Skip to main content

tv   Closing Bell  CNBC  June 21, 2018 3:00pm-5:00pm EDT

3:00 pm
needed a trim. i was listening to you, larry. also, if brian is out after a relationship violated company policy there's been a turn around and transformation will the next guy or girl be able to continue the transformation that's the question investors have now with the stock down 2%. thanks for watching "power", and "closing bell" starts right now. ♪ it's time for the "closing bell, " everyone, on the floor of the new york stock exchange, netflix at a new high and whether the fang stocks have room to run. >> we're in chicago, and tariffs could hit the bottom line. we'll break down what it means as trade tensions heat up. i'm kate rogers in new york city where chippolte is testing out additions to the menu. we'll talk to the chief marketing officer about the items and the company's strategy a supreme court ruling dealing a major blow to internet retailers. impact on the stocks and consumers coming up as the
3:01 pm
"closing bell" starts right now. ♪ welcome, everybody we're going to get to all the stories in just a moment first, a check on the markets. look at this eight straight days, the dow is now lower. right now, that's the longest losing streak since march of 2017 the s&p on the pace for worst day of the month, dropping 16 points >> and dow just for the week down 2% if we stay where we are. very much the laggard of the major indexes. earnings may not be enough to lead the market higher mike santoli has the argument. hello, mike. >> it might not be enough for an increase in stock prices we're talking about a dynamic going on all year, which is the multiple compression of stocks in other words, we went from a pe multiple at the beginning of the year of 18.6 we're down to about 16.5 right
3:02 pm
n now. you see the sharp break in january, and sharp break in prices and rapid increase in earnings goldman sachs suggested this trend will likely continue what goldman did raised earnings forecast for 2018 to a full 19% for the calendar year, but still see only 3% upside for stocks. why is that? the fed is tightening, generally financial conditions are tightening, and markets see huge increases in earnings and say, well, that has to be decelerating from here might be getting to the peak of earnings what's this mean for 2019? here's the deal. we dealt with earnings compression for a certain amount of time. goldman does not see it going further, but there's a push-pull in earnings growth and rates going higher also, stocks remain expensive on most measures versus history, other than versus bonds. if you think bonds stay low, you n say maybe valuations can go up a little bit -- i think 2019 is what holds the key because
3:03 pm
how much we decelerate in earnings growth in 2019, goldman said growth is only 7%, and s&p 500 earnings next year might be something that creates a little of room for downward earnings revisions because the analysts right now are still looking at 10% for 2019 so i think this is an observation of what the market's been doing and extrapolation perhaps it's going to continue for a little while, guys >> tony dwyer yesterday said he thinks the market trades 20 times earnings end of the year, a high one on the street, 3200 for the s&p. the point is if we know earnings will slow and that's built into the market already, what if that other ways stock prices could rise overall >> sure. kelly, i think the way you might get to a 20 times multiple, he says bull markets often get to that point in history, 20 times trailing multiple, is the fang stocks drive us there. that's one way to do it. high multiple and high growth stocks outperform. it drags the overall earnings
3:04 pm
higher or there's clarity, the fed could pause, and all the sudden we revalue things higher across the board there's no se path that we know this market is going to >> okay, mike,retuff, lookear. forward to seeing you later in the show joining our exchange now, shannon, keith bliss, and rick santelli rick, starting with you. at the top, eight straight days down for the dow, down more than 2% week to date. is this getting concerning we said trade wars are weighing on the markets are they now >> well, certainly reaction from investor and traders on international companies, main components of the dow. they are concerned, taking money off the table, above 25,000 again, so it's the right move to do, see rotation into the smaller cap names that do the business here in the u.s i'm not that concerned yet we still don't see the dow as being oversold it's been a drip, drip, trdrip coming down.
3:05 pm
next week is constructive getting into the end of the quarter, and then we set ourselves up for what happens in the third quarter, start getting earnings reads i'm not concerned right now. the otheint is investors and traders looked at what the strategy and tactics have been over the trump administration, and basically threw a grenade in the middle of the negotiating table, everybody scatters, clears out, and come back after the weekend. things get back to normal. we see that over and over again and why the market is read this. >> the tariffs in the eu, cars, and whether that comes down. that's a major breakthrough. we'll see. shannon, what do you think of the market here, and, you know, are there places you wouldn't like to be right now in particular >> i think point is well-taken about the dow i think that, you know, there's moves by investors to inflate themselves from some of the activity that will probably see as it remilates to trade over t course of the summer there's areas not as effective we like technology in the space. we like certain opportunities in health care. we're looking at financials.
3:06 pm
tough environment for the yield curve right now, but if you look at valuations and opportunities in that sector, there's certainly places that we want to be i think overall, i mean, i still think there's quality companies in the financials. look at some of the larger banks such as jpmorgan, you know, great fee revenue, not as exposed to kind of the yield curve overall. i think there's opportunities there. i think that, you know, the dow moving down is a headline over the last eight days or so. i think if you look what happened with tariffs, it's not surprising, but i think if you look at the s&p 500, the sectors that have done well, investors still continue to find solace in growth and momentum, and that will continue through the summer >> rick, the fed survey came in -- manufacturing came in weak, sorry, surprised how much it moved the u.s. dollar >> you know, i was a little bit surprised, but it was not the soft education number since november 2016. you know, you'd be surprised
3:07 pm
traders, for whatever reason, always paid close attention to that number, but then again, there's another way to lock at this now, it's impossible for us to truly say what is affecting ceo -- equities in general or the dow specifically it's difficult thllars do today at 94.75, it's pretty much where it settled last friday we have dripped down to just under 2.90 in 10-year notes. same place we settled tuesday, just a whisker 2.90. we settled at 2.92 last friday by looking at dollar indexes and interest rates in the u.s., it's hard to gain knowledge of nervousness on investors' part, which is the problem many of the signals we used to get from those markets have been distorted. think about how mario draghi affected markets last week, how that was affected into the
3:08 pm
announcement today and how it responded afterwards it's more and more difficult one thing for sure, there's a slowdown going on that affects u.s. less than the rest of europe in that environment, the questions of trade seem to be magnified a bit. i think anything that diminishes the uncertainty of that issue, and i think there will be events that do that, i think the snap back could be rather fast. >> keith, if that's the case, then are we going to look back on this eight day soft patch asseting us up for a rally >> rally moving forward, yeah, i believe so reasons, but technical a lot fundamental quantitative work that we do, that we'll trade higher through the end of the year of course, earnings help out as we get through it. if there's a slowdown there or heightened inflation which, by the way, i don't see coming, that's slowdown in earnings and higher inflation are two things the equity markets hate. we have to be careful there. again, i -- i firmly believe that a lot o
3:09 pm
tempest in a price war no one wins. they are interconnected. they will back away and get reasonableness and sanity among the constituent groups >> record high for netflix today and all four fang names at some point of the course of the last week are the stocks overrunning or happy to ride that upwards >> i think we're still pleased to continue to have exposure in those. i think that we're cautious, just given the returns we've seen in the gains and making sure position sizes is appropriate, but as i mentioned, i think the drivers in the market continue to be growth and momentum and fang stocks represent names that investors feel comfortable with in trying to capture the exposure to those two factors. >> okay. thank you very much, everyone, shan sha shannon, keith, and rick >> you know on the fangs, higher market capitalization than the ftse 100, the hangseng >> not surprised it's combined
3:10 pm
>> not combined, but astonishing fact there intel announced their ceo is out following revelations of a consensual workplace relationship that violated company policies the interim ceo is stepping in, and we bring in john with the latest john >> reporter: yes, this is a surprise intel announcing the board became aware that's former ceo now had a relationship investigated, and now he has resigned. this is at a time when intel is in the midst of transmissiforma from a pc company to a data centric company. you look at the acquisitions they've done over the past few years, for example, what it mea means, artificial intelligence, and systems for driving, a lot
3:11 pm
of technologies, the idea that data is the life blood, and intel wants to be at a core of that the question is what ceo will be able to keep together these district businesses and also keep the courtship business running? that was brian's background, running the chips, and there's been a bit of disruption in the ticktock cadence they had, and they need to get back on pace. so intel is going to look internally and externally for candidates, and for now, the cfo, bob swan, is the interim ceo. >> and, john, on the sort of perm si personal side of this, the relationship was greagreed upon, but it violated policies even the ceo who had done pretty well, they were not making an exception for him in this case >> well, kelly, i think part of what brian was trying to do at
3:12 pm
intel is push cultural change. he had done things like set targets for gender and ethnic diversity among different job categories at intel. pegged to the bureau of labor statistics information about the availability of the labor pool of diversity in labor pool i imagine that when you set targets like that, which silicon valley is not used to seeing, certainly the semiconductor industry, leaning conservative culturely, is not used to seeing -- for you, then, to be in violation of a policy that could be seen as related to that, that wouldn't have sat well with a number of people, so i can imagine that there was probably moral authority perhaps lost in this case or, you know, perhaps fears of what it could do to corporate morale in a critical time. >> lean to the political right >> yeah. >> or a button-up culture? >> no, no. in silicon valley, people who have covered it for a while tell you the semiconductor industry just tends to be a bit more
3:13 pm
conservative, even politically, culturely, than say the software industry, and, certainly, the social and internet culture would have been, and that is a factor that i certainly thought of when i saw this news and considered the ways that intel is trying to shift its culture and others are as well >> interesting yeah i never would have thought although it's maybe internet companies are so far to the left anyway >> right >> john, thank you interesting one, obviously, in the big deal for intel >> interesting, but as the details came out throughout the course of the day, it is very different for some of the sort of harassment related stories we've been hearing about, a case of rule break, and you can't argue with that. >> agree coming up, german car makers taking a hit on mercedes, impact of tariffs, what that means for the rest of the auto industry. that's coming up up next, supreme court's
3:14 pm
online sales tax ruling had a big impact on the major e-commerce, and we talked about to amazon and the decision could affect your et we want to hear from you reach out to the show. we're back in two. a bachelor.
3:15 pm
and that's how he intended to keep it. then he met the love of his life. who came with a three foot, two inch bonus. for is new stepdad, it's promising to care for his daughter as if she's his own. every way we look out for those we love is an act of mutuality. we can help with the financial ones. learn more or find an advisor at massmutual.com
3:16 pm
3:17 pm
welcome back, down 0.8% for the dow, over 2% for the week now, and s&p down 0.6%, and nasdaq down 0.8% a broad selloff today. the low of the day on the dow is 206 points, now down 1 the9190, the lows as well >> the supreme court gave a big blow to the internet shares of overstock down 6%, ebay down 3%, and wayfare, named in the ruling, down 1% after the supreme court said states can require online retailers like these companies to collect sales tax across the states. joining us, forester and former
3:18 pm
target vice chair and toys "r" us ceo jerry storage, now a ceo at storage adviser welcome to you both. jerry, if there's, you know, if there's hundreds of little jurisdictions now that can impose sales tax, don't you have to be one of the biggest online platforms to deal with the new frame work >> no, i don't think so. i feel the administrative issue in regards to this collection is a red herring from the very beginning of the internet. you know, retailers do not just do to town hall and find out the sales tax of the jurisdiction, but there's readily available software that provides tax rates. much of the activity where mom and pops and smaller retailers sell online goes through the market places like amazon, like at walmart, like on ebay, and while it's a simple matter for that sales tax sa-- >> to be clear, if i start up, just have a little web business, i will be able to -- how cheap are we talking how easy is the software to let me know now not only the
3:19 pm
existing state of play for all the sales tax jurisdiction, but all the people who are now piling in saying, great, we have to take this too and change what they collect >> sales taxes have always been there, let's be clear. >> yeah. >> this is nothing new new is the collection of the sales tax owed it was odd, and consumers remitted the sales tax themselves if not charged by the retailer, so, you know, sure, great if people didn't have to pay taxes, but taxes are on everything, but we do. the software that accelerates in or that enables this is actually quite good and readily available, what every retailer who operates in multiple jurisdictions before the internet uses. it's done through software, and that will be readily available for almost any retailer, even small ones if it's not something they can immediately access, they can use the existing marketplaces and there's a rapid rush to unpackage software you plug into the website to do this
3:20 pm
i think that's an absolute nonissue red herring. ridiculous argument existing from the beginning of this sort of court imposed loophole in the tax laws >> do you think this might drive people back to physical stores >> on the mar begin, of course it will. >> hold on, jerry. >> yeah. >> yeah, yeah, absolutely. one of the things that we've seen in the research that we've done is that a significant portion of consumers, about half of them, currently do not pay online sales tax for transaction completed with their pure play retailers, and when asked, would you go back to the physical store if these stores started to charge salesax, 10% said, yes, we go back to the physical store. >> to go back? >> yes >> that's not a big number, though >> well, depends -- it's all relative, right? i mean, we're talking about online pure plays now are commanding $200 billion in e-commerce so if 10% go back,
3:21 pm
that's $20 billion >> i mean, jerry, it's something, but i don't think -- look, i order online because it's convenient now. frankly, i know amazon's not giving me the lowest price, but i see the sales tax, like, look, i can't get to the store to get the things i need. >> right >> that's why i'm skeptical this has an impact on how people do business >> retailers with a strong value, whether amazon or bricks and mortar retail, are going to do just fine this is not going to stop the amazon juggernaut from proceeding on the margin, provide better service or better product to win now. you're not goingmargin, it's ju business, not just necessarily towards brick and mortar, not going to the store, but internet arms thatpreviously had to charge sales tax when e-commerce only players did not charge the tax. there's no justification for
3:22 pm
that distinction we do see, for example, when there's a tax holiday, which often happens in states before back to school where states say for a day in august or september, you don't charge sales taxes or retail. there's a bump in sales like 10% or 20% on the days you do that on the whole, i'm not worried about amazon or the guys they will do fine. as you say, they have a tremendous value proposition, but it does provide a playing field to give more opportunity to the internet arms associated with retailers to compete evenly and do better. >> jerry, tell us whether you get the toys "r" us brand? >> yeah. there's a lot going on there only thing i will say is i think it's sad what happened there and there's a lot more opportunity with that brand than the face that seems to be - >> we want to know first i don't want to read about it, jerry, that you won, and we want your plans here. >> i don't remember that topic
3:23 pm
for the interview, but i think the internet taxation is long overdue, always required, always just a -- the argument to get whether it was administrative complexity or a sense the internet needed a helping hand were ridiculous from the beginning. >> all right, thank you, sir jerry, thank you, talking about the impact this has. already at session lows, dow down 234 points, taking a leg down in the last five or ten minutes. i don't know what that means, maybe argentine traders are lamenting and selling stocks at the same time. >> buying stocks, going back into an emerging market status >> yeah. >> time for an imf bailout up next, china and canada made headlines for tariffs how are other countries responding what india's doing to hit back, and we'll talk to an indian steel company. dow on track for eight
3:24 pm
straight down days, down 4%, but netflix just hit yet another all-time high. we'll debate where the stock's headed next. you always pay 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. liberty stands with you™
3:25 pm
liberty mutual insurance.
3:26 pm
welcome back, stocks a leg lower, down 200 points, 191 on the dow at the moment, and dow and nasdaq down three quarters after percent, s&p down half a percent, and russell down 1% china made headlines against
3:27 pm
the trade threat, but how are others reacting to the tariffs we have a look how india hits back and what it means for u.s.-india relations >> after failing to get an exemption from u.s. steel and aluminum tariffs, india announced a set of tariffs, amounting to $240 million, matching the amount the u.s. will collect from india on its tariffs. they are hiking import duties on 30 u.s. products ranging from select steel items to lentils, beans, walnuts, and almonds. they make up over 50% of u.s. shipments of almonds in 2017 the u.s.-india strategic partnership says ultimately the tariff is something passed on to the consumer hurting both consumers and businesses trade represent atives from both sides are set to meet next week remaining hopeful a new deal is carved out before the tariffs go into effect august 4th
3:28 pm
still, former state department official saying further escalation of trade tensions might affect the positive defense and strategic relationship india is seen as a key strategic ally in asia by the trump administration, especially as tensions with china escalate kelly? >> thank you despite the rising tensions between the u.s. and countries like china and india, many international businesses are still planning investments in the u.s. joining us from the u.s. commerce department is john grit, ceo of jsw usa, part of a steel company associated with india, and explain to us, you have news to make about you you are expanding in the u.s. as a result of this, right? >> we really do. it's all incredible and wonderful news, and jsw group, the parent company of our entity
3:29 pm
i'm president and ceo of jsw for the united states, and we are investing a billion dollars, and at the junction, a farmer willing pit facility and in texas, and what we're doing is creating fabulo fabulous mounta manufacturing facility, hiring over a thousand people this is the most transformational project in the united states, in the united states steel industry, and, you know, we had to compete for this capital, and india, our parent company sees the vision and value that these projects will bring, but not only that, we're going to be -- i grew up in the steel industry, 44 years, started in youngstown, ohio. anyway, with u.s. steel, this is for ohio, transforming whole neighborhoods, mango junction,
3:30 pm
hiring many,y high-tech jobs, creating mountain manufacturing capacity, all over again, but very, very high technology >> as you said, india-owned company ultimately, opening in the u.s. if the tariffs were not put in place >> well, you know, the tariffs have -- they did not really fall into place look, we -- we are completely in lock step with the president, completely in lock step with the administration that does not mean we'd be doing this, but the vision was developed and the vision developing over the last three years, and it's a phenomenal vision, and i wouldn't say that we wouldn't be doing this, but the whole idea of melt manufacture where this country's going with regards to our ability now to, when the projects are done, supply defense and infrastructure, to bring up the mango junction
3:31 pm
facility, and take a community that was, you know, really decimated like youngstown, ohio where i grew up in the steel industry and started at 18 yieas old. so all of this makes great sense. we would not have this capital from our parent company if they did not believe it and get it. >> yeah. >> and, you know, the return on this investment. >> john, final question. >> go ahead. >> how do you expect to compete against the likes of ak steel, u.s. steel, and the other major u.s. players >> actually, we will be the highest technology, lowest cost entity of its kind, of our kind in all of north america. competition will not be the issue. we'll pick the markets we want it will be wonderful we'll create great job security and a thousand new jobs and i'm as excited as i can be to be back in ohio and helping the communities that i grew up in. >> yeah. no must feel good i'm sure they appreciate it.
3:32 pm
>> yeah. >> everyone wins if this works long term. that's key john, thank you very much for joining us >> it is thank you very much for having me >> you got it. thank you. for more, go to cnbc.com, see why two-thirds of cfos say trade policies hurt their companies in six months that's online right now. time for a news update >> here's what's happening right now. president trump touting his successes at a cabinet meeting today, but spoke mostly about immigration, blaming democrats for many of the problems with the system >> they've got to get together and do something this has been going on for decades, and they have to sit down, i'll be certainly willing to do it, i just told you i'll invite senator schumer and nancy pelosi, come over, bring whoever they want. >> the secretary general of nato arrived at 10 downing street shaking hands with the prime minister may before posing for
3:33 pm
photos they were expected to discuss defense and security issues. hedge fund manager victor will auction off 100 rare letters beginning saturday one an emotional handwritten letter from ronald reagan to his estranged dollar writing, what did we do wrong? we were a loving family. that's the cnbc news update this hour back to you. >> always tricky when it's personal like that thank you. we got just under 30 minutes left until the close we briefly touched more than 200 points back down theel, down 223 points on the dow. best part of a percent decline for the dow, s&p, and the -- sorry, nasdaq, the dow, and s&p down three quarters of 1%. coming up, almost every vp is speaking out in the first appearance since leaving the ad giant. what he said about the former employer and interesting comments about his new venture
3:34 pm
shares of chipolte up 60% this year. can the companies keep it up we go to the new york kitchen for a new look at menu test items. whoooo. 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... ...search over 200 booking sites ...to find you the lowest price... ...on the hotel you want. don't sweat your booking. tripadvisor. the latest reviews. the lowest prices.
3:35 pm
with the new chase ink business unlimited card i get unlimited 1.5% cash back. it's so simple, i don't even have to think about it. so i think about mouthfeel. introducing chase ink business unlimited with unlimited 1.5% cash back on every purchase.
3:36 pm
3:37 pm
welcome back, dow down 227 points, watching that at the bell kroger pops today, one of the two stocks to watch. they are on the best day since march 2009 after posting an earnings and revenue beat this morning saying it's reached the program that's paying off and frankly calling it a kitchen sink type of thing, doing everything they can to improve the supply chain, expand meal kit offerings, get data going, and they are actually pairing back products on shelves, weighing on sales, too, but market was happy so far with the results of the program absolutely right, up 9%. >> i pick wpp stock to watch the former ceo was speaking at an event in canada, a writeup in the "financial times," critical of the exit, of course, but his venture now, s4 capital, and in that, it's more agile, more responsive than wpp.
3:38 pm
not to be a critic, condemnation of wpp - >> but - >> but in terms of the business models changing, in our industry, we are stuck in the past this is a very small company relative to wpp, but sure he'll have the ability t pick the best and might not destroy wpp's business, but certainly going to hurt their ability to grow significantly if he does that >> with your point, too, going tkroger, they bought hole foods last year, two years ago now, but shares were slack they fell substantially. everybody thought -- and kroger responded by changing and by copying some of those things and throwing everything at the wall and now perhaps there's some of that paying off. same thing for an incumbent like wpp. if he shows them a better way that forces them to respond, frankly, a win for everybody although difficult >> yeah. he also was talking very positively about the two co-ceos
3:39 pm
taking over from him, saying they will do a great job, but wpp down three quarters of 1% today along with the rest of the ftse 100 which was down. we got 22 minutes left of trade here we are down 250 points now on the dow. very much near the lows of the day. the best part of a percent decline for the dow and nasdaq one big auto maker warned trade tensions could negatively impact earnings this year. details next later, netflix received not one, but two $0 ic50pre targets this week. we'll debate whether to get into the stock. that's coming up here. deponent go anywhere -here comes the rain. [ horn honking ] [ engine revving ] what's that, girl? [ engine revving ] flo needs help?! [ engine revving ] take me to her! ♪ coming, flo! why aren't we taking roads?! flo. [ horn honking ] -oh. you made it.
3:40 pm
do you have change for a dollar? -this was the emergency? [ engine revving ] yes, i was busy! -24-hour roadside assistance. from america's number-one motorcycle insurer. -you know, i think you're my best friend. you don't have to say i'm your best friend. that's okay.
3:41 pm
3:42 pm
welcome back, s&p and dow and nasdaq are down. let's have a look at some leaders. there's a couple at the moment talking verizon up nice, a bit of performance for the telco, pg benefits and walmart as well >> we'll watch that dow into the close. shares of daimlem falling today. phil lebeau has morement we talked about it yesterday, but,
3:43 pm
man, this is a major headline worldwide today. >> right it makes you wonder, will we hear this from other auto makers and other companies worried about tariffs in the next six months impacting earnings for the second half of the year. look at shares of daimler, down 4.5% today, and it has to do with the warnings the company issued late yesterday, and that warning, while there's a number of issues behind expecting lower earnings for the year, the one that got a lot of attention with the company saying, look, the mercedes car unit has lower earnings this year compared to last year due to anticipation of tariff costs vehicles built in the u.s. shipped to china have not gone up, but come down, but they are expecting that there could be increased tariff costs china suv sales slow down. combine this news that daimler
3:44 pm
and volkswagen and bmw press to eliminate tariffs on vehicles imported into germany in hopes that will dissuade the trump administration to slap a tariff on vehicles acceptability hesen. they are responsible for 3% of the sales. nonetheless, all of the stocks, daimler, bmw, volkswagen, a rough month. wonder if there's more in the weeks ahead as they work their way through the trade tensions >> phil, so to what extent could this be the management of the companies that don't want tariffs trying to torque up how severe the impact could be clearly, the tariffs have not been changed in the short term they are predicting impacts in the future could they paint a doomsday scenario in the hopes it either gives them easier targets to beat in the classic sense or
3:45 pm
because it impacts politicians >> less that they are looking to have easier targets to beat in the future i think that it's basically looking for a little cover here, wilf what you're looking at is a situation where the tariff costs have not gone up, but it's the anticipation of it that is one of the factors is cited here, and at the same time, sales of suvs are swing down in china. there's other factors behind that including increased competition from domestic auto makers in china who are increasing their suv production so a lot of people look at this today, and i talked to a few folks who said, i'm not entirely sure that it's fair to blame mercedes having a rough year on the anticipation of tariffs and the higher costs there >> yeah. and another group pushing the u.s. to get this solved, and still, reminder of what a low it
3:46 pm
is phil, thank you. >> you bet >> phil lebeau wall street feels the love r netflix at another firm gives the streaming service a $500 price target on the stock this week. debating whether the company has more room to run next on "closing bell. clvp and how it's performing. so you can spend more time floating about on your inflatable swan. [ding] 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 mutualon't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call
3:47 pm
for a free quote today. liberty stands with you™ liberty mutual insurance. that's confident. but it's not kayak confident. kayak searches hundreds of travel and airline sites to find the best flight for me. so i'm more than confident. how's your family? kayak. search one and done.
3:48 pm
3:49 pm
clvp. trading at $415 for netflix, off the highs a little it's following pivotal research group raising the stock's price target to $500 from $420 per share. now, the second firm this week to give the company a $500 price target they expect solid second quarter results and third quarter guidance and recent at&t time warner deal boosts netflix shares >> up 6% in the last week, can netflix's rally continue joining us to discuss is daniel, and david from new constructs. good afternoon to you both david, i start with you because you have a negative view on the stock. talk us through why the $5 target is not achievable >> because the company's spending 120% of the revenue every year, and a lot of the
3:50 pm
reason you see most of wall street cheering this kind of activity in boosting the stock price or target price is because they're going to make a lot of money helping netflix sell the shares or debt that it needs in order to continue to fuel the cash burning machine on top of that, you look at a valuation that implies the company's going to grow profits at 25% compounded annually for two decades. even if they double prices, there's 3 billion customers, so we don't see good risk-reward here even if you see short term tendencies that look ositive >> all right, how do you get to a $500 share price for netflix >> arguing this when the stock was $200, and look where it is today. part of it through the trees is about content at this point. they continue to have 125 million subs and growing we think international that's the story. 68 million subs today, getting to 100 million by 2020 you do some of the parts n,
3:51 pm
netflix, which is how we got to the 500 price target ultimately, this is one where the margin expansion over the coming years, content, which they continue to own, 8 billion this year, 10 billion next year. look what happened in the industry even if disney gets 21st century fox assets, we don't see for the next two, three years, a competitor at this point, it continues to be netflix, you know, names, that's the name to own in streaming. their world and everyone else is paying rent. >> daniel, what would make you think that you can get -- what are the biggest risks to this if revamped hulu or disney streaming services is powerful are you concerned? >> yeah. i think the biggest risk here is international. can they duplicate what they've done here domestically internationally? that's the growth story here in order to get to a $500 stock plus, international needs to take off you talk about competition that's why everyone is watching.
3:52 pm
disney-comcast battle. the assets ultimately get split up, star india, sky, that ultimately makes netflix that much stronger, which you see the street' reaction here. it's more competition, the disney potentially as a long term threat, and, ultimately, it's international if they are successful internationally, it's stock we believe goes, you know, much north of $500. >> all right david, do you want to respond to that >> you know, look, i.n don't thk there's an argument that makes sense around netflix i don't know how you get to $8 billion for value in content when it does not produce cash or make any money it's going up for a long time. >> it delivers money >> revenue, but at a negative profit, right? so they are paying more for the content than they generate in revenue. 120% more to run the business than revenue they make free cash flow was negative 2
3:53 pm
billion last year, negative 3 billion in year. they have to raise capital and continue to have to raise capital. we're talking about a business that's going to have to make a drastic swing from negative profitability to positive profitability and growing a lot. i just don't -- as much as the stk prichas short term good performance, the risk-reward here is hard to make sense of at any fundamental way. >> all right so before we go, dan, explain how netflix pulls this off and makes it so that they are not burning cash, and that the new people they bring in are not causing negative profits >> they continue to be the lebron james of content here look going forward, they invest near term, but longer term, that's where the margin story plays pb we've seen th-- story ' subscription prices going up international, through the model, there's $15 in earnings power in five, six, seven years. >> david, we have to go, but if
3:54 pm
he's the lebron james, you say they are the who >> i don't -- i don't -- you tell me. >> putting you on the spot here. a proper basketball analogy. >> eddie murphy? i don't know >> might have a good joke set. guys, thank you, both, for joining us, appreciate it. david and daniel >> they should be just the who >> the who >> british band. >> the who >> do they play basketball >> no. we have to switch from sports to music. anyway, what we didn't touch on was net neutrality >> i thought you'd say the world cup. >> well, we had an e-mail to stop talking about it. >> good. i love you taping it? >> taping it, and ruined the score, and so, anyway -- up unow, coming back with the cotdn. >> fed results the stress tests in the next hour, instant analysis and results coming up on "the closing bell."
3:55 pm
3:56 pm
let's get started. show of hands. who wants customizable options chains? ones that make it fast and easy to analyze and take action?
3:57 pm
how about some of the lowest options fees? are you raising your hand? good then it's time for power e*trade the platform, price and service that gives you the edge you need. alright one quick game of rock, paper, scissors. 1, 2, 3, go. e*trade. the original place to invest online. kelly, if you are listening, this is one of the greatest songs, too epic. let's talk about what happened
3:58 pm
today. s&p -- start with the four, down a percent for the dow and the nasdaq, and, look, russell is down as much as well, if not more in the past couple trading days, trade war fears, russell outperformed as well as the nasdaq that's not happened, broad selloff. set for a 2.5% decline week to date not pretty intraday, sold off in the first couple hours, and stayed near the lows of the day throughout the session. sector performance for you, energy's near the bottom, of course, opec decision tomorrow as well, industrials suffering, trade related, real estate higher, and utilities, boring sectors holding on to gapes, but it's not a pretty picture. fang, itself, suffering, and netflix with the big upgrade is down amazon is down alphabet is down not much to hold on to today we bring in bob pisani and point out the dollar, if you are looking for something bright,
3:59 pm
softer today >> first time in a while, but it's not helping there it is down, all three major currencies >> still about the tariffs s&p's broke a pattern. remember, we started generally down in the first hour and closed near the highs the last four days or so. that did not happen today. we're essentially near the lows. got new lows, industrials hitting new lows because of the tariffs here general dynamics and general electric, xerox, many related to tariff issues. there's a value -- value stocks are things like oil stocks and industrial stocks, heavy volume, european etfs with heavy volume, emerging markets on, and then there's the global auto. that's at a new low for the year what's that? etf with the autos in the world. you heard with daimler today
4:00 pm
>> absolutely right. you mentioned higher volume. if you are looking for one, yes, down, but less than europe was, down less than asia today and week to date there's the bell down 196 points on the dow so, yes, best part of 1% just off the lows of the day nasdaq is down a similar amount. s&p down, and ringing the bell here at the new york stock exchange, lithium america, and i3 at the nasdaq. that's all for the first hour of the "closing bell. thank you, welcome, everybody, i'm kelly evans, dow sliding for the eighth straight day in a a row, droppi inping 20 points on the bell closing down .8%, a drop to 24462, and nasdaq with a similar hit today, all the way back down to 7712. s&p 500 down two-thirds of 1%, 17 points to 274 the9, and russl
4:01 pm
down 1% to 1489. russell above 1700 for the first time last week, but today, both averages gave it back, and dow, as we said, just can't break the slide. checking big banks today as well moments from the first round of results on the stress test from the federal reserve. those as soon as they are out. it was a mixed session, bank of america and citi higher today as well as jpm weaker talking about this is michael santoli, rod, co-managing partner at associates, and stefanie link, managing director and u.s. equity manager at ciaa company. welcome to you all a busy afternoon >> sfor sure >> the winner on the dow was verizon. caterpillar the biggest loser. hit every time there's trade war concerns, of course, down 2.5%
4:02 pm
over in the s&p, darden restaurants a big winner, up 16% today. marathon oil down 5% mike, why did we weaken so much? there were not that many headlines, not a major trade story to point to in the amp >> there was not >> what do you think is going on >> markets seemed heavy and tired for a couple weeks now you have the strength in the big growth stocks, nasdaq, and to some degree the russell 2,000. got the feeling people were hiding in there for a while, and those gave way to profit taking, a pullback, and there was nothing to take its place. i think the market's noticing this, global markets are very weak >> yes >> chinese market in a downward slide. >> terrible. the economy does not look great. >> european markets are off the highs. it's not a critical stress point but feels as if u.s. market outperformed to a degree i think right now the broadest of the skills looks like it's in the context of a 3% pullback after a two month rally, and not
4:03 pm
necessarily at a critical point, but you have to pay attention because i think that traders have started to pay attention. >> i wonder are people thinking that the u.s. is in a position of relative strength in spice or because of everything that's happening in the trade front or why is the rest of the world growth seems weaker than, you know, it's just -- every time we have someone say they want to invest abroad, but it's the returns that are not there >> it is i think they still really have not gotten, especially europe, the banks are still in trouble go overseas, other markets kind of slow down, and people look at it say, well, what else are they going to use to grow >> right >> so much monetary policy has been used. look at the u.s., and right now, people are taking money off too because people are looking out, especially the traders what is the catalyst in the next four to six weeks? maybe financials that's not helped anyway at all. with good earnings, they all came down. right now, it's a wait and see, and for investors,you look and say, what are the high quality companies sold off >> you wonder, too, in
4:04 pm
particular, what you like right now in. >> in industrials, companies like honeywell, which we think are world class companies, add to those types of positions. i think that's where you want to look at. even in some home builders like stanley works, that's come back down, that's a good company. >> yeah. >> might not work for a quarter or two, but longer term, it's good >> there's opportunities to get caterpillar. >> unfortunately, yes. >> and, today, was there even a headline to point to, a reason for another 2.5% drop here >> right from the beginning of the day, there was the daimler news and disappointing fed, the first manufacturing number seen in a while, so i think that just added to the concern there was crude. wa waiting for opec, although, they hung in well, it was the sector that was slammed there was a risk-off feel all day long of course, i think it's all about trade, right trade and the fed, and
4:05 pm
uncertainty about the fed, and why are they tightening when the ecb is not pulling away at this point, and boj is years away, so there's a lot of uncertainty, and to that point, there's not company specific fundamentals for a couple weeks until we get earnings we hope earnings help, but in the meantime, you know, it's riskoff for the time being >> we had news on retail, amazon and online retail platforms hit on the supreme court decision allowing states to force sales taxes from shoppers decision overturning a 1992 decision keeping states from those acquiring sales tax. wayfair was named in the case, down 1.5%. overstock down 7%, amazon down a personality. is this the opportunity to buy a giant platform that copes with the new landscape? i wonder if the selloff's overdone >> i think it is, particularly for companies like amazon where
4:06 pm
for a large portion of the business, they've been paying sales tax. this is going to hurt small sellers, sellers that, you know, third party sellers on amazon, people that sell on etsy or -- >> which i think, okay, if it hurts third party sellers, that's a big part of amazon's business or etsy does that make sense that's where they feel the most pain on this >> does not change fundamentals that consumers are shifting towards online, and so there were loopholes here, and i think a lot of consumers like to get very cute about where they shop to avoid sales tax, but it's a more convenient way to shop, and i think there are situations where people might drop their baskets because of tax >> yeah. >> similar to shipping ultimately, i think it does not change the story that more business is moving to on line. >> i don't know about you guys, but would have had a bigger impact five years ago than today?
4:07 pm
>> no doubt about it amazon fell back to a year to date gain. >> tragic. >> yeah. no true panic. people seeing a slight margin. >> the flip side of it, where we saw the traditional brick and mortar retailers rallying, but in some cases, more competitive online against the platform. >> just short term noise in there. the arbitrage game is so small for so little of a consumer that goes on and says let me play it. now it's a level playing field buy the quality product or what you want opposed to i'm going for the sales tax. >> if this was ten years ago, it would be much different, but right now, like, online, and the guys that have been winning online have such an advantage and such a lead, and so who knows how it's going to shake out. it was interesting that ebay want to protect the small business guys, asking congress to actually at least put in the rules so that they know what the gain is, right >> yeah. >> and what the rules are. so i think you're going to hear more and more from companies
4:08 pm
like that and talking about congress really getting it in law. >> absolutely. >> i wonder, and maybe you have a thought on this. what product categories are more affected made sense that wayfair was hurt a lot because bigger tickets, furniture, that seems to move the needle, like, oh, i don't have to pay taxes. >> it is a big ticket play it's buying something for $20, sales tax is not going to rise to the level of making me care wayfair, certainly, and i think they being a little disingenuous saying they are so concerned about the small business people because ultimately their market play, you know, etsy, overstock, they are, i think, i think that they are reaching trying to protect this why else have they been named in the suit >> right more on this, but, liz, thank you very much for now. another big story of the day, shares of intel closing after the sudden resignation of the
4:09 pm
ceo. there was a relationship with another intel employee effective immediately. the company's cfo, robert swan, is interim ceo company at the same time raised second quarter revenue guidance today. shares down more than 2% any opportunities for you guys who likes intel? a problem for them they are distracted now with the ceo? >> well, i own the stock, and, of course, a shock as soon as we saw the news i think the ceo was a good ceo, did a lot of good things, especially in m&a and found position on them in a data center, and that's 50% of the business, and that's the piece growing and people were excited about. it is disappointing to see him step down. the cfo is a cost cutter, something they needed in addition to the strategic positives the ceo put in place you need to control costs. you have seen this year operating leverage as a result you've not seen that in a long time the cfo steps up for now that's fine.
4:10 pm
i hope they go outside i hope they find somebody that's a visionary to take them to the next step and get into additional growth markets, but for the time being, this is in perg sto purgatory, it's the unknown. >> do you own it >> it is unfortunate because he was a, quote, loved ceo, a good strategy and vision, interesting to see how the stocks react. have been negative over the last couple weeks, but could be the opportunity to come in and buy a stock that people were selling because they don't want to follow it anymore. >> yeah. intel down 2% on the news. guys, thank you very much for joining us we'll see you later when we get the stress test results. >> you got it. >> in 20 minute's time supreme court blew a deal to internet retailers, but there was a damper put on brick and mortar celebrations. i don't think this is going to somehow stop the amazon juggernaut from proceeding
4:11 pm
wt is>>hath decision means for states, for retailers, and consumers when we come right back or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. 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 flexshares.com for a prospectus containing this information. read it carefully. yourbut as you get older,thing. it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. the name to remember.
4:12 pm
4:13 pm
well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. welcome back, governments making plans for new revenues
4:14 pm
generated by collecting online sales tax after the supreme court decision this afternoon, nebraska governor said he plans to convert new tax dollars into local property tax relief. south dakota arguing the case before the supreme court and its governor is issuing guidelines within days of collecting the new tax. other states are sure to follow. for more on the impact, the women's forum and alex brill from aei do you think the supreme court made the right call here >> you know, i don't i'm worried for taxpayers moving forward. as you mentioned before, was the supreme court did, it was eroding 30 years of precedence a business must have a physical presence in the state for the state to tax that business right now, there's a future now basically borderless bureaucrats. really doesn't matter where you are located in the country, a bureaucrat in another country taxes your transaction this is worry some for the
4:15 pm
interstate commerce moving forward, but it's ultimate taxation without representation. >> were you surprised? part of the kennedy majority opinion here >> interesting breakdown amongst the supreme court and i expected a narrow decision here where essentially the supreme court could have said that the way zach approached the issue was not the right baa, but remanded it back, ordering that congress takes a look at it, but the supreme court said, listen, the basis we used for the better part of three decades is not right, and we have to reassess >> alex, you think they made the right call why is that? >> i do. i think that there's a modernization that came down from the supreme court today, a recognition that the internet is a large part of the economy and marketer of importance of fairness and good economic principle to pursue what i call
4:16 pm
a level playing field. we shouldn't have a subsidy on any type of seller over another seller, and so while this is, you know, sometimes being characterized today as, you know, good news for the brick and mortar guys, what's important is that no one's getting a preference this does not mean that any state can go out and put in place any system they want to go and grind down hard on a retailer, but do it in a blanszed way that's one of the things we see from the court they have to pursue this level playing field that allows small businesses to fairly participate without representation >> not just the sales tax issue, but what is it about the ruling making businesses more sus successb -- susceptible? >> this is the assessment, this notion that somehow businesses are not competing in a level
4:17 pm
playing field. listen, all businesses, all generations have had to deal with this advancement in modernization and technology the question is whether or not we have public policy. that said, fits the current circumstances. nothing is more democracitizing for small businesses than the internet the notion we are moving forward in business with a level playing field that businesses everywhere benefitted from is not true. amazon, itself, already collects sales tax, but they don't collect sales tax for independent vendors on the website. the small businesses are people using these platforms are the ones who are going to struggle to keep up with the changes in the tax code >> alex, what about that >> well, that's not how the law in south dakota works. the law in south dakota says that small businesses are exempt right? so they set clear rules. >> not necessarily, alex 200 transactions if you're a small jewelry vendor, that could be a big mess >> they can change that?
4:18 pm
what if they say, you know, okay, that was south dakota's threshold, ours is lower >> and may go back up to the courts, and there's -- this is not the last we're going to hear of this issue. could go back up to the supreme court in another case, and i think this is likely headed to congress as well because there are rules that are -- that need to be addressed such as what is overly burdensome, who is a small seller congress thought about taking this up in the past. more likely to pick it up in the future i think that it's a little bit hyper bollic suggesting all the states try to reach out in some unfair way and as you mentioned at the top of the show, some of this additional tax revenue coming in is going to be used to lower taxes in certain states. >> right, which they reeve for the revenue, right i would do the same thing. this is not going to last that long, first movers have the competitive advantage. i don't know that congress gets its act together to get it done
4:19 pm
before midterms or likely after, but for one blanket, you know, here's the rules for everybody >> yeah. the difficulty is we got 12,000 taxes jurisdiction in the country. how do you align all the authorities, i don't know. congress has to intervene. the fact congress has to save us from the supreme court, i think, it's worrisome for everyone. >> one of the things we heard today -- >> go ahead. >> one of the things we heard today from the decision that was handed down where all nine justices agreed is that this rule is silly. does not make sense in the modern era the notion that some small online seller has a warehouse in one state, and, therefore, subject to tax, and another seller who is larger does not have the warehouse, that does not -- >> one final thing - >> not defining the line >> asking, if they go forward saying, any company with a virtual presence in another state is subject to all regulations. that worries you guys, i
4:20 pm
imagine, right >> oh, absolutely. >> worries me. >> exactly what we set ourselves up for >> yep >> all right, guys, thank you, both reacting to today's supreme court decision at&t wasted no time days after the merging with time warner making moves with eight of the new cable networks and other tv brands that's in today's take jane way. moments away from the first part of the fed's stress test annual or every other year now >> annual. >> yeah. ismplete coverage and analys from the all-star panel including former wells fargo ceo. stay right here.
4:21 pm
4:22 pm
4:23 pm
we begin with kroger jumping 10% after better than expected earnings today put the shares just under $29 or sk so, mike, meaning they are back to where they traded at $30 last year when amazon had a blockbuster announcement of whole foods, kroger fell 25% on that single day. the market totally overreacted, or has kroger been able to make enough changes >> probably both there was a reflex panic that happened the business does not go away quickly. kroger won back the benefit of the doubt they have a decent strategy, and the consumer is helping with the ability to get pricing. they have power over the brands a little bit more now, so it does seem as if things are going
4:24 pm
well, of course, also, the markets up% marke markets up 12% >> to your point, five year highs, but today was significant. at&t fresh off its victory, they launch a service next week part of the unlimited and more phone plans running $80 a month per line right now eventually, get it on a stand alone basis for $15 a month. the channel's obviously including cnn, tnt, and tbs. how big a deal is the new offering for them? >> incrementally a big deal, right? this was the logic of the merger in a sense, was basically, be able to through it in as a proprietary add-on it's not exclusively time warner channels >> right >> it's all the rest of it, but all about putting data over the network, and, basically, keeping customers sticking to the network, and this is one of the ways to do it. >> yes >> it's not a $15 third party, you know, product line that's going to be that attractive.
4:25 pm
>> but now they are bundling it in with other services i agree. speaking of streaming, viacom be produce nick content for netflix. now, the risk, of course, drives the audience to netflix rather than cable channels. if they don't merge, do they need growth strategies >> certainly the risk is lower now because the horse is out of the barn in terms of where people are watching when netflix came around, people thought it was a new syndication, and it just operated that way as well. also, from netflix's point of view, soon going to lose disney content. >> true. >> they want to make it kid-friendly and fresh. >> a win-win, but a risky -- a deal with the devil. >> right you don't want to make your whole business necessarily and abandon your own channels. >> at least for now, and all depends how they tie up anyway netflix year to date up 116% more than doubled. result of part one of the federal reserve annual stress
4:26 pm
tests coming up. news and analysis after the break.
4:27 pm
4:28 pm
4:29 pm
welcome back, eighth straight day of declines, dropping 2 hurgs points today, and meanwhile, the russell and nasdaq closed at record highs yesterday, giving up 1% in the russell's case, and s&p 500 down 17 points today, two-thirds of 1% we get to the panel to talk about the stress test results, mike is here, and tiffany hart, and tom brown is in the house, and dick is with us, former ceo of wells fargo, and stephanie is here as well, tiaa company we like to emphasize so, welcome to everybody tom, quickly, what are your expectations for the -- what's most important to watch? >> i'm not a fan of these particular fed stress tests, but i like stress testing. every bank is going to pass. this particular stress test was probably the worst of all of them >> you mean the hardest? >> hardest, yeah, but just the way they designed the asset prices that are so weak, and then they have the recession
4:30 pm
coming faster than any other year, it's just makes it very difficult. >> jeff, do you think everyone passes with flying colors as well we have had surprises in the past >> it's anticlimatic today, right? you got the stress scenarios, so this is a hard test, but they are starting with higher capital levels, overall economic environment they operate in is better i don't think there's any problems today, and i'm not expecting a lot of problems next week either. >> yeah. dick, it's a two-part thing. you know, what are you looking to learn today >> well, i don't think we'll learn a lot. i think everyone will pass every now and then there's someone who does not pass the quality part of the test, and i think the quantitative part will be past. and -- >> in fact - >> i don't think we'll learn much >> let's get right over to mr. frost. the results are out. he's got the full reports. >> kelly, fed vice chair for
4:31 pm
supervision said, quote, capital levels of the banks under severely adverse scenario are higher than the actual capital levels in large banks to the years leading up to the financial crisis, despite a tough scenario and other factors affecting this year's test the capital levels of the firm after the hypothetical severe global recession this is reading through the quote, again, if we can move a little bit further down, and we'll continue to point to make is that on average, the 35 banks tested ct1 ratios fell from 12.7% to 7.9% under that severely adverse scenario, despite things getting harder this year from last year unemployment rising to 10%, equities falling 65%, housing down 30%, and commercial real estate down 40%. there are some individual results to look at all of the big six looking fairly comfortable goldman sacks the lowest here,
4:32 pm
expected, and in part why they spent their buyback earlier in this quarter the supplement leverage ratios are comfortable for most of the banks. they are all above the required minimums, which is the crucial thing morgan stanley and goldman sachs, questions on the call, they are close to them, but above it we don't get an outright pass or fail this week that comes next week, and overall, saying the banking system seems robust, seems well-capitalized, and 35 banks tested represent 80% of the total capital in the banking system here in the u.s kelly? >> yeah, wilf, stay with us. tom, does this mean banks have too much capital what do you think -- i mean, is there -- look, that was such a severe -- squeezed down 65%. >> a 2008 scenario >> exactly >> we lived the ed through it, t do you think >> i told you for years they have too much capital. the question is how do we get it out of its system now?
4:33 pm
if you're going to limit the payout ratios to 100% of earnings, which i'm afraid - >> sounds reasonable, by the way, sounds, like, well, sure they can't pay more than they make >> raise too much capital, growing internally faster than they need, they ought -- some of the companies ought to pay out more than 100% >> that's the announcements we get next week? >> yeah, i mean, obviously, we get some announcements the question, i don't know the answer, is how much already was anticipated and what magnitude for each banking, what they are able to do and distribute. >> banks are down 20% from january. expectations are not in there, you know, obviously, we knew capital levels were strong, and even though we had a very tough test this year, payouts could be higher because they are more capitalized, overcapitalized, absolutely >> what about goldman being in the bottom end of the range having the 5.6% capital ratio under that scenario? >> exactly as expected i think exactly why they
4:34 pm
extended buybacks for the quarter and why the stock lagged their peers because everybody else buys their stock, and they couldn't if they get 5 billion to do as they think they are able to do, get on the wagon, buy back stock, and that alines with fundamentals of the company getting better as well >> jeff, do you like goldman who in general is now best positioned >> i like goldman here fairly bullish on capital markets activities, and that plays into their strength. the market is too conservative on what the buybacks will be look, with the asset price corrections they built in here, it's not surprising, but what i hear of the numbers so far, there's ample room for the guys to return. >> so what are the expectations, jeff, that you think are too conservative at this point
4:35 pm
>> goldman gave guidance of what they thought their capital returns would be and people commented on expectations that are kind of at the low end of that, mixing below it, in light of the holding off on the dividends and buybacks this quarter, but as i look forward with even reasonable earnings power, they are going to start amassing capital again quickly, so, i mean, i don't see any reason the buyback is not in the middle of that five to six billion dollar range with a dividend on top of that. >> dick, what do you think of this >> well, certainly, we'll get more than we had before. i actually think it's time for the fed to get off approval of capital every year i think we're free enterprise system, there's a lot of capital in the system now, and banks should be allowed to return what they think appropriate with, you know, a reasonable amount of reserves for recessions and so forth. i also think - >> is that the bull market
4:36 pm
talking, dick? >> well, no, no, i think, you know, there is plenty of capital out there, and the purpose of capital is not to -- use it when there's recessions it's not to have it there forever. and be it at very high levels, even during a recession. that's not making any sense. that's just not using capital. secondly, there's two restrictions, restrictions on how much in dividends you should pay and less restrictions on buybacks because they do not lastment again, banks should be allowed to -- there shouldn't be restrictions on dividends unless, again, you don't have the capital to satisfy that. i think it's time to after all these years and all the stress tests and so forth, that we let banks decide what is appropriate
4:37 pm
and you're taking a risk of doing that >> sure, yeah. >> if you're wrong, you may get in trouble that's capitalism. >> yeah, no, i know a lot of people think that is worth it. wilf has color on. >> back to the point of goldman sachs and morgan stanley, particularly questions on the call about the sleverage ratio they came in 3.1% for goldman, morgan stanley at 3.3% quite a lot lower than the other banks. randy is on the call, would not be drawn on any individual names, and, again, said this week there's no strict pass or fail, but brought out the point about the tax bill the tests are applied from the last quarter of last year before the benefits of the tax bill came through again, that encouraged the tone from him even when safe, things improved for the banks since then now, within the c-card tests next week with a pass or fail, minimum requirement is 3%.
4:38 pm
the guys are above that anyway, and he kind of seemed to suggest on the call that things have steadily should have improved since the tests were carried out. definitely questions about morgan stanley and goldman sachs, but it's come in lower than the others, but expected. >> mike, what do you think happens if they did away with the stress test exercise from now on >> the market takes it in stride one purpose it serves is to focus in investor attention on the whole capital return story once a year. maybe it's just an after effect. would take amending or repealing dodd-frank at this point, it's part of the interoperating procedure i'm curious, i guess, exactly -- it seems like stocks are down to a level that people are not expecting great things could mean relief opportunity. tom, why do you think we trade where we are >> because the market has too much capital the -- there's a variation
4:39 pm
between some banks benefitting from higher rates, others don't. i don't see the average bank is not down 20% so far this year, so it -- it has not been that tough a year, and the second half looks bright. >> what do you think happens if we get rid of the tests? >> back to what we had before. capital standards. banks lived to three different capital standards. i'm all in favor of doing that now, if dimon were here, he'd say stress tests are great we do hundreds of stress tests every day. >> yeah. >> i think that's great they do it internally. >> people will always say, yeah, what happens before did not work because the banking system blew up in 2008 >> well, it did not workbecaus we -- the banks did not have liquidity. so there is a liquidity test now. >> much more important >> the strongest capitalized bank of the top ten national citi failed, and it was not because they did not have the capital. it was because they did not have the liquidity.
4:40 pm
>> the difference between the two? >> difference is you fund yourself when you have problems, the other bank across the street said, i'm not lending money to national, they can't open the doors the next day >> so they need more cash? what's the distinction >> large banks have liquid balance sheets, national's loan to deposit ratio was $160, and you won't find banks above 120%. >> i think the reasons banks have not done that well because, a, in the beginning of the year, expectations were high to see returns, and everyone was jazzed up about tax benefit, deregulation benefit, and then net interest margin expanding because rates would rise and yield curve was not flat or flattening i think all the things have not really helped the group since january, and i think you need loan growth. quite frankly, if you see better loan growth, people feel better that these companies grow. maybe roes grow, and they are, but with all the capital, they
4:41 pm
have been so depressed so i think you need some real growth happening in this sector for people to get excited about it it's not just valuations or rates. >> yeah. macro factors, jeff, do you see loan growth coming shouldn't we have to in an economy this strong? >> seeing signs of it picking up again, but commercially, there was strong growth year over year, catching up there, but investors concerned about a flattening curve as long as loan growths show up, concerned about trade wars, so you see the more international capital focused market banks taking that on the chin more than the regional banks. a key point that came up, and as tom mentioned it, banks failing is all about liquidity liquidity coverage ratio goes a long way to remove the next financial crisis, what people should be looking at beyond just what the capital levels are, how the banks are, it's really a wash in liquidity right now. >> yeah, no, excellent point so, finally before you go, what
4:42 pm
are your picks right now for the banks? >> well, you think you'd know i was at bank of america yesterday, right very impressed with the momentum in terms of growth, bank of america has it today, and it's really, expenses are not going up revenues go up 4%, and that creates a lot of operating leverage and good earnings >> guys, thank you all, great discussion just got, as we said, latest annual stress test results with more to come next week time for a news update >> the house killed a hard right immigration bill and gop leaders delayed a plan vote on a compromise until tomorrow. the conservative measures defeat, sets stage for debate on a second bill. a northern california utility expects to pay at least 2.5 billion in connection with deadly wildfires last october. some of them ignited by its fallen power lines they warned its liability could be considerably higher
4:43 pm
pope francis almost took a tumble celebrating mass in switzerland. aides were able to catch him you can see it there it appeared francis did not notice there were two steps to descend. it was the final event a close call first lady boarded a flight to a facility housing migrant children separated from parents made headlines because of her jacket on the back it read "i really don't care, do you," the green hooded jacket had the words written on the back. her spokeswoman says, it's a jacket there was no hidden message. by the way, kelly, she was not wearing that jacket when she arrived in texas that's the cnbc news update this hour >> who knows i'm glad the pope is okay. that was scary geez thank you very much. >> there may be more items to choose from soon as kate rogers is outside a test kitchen in new york city. what are you seeing?
4:44 pm
>> reporter: kelly, cool stuff like this avocado toastado there's more after the break you always pay
4:45 pm
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
4:46 pm
due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance. chipotle could expand its me menu, did i hear something about avocado toast, kate? >> reporter: that's right. we're in new york city at the test kitchen where they are trying out new items like this mexican chocolate shake, that
4:47 pm
toastado i showed you earlier, and a quesadilla in april, they said they were trying out new items this is not a surprise he says they are sticking to the fresh ingredients that chipotle is known for investors, obviously, very excited about this, the stock up nearly 50% since the announcement back in march he was an innovator at taco bell with breakfast and other big marketing campaigns. we caught up with the company's new chief marketing officer, chris brandt he's from taco bell as well. we asked about the untapped potential of beverage, less than 7% of their overall sales. take a listen. >> we just redid ready to drink beverages out there. we are putting those in a test market we have the frozen mexican shake, testing margaritas, a few more things in the hopper, but biggest thing is, let's be
4:48 pm
methodic methodical, quick to not hurry >> reporter: as you mentioned, that's right here. people are wondering, is this going to be just like taco bell? two former executives now at the helm of chipotle this is what he said about that. >> our goal is not to turn this into a fast food type enterprise this brand has unique merits all its own. i've never seen more passion in a brand in my entire career, and that brings a special emotional component that people have i think we'll do seasonal promotions bur promotions, but not characterizing it as limited time offerings that's not where we want to go or need to go. >> reporter: so far, guys, i've only tried this, very good, but remember, this is the test kitchen so that quesadilla, the shakes, only available here. testing in markets they feel represent the national scale and then they decide where to roll them out if you're in new york, try these items out, but you can't get
4:49 pm
them across the country yet. kelly, back to you >> that answers a question, which, can we try them, and the second one, kate, is i think i spied nachos are they doing -- can you get chips? that's what i want know. get it on chips? >> reporter: i happen to know, kelly, you've been wanting nachos i heard this in the office i was going to tell you they introduced them back in may. you can get them here and in 20 markets across the country they look good, but i did not try them yet because i had the live shot. >> do you know if they're in jersey >> reporter: i'll find out and inform you later you got it, i'll find out. >> no chips on top letting you do it as a topping yet, kate, that was the other thing i'm hot on >> reporter: not to my knowledge. strategic in what they test. as you heard chris say, they are not trying to do limited time offerings, no splashy promotions, seasonal things, but they are thoughtful about what they roll out, how they test it. and they want to be set up for
4:50 pm
this >> thank you this is news i can use michael, what is the big hit for the santoli house? >> the trial of the toast, for sure >> will you allow exactly going, you know -- this is something that's been a knee no, ma'am no, ma'am for a while. i was really interested in what kate said as a beverage. i'm glad to here it doesn't mean they're going to go coffee. >> you can't do coffee. maybe ice but i'm not an iced person. i want that chocolate thing. shares of cbs were lower today. they're up 5% since announcing they will deliver prescriptions in conjunction with the post office. we'll hear from the ceo about that next. a top strategist says the tech trade is too crowded and he'll tell us what that means. 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?
4:51 pm
♪ ♪ 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, with td ameritrade. ♪ is it to carry cargo... greatness of an suv? or to carry on a legacy? its show of strength... or its sign of intelligence? in crossing harsh terrain... or breaking new ground? this is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedes-benz summer event, going on now. receive up to a $1,250 summer event bonus on select suvs. mercedes-benz. the best or nothing.
4:52 pm
4:53 pm
welcome back. shares of cvs higher this week after the company said it will expand prescription delivering nationwide. its awaiting regulatory approval of bertha kuhns and just sat down with the company's ceo. bertha all right. i was giving it a second. we'll get back to her in a second. it looks beautiful. >> colorado's not that far away. >> i can try one more time. nope. we'll try again in a minute. we'll get back to ms. coombs out in aspen. we'll carep the big after-hour headlines and movers after this. stay with us.
4:54 pm
directv now gives you more for your thing. get all the good stuff about tv without all the bad stuff. yes! you can still stream your favorite shows... yes! ...with no annual contract. wait, what? it's live tv. yes! with no satellites. what? and no bulky hardware. no bulky hardware! isn't that great news? yes! noooooo! no! noooo. try directv now for $10 a month for 3 months. more for your thing. that's our thing. visit directvnow.com so he grabbed three of his friends and started his own job listing site. zip recruiter now has more than 1,000 employees and is one of
4:55 pm
the top recruiting platforms employers use to find talent. to find out how he did it, watch your business sunday morning at 7:30 on msnbc. mom and dad got a new car. it's not theirs, it's mine. the new rx 350l with three rows for seven passengers. lease the 2018 rx 350l and rx 350l awd for these terms. experience amazing at your lexus dealer. that's confident. but it's not kayak confident. kayak searches hundreds of travel and airline sites
4:56 pm
to find the best flight for me. so i'm more than confident. how's your family? kayak. search one and done. bertha coombs is out of the aspen ideas festival and just sat down with the ceo of cvs, ms. coombs. >> larry is very confident about the progress on the antitrust
4:57 pm
situation with eight in a and cvs and they're merger. i asked him whether he was more encouraged in light of at&t winning its bid to take over time warner last week. he didn't really want to talk about that directly, but again, he says things are going well. >> we're really excited about the transaction. there's a lot of positive activity and momentum and we hit some key milestones back in march when shareholders of both companies approve the transactions with more than 95% approving. we announced the leadership team just last week as you mentioned. it's a great team of cvs and aetna executives pretty excited about that and the regulatory process is progressing. the transactions being reviewed by the department of justice and there's a parallel process at the states with the department of insurance and we're pleased with, you know, how that's all progressing and we expect the transaction to close later this year.
4:58 pm
>> reporter: he really does think it'll close in the second half of the year. they are going on with new initiatives which include the home delivery expanding it nationwide, also getting rid of transfats in their cvs products and moving some of those less healthy snacks to the back of the fruit aisle rather than near the front of the store in response to clients. they are doing a lot of these things because of amazon. i asked larry merelio what he thought of amazon naming a new ceo for that new joint venture with berkshire hathaway and with jpmorgan and again he said he thinks it'll be good for cvs. >> we think that there's a lot of parallels in terms of what we're looking to do with cvs and aetna coming together and what they're aspirations are doing -- what they're planning to do in terms of this announcement.
4:59 pm
we'll look forward to getting together at the appropriate time to compare notes and see how we might work together. >> reporter: it's going to be a while before that new venture gets under way, kelly and i think larry merlo is thinking that they and aetna will get a big head start on the new company. >> that company making quite a splash lately. thank you very much. here's a check on your headlines after-hours. the fed releasing the first round of its stress testing saying all 35 banks tested have sufficient capital. financials up marginally after-hours and shares of red hat plunging. they beat earnings expectations but the second quarter earnings below wall street estimates. mike, the shares are down 12%. >> this got a downgrade two days ago. price for perfection, has some challenges. it was raymond james so pretty
5:00 pm
well timed. the stock's up 70% in the last year. >> you like to be the endless that has the calls before hand -- >> exactly. we may get that tomorrow. >> which everyone else will probably have to do. thank you for tuning in. "fast money" begins right now. "fast money" starts right now. live from the nasdaq marketside overlooking times square. the traders on the desk of dan nathan, guy adami. don't sweat the stress test. the big things in the green after passing with flying colors but the real hurdle for the stock is just around the corner. we'll explain. should shareholders be worried. we've got the details. we start off with summertime sadness on the first official day of the season, the dow locking in its eighth day of losses dropping now 200 points. when it the selling start? when the fed raised rates last week so we'var

20 Views

info Stream Only

Uploaded by TV Archive on