georgia. there were five people on board. it is unlikely there were any survivors. a southwest airlines plane from chicago to new jersey was forced to land in cleveland due to a cracked window. it comes just two weeks after a jet engine blew apart and broke a window in a tedly accident aboard another southwest flight. southwest says the plane landed unevent. ly. two black men arrested for sitting at a philadelphia
1:31 pm
starbucks without ordering anything have settled with the city for a symbolic $1 each and a promise from official to set up a $200,000 program for young entrepreneurs. that arrest touched off a führer around the country they also struck a dewith starbucks as well. more on that as the day continues. aaa is out with their top domestic summer travel destinations taking top honors, orlando, florida, honolulu, anchorage, seattle, and los angeles round out the top five you are up to date that's the news update this hour orlando is kind of hot and steamy in the summer. >> icy you have kids, kids love it there. >> take them to honolulu. >> universal studios >> yep, all of that and a pool. >> a pool, v sue, thank you. >> it's wooip versus wynn in the fight for the future of wynn resorts. contessa brewer joins with us a look at the latest chapter in this saga. >> this is an epic a
1:32 pm
lots of chapters elaine wynn is suing in a nevada court to delay wynn resorts from holding its annual shareholder meeting two weeks from today as seld scheduled the company cofounder and now the larger shareholder said the science companies failed to provide her with a list of shareholders she believes this is ann an effort to stop her from persuading other shareholders from voting with her elaine wynn prepared a presentation for the shareholders and is pressing for all kind of change, laying out specific challenges about the way the company failed to deliver maximum value to its investors. she accuses these legacy directors of a conflict of interest where the boston casino is concerned and insist as sale could destroy shareholder value. and she's pressing for more independent and oversight on the board. all around, she wants improved corporate governance i have been told i view this
1:33 pm
back and forth with the company as a positive. she acting as a grain of sand in the oyster she wants a pearl out of this. there are times when you have to agitate for change the management and board have already made some significant changes to the positive. and it will be up to their shareholders, and they will be thorough about whether it's in their interest to press for additional change. so after elaine the next largest shareholders are galaxy entertainmentment, t roe fries and cap reeves i have not received any reaction from wooip resorts to the suit or' line's presentation. but the financial times apparently got an e-mail saying they would provide elaine wynn with the list she has requested but delaying the shareholder meeting they say is unwarned. >> fascinating developments. president trump's trade team arriving in china today. what do they hope to accomplish? kayla tausche has that story. >> they are hoping to avert a trade war and trike a deal as
1:34 pm
the threat of tariffs loom china is officially calling it an exchange of views and putting its top economic adviser out front. the u.s. is sendingi seven high-ranking officials it's unclear what proposal they put on the table or what they view as the potential outcome because this is a conversation that has been attempted before there have been at least seven bilateral tie logs between the u.s. and china since trump took office from president xi's visit to mar-a-lago, a chinese delegation visiting washington in july, advanced visits ahead of the president's trip to beijing in he have no, and the price premiere visiting washington ahead of the tariff rollouts earlier this year. they cited these many past dialogues that failed by this and previous administrations as one reason why the president needed to take action. so we will see whether these talks actually change the
1:35 pm
conversation china doesn't seem to be challenged by the threat of tariffs but certainly the u.s. feels that the threat of tariffs has upped the ante at this moment in time back to you. >> kayla tausche, thank you. shares of snap plummeting after missing the market revenue and daily active users both missing outlook looking weak stock off session lows, on pace for its worst day since last may and second worst day ever. still down more than 20% let's bring in dan ives. you lowered your price target but call this stock attractive what do you see? >> i mean, look, this was harsh in term of the actual quarter. let's be clear they are going through a toxic situation. in our fin, social media, facebook and twitter are top plays. snap we are not giving up yet on the turnaround story we are giving them another quarter or two but i'm the first to say, this is one if you look at dau, you
1:36 pm
look at r purks, you look at anything on the advertising front it was an episode out of the horror movie >> forget arp. look at kylie jenner she said the redesign was wrong and sad. there is a petition signed by more than a million people who said they should go back to their previous look. >> you continue to feel like there is really no pilot on the plane here. >> it was a terrible conference call it was everything you did not want management to say they said it particularly when the cfo said they are not managing to baek each or profitability and there is no time line for it at this point, is that -- can you still be invested in this company with the management that says we will be profitable whenever we are profitable we just don't know. >> that's why this is a huge make or break next few quarters. given the cash burn and if the
1:37 pm
app redesign is to the successful in terms of exnd paing demographics, you talk about the backlash effect, ultimately this becomes a go pro two. you look at twitter and what they have done to change that story. you have a core franchise with 200 million users. definitely a demographic that they have really put -- you no e almost an iron fence around. but instagram is right there that's why right now, this is one of those where if the app redesign doesn't work it is a single digit stock. >> when does it get bought >> i think it doesn't get bought probably until it goes to $6 or $7 which it's attractive as an acquisition. given the cash burn and what facebook has done with instagram and twitter and potential acquisitions out there, maybe p/e. at this point it's one of the names where another quarter if the turnaround story doesn't
1:38 pm
show some signs like we saw in q 4 at that point it is a dead money stock. >> do they have the people who can do it? >> you came away from that call, that doesn't feel like that's a pilot you want flying that plane. that's the fundamental worry, they didn't handle the call and ultimately it's going to be one of these huge prove me situations >> cramer called it a pardy of a conference call that should have been on "snl." clearly they have had a problem on wreath since the ipo. but they have never had with it their users. now they seem to be having that. that will suggests that -- it's going to be hard turnaround -- is there even a path to profitability. >> there was a glimmer of it a quarter ago. right now it doesn't seem like it's there that's why, remember the power users, if the backlash from the power users, talk about the kylie jenner -- >> who is doing the redesign of the redesign
1:39 pm
whoever that is bisque chi has the future of this company in their hands. >> they do. >> do you know who doing sit in is same team that did the original design? >> that's part of the worries, that doesn't feel like it was the a team doing the redesign. >> no a team on redesign, and no a team on management jv across the board here. >> it is a situation where it is a hand holding period. they didn't show anything. the only reason you keep faith here is just given that 200 million users and the advertising potential but another quarter like this it becomes dead money. >> and you are at 14 on the stock. lowered from 24. >> yeah. >> dan ives thank you very much. amazon and macy's going shopping what did they buy? and what re they getting to their money. >> we are counting down to the ad decision were just about 20 minutes away don't go anywhere.
1:40 pm
1:41 pm
1:42 pm
sna two big stories in retail. amazon reportedly making an offer for a majority stake in flip cart. setting up a major multibillion dollar battle with all mart over india'sdom nab e-commerce player and macy's buying story, that company's founder will become brand experience officer for macy's, using pop up stores and interactive events to help boost foot of trachlt let's get more on what the moves mean professor mark cohen director of retail studies at columbia business school and bradley lazarus. welcome back to "power lunch," mark >> let's talk first about the macy's move. what do you see in this? >> story is an interesting story that unfortunately and unhappily
1:43 pm
means nothing. macy's problems are greater than the staging that they engage in in some of their better stores they have hundreds had of stores they haven't invested in over the years that they have to either step up to or close and they don't have a strategy their preprints every sunday look exactly as they have looked the last decade. now they are doubling down on off price, which of course is something of an annate me to the folks who report who story represents. >> you don't see this as a nields mover >> not a chance. >> it's one store. >> one store. >> i know about it because i love across the street from it it is an interesting concept of it is like a pop up. every knew months they totally close the store and reopen it with some theme whether it's meditation or a holiday market or something like. that it's random it gets lot of foot traffic because it's very pretty and exciting but it's hard to see how this could operate on a big scale and
1:44 pm
how it would be useful in people's lives am i wrong >> story boarding and story telling is an underlying precept behind merchandising and retailing at large so the notion that they would hire someone or buy a company that purportedly cut its fwoens th -- bones in this space doesn't make sense to your point that it has an impact on only one store, meaningle meaningless. >> tell me about the purchase of flip card. >> amazon is number five in a two horse race in india. you could say they are running number five in a two horse race in the world with regard to e-commerce walmart has plenty of cash but they don't have any horsepower so amazon is already in india. they are a major player in the e customers space.
1:45 pm
flip cart is the major embedded player if amazon prevails they will expand their opportunity to expand market share. walmart has 20, 21 stores that se sell 5,000 or 6,000 thing. amazon is a marketplace. walmart is a store i don't know how the bidding war is going to turn out if amazon wins -- >> advantage amazon. >> advantage amazon and flip cart >> and flip cart. >> if walmart wins, this may go down the same road as asda in the uk metro in germany walmart brazil seyu and japan >> i think this would help them in their on line business in india. we saw for a brief period of
1:46 pm
time walmart getting more akin to an on line business that couldn't happen in india. >> the street's response to walmart's moves notwithstanding, walmart is a store and am is a marketplace. and e-commerce is a play on marketplace, not on store. and though walmart is rapidly acquiring more and more products with which to sell, they are decades behind in aggregating what amazon has today. i just don't see the logic or the strategy behind what they are doing. and i would include jet in that conversation. >> professor, great to have you with us. mark, glad the see you mark cohen, columbia business school. >> a trend in real estate. high end buyers don't want your furniture or your gadgets. you need to strip it down before you flip it? >> absolutely. i'm going to take you to a $58 million west hollywood pend house. ytu i'm not going to show yo
1:47 pm
anhing in it i will explain why coming up next on "power lunch." [phone ringing] need a change of scenery? the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price. giddyup! kayak. search one and done.
1:48 pm
with dell small businessout your technology advisors you get the one-on-one partnership you need to grow your business. the dell vostro 15 laptop. contact a dell advisor today.
1:49 pm
we have got ten minutes until a fed decision we do want to take a check on the mark it's quiet on the equity front
1:50 pm
here the dow is down by less than a point. the s&p is down by 2.5 the nasdaq is up by about eight points there on the rate side we are also quiet ahead of the fed decision. key issues here for the equity markets and the bond market will be how the fed starts on inflat start to remove language such as symmetric, clearing the way for perhaps more rate hikes than expected later this year we could see fireworks on the other side of this >> it's coming down to outlook and how aggressive the fed wants to talk about the fact it is meeting its inflation target and growth is looking pretty good. there are big down side risks like trade the bond market steady, the ten-year yield below the 10% level. that's a key indicator the dollar is breaking out to the highs of the year which could be painful for companies >> and um mroeemployment prettyh where they want it >> 4% unemployment >> inflation's where they want it not too hot, not too cold. just right >> the countdown is on
1:51 pm
when we come back, the latest from the fed on its decision on interest rates we will parse that statement, all the market reaction and analysis straight ahead. we'll be right back. (birds tweeting) this is not a cloud. this is a tomato tracked from farm to table on a blockchain, helping keep shoppers safe. this is a financial transaction secure from hacks and threats others can't see. this is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. this is not the cloud you know. this is the ibm cloud. the ibm cloud is the cloud for smarter business. ♪ ♪ when it comes to travel, i sweat the details. late checkout... ...down-alternative pillows... ...and of course, price. tripadvisor helps you book a... ...hotel without breaking a sweat. because we now instantly... over 200 booking sites
1:52 pm find you the lowest price... ...on the hotel you want. don't sweat your booking. tripadvisor. the latest reviews. the lowest prices.
1:53 pm
1:54 pm
welcome back to "power lunch. it used to be if you wanted to sell a high end penthouse you had to trick it out with expensive stuff. now you have to strip it before you flip it. we have that story from los angeles. >> reporter: i'm calling it deconstructing luxury. this nearly 60-year-old storied penthouse is listed at $58 million and no, i can't show you the chef's kitchen, i can't show you the spa bathroom i can see the gorgeous views but no, the rest of it's been stripped oucht. it's a new strategy called white-boxing >> white-boxing is really just having a blank canvas so you can walk in, you just see the walls, you see the interior space but you can do whatever you want to it >> reporter: rather than flaunting a chef's kitchen or spa bathroom, the seller boasts basically nothing. it seems as if the property is new. although this storied penthouse
1:55 pm
is anything but. its views are unmatchable because zoning prohibits towers this tall. architect gavin broden came up with designs for the space so potential buyers have something to look at other than the view >> this is much easier first, you can bring the client leer a here and get to feel and breathe the space. >> reporter: he says it's easier for designers and architects to come in and do virtual imaging, doing computer generated studies, because there's nothing in it. nothing to distract from it. any buyer who is coming into a high end property will put their own stamp on it, they will bring in a crew of their own this is what they want to see. they say it's more valuable. back to you guys >> thank you very much we are moments away from the fed's decision on interest rates. markets right now pretty quiet on both the equity side as well
1:56 pm
as the bond yield side let's get to the market panel in terms of what we should expect tim seymour is here, as well as mona mahajin we are also joined by john belos with western asset tim, from a trader's perspective, what's the first thing to focus on? >> the inflation statement their characterization, which we got to in march. they have a lot of flexibility in their language, obviously the word symmetric to me is the word that also means we can undershoot this, overshoot this, we probably don't need to do too much i, from a market perspective, going into this number, i still sense that people are overly complacent about how much fed they could have in the next six months >> meaning what? >> look -- >> not accepting the fact there could be more rate hikes than we think? >> tactically, we went down 5 1/2% after the last announcement people got some false sense of
1:57 pm
we don't think the fed will be overly hawkish even though they upshifted in their assessment of the economy and inflation. we haven't traded back above that level since then. the market is going into this number feeling the fed can't do much here. let's wait for that statement. >> there's now three hikes for the year, right? we already got one two more expected. but there's increasing odds there are four hikes that's what we will watch after this report. >> yeah. i think most market participants are starting to creep that number up to four. we still kind of believe there's no reason for the fed to kind of communicate a fourth rate hike here look, the ingredients for inflation are in place but they haven't really come through in the numbers yet. core pc was 1.9%, still hasn't penetrated the 2% level yet and it's been under 2% for nearly five years until we kind of get a stronger momentum in inflation, we don't see the fed kind of spooking the markets in any way by communicating a fourth hike. >> there seems to be an underlying, maybe less often
1:58 pm
spoken about imperative here and that is to get some more arrows in the quiver for the fed for the time when the business cycle needs the fed to go in with fresh monetary policy. agreed >> i agree with that, although -- >> they are reloading. >> this is a fed that's been overly cautious about doing too much, too fast if you think about where -- >> this is a new fed, not the yellen fed >> true. i think the fed is probably focused on a couple things we don't talk about they need to focus on credit spreads which haven't really given a lot of ground. that sounds like it should be -- that's a good thing, but i think the fed wants to see commensurate move also not just what we are seeing in rates but in credit spreads to feel like something's happening here >> john, jump in >> one thing i would say is the fed's interested in keeping the cycle going. the fed has no interest in ending the business cycle prematurely. this idea they want to put arrows in the quiver may be there but that's a second order of consideration the first order of consideration is not to make a policy mistake. don't do anything overaggressive
1:59 pm
or rash. and as long as inflation is below 2% there's no reason for them to be more aggressive here. we think the market's pricing a lot of fed for this year, it's pricing more for next year and given the backdrop, we think that's about enough. >> pricing in a lot of fed meaning that you think there are only two more rate hikes here? or maybe fewer >> i would say this way, a june hike is fully priced another three additional hikes are priced after that. that would take the fed funds rate to over 2.5%. that's a big move up, a big move up in the context of growth in inflation that frankly haven't shown very much. the forecast they were going to show more in the future but until that's evident in the data, 2.5% funds rate which is fully priced now in the market is pretty aggressive we say the fed will adopt more cautious approach, gradual approach, and until the data validate it, those 2.5% forward rates are pretty aggressive right here >> i think it's what the market
2:00 pm
wants to do at a discount rate in valuations. that's the big issue, not the fed, it's the markets multiple >> in terms of the markets and where they stand ahead of this decision, the two year yield is 2.51%. the ten year, 2.97%. on the equity front we are very quiet here ahead of the fed with minimal moves. let's get straight to steve liesman. >> unchanged the federal reserve leaving interest rates unchanged at a range of 1.5% to 1.75% the fed continuing to call the current level of rates accommodative and still expects further gradual rate increases, expects the economy to develop in such a way. the fed is signaling, however, more progress on inflation now it says inflation has moved closer to its 2% target and says that 2% target is symmetric, making a point of that we can go back to that later it expects inflation to run in the future near that symmetric 2% target in the medium term also dropped the line it's monitoring inflation closely, that line is now gone from the
2:01 pm
statement. the committee expects the funds rate to run quote, below normal for some time. couple items on the economy. the labor market continued to strengthen, economic activity is rising at a moderate rate. job gains have been strong on average in recent months the unemployment rate has stayed low. household spending, the growth rate has moderated but business fixed investment continues to grow strongly. market based inflation compensation measures, it now says remain low but longer term inflation expectations are little changed guys, that's really just about it the economic stuff, about the same a little bit more positive stuff on the inflation but keeping rates unchanged and signaling for the rate hikes ahead melissa? >> did you think the fed was more dovish or hawkish >> i think they are pretty much the way i expected them to be. they took a step towards declaring -- i think, look, if this 2% target remains, this is
2:02 pm
sort of a potentially historic day in hindsight because the fed will become the first central bank among the three big central banks to have hit both of its targets, the unemployment target and the inflation target i don't know that that's going to remain. if you look at a chart of the pce it went up to 2%, came back down for awhile and now is back at 2% and the fed kind of not quite out there on aircraft carriers saying mission accomplished but maybe saying you know what, mission kind of accomplished >> i think seeing the market reaction, just a little pop in stocks steve, thank you with our panel, it would suggest this was not a fed that wanted to be particularly aggressive when it comes to saying we made it to inflation. they're saying balanced risk on economic outlook and symmetric risks on inflation that's sort of a so-so, things are going the way they should. >> saying the targets are hit but leaving them symmetric is huge for the markets i don't know what you think. >> absolutely. symmetric kind of means they can overshoot somewhat when you look at their projections for march, they have
2:03 pm
2.1 core pce listed for 2019 they are expecting it to go above 2% to some extent but i don't think they are communicating a runaway inflation here slowly rising, maybe overshooting a bit but i don't think -- >> explicitly they say 12-month inflation expected to run near 2% target over the medium term they aren't expecting runaway inflation. >> no. let's be clear they are stating fact. they are closer to their 2% target even if the course of 1.9 and the headlines are 2% runaway inflation, we aren't even close to that if anything, i do think we have -- >> we do have tariffs on steel and aluminum >> those are all things for the markets to really digest i think what concerns me in terms of you mentioned central banks, i get worried about the ecb who i think is very behind the curve even though we have seen moderation in the euro zone i think the ecb's movements will have an impact on treasury yields here and that -- >> the fact the whole world is sort of taken a back foot in
2:04 pm
terms of rate tightening versus the fed. that discrepancy is only going to really change the dynamic here >> if i can just add that the other factor here is global growth has actually slowed that was kind of hinted at in this statement the ecb was just mentioning we had a euro zone economic gdp print that was disappointing, disappointing in the uk last week this idea we will have inflation at target over the next few years is predicated on better global growth which hasn't happened in the first quarter. i think that's keeping the fed in check a little bit, too it's true inflation has been under target for a long time, it's only now back, but i think the fed has a little bit of caution here just given the growth data has been disappointing. >> if the overarching thought right now ought to be first do no harm, how do you do that exactly? how do you do that what does that look like >> i think this language about gradual being cautious is exactly aimed at doing no harm i think the fed that's willing to have an overshoot on
2:05 pm
inflation is a fed that's willing to have more growth and aiming for more growth there's nothing the fed's saying or doing right now that sounds hawkish. none of it sounds like we want to end the business cycle. they are happy to let th current trends continue. until they see something more menacing in terms of higher inflation or financial stability concerns, i think that will be true i just go back to the beginning, the market is pricing in a pretty aggressive fed over the next few years and unless something else develops, i don't necessarily think that's warranted here the do no harm stance is right and i think that's what we will see from the fed >> steve liesman, still there? >> i think that's an interesting point as to whether or not the market is running ahead. we aren't fully pricing, depends on which probability index you look at. we aren't fully priced for the fourth hike this year but certainly, the june is fully priced, september is fully priced and my index has them about halfway in that december or fourth hike of the year i don't see a fed here that's
2:06 pm
ready to speed up at all that's for sure. i think you guys are right, i forget who did it first on the panel, maybe sarah, the importance of the insertion of the word symmetric it was in the statement last time it's in a place now and that kind of is a signal to the market and we will wait to hear commentary from fed officials, but signal to the market that we are not going to pull the trigger or i guess better way to say it is slam on the brakes on this economy if we are going to run a little lot on inflation. there is an interesting question, i think those inflation reports, the jobs report on friday becomes more important, as to whether or not the market has gotten a little bit ahead of a fed that wants to stick to plan and does not appear to want to change that plan of gradual rate increases >> look no further than the u.s. dollar which has given up some of its early gains it's now negative and gold pops in reverse on that idea that the fed's not looking to get more aggressive >> we have a cap on ten-year yield at this point? >> i think we have to until we
2:07 pm
get more news. again, today's different because you don't get a statement and fresh fed forecasts. so we don't know but the dollar, that's a drag, right? that's also a drag, a tightening mechanism. not saying they're targeting the dollar >> according to david rosenberg, 60% of companies that have reported earnings this season so far have mentioned the weak dollar as a tail wind, actually helping them on earnings >> that's going the other way. >> that means there's actually a negative consequence to that >> yes but it's been helpful. >> let's get the reaction from the equity and bond markets. bob pisani is at the new york stock exchange, rick santelli at the cme. bob? >> we are up six points, 2652, we started now we are at 26 almost 58 and with very good reason, up nearly six points everybody knew the fed would say we are close to the 2% target. they didn't want any hint it was running too hot. the key line, inflation on a 12-month basis expected to run near the committee's symmetric
2:08 pm
2% objective over the medium term that's all anybody wanted to hear, some reassurances. likely not going to get four rate hikes a year. they will try to levitate themselves into believing that you see the market moved up a little bit bank stocks, you can put that up, you see essentially intact two of the three things traders wanted to see this week have happened so far. number one, a bounce off the 50-day moving average yesterday. that was important today, the fed reassured everyone inflation should stabilize around 2%. that's the way traders will read that statement the third thing we haven't had happen yet, the friday jobs report goldilocks we expected 195. if you get 295, everybody is saying you see, the fed might have to hike because the numbers are really strong. if you get 95,000, really weak, they will say you see, growth really is weakening. this is extending out into the second quarter so a perfect goldilocks number would be fine for the markets on friday remember, we need to get the markets, the bulls back in
2:09 pm
charge they have lost control of the narrative. you look at a market here this year, those are lower highs, that's the s&p for the year, we have had a series of lower highs. you don't want that. you want to keep moving the markets up a little bit. maybe that number on friday will be the magic three in a row for the markets. back to you. >> all right, bob, thank you now out to rick santelli in chicago. rick >> well, it's fascinating because i think everybody gravitated really to the only market that moved of any consequence, the dollar index. look at the intraday chart up just a whisker under a quarter of a cent. we dipped slightly into negative territory, now it's coming back. i don't know, interest rates didn't move much and the dollar index, there are so many things at that buffet table for it to price off of it seems as though the european buffet of investor preference is what changed in favor of the dollar more than interest rates which have hung tight because bob's right, we have big data coming out whether you look at twos of
2:10 pm
2.51, we gave up a basis point pfizer have given up two but it's been slow 3.13 for 30s, they have given up one. no activity whatsoever tim seymour nailed the operative fact and that is let's think about what's going on with the still negative rates and as far as japan, i don't know if we should worry about them. more like sympathy cards, i would think. >> they aren't even close to their inflation target there rick, thank you. steve liesman, still with us >> sure. >> what was the vote breakdown did everyone vote for unchanged? >> yes >> i just wanted to know if there was any hawkish dissent. >> i double-checked that there was no hawkish dissent there's nobody really who is inclined to dissent. i'm looking here, especially on a day when they are not raising rates. we don't -- i look at this particular fed, the voters this time around, i don't see anybody here who is particularly dovish.
2:11 pm
the doves i think have lost the vote this year maybe i'm missing one or two but maybe bostic would be one. we'll see what happens >> brainard used to be super-dovish and now sees inflation and is on board. >> solidly on board the idea of raising rates. she has changed and really, what we did not talk about in this panel is the fiscal stimulus the fed didn't mention it here but we know that's something they're talking about, trying to gauge how much will increase gdp growth, how much will increase employment and the real question for the fed is does it end up spurring growth beyond the capacity of the economy such that it generates inflation. that's going to be something, it will watch let me be clear here the fed has never run ahead of fiscal policy. it lets fiscal policy take place, then the fed will follow with monetary policy behind it
2:12 pm
>> steve, thanks tim, i want to walk through market reaction with you here. one of the sharpest reactions we have seen sector-wise is information technology tech now up more than 1% why do you think that is >> the ultimate cyclical tell. clearly tech is suffering from a couple things. i don't think it's really questions about the strength of their underlying earnings and the underlying global economy, but i think it's a bit of a relief for a sector that is seen as defensive here, i think in this environment people are still feeling more -- let's call it defensive rather than going for it i'm not surprised. >> financials continue to get hit. they just can't catch a break. yields are lower, they have been so sensitive to this yield trade. they are still losers in the session. >> it's interesting because after the great earnings this quarter, financials sold off quite a bit. people are expecting that because they think it's a peak in the cycle
2:13 pm
when you look at the earnings picture, this year 20% earnings but next year, 10% earnings. we may actually be closer to a peak but to tim's point, technology is a long term growth story. i think lower rates potentially or lower than market expected rates would help them from a valuation perspective as well. >> thank you all speaking of the fed, on friday you won't want to miss an exclusive interview with san francisco fed president john willia williams, his first tv interview since being named the next new york fed president that's right here on "power lunch. >> here's what's coming up on today's "power lunch." reaction to the fed's interest rate decision. we will get it from bill gross plus another day, another big earnings report. tesla on deck after the bell what to watch for, ahead and amazon planning more perks for prime members at whole foods. durythis model change the inst xfinity x1 customers can vote, simply by saying,
2:14 pm
2:15 pm
"vote for the voice." i'm gonna vote for... unless, kelly clarkson, you're a coach,
2:16 pm
because, you know, that wouldn't be fair. [ whispering ] whatever. which artist will you vote for? vote for... ok, still know it's you. i just wanna vote! cast your vote during every live show. simply say, "vote for the voice" or your favorite artist's name into your x1 voice remote. come on! welcome back to "power lunch. the fed leaving rates unchanged but acknowledging inflation is beginning to creep a little higher, getting closer to its target let's get more reaction to the fed decision from bill gross, portfolio manager with janus henderson. good to see you. i can't remember a fed decision that left me feeling more ho-hum than this one does
2:17 pm
tell me if i'm right or wrong here >> i think you're right. there's not many calories in this particular statement. i think the important word if there is going to be an important word in a head line tomorrow would be symmetric, in which the fed basically signaled that yes, inflation is at 2% but maybe if it goes to 2.10% or 2.20% it's a symmetrical movement around 2% but i don't think it's significant the fed ultimately is on the move probably in june and maybe one or two thereafter. i would expect for the balance of 2018 for maybe an average 30 or 40 basis point hike, not much move in terms of the ten-year. >> right now they say stay at 1.5% to 1.75 we were talking a moment ago, the mantra seems to be first do no harm. at what point does that
2:18 pm
short-term rate, the fed funds rate, start to maybe do a little harm is there a threshold in your mind, a river not to cross >> well, that's the question i guess perhaps of the decade, and probably for the next few years, too one in which the fed is grappling. i think yes, a higher short-term rate certainly as reflected in fed funds but also in libor, which is really the private market where individuals have trillions of floating rate debt connected to libor i think since it's about 2.35 and it was 1.25, rates have doubled for many borrowers over the past six to 12 months, that yes, if short-term rates go up by another 25 or 50 basis points, i think real growth and some disruption in terms of
2:19 pm
borrowing on the part of individuals is going to take place. >> it's sarah. is the fed right not to be too overly concerned with rising inflation? you hear more and more chatter these days about the potential for fed mistake. you've got rising tariffs on steel and aluminum, the prospect of mortar e tariffs, prospect oa trade war with china could inflation get a little more overheated and when then the fed would be behind the curve? >> there's a possibility you mentioned several points in terms of tariffs i think the stronger dollar ultimately is not inflationary, it's basically away, and real growth as we have seen in the first quarter, 2.2% probably moves higher at 2.5% or 3% for the balance of the year. all of those in combination with tight unemployment basically suggest inflation could move higher on a core basis but the symmetric term today in the fed
2:20 pm
statement basically tells me that if it does, if it's 2.1 or 2.2 they won't be that concerned and face it, for the rest of the world, for the globe itself in terms of japan, europe and the united kingdom, et cetera, there's very little inflation to be seen. >> have we seen the peak on global growth? >> i think so. i think we have seen it certainly in terms of the eu, perhaps not in terms of japan but it's very low there to begin with in the united states, 2.2, we have got our program, we have a trillion dollar deficit ahead of us over the next 12 to 18 months, i suppose, and that's certainly very stimulative it may produce growth of 2.5% to 3% but basically on a global basis, the rest of the world has peaked >> if i want to put money to work in fixed income, it seems pretty obvious to me that there's very little advantage to going long
2:21 pm
if the two-year note is at 2.5% and the five-year note is 2.8 something and the ten-year is 2.9 something, why would you ever risk the longer duration? >> yeah, that's a great point. you point out the flat yield curve and yes, when the yield curve gets flat there's very little incentive to go long. why not? because a ten-year treasury and 30-year treasury basically are much more volatile than a two-year or even short-term cash which isn't volatile at all. there's rarely incentive to go out long in the bond market. we have seen for the first four or five months that bonds are down about 2.5% on average for the year and yeah, i would characterize that as a hibernating bear market, one in which the bear is sort of growling, waking up but not really the grizzly we know during noontime. there's very little incentive to go there i would go another direction
2:22 pm
>> if you don't think the ten-year yield will move very much for the rest of the year, where do you see the opportunity? are you buying the u.s. dollar >> well, i see there's opportunity strangely enough, this isn't a convertible bond type of idea, but it's an arbitrage type of idea there's a number of situations investors know of, i suppose, in terms of arbitrage and buyout situations time warner for one, to my way of thinking, offers investors a 5%, 10%, 15% return if that decision goes the right way. monsanto is an arbitrage situation over the next few months where you can get a 5% to 10% type of return aetna health is a situation that offers even more i would go convertible equity in terms of these situations to earn a higher rate of return with a little more risk, obviously. >> this is why you like being called unconstrained, right?
2:23 pm
>> that's correct. >> bill gross, thanks again. >> thank you still ahead, taking the vodka out of vodka why? one liquor company doing just that, well, sort of. we will tell you who and why next and sticking with booze, this stock taking a tumble on earnings what's on tap? that's your hint for this company going forward.
2:24 pm
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. the kayak explore tool shows you the places you can fly on your budget. so you can be confident you're getting the most bang for your buck. alo-ha. kayak. search one and done.
2:25 pm
becareally want to be there, but you can't. at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems and technologies. get ready, because we're helping leading companies see it- and see it through-with digital.
2:26 pm
welcome back to "power lunch. in today's booze news, a lighter, less alcoholic version of kettel one vodka, with only 30% alcohol. that is too little alcohol to be sold as actual vodka under u.s. and european regulations they will market it as made with vodka. i'm just puzzled by this can't you just dilute vodka? >> with water? >> cut it. or soda. or tonic >> i don't know. >> younger people are drinking less in terms of actual -- i
2:27 pm
don't know alcohol. >> reminds me of a thing called cheese food that isn't really cheese i won't name the brand that i'm thinking of. >> we all know it comes out of a tube >> sticking with booze, showe sf moulson coors fell sales in the u.s. account for 70% of global revenue, down almost 5.8%. despite poor results, the company isn't lowering its outlook. the stock on pace for its worst day since april 28th, 2005 it was already underperforming all year >> no one is drinking beer anymore. >> hard liquor >> craft brewers are rocking >> cocktails and wine. coming up, tesla out with earnings after the bell. we will tell you what to watch for. plus this man has got some balls. 15,000 of them, to be exact. can't believe i read that. >> what was going to come next >> the story behind this massive golf ball collection ahead
2:28 pm
there's nothing small about your business. with dell small business technology advisors you get the one-on-one partnership you need to grow your business. the dell vostro 15 laptop. contact a dell advisor today. we just switched to geico and got more. more? they've been saving folks money for over 75 years. a company you can trust. geico even helped us with homeowners insurance. more sounds great. gotta love more... right, honey? yeah! geico. expect great savings and a whole lot more.
2:29 pm
(slow jazz music) ♪ fly me to the moon ♪ and let me play (bell ring)
2:30 pm
hello, everybody i'm sue herera here's your cnbc news update
2:31 pm
cambridge analytica, a data firm that worked for president trump's 2016 campaign, is shutting down following the disclosure of its misuse of facebook data, as first reported by the "wall street journal. it said it was losing clients and facing mounting legal fees in the facebook investigation. french president macron stepped up calls for renegotiating the iran nuclear agreement. it came as he met with top government officials in australia. >> i don't know what the u.s. president will decide. i just want to say whatever the decision will be, we will have to prepare such a negotiation on a broader deal because i don't think anyone wants a war in the region. ford is expanding a full-size van recall to fix wiring problems which could cause fires. the company is warning drivers to park those vans outside until they are repaired. the automaker is adding 26,000
2:32 pm
transit vans from the year 2015 to 2017 to an october recall, bringing the total to almost 100,000 vans in north america. you are up to date melissa, back to you >> thank you, sue. let's take a check on the markets on the back of the fed decision rates remaining unchanged here the dow jones industrial average up by about 40 points, nasdaq higher by 30 we had an initial pop, little stronger than where we are, we gave that back the energy sector is up about a percent, on pace for its first positive day in four wti closing their session high at $68 and tech able to maintain its gains here s&p tech up by about 1% being led by apple, on pace for its best day since february 2017 financials also higher and it is also worth noting small caps are up by almost 1%. the oil market is closing for the day. let's go to jackie deangelis
2:33 pm
>> crude oil saw about a 1% pop today despite a bearish inventory report this morning. it was a little surprising 6.2 million barrels, on the high side, and u.s. production, another high of 10.62 million barrels a day. the market didn't take these data points to heart there are other reasons for support in this trade. president trump stands on the iran nuclear deal, perhaps the most impactful event people will be watching for may 12th today's session high 68.04 you have a good sense of where the boundaries are in this trade. tesla set to report earnings after the bell and let's check in with phil lebeau in chicago hey, phil. >> one of the most anticipated earnings reports in the earnings report season comes from tesla it will come shortly after the close of the trading session and what are people going to be focused on it comes down to the model 3 and the question of cash burn. why focus on cash burn
2:34 pm
we know they have been chewing up cash as they ramp up production of the model 3. elon musk said we don't need to raise further capital. that will be addressed no doubt both in their earnings report and on the conference call what's going on with their production increases specifically when you talk about the model 3, remember, the model 3, they said they were going to get up to 2500 per week by the end of the first quarter got to about 2,000, maybe 2100 and they said look, we can sustain that then couple of weeks later they said we have to shut down for retooling and getting ready to adjust production any further. the target, 5,000 by the end of june 30th although musk said we think we can hit 6,000 during an internal e-mail. also remember, this is going to be another quarter where they post a massive loss. the estimate is they will lose 3.58 a share the focus again won't be as much on what they lost in terms of earnings per share nobody is expecting anything great. the focus will be on cash burn and what they have to say about
2:35 pm
production for the second, third and fourth quarters. back to you. >> phil, thank you phil lebeau in chicago with the stock down nearly 22% from its most recent highs, will tonight's earnings give the bulls a reason to come back? joining us, senior analyst with consumer edge research jamie, great to have you with us >> thanks for having me. >> i want to go to the issue of the model 3. obviously that will be a major factor here. on the last earnings call they said that battery was a limiting factor in production what do we need to hear about battery production and the parts we are expecting from germany for the plant? >> yeah. it's a great point, great lead-in from phil as well. i think that's exactly right the groeman engineering more automated part of the line was supposed to arrive sometime in april and getting ready to get up and running as we enter mid-may. that will be on many people's minds, that's the factor between the 2000 or so unit run rate
2:36 pm
they had first quarter and getting to the 5,000 per unit goal for the end of the second quarter. i think that's probably the primary issue. there's going to be quite a bit of focus, i think as well, on demand and competition we have seen the geneva motor show, so forth, is demand holding up, how are reservations looking and so forth >> just to connect the dots, if they don't hit the targets on model 3, then it's going to call into question how much can they continue to fund this operation without hitting the production targets. that gets right to the second issue that phil addressed, cash burn end of 2017, $3.4 billion in cash on hand, $9.4 billion in outstanding debt they said they do not require a capital raise or debt raise. that doesn't sound like they won't do one to me >> no, you're 100% right we agree with you. today, we aren't necessarily
2:37 pm
going to get any more confidence or comfort around that number. expect the debate to rage on here into the coming months. really now, we will get some sense of whether or not that line is up and running which will give i think bulls a little bit more comfort in their ability to get to 5,000 per week sometime in the coming months. to the degree there's some delay there, that will call more of your questions into play as it relates to capital concerns and needs of going back to the market i don't know that we will get a resolution tonight but we will see. he's tweeted about 6500 units as well in june this is another opportunity for tesla to sort of reframe the story as they always do. but i don't think the battle will be won on first quarter '18. >> where do you stand on whether or not the company will in fact do a cash raise regardless of what elon musk said or tweeted on the subject >> yeah. i apologize for not answering that more directly prior i believe they will hit their target for 5,000 a week.
2:38 pm
i believe at that point they will raise more capital, use some of the momentum they generated in the market, i would imagine the stock would be performing well at that time as well, to help fund the model y they are going to need more capital. they will go back to the markets for additional products. they have to continue building up their distribution, charging infrastructure and so forth as well as service and sales. i do believe they will go back to the markets but i think they will do so on more positive ground and better sentiment and higher stock price >> what's the biggest risk to your price target? >> well, their ability to make the model 3. manufacturing obviously is something that perhaps they underestimated to a degree i think going back two or three years ago, maybe they would have chosen to go with the model y first, in particular, because of demand for crossover utilities is quite a bit better than compact sedans we have seen them sort of drum up some significant, unprecedented, not significant, unprecedented demand from consumers.
2:39 pm
400 plus standing reservations we think they can execute over time but clearly, they need to get to the 5,000 per unit per week >> do they need a manufacturing partner? >> not yet i think they could certainly benefit from one down the road as they're looking to scale and as they deliberate on where the next factory might be and how to supply into other markets. i think right now we are still very confident they can go it alone for the foreseeable. >> jamie, we will leave it there. thanks for your time facebook playing cupid snap's getting rejected. amazon trying to move prime members with more perks at whole foods. all is fair in love and business we will talk about it next let's take a look at the dow we rallied more than 80 points after the fed announcement lost a large chunk of the gains. apple holding the dow in positive territory ♪
2:40 pm
feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. when it comes to travel, i sweat the details. late checkout... ...down-alternative pillows... ...and of course, price. tripadvisor helps you book a... ...hotel without breaking a sweat. because we now instantly... over 200 booking sites find you the lowest price... ...on the hotel you want.
2:41 pm
don't sweat your booking. tripadvisor. the latest reviews. the lowest prices. wi'm really grateful that usaaq. was able to take care of my family while i was overseas serving. it was my very first car accident. we were hit from behind. i called usaa and the first thing they asked was 'are you ok?' they always thank you for your service, which is nice because as a spouse you serve too. we're the hayles and we're usaa members for life. see how much you could save with usaa by bundling your auto and home insurance. get a quote today.
2:42 pm
we have big stock stories on the radar right now. snap, new all time low facebook targeting the dating game amazon's new prime perks joining us to help break it down, jason hedelstein, from oppenheimer. welcome. good to have you with us
2:43 pm
start with snap. is it as bad as it seems >> it does seem pretty bad i think the market was expecting potentially some weakness around the daily active users around engagement metrics but they missed revenue by too wide of a margin the question was we know they put major changes through their ad tech system they launched the middle of last year and for some reason, they chose not to let that play out and do this app redesign in the middle and the take-away was this app redesign was the straw that broke the camel's back for some advertisers. that was not expected in the narrative. it was more of like users maybe lose a little, et cetera, but no one was expecting this to really have a big impact. >> rihanna didn't like it. chrissy tegan didn't like it the kardashians. this is a disaster where does this stock bottom out? >> going into this morning, the stock was basically trading at
2:44 pm
about eight times sales. to buy the stock you would want to pay ten times sales based on trading right now about six. our estimates actually assume a rebound in growth in the back half of the year and good growth next year. we just felt like that was just too rich of a price to pay my guess is sub $10, people start to look at this but until then, i think it's really waiting for management to get back in good graces now with advertisers and users and wall street >> let's move to facebook which said they will get in the dating game that sent shares of iac and match plunging you cover both how big a deal is this has it been overdone in specific respect to match which is down about 25% in two days? >> you got to remember, going into this, match was probably one of the most expensive consumer internet stocks trading at about 21 times forward cash flow
2:45 pm
typically marketplace businesses will trend around 18, 19 so this was expensive. then you got this news this morning, stock trading around 17, you say that's fair value, if you thought there was no impact, but you can't dismiss it this is facebook, right, the king of consumer data. what makes this more difficult is that the bulk of the online dating ecosystemhas been built on top of facebook that's how you authenticate that someone was a real user. facebook, according to the terms of service, is allowed to use all that data for themselves >> i told you, never swipe right unless you know you have a neutral facebook friend. that's the golden rule jason, does facebook have the ability with all the consumer data to make better matches than match in terms of suggesting who you could be in a relationship with isn't that what it comes down to ultimately >> i think there's a few things. one is tinder does the magic they do with kind of little
2:46 pm
information. you don't tell tinder much it's very superficial but it works. on the other side you have where you tell them all this personal information about yourself, maybe you tell it the truth, maybe you embellish, maybe change, et cetera facebook technically has the truth about you. what we see particularly in what we call the legacy dating business, people go on, they don't, you know, they go off, they go on, they go off. there's almost like this serial online dater which is great from a business perspective because you keep getting paid but these are people who are not finding love or companionship. this is the problem facebook will try to tackle they know the truths about all of us. >> i still think amazon should go to the dating site business they really know the truth about all of us. >> they know exactly what you have done, bought, listened to >> then you open, you know, the next morning you go to the medicine cabinet, open up and it
2:47 pm
looks like yours that would be pretty weird >> let's go to amazon, speaking of new perks for prime members. 10% discount at whole foods. what does it mean for amazon's push into the grocery business and for the grocery business more broadly >> we know that they -- after they bought whole foods they would try to figure out how to extract the maximum value. the first plan was to basically connect the whole foods loyalty and prime loyalty, and right now, that hasn't been happening. so they are going to use discounts. you get 10% off sale items which in a grocery model 10% off is a lot, to try to get you to do that, to connect your purchases in the store to your amazon prime so they can make that identity that's really what this is about. other things that they have already talked about, two-hour delivery, they lose money on every delivery they do it's almost impossible according to our grocery analysts to put a
2:48 pm
basket size big enough where amazon can actually make money on delivering you food from a whole foods. so there's clearly a data play going on that they really want to understand the consumer in whole foods better, and are willing to spend a lot of money to do it >> jason, thank you very much. great answers. appreciate it. kate rogers with a news alert on starbucks >> that's right. we now have more information on the settlement between the company and the two men who were arrested in philadelphia last month. we have a joint statement from starbucks and the men. the ceo kevin johnson thanking them for their willingness to reconcile and the two men saying jointly we appreciate the opportunity to have meaningful discussions with kevin johnson and the group around the table to address hard issues we all recognize the importance of communication about differences and solutions and that we will be measured by our actions and not words. as part of the agreement, there is a confidential financial settlement the men will also be able to
2:49 pm
provide input based on their personal experiences to former u.s. attorney general eric holder as part of the company's long-term diversity and equity efforts. also eric holder will be involved in that racial bias training on the afternoon of may 29th we mentioned earlier and also, the two men, robinson and nelson, have been offered the opportunity to complete their undergraduate degrees through the starbucks college achievement plan, a partnership with arizona state university that covers their tuition fees should they choose to accept that, and once again, tomorrow at 1:15 we sit down with c.o.o. rod brewer and address this and more at the opportunity youth hiring back to you. >> look forward to that. thank you. a blowout quarter, apple stock up 5%. how do you trade it? that's next. it may look like a golf ball museum but it's just a basement in wisconsin the story behind this video next alerts -- wouldn't you like one from the market
2:50 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. hello. give me an hour in tanning room 3. cheers! that's confident. but it's not kayak confident. kayak searches hundreds of travel sites to help me plan
2:51 pm
the best trip. so i'm more than confident. forgot me goggles. kayak. search one and done. we have one to two fires a day and when you respond together and you put your lives on the line, you do have to surround yourself with experts. and for us the expert in gas and electric is pg&e. we run about 2,500/2,800 fire calls a year and on almost every one of those calls pg&e is responding to that call as well. and so when we show up to a fire and pg&e shows up with us
2:52 pm
it makes a tremendous team during a moment of crisis. i rely on them, the firefighters in this department rely on them, and so we have to practice safety everyday. utilizing pg&e's talent and expertise in that area trains our firefighters on the gas or electric aspect of a fire and when we have an emergency situation we are going to be much more skilled and prepared to mitigate that emergency for all concerned. the things we do every single day that puts ourselves in harm's way, and to have a partner that is so skilled at what they do is indispensable, and i couldn't ask for a better partner. a man in franklin, wisconsin, has an unusual pastime. he spent the past 30 years collecting more than 15,000 golf balls. don thompson says he collects most of them from courses after golfers hit the ball out of bounds his collection represents presidential inaugurations, local courses, major
2:53 pm
tournaments, sports teams, beer brands, more here he is -- he's on how his collection got started >> i saw this ball and i picked it up. and here it's a baby ruth curtis on the backside it says 50th anniversary. and that was the start of it i thought that was pretty neat >> there you go. >> i guess that's worth a lot, right? having all those famous balls. >> you have to have your own golf ballroom there like he does >> how does he find his balls? i mean, the -- in the collection the dewy decimal system or something? >> probably has it categorized by the looks of that closet. switching gears now, take a look at shares of apple. soaring 5% on the back of earnings now just 3% its all-time high. let's bring in the trading nation team. todd gordon is with trading
2:54 pm
so how does apple look technically now that we're getting this pop >> in fact, it's unfortunately we're gapping up into this huge massive overhead supply. apple's trying to get through this $175 to $180 level all the way back from november of last year so there's a massive amount of resistance overhead. the upside gap here today was very constructive from a technical point of view. we refer to that as a breakaway gap which starts the momentum going. and if you just do a little trim line here over the last three significant highs, if we can get through 177 bucks, i think we have a shot to the topside however, i'll caution you. there's two things to keep an eye on from a psychological point of view, number one is the $200 level. number two is the $1 trillion cap mark we should be able to get it. the one caveat if we just take a quick look at the indexes, we are so tight inside of these ranges if we look at that qqq, the nasdaq 100, you can't squeeze
2:55 pm
this thing any more. i think it's going to break higher if we happen to move lower, we're giving up to the fed that's the one thing that's going to get in the way to this. watch your technicals. we're clearly defined in this consolidation. >> apple's trading 17 times earnings how does it look to you? is it a buy? >> all day long i've been reading research to tell me what kind of an idiot i was for doubting apple i have to eat a bit of crow but i think it's a quail sized crow. when you look at apple right now, the net takeaway was they've been able to retain their customer base. their customer experience is still strong but they really aren't able to grow it forward. my attitude is, yes, it certainly looks good fundamentally. but it is not a chase at this point. i would much rather be selling puts and letting it come to you rather than try to chase the stock at this point. i also think when it does -- and if it does go to $200 and hits $2 trillion because everybody is fixated on that idea, that's going to be the top of the
2:56 pm
trade. as far as organic growth goes, there isn't much there one thing i'm always very skeptical about is buyback programs it is an implication you don't think they will take the stock higher it was a lot of razzle-dazzle yesterday. it was impressive on a bare bones basis. but ultimately it's still a slow growth story they don't have a flash next best thing going i think that's the key thing of why i'm -- >> it's also a mission they have a lot of cash to bring back from overseas we'll leave it there for more market insights you can head to our website at check please is up next. and now the latest from and a word from our sponsor. >> short selling can help you profit from a stocks decline however, because it involves unlimited risk, you must have a plan first, screen for poorly rated stocks showing weakness versus the broad markets.
2:57 pm
second, look for the stocks with the poorest technicals in that group. and finally, incorpote rk rais management techniques into your order to limit potential losses.
2:58 pm
2:59 pm
check please >> big night for earnings. obviously we're monitoring tesla. but also square is going to be reporting earnings this is going to be interesting because andrew left of citron research, we're going to have him on "fast money" tonight to explain. >> he wasn't buying into the
3:00 pm
cryptocraze that square might be cashing in on. >> exactly >> not much reaction to the no action out of the fed. >> no. that was very exciting for me. >> it was really kind of a ho hum report today on the fed. >> we'll see how it trades into the close. >> "closing bell" starts right now. i'm wilfred frost. this is "the closing bell. a busy day for investors with many wondering whether another round of big earnings beats is enough to get stocks moving higher >> i'm steve leisman in washington where the federal reserve has just given investors something new to think about >> i'm bob pisani on the floor of the new york stock exchange i'm phil lebeau in chicago getting you ahead of today's key quarterly report from tesla. the big issue? cash burn. all that plus love and war in online dating and a dire, dangerous, deadly warning from the cdc i'


info Stream Only

Uploaded by TV Archive on