tv Power Lunch CNBC July 23, 2018 1:00pm-3:00pm EDT
kbloe thaimgs for being here thank you for watching "power lurcnch" starts right no. >> i'm michelle caruso cabrera the president warns iran not to threaten the u.s., or there will be consequences. is this just trumpian saber-rattling, or should the markets be worried the fast and furious five. the fang stocks. there their. they've been a big driving force in the markets this year if you are looking to get in now, what name is your best bet? we are going to rank them. and the meat glut. yes, there is one. tariffs are in demand for u.s. meat around the globe while that may be great if you are on the atkins diet, it's not so great for the markets and farmers. "power lunch" starts right now
>> welcome to "power lunch." stocks higher with the nasdaq today leading the gains ahead of what will be a very big week for earnings particularly. the fang names financials and technology are your leaders today utilities and consumer staples are lagging. take a check on yields that are on the rise following a big move in japanese rates overnight. there was a reuters report saying that the bank of japan could scale back its stimulus, and that caused a spike in the yen and a spike in japanese yields a ten-year yield, meantime, hitting a high of 2.9%, and that moving yield pushing footballed higher the xlf is on pace for its fifth positive day in sixth. earnings movers today. hasbro hired a surprise beat, and halliburton syncing despite meeting estimates. tyler. >> thank you very much i'm tyler matheson here's what he else is happening this hour. pinterest nearing $1 billion in ad salgz, and as the company
prepares to ipo, and it has valuation right now of $13 billion to $15 billion mondelez recalling more than a dozen types of its ritz cracker products the recall is because of salmonella concerns, and lockheed martin has hired more than 1,800 new employees in support of its f-35 program. also announced, it aims to create an additional 400 jobs at its texas facility michelle >> thank you, tyler. we begin with the president and what's been a very active monday on twitter so far for him. trade amazon, iran, all part of his tweet storm. kayla is following it all from the white house. kayla. >> michelle, it is certainly the escalation between the u.s. and iran that has the biggest geopolitical and market implicatio implications president trump late last night tweeting directly at iran's president that threatening the u.s. would result in consequences the likes of which few throughout history has ever seen before. that late night tweet coming after the president reportedly told diplomats on the grouped in iran that the u.s. shouldn't
provoke its government in just two weeks the u.s. will be resanctioning iran's economy, limiting debt issuance, activity, and the real and exports like metals, carpets, and autos, those go back in place on august 6th after the u.s. in mid-may decided leave the iran nuclear deal. as denuclearization with north korea, president trump says he is very happy despite the washington post reporting that he is frustrated privately with the lack of progress since his mid-june summit there. he tweeted about that too. he is now taking aim at amazon of course, amazon's jeff bezos is the owner of the washington post that published that report, and he says the negative coverage is rooted in anger over the supreme court's internet ruling saying next up is the u.s. post office, which trump called amazon's delivery boy it is true that it could be, in fact, the next target. the u.s. post office in this fight. in april president trump published an executive order that essentially assigned the
treasury department a mid-august deadline to study the business model of the u.s. pois office, so we could get that in a matter of weeks that executive order did not mention amazon by name, but it might as well have because the president was airing frustration with amazon at the time of that eo as well finally, we're getting some headlines at this hour about a deregulatory push by the administration we've learned that the white house plans to challenge california's authority to regulate greenhouse gas emissions. white house officials tell me that while that proposal could come this week, it is expected to be a pro tracted litigation battle that will play out in court, but we'll see california and the white house go head-to-head on emission standards a little later on this week guys, back to you. >> all right, kayla on what is a very busy day out of the white house. thanks so much >> in the meantime, the markets seem to be shaking off the president's all caps tweet on iran if if you're not familiar with what we're talking about, when you tweet in all capital letters, it's the equivalent of
shouting the question is should investors be more worried than they are right now about the escalating tension between president trump and iran's president with us is president and ceo of the atlanta council, and the former supreme allied commander at nighto, currently the deech e dean of the fletcher school at tuft university. let me start with you. we'll show everybody a map of the strait of -- where a huge percentage of oil travels every day. the most immediate market concern, whenever something happens with iran, we ask are they going to shut the strait of hormuz, which 18.5 million barrels of crude per day move through that shipping lane between iran and oman just last year what do you think? >> well, i have been through that strait many, many times, and everything from destroyers to aircraft carriers i have escorted tankers through it it's only about 30 miles wide, which i guess sounds like a lot, but it's twool a very narrow choke point. as you say, i think the number is about 35% of all seaborn oil
passes through that strait it is critical we've seen this movie before the iranians have threatened to close the strait on numerous occasions in the 1980s and 1990s. they made some moves towards doing that that created a u.s. combat response called preying mantis in the late 1980s, and the iranians could close that strait for a period. probably days. maybe a few weeks. the real dark end of the speck truck would be if they dumped thousands of mines into the water. it takes a long time to clear mines. this is very turbulent and very critical, and we ought to be concerned about president, if you will, screaming at the iranians it marks a sharp turn against iran its national security advisor is tough on iran. his secretary of defense, jim mat is, tough on iran. i would pay attention to this as a potential crisis moving towards us not here yet, but could come
you have to watch the economics along side the security issues on the economics, november 4th is the date at which the iranian oil boycott is supposed to take place under u.s. sanctions they want it to go down to zero. that would be 2.3 million barrels out of the market every day. secretary pompeo pointed on sunday talking to an iranian american group in california, is regime change through their own people now, that's a big bet, and i don't think that comes any time soon, but the pressures have
grown on the ayatollah and the pressures have grown on the government in general because of the bad economy. >> it's interesting to see the reaction in the oil market you know, premarket when everybody is digesting this, we had brent down by 1.5% we have brent down now sort of just shrugging this all off. i ask if granting waivers to you are allies for these sanctions, if that's even in the books or in the price, and he said no it doesn't seem like the markets are treating this with any concern at all, right? is that wrong? is that -- >> i -- it befulgdss me what is going to make markets worried these days you are looking at talk of trade wars you're looking at geopolitical uncertainties of the sort that we haven't seen in a long, long time, and i think people keep thinking president trump goes in for -- with these as extreme negotiating positions. the other comparison you could look at is fire and fury last august on north korea.
again, secretary pompeo suggests this could be the case this isn't a president who has shown he likes to make war this is a president who has shown he likes to do deals, and so that's what he did with north korea at a time when all of us thought, well, he is actually racheting up the tensions. it could also go in that direction, and i think that's what the markets -- >> to enforce sanctions against iran, it would seem that we would need a lot of international cooperation. principally machining our allies how do you characterize our relationships right now with our allies particularly in light of the nato summit last week? >> yeah, they would -- i'll use a technical term here. we've cratered those relationships, and i am getting constant phone calls i'm sure my very good friend, fred kemp is as well, from our contacts in europe i was with two european heads of state in the last several days, in fact. they are befulgdsed.
they are hurt. that creeking sound you hear is the trans-atlantic bridge. i do want to pick up on one other point fred made about north korea. the big difference here is geography. this really is the revenge of geography. korea is a peninsula, where there's not much of significance no choke holds with those straits iran has a big card to play they would be playing with fire to use it, but the potential for them to play that geographic card is there, and lastly, i'll say that our allies are not in any state to come rushing in to another war in the middle east particularly after the events in the nato summit and the g-7. >> do you see is war possible, probable is it a ridiculous question to ask? >> it's not a ridiculous question to ask, and the uber concern is that somehow this
will drag the sunni states -- saudi arabia, the gulf states -- who sit right across the arabian gulf and persian gulf into a conflict that gets into a broad regional war. is that a high percentage? not at all is it a probability? no i would say the possibility is in the 10 % range, but the tension that went into the system today makes me at least pay more attention to this than i have been as opposed to north korea? >> you worried about war zbloog i would add only one thing to what i have, and that is iran facing off against israel and syria i think think you could have a situation that could get hot if the israelis are not satisfied that the russians and the syrians are not looking further back from the border, but i agree that the notion of it
happening in iran in saudi arabia is there. it was out of the question a while ago. it's back on the radar screen again, but i would also say it wouldn't be much more than 10% right now. that's still a one out of ten chance of that sort of horrible thing happening, and we shouldn't even be there. >> probably -- general, thank you so much. thank you. coming up, cattle ranchers across the country bracing to lose money how the trade wars impact the very industry the president vowed to protect plus, papa john's trying to block the company's founder from gaining control. what it means going forward? first, it is the busiest earnings week of the season. will it push the markets to new highs? be back with that coming up next the smoother the skin, the more comfortable you are in it.
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>> the volume sent that bad. bulls and bears about equal, but i think that's good news with the markets hitting a new high you don't want too much euphoria let's take a look at what's moving here. banks are having a great day because the yield curve has been steepening today you have nice moves. look at these 2% moves in big money center banks the regional banks, sun trust and fifth third are doing
better all these have been so upward ascent since a slightly rocky start a couple of weeks ago. retail stocks, great the last several weeks. they are regularly on the new high list now. tiffany, ross, costco, o'reilly, tjx, all new 52-week highs that's happening fairly routinely in the last week or so we also had some very good earnings reports from the transportation sector. for example, last week's csx, great report had a nice pop up again today. united, same thing nice report last week. nice pop norfolk southern, they'll be reporting on wednesday a little bit of rockiness in approximate the semi-conduct ors. micron was down notably in the morning. it's come off of its lows, and still down nxp, and we're waiting about the qualcomm deed. that deadline is wednesday that will be a big price of news, and then we have applied materials, generally we're in a bullish trend. that's where my position is. we've got nice earnings.
we've got favorable momentum we're at 2, 800 on the s&p sentiment is neutral, and i think that's a positive for the markets, and the valuations, 2019 estimates 16.5 times forward earnings. that's not overpriced. a lot of people complain about no clarity on trade, but it's not killing the market the dollar has been strong some people were complaining about the narrow leadership, but as i pointed out before, guys, transportations, small caps, mid-caps, all doing quite well back to you. >> all right, robert thank you very much. that's a lovely photo of a bear up there in the corner bob just mentioned, busiest week for earnings much the season 165. s&p 500 companies and 11 dow components will report quarterlies this week. so far 82% of companies reporting have come in above estimates. 7% have hit them on the nose, and 11% have come up short will this positive trend continue, or will a trade war worry derail the recent rally? laurie is head of u.s. equity strategy at rbc capital markets.
kevin is president and cio of enion walsh asset management both of them here with us. good to have you laurie, let me begin with you wher where. we are less bullish on stocks. how do you make that assessment? why do you feel that way, and what the hell are you doing about it >> so we -- in terms of what we're doing about it, we think more defensive and more dpesic >> means what? >> we just upgraded health care recently he also upgraded reets to neutral, and back in april we took utilities up to market weight we've been slowly creeping more towards the defense i and dpesic side >> it's not flowing out of the market it's just repositioning within the market >> we're also looking for valuation opportunities, frankly. one thing i don't like about the industrials, we just took it down to a neutral from overweight it's just not cheap yet, and, you know, we've certainly seen a lot of reaction to the trade fears, but if you look at price to cash flow multiples, it's -- >> i didn't hear why is it trade fears or simply valuation? what is it >> in terms of the industrials
>> if terms of your repositioning of your view >> we have six drivers of the equity market that we track, and right now only one of those is positive we had four that were positive to start the year. we have lost money flows we just heard about that and the footballs reporting season how money flows on the e st f side have suddenly dried up that removes support valuations are reasonable, but they're not cheap. valuations are not a reason to buy stocks here in another realm, and i would argue that they're more neutral than positive right now based on my read of what we have heard so far from companies, the dollar is going to be a pressure point in the second half >> you heard what laurie just said kevin, discuss >> i'm more optimistic right now. the visual we've been using with clients is right now the markets are pressing as hard as they can on the gas pedal with the second consecutive quarter of stropg earnings as a tail wind. yet, the threat of a prolonged trade war is serving as an emergency brake. once we see positive momentum with respect to trade negotiations, we think that emergency brake is lifted and there's more upside.
certain areas we like more than others regional banks, biotech, fin tech we do think this is a case for a bullish market >> we're seeing a string of pretty good performances by the financials thanks to the steepening yield curve, which sort of got a yank because of president trump just wondering if you think that steepening yield curve is sort of a flash in the pan or if this is the start of the real steeperning that everybody thought would happen beginning of the year. >> i think we have to remember that the fed has two -- one, they could raise short-term interest rates which afs the short end of the curve two, they could sell bonds off their -- to the long end much the curve. they know the impact 6 inverted yield curve, and i think they're going so manage that effect. >> you look regionals. is that because of consolidation? thinking of consolidation? >> i think regionals, if they have good long balance sheet, says if they have a history of earnings growth, they should perform well in a rising rate environment, and i think we're going to be in a prolonged extended rising rate environment. >> what do you think of financials
one of the most debated sector of the market because everybody thought the yield curve was going to steepen dramatically, and they kept waiting, and the stocks didn't do anything. >> i'm a glutton for punishment. i've been overweight on the year, and i've stuck with it we like the valuation story. we like the rising rates story we've had very, very strong results so far actually, better results from the big caps than smaller caps at this point. you know, i think etf flows have been a little bit of a wild card for this sector. very strong to start the year. we saw those investors really just run for the hills at the end of the second quarter. it hasn't been easy. i'm actually cautious on technology, and i think that once we really start to see a rotation out of that sector, financials probably health care as well are going to be some of the big beneficiaries. >> all right, laurie, kevin, thank you very much. snienchts still ahead, papa john's taking a drastic step to prevent the founder from gaining control. what they are doing to keep him at a distance and what it means for papa john's going forward. power lunch is back is two what did you have in mind? i don't know. $4.95 per trade?
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he plain tabz a board seat, though, and has ordered remove schneider, who is papa john, of course, from its advertising materials. he is not commenting on this latest development, but i did speak with his attorney who maintains that her client is not stepping away from the company without a fight. we should also mention new 52-week low. it got a downgrade at stieffel saying it needs a strategic savior >> if he is papa john and he is being effectively excused from the company, can they continue to call themselves papa john in the long run >> so we haven't heard anything about a name change, but, of course, he is in the advertising. he is on the pizza boxes he had been in the commercials
they are continuing to distance themselves from the company. reason it's a p.r. crisis for sure >> the underlying as etsds are worth something, but you don't want to get in there -- >> until it's cleared out. >> the ownership fight >> has stopped since he hired patricia glazier >> too much talking. >> we don't mind it. it's news for us, but certainly. >> thanks, kate. >> thank you >> coming up, good news for carnivores it's good news for consumers, but it's hurting the very people the president vowed to protected. we will speak to a cattle industry insider that's next. it really- it rocked our world. i had no idea the amount of damage
that water could do. we called usaa. and they greeted me as they always do. sergeant baker, how are you? they were on it. it was unbelievable. having insurance is something everyone needs, but having usaa- now that's a privilege. we're the baker's and we're usaa members for life. usaa. get your insurance quote today.
and i am a senior public safety my namspecialist for pg&e. my job is to help educate our first responders on how to deal with natural gas and electric emergencies. everyday when we go to work we want everyone to work safely and come home safely. i live right here in auburn, i absolutely love this community. once i moved here i didn't want to live anywhere else. i love that people in this community are willing to come together to make a difference for other people's lives. together, we're building a better california. >> i'm sue herrera here's your cnbc news update paul maniafort's legal team arriving in court in virginia.
alexandria, virginia they are asking a federal judge to delay one of two critical trials the judge saying he will make a ruling on whether to delay that trial later today. the duck boat that sank in branson, missouri, last week killing 17 people on board was lifted out of the water this morning. an investigation into the cause of the accident is underway, but it could take months or longer to complete. toronto's security counccitl holding a moment of silence for a mass shooting where a man fired a handgun into crowded restaurants last night two people, plus the gunman, were killed. 12 others were injured chik-fil-a will offer meal kits in atlanta next month. they're aimed at providing all the fresh ingredients needed to prepare a meal at home skme customers can choose from five recipes. each meal costs $15.89le, and it serves two people. that is the news update this hour michelle, i'll send it back to you. >> well, everybody is getting in
on the meal plans. >> a lot of people wondering whether that signals a top >> we will see good question. thank you, sue let's take a look at the marks the nasdaq is higher by almost ten points leading the gains and trying to avoid a fourth straight loss. the s&p is higher by 3.5 pointsds the industrials move back off of its lows and off it is its highs. lower by more than six points. as for the dow, the leaders in the dow, a lot of financials because of what's happening with interest rates today jp morgan at the very top. microsoft, american express, and goldman sachs. jp morgan moving 2.5%. lagging, 3m, coke, ibm, and travellers melissa. >> well, michelle, more than twn pounds of meat are sitting as exports slow due to the latest round of trade disputes this could he tletden process for meat processors. joining us on the cnbc news line, the research analyst at pivotal research group tim, great to have you with us >> thanks, melissa >> when was the last time we saw
such a glut in meat, and what happened to margins in the processors >> well, it's been years maybe 2009-2010 since we've had anything like this, and, you know, there's an old adage in the meat beusiness. you sell it or smell it. this is an industry that can't really inventory product very well small changes in export market can have a profound effect >> that's very memorable, tim. sell it or smell it. is there -- is there an advantage, though, to the companies that don't necessarily sell fresh meat, but process it in some form and maybe freeze it
if you have a process of meat company that -- that could be a positive for margins we follow post, for instance, which owns bob evans farms, and as pork prices are soft, that will probably help their margins. >> we see tyson foods or mel, post holdings. they are all off roughly 1%, if not a little more because of what's going on here is this an opportunity is this justified? what would you do with any of these stocks we think, you know, this is a company that is clearly past its peak in margins. if the export situation didn't
do it, the cyclical factors of increased production will. we're certainly not a buyer of tyson. i am a buyer of post, and it would be wrong to think of post as a meat company, although they certainly do have some meat exposure their primary exposure would be to the egg business where they're on grain-based contra s contracts. you'll see eggs used in quick service restaurant menus, you know, because of lower prices on eggs >> that's different from what we were hearing from -- how are they different in terms of the eggs and what they said this morning on earnings? very different post sales, its products, which are primarily sold to the quick service restaurant industry on grain based contracts so they're really working with a spread business whereas taking a
business and earn a profit on the eggs they're someone -- post is indifferent to the price of eggs in many respects because they're just going to drain that margin. >> pivotal the meat glut also raises big questions for america's cattlemen who need three years before they can take their lives to retail. let's bring in kent, director of international trade for the national cattleman's beef association. where does it go once it's exported >> about 15% of what we export are what we produce is for the export market. the rest is consumed here in the u.s. a lot of what we sell something
in the asian market. three of our top five markets are in asia. japan and korea are number one and number two >> short ribs. >> we got three votes for short ribs here, kent. >> we'll pick up the slack >> we'll pick up the slack on that let's talk specifically about china. i gather we have historically exported an extremely small dollar volume of our beef to china in part because they had agricultural rules on imports that we did not typically comply with >> well, you know, we just came off of the 13 year ban on our exports to china, and that was directly related to bse. a lot of the restrictions that china continues to place on our products are not based on
science. i think it's important to point out that, you know, previous administrations tried to open that market and made a lot of inroads, but it was president trump that ultimately opened that market. that is essentially closed us out. that wasn't a huge market to begin with, but that's not the kind of signals we we want to see. >> what did president trump do to open that market up what were the hormones being used what was it? >> it was when he hosted president xi to mar-a-lago this was the number one item that came out was reopening that market now, part of the terms were china kept it's restriction on orm owns those are two very safe technology that is are widely used in our industry and make us very profitable and also make us very efficient, but, unfortunately, china does not allow those products you know, china has a long history of finding on a whole
host of issues, but, unfortunately, and the short run that means that we're going to be a target for retaliation. >> i think the glut has to do with the fact that, you know, a lot of what -- where we send our products there's also a lot of u.s. pork that goes to those markets foreign demand has been so strong for the last few years that ever since we started to ror from the drought in 2012, 2013 we've seen an expansion in our cow herd and our pork production and poultry production, and we got to move that product
>> it takes three years for our cow to come to market, so we were basing our production off the market signals at the time we have a lot of product that's going to come on-line. there's a lot of demand for it trade policies are kind of getting in the way right now we may not have that same access for the next few years >> how long does this current situation have to exist before farme farmers. >> you know, i think we're starting to see some expansion it's starting to slow down now we're still going to have to export this product. unfortunately, until, you know, ranchers start to feel it in the pocket books, they're going to continue to really support this aggressive trade policy. did he end of the day we do need
improved access. we need all of these nonscience based restrictions and some of the blatant disregard for the wto. we need those practices to stop whether it's in china or other asian countries or the european union who has been notorious for this same thing. >> i think you've suggested this answer to the question, but i'm going to ask it explicitly do i hear, in other words, you are very supportive of what the president is doing even though it may hurt meat prices because you think in the long run it's going to be better for meat producers? >> we support the administration enforcing trade. that's something that we have asked for a long time. i think that we've differed on how some of this has been carried out. we would much prefer the use of trade agreements like the transpacific partnership we've seen a lot of benefits from having rules-based, science-based trade from those free trade agreements. we also believe in using the wto. we want to strengthen, you know, those efforts. i think that the use of tariffs
to try toably leverage, i think, we need to look at other options, to be quite frank with you, and i think that at the end of the day, you know, producers if we don't see something turn around, this could have negative repercussions for us >> quick question, how much does a rancher sell a head of beef cattle for today >> so if you look at -- you look at an average cost, you are looking at anywhere between, you know, $1,700 to $2,000 for a finished carcass about $300 of that value is atripped solely to exports that's an important profit margin we want to keep that going again, japan, korea, mexico. canada hong kong. all great markets for us china has the potential to be upwards of a $4 billion market for us if we were able to remove some of the restrictions. we've been vigorously going after china and trying to get the restricks lifted honestly we need that long-term
stability. if we want future generations to continue to engage in agriculture. >> kent baucus, thank you very much appreciate it. >> thank you >> are you seeing what's happening in the bond market it is the big story today? ten-year yield rise. rick santelli tracking the action you have the details some having to do with japan amazing moves today. >> yeah. i'll tell you what, michelle, everywhere you look there's important treasury news. we were all very nervous about a flaterning curve and how to interpret it it still may flatten and invert. look at one week of twos two-year rates were up several basis points, but clearly on this chart they zoomed up to kind of the top of the existing range. now if you look at the long-run, like one week of tens, you could clearly see how it jumped out. 23 is not meant to be, and not only let's look at what's going on with the dollar-yen a lot of talk that the last day of the month and the first day
of next month, the policy in the bank of japan may have some surprises. not that they want to remove stimulus, but there is more and more pressure that they need to remove stimulus. one week of dollar-yen, it doesn't look that threatening. yes, the dollar broke down a bit. when you look at year-to-date, it jumps out at you. we pask basically crawl back up to where we close the dollar against the yen at the end of last year and maybe some of the president's comments, maybe bank of japan comments, but nonetheless, we are now below 112. tyler, back to you >> thank you very much still ahead, an auto legend steps down what's sergio's departure mean at nt.at, chrysler, and ferrari. th'sex [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.
with tough food, your dentures may slip and fall. new fixodent ultra-max hold gives you the strongest hold ever to lock your dentures. so now you can eat tough food without worry. fixodent and forget it. welcome back big changes on one of the world's largest automakers sergio marchionne stepping down as ceo of chrysler and fiat.
phil, his departure is really an end of an era. >> it is think about this he put together fiat and chrysler doing that in 2009 when chrysler was in the supervised bankruptcy his departure, while it's sudden, it's not totally unexpected he was planning to retire in the next year, but because of his declining health, we should point out rapidly declining health, the board made the decision that he will be replaced as ceo. he is not returning to fiat chrysler this is not a temporary move this is permanent. the new ceo, mike manly. he is best known for running the jeep and the ram divisions within fiat chrysler well known on wall street. well known within the auto industry, and look at the growth of jeep under manly. since 2009 sales have skyrocketed. worldwide they're up almost 300% more than 3 opinion% to just under 1.4 million vehicles last year he faces three key challenges as ceo, fiat chrysler implementing a five-year growth plan that he helped put together
along with sergio marchionne, and then the question of whether or not there is potential sales or merger or a partial sale of fiat chrysler. those are questions that he will face maybe want immediately, but certainly over the next couple of years as he runs this company. remember, they report earnings on wednesday, and that will likely be the first time we hear from mike manly about his new job running fiat chrysler. >> all right, phil stick around we may have some questions for you, but, first to robert frank with what marchionne's departure means with ferrari >> we forget he was actively running as ceo and chairman. both of these companies. the question for ferrari now is can a former cigarette chief now run the most storied name in autos and racing now, ferrari stock down 4% after the company named lewis calamari, the former chief of philip morris as the new ceo here are the challenges that he has. first of all, he is not a car guy. now, cavalleri loves cars.
he also attends a lot of races he has a large personal collection of ferraris, but marcel, the history i can't be, told me ferrari is all about emotion, style, success, and drama. buyers want a true and passionate car guy at the top. the second problem is maintaining that storied brand it's about the only car that does that's because they're so clus and sought after that could come under pressure as the company expands production, and they're going to launch an suv and they're going into electric and hybrid engines cavalleri is an expert at transitions. he moved philip morris into e cigarettes the third issue is management. he was the architect of ferrari's ipo, and its huge current commercial success the worry is that those are very big shoes to fill. friends and former colleagues of cavalleri say he is a dogged workers and a master at running large global organizations
if anything, he could improve the company's governments and structure. at face value, he seems like an unlikely candidate, but you dig a little deeper, and he might be the perfect replacement. >> phil, what will marchionne's legacy be, number one? number two, what happened? >> why -- his rapid decline? health he had shoulder surgery earlier this month, and we had heard rumblings that he wasn't doing very well in the middle of last week, and it was clear that something was escalating as the week went on what caused this what specific issue is he facing right now? we don't know, and we're not going to report on some of the speculation that's out there on twitter and on some of the european press web sites, but he is not going to be returning to this company this was a decision the board made on saturday.
he saw they should get away from building cars in the u.s. long before other auto executives ex came to the seam realization so he was a visionary in terms of what needs to be done but the one thing guys that he always advocated that has not happened, more consolidation including fiat chrysler getting together with general motors and others and he still believes that should happen in the auto industry and but it hasn't happened as he. >> he has also a style legacy. i am going to miss him he said whatever he wanted to say. and he he didn't give a damn excuse my french when all the other ceoss come on on talking points and they have been media trained until the point of boredom. he was never that way. >> remember when he said. >> the best part go ahead,
robert. >> when he sat with the president for the first formally meeting everyone was in suits and there was sergio with the black sweater. he defied convention he defied conventional wisdom whether at ferrari where they could you can never commercialize this you'll ryan or a non-car guy taking over the companies in the first place he was a true pioneer in alm these companies. >> phil, robert, thank you very much. >> thank you. >> coming up, who reigns sprert spreet supreme among the fgsan who they say the fangs is the best bet that's next.
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it's the only network that combines america's largest, most reliable 4g lte with the most wi-fi hotspots. and it can be included with your internet. which could save you hundreds of dollars a year. plus, get $150 dollars when you bring in your own phone. its a new kind of network designed to save you money. click, call or visit a store today. for many investors the fang stocks are the cream of the crop all four plus apple are up to the year and make up more than half of the market's gains you can see them there look at amazon up 53%. are all created equal or some better buys than other piper jaffrey out with a new note ranking which are more likely to out perform the rest fortunate year an analyst at piper jaffrey, michael good to have you here. >> thank you. >> you got them all rated above. but let's start with the least favorite pick of the five. google in alphabet the g in fang why is to it least favorite.
>> google is undisputed leader in search. we expect that to not change any time soon. but we don't see any specific catalyst for google. they got the benefit of the off line to online add win working and we think margins will be down year over year. >> when you rank them stepping back and looking it at your criteria and we say there is a certain percentage upside is that a percentage of upside from today to last close to the price target or when you initiated with the price target in terms of the full upside? how should we understand this. >> yeah, so when we define the ranking it's really from now we published this note on friday thp from now until the end of 2018 so through the remainder of 2018 the fang rank essentially. >> so we don't have a lot of time number four is facebook. number three is apple. and number two and number one let's talk process them. because i thinker they are the
most controversial netflix is your number two best pick amazon being number one. why netflix for two and why amazon for number one. >> yeah, so netflix, you know we just believe that this is going to be a buy on pull back situation after the quarter last week we really do think that the world cup had an impact. we also think the weaker content slate had an impact in the second quarter q 3 has a better content slate and just in general when you look longer term international has a huge growth opportunity with about 15% of households internet households that is that have netflix internationally versus 60% in the u.s. hughes international tune as well as pricing growth opportunities. >> and amaze isn't the number one pick why >> yeah, amazon just keeps adding huge addressable markets. they've added essentially $1 trillion of new addressable market with pharma and grocery we think there is more to come in other markets as well some they are in like gaming and when we just look at the penetration, you know, retail
sales only 12% of the market for u.s. retail sales online that leaves a ton of upside. >> thank you so much mike at piper jaffrey. redshirt if. >> coming up the president's war of words with iran what it could mean for oil prices. and he didn't win the claret but he delivered on ratings a look rnstiger's big impact at caouiethe second hour of power in two minutes
i'm melissa lee here is what's on the men ewe. president trump taking aim at iran with an all caps message on twitter. the war of twitter words will the battle amp up. >> home sales hammered down for the third month. not enough houses for sale, the prices down. we debate where prices and sales go from here the tesla tumble shares getting hit on reports the money wants money back from suppliers back por bjork work in 201637 is it stalling second hour of power lunch starts right now werjts welcome to power lunch. eye i'm michelle carissa kresh cabrera. stocks hovering near the flat line with the nasdaq leading by
15.5 points. the dow briefly dipped below 25,000 holding above that 25056 with a decline of one point big mofz in the treasure market. the highest level since june the 2-year is up 6 basis points near a session high as well. some stocks on the move good year tire. and retail stocks at all time highs ross stores tiffany tjx and o'reilly auto. tesla, you heard mels aire falling on reports that its asset suppliers for refund more on that straight ahead that stock off more than 11 points a decline 3.5%. >> tyler. >> i'm tyler mathisson here is what's happening at this hour. welcome to the second hour sonos setting the. the maker of high end speak erps plans to offer 14 million shares priced at $17 to $19 apiece.
omega says it's it will convert the fund into a family office. a familiar friend of cnbc doesn't want to spend the rest of his life chasing the s&p 500. and the equalizer ii beating out the latest installment of mama mia. in box office. analysts anticipated that mama mia would take the spot. >> we begin in washington. president trump has a lot on the plate today. levying new threats against iran hosting a made in america showcase at the white house as well process eamon javers joins us from washington with more eem zbloon just before midnight last night when we saw the fiery warning from president trump on twitter. here is the tweet the president put out in response to a speech by hassan rouhani the president of iran citing the u.s. clamping down on iranian oil saying we are no longer a country standing for departmented words of violence and deaths. be cautious today, the national
security adviser john bolton put out a statement on iran saying i spoke to the president over the last several days and president trump told me that if iran does anything at all to the negative they will pay a price like few countries have ever paid before. so we are waiting to find out what anything at all to the negative means white house press secretary sarah sand certifies scheduled to begin the press briefing in a couple of minutes. if not right now we should get more clarity from the white house on exactly where the line is here and where we go from here. meanwhile, the president is getting started -- getting set to start that event that you mentioned, a made in america event with a number of companies over at the white house. that will begin at 3:00 p.m. eastern time michelle >> thank you very much eamon javers capitol hill. >> as trade war words intensify. jaimie diamond issued a warning about further escalation of the trade war with cnn saying if you do another $200 billion in the
national security thing about ar cars you are getting close to reversing bifurcates you have seen in the economy. diamond went on to say i would remine the folks that the president's team said there would be no retaliation. they've been wrong president trump is picking trade fights with allies including canada, mexico and the eu with a new president ptd in mexico and upcoming visit from the european commission visit, there a deal on the horizon joining us it guy herb, the former white house representative on the u.s. interagency trade policy committee. guy welcome to the show. >> thank you. >> there is also a recent report in the past couple of hours on bloomberg citing source that is mexico would like to reach an agreement, a nafta fwreemt by the end of august. is that even possible with the president-elect not yet sworn into office? >> well, the president-elect will be sending his people to the negotiations and the president -- the current president is in charge until december so certainly it would be possible but for that to happen you would
have to see big movement by the u.s. on issues that have been basically stuck -- they've been stuck on for for months now, the sunset clause, the dispute settlement and automotive rules of origin. all those things have to show significant progress before you'd get to an agreement by the end of the month. >> the way you phrase that, guy was interesting that it's the u.s. having to make progress on the issues are we our own biggest economy when it comes to progressing with the negotiations? >> well, one of the problems has been that there's been very little change in the u.s. position on those three issues since the negotiations began a year aig and so we are waiting to see what they come up. the other side indicate some flexibility that you might be able to get some movement on auto parts, for example. but so far we haven't seen anything significant. >> there is speculation the u.s. does a deal with mexico and forces canada to take it where oolts of the belief is canada has been one of the most difficult partners in the
negotiations, not just the united states. >> well, true, canada does have a very protective regime on dairy. and this recent threats toward trying to revive a bilateral negotiations may be intended to bring canada to the table with dairy concessions. >> what do you think is happening on autos particularly european autos? >> well, that's a separate issue. >> yes. >> we do know that bmw has a huge operation here in the states and anything that would affect that would diminish exports from that productive operation there. european autos have access now to the mexican market because they have a free trade agreement with mexico. and if we put tariffs on european imports it would run the likelihood of disrupting the supply chains that now exist all the competitive relationships in autos depend on multicountry sourcing of products and i can see real troubles
ahead automotive manufacturing if trade barriers affect the supply chains. >> guy, we had larry kudlow on at alpha last we can he said the contentious g 7 meeting remember walked out in a huff but he had behind closed doors said, okay let's get rid of all barriers you guys get rid of all the subsidies. and none of them would have it, right? i mean the u.s. continue use youly painted as the bad guy but when you look at europe in canada with you, you mentioned dairy when it comes to agricultural they still want to protect their farmers in a way that's politically untenable for them to back away. >> very differ for them to back down but it has become an issue dairy with canada in particular. our negotiations with europe with agricultural have been going on many years. and they do have high barriers we have support programs for
agriculture they would like to talk about everybody would have to make sniff condition eggs ises bes canadians, mexican cans and united states to get anything. the u.s. and europe are not northbounding but retaliating with retaliation for tariffs. >> guy, herb, thank you. >> the dow as last record high was on january 26th. since then no amount of good news has been enough to send it soaring. but no amount of bad news has sunk stocks for a long time what does the pause mean for the money? michael is here with ip sight. >> tyler, yes, thursday will be half a year since the all-time dow in the s&p 500 you paint a picture of perfectly offsetting good and bad news supported by excellent corporate fundamentals a kpk growth and zpresed by talk of potential disruptions and the slowdown overseas and the fed continuing
hike rates for context we are down 2.5% from the all-time high and i do think it makes sense to look at the market outside of the fact that we went up 7% in the first four weeks of the year so right now the s&p is up year to date 4.8% on track for a 10% annual return this year including dividing with, the pe multiple of the overall market has come down to about the 5-year average you'd say not a baddier. the problem is most corrections in bull markets usually are fully recovered well before six months it's not unprecedented to go six months but it's caused people to say what's wrong under the surface if some of the good news can't get us there the way the weight of the evidence leans is that it's still a bull market. still likely to see further high prices although maybe not for a while. every rally has gotten tired and been labored i wish i could say we are out of the trading range muck for a while. the market seems comfortable at this level
but this is not much more than a multikmont consolidation off of of the last year gains. >> is there any historically that the longer it goes on the more violent is the move up or down once you've gotten through the consolidation period. >> it's interesting, if you like back 2015 into 2016 that was a long and much more painful downturn it wasn't just a simple correction you had the huge break out in february after the breck it. a high velocity move to the upside that's one example of when you did come off that low and in a very dramatic way. on the other hand a lot of people are looking back to 1994, 1995 where you have a similar kind of bullish resolution to all these things unfortunately, a lot of people are looking at this action and saying, bell weather groups are flagging financials and industrials lagging. maybe it looks like a top. that's what makes this debate interesting is that we can't just assume that we're going to kind of go higher before we go
back to toward the lows. >> mike, thank you mike santelli we have a news alert on tesla let's get to phil lebeau. >> the story circulating all day long about the report which was first in the "wall street journal" that tesla has essentially been negotiating with some of the key suppliers saying they want cash back we reached to out to tesla for a statement. the company just responded saying we are not into the entire statement but one ke point they make is that we asked fewer than ten suppliers for a reduction in total cap x project spend for long-term projects beginning in 2016 but still not complete. and any changes with these suppliers would improve our future cash flows but not impact our ability to achieve profitability in q 3 the end of that sentence is important, melissa, because the report that came out late yesterday and you got a lot of attention this morning suggested that tesla essentially was saying to some of the suppliers in a memo that was sent out, the
suggestion was that if any did not get these cash back guaranteed as part of the negotiation it might impact their profitability in the third quarter. but tesla saying in this statement that is not the case guys back to you. >> so phil, just so i understand they're not asking for -- did i mean, when we say projects that have been started since 2016, it's not a retroactive negotiation. these are project -- products or projects started in 2016 and the cost reductions are from here going forwards >> and that's what -- that is what elon muvg tweeted out saying look we are not going in the past we are talking here forward. and one other thing to points out i have talked with a number of people in the auto astro. everybody says the same thing. these types of negotiations which can be very challenging to say the least between auto makers and suppliers, they happen all the time. the difference here is that you had the wording in this memo which we haven't seen the memo but based on the reports is probably not the best wording. and that word something what has
spooked investors. >> what do you think are the projects that were started in 2016 that are ongoing? i mean -- when you think of suppliers you think of parts and you think it's a one off you supply the part they go to the car the car gets sold and on it's not multiyear thing. >> but you talk about the tooling that goes with the part. it's not as simple with we want part xyz ship it there is a lot of tooling and interrogation that goes with in on the longer term projects. >> thanks, phil. >> you bet. >> here is what's coming up on power lunch, the economy is booming. wages are rising home sales are going down hmm? we explain. >> plus the war of words with iran could have implications for the oil market well will tell what you comes next tiger woods in the hunts at the open resulted record breaking ratings. we'll take inside e theye popping numbers straight ahead power lunch will be right back how much do you think it cost him?
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they rent this out they went through several bidding warsen final they finally got this house they were able to afford the number new one but doing math on the old one. >> we ran the numbers. i literally made a spreadsheet and all the different options we stay in d.c. rent out san jose in d.c. all the options. it made the most sense to keep the house in d.c., rent it out, and buy here >> carrying two mortgaging can be scarey but realtors say lenders are making it easier because as interest rates rise they need more business. one word of caution though make sure you have a good umbrella policy on the rental home and make sure it's in top shape so the tenants aren't calling you in the middle of the night more nofgs on this on cnbc.com back to you. diana thank you. it's not just existing homes sales falling. housing starts fell 12% last week as did mortgage
applications, because rates are moving up. so how troubling are these signs? housing? susan wantinger is a approvalser at of real estate at wharton appear an economist at zillow. what's going on with housing and why the signs of maybe a slowdown taking shape? >> trifectaa of problems on the supply side. labor costs, land costs have been high. now material costs are high. that slows down the supply except at higher prices which is simply not affordable for the great middle that's where we see the the hit in sales, existing sales sales of existing homes are down particularly at the $250 lower price point. >> why would labor, materials costs and i forget the third you mentioned affect existing home sales more than they would i see how it would affect new construction. >> right so the new home construction is kind of a ceiling on this. and new home construction prices
are going up as new sale -- new construction declines. and that's setting a price point for the existing sale market as well but on top of that we have inventory at almost historic lows they increased slightly. the inventory problem is not -- supply isn't going up by new construction and existing owners are holding on, which constrains the splay on both sides. >> aaron, what are you seeing? are we at a turning point? i note in my town that relatively small houses, three bedrooms and there abouts are going for very high prices and eliciting if they are properly priced bidding war that is can lever the price up by a couple hundred grand. >> that's one of the challenges in the housing mechanic. whenever we saw the existing home sales down. the big increase in inventory in three years. but that's a good sign but more importantly at
different price points a lot of the increase in inventory is at the higher end, the us luxury homes whereas you say the affordable entry level homes are still facing a lot more demand than there is supply. >> susan when you say that we're not getting the wage increases in our labor force that could support much, much higher prices, i would imagine that affects a certain kind of housing, a certain kind of home? >> absolutely. we see that million dollar home sale is doing well they've increased. but that $250,000 is clearly impacted by wages, not increasing at the rate of prices or rents >> aaron, help me understand because i think when prices go up there are fewer prices then the prices go down in order to attract the buyer. you think about that with commodity. but the way susan explains things if the input costs are so high you are never building a house below a certain price
point because it's not worth it for the builder. you never get the entry supply at the lower level in theory you are not getting that expensive house to come down in price. am i analyzing this correctly? >> that's right. certainly builders face all the cost head winds and not able to build at the scale or the price point that historically they have that said, you know, even when they are adding spli at the higher price point that's taking off some pressure from the milledle appear feeds the rest housing market any addition to supply helps a bit but no where near enough to meet the demand from nesting minimal yams bying thes first home or more often as the previous clip suggested bias second whom to accommodating. >> did you say nesting millennials. >> nesting millennials. >> quick answer here, aaron, are prices for owners are prices about to turn over, go down? >> so home valet appreciation has been about 8% the past year.
our forecast suggests it slows to 6.5, 6% the next year yes, i think home valet appreciation is slowing the in ex12 months go down by no means. >> thank you very much, susan, aaron we appreciate it. >> thank you. >> coming up, the semi conductor stocks in the midst of a chip wreck. issue should you buy the trick. >> trading next next saber rattling raising fierce in the oil market is another conflict coming what could it mean for the price of crude? that story is next on power lurj what about him? let's do it. ♪ come on. this summer, add a new member to the family. at the mercedes-benz summer event. lease the glc300 for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.
i'm sara eisen this is trading nation pl today we watch the semi conductor stocks in the midst of a chip wreck. names like merck micron. and texas instruments all falling today. although off the session lows right now. this as morgan stanley comes out with a new note siting tariff uncertainty as a risk. max miller gina sanchez with sanity coglobal matt kmips have fallen before on trade concerns more analysts citing a red alarm for the group does it make you worry? key as an indicatorer for technology in the broad are
market. >> yeah, it's definitely raising concern a little bit but on a technical basis they have to break down further from here we want to focused on the high fliers like nvidia the high flier of 2016 and 2017 mick con another high flier retina thief broken down but still above key support. the one that looks vulnerable is applied materials. the 45 level was the 2018 lows but it's also the bottom line of a descending triangle forms. if if it breaks below that level any kind of meaningful way it's negative for the stock it's too early to throw up a red flag on it but keep a eyen oh the $45 level. it's the vulnerable in the group. >> gina is the group more vulnerable than most other sectors and industries in the market on the trade headlines? >> well, it's obviously vulnerable because it's right in the center of some of the tariffs. but if you look at the long-term
outlook between despite the short term outlining our look at strong outlining for demand. the internet ever things, the cloud computing, auto computing. all of those things are going to continue to build demand and i think that's really what's been priced into these stocks. so while this is a short-term disruption i would say you know maybe go for better priced growth something like replayed materials even though matt points out that it looks for more vulnerable on a technical basis. it's one of the cheapest ways to g get access at a vul earnerable time right now tor a longer term trend. if you're willing to stay the course this could be an interesting time to consider this >> all right guys thank you for the take on semis getting beat up today for more trading nation you can head to the website or follow us on twitter at trade attention nation don't go anywhere. power lunch will be back in two minutes. >> announcer: and now the latest from trading nation dot cnbc
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everybody. i'm sue her here is the update at this hour the britain top dplmt warning the country could crash out of theeuropean union without agreement causing economic and political damage on both sides he meets with his german counterpart in berl zbloon when it comes to brexit there is now a very real risk of a brexit no-deal by accident. and this is because i think that
many people in the eu are thinking that they just have to wait long enough and britain will blink and that's not going to happen >> one person was killed and two rescued from a house that collapsed in central new jersey. the home tumbled into rubble about 7:00 a.m. this morning it's unclear what caused the collapse but so far it does not appear to be gas related the american edema of petdiatric warn of food additives for children it's thought the food color preservative i have may interfere with development it's urging families to cut down on processed feeds you're up to date. melissa back to you. >> sue, thank you. let's check the markets. stocks trading and have been trading a very tight range right now the dow jones is flat. look at that flat just up a quarter point s&p 50 oh up by 5.5 and the nasdaq up by 18.5 points
financials and tech the best performing sectors reals stand out state your nameles and utilities lagging. leading the dow. jp morgan microsoft and goldman sachs and intel. mitch. thank you, mels oi war of words taking place on twitter. president trump sending a message to iranian president rouhani saying never threaten the united states again or you will suffer the consequences oil priss closing the in the red for the day despite the tweet. look what do could this tension money for the market let's check with bob rabadni pch testifying tomorrow on a factors impacting oil prices sure to include the latest what do you here. >> good to be with you. >> what do you think this means when you see the saber rattling. >> i think the market is complacent maybe they are thinking a repeat of north korea president president tweets about fire and fury. before you flow it, the president and president rouhani will be in geneva having a meeting talking about a deal
it could be the macro risks, the trade disputes, the strong dollar overweigh -- weighing heavily. but i think there is complacency. for the president's tweet followed a statement by the iran supreme leader saying if we can't export from the strait of hormuz nobody can. when you talk iran exports that's 2.5 million barrels when you talk about the strait, that's 19 million barrels a day. that's the world's most important choke point. about 30% of oil goes through the strait >> it's the channel wbl between oman and iran. the graphic we created this for today to show where the strait is and how important is. admiral was on yesterday said if any shut it we will reopen it in two oh three days that doesn't mean it won't be messy out there. we'll have interactions and military interactions. but ultimately the flow of oil
will -- will continue even if they do shut it a couple of days is that does that not sound like we shouldn't be worried about it. >> no, it's true that the united states military is going to prevail against the iranian military in a conflict i'd be a little careful about two to three days. i was on the national security councils when we liber eighted iraq and we looked at scenarios like this as well. we have to be careful. if the iranians got the jump on able to swo sow mines it could be several weeks before it's safe we will prevail in the all out military conflict quickly. but cleaning up the straight, getting insurance companies willing to ensure those ships going through, that could take a little more than a couple of days as a matter of fact, if the market thinks it's only a day or two and it lasts a week, there could be a rude shock. so, yes, we would open the strait they can't keep it closed but it
could be longer than folks think about. >> take me -- unpack some of the rhetoric here. if iran moved against the strait of hormuz that would be an act of economic war. but who is threatening economic war on whom? or are both sides doing it. >> well we are threatening economic war on iran we are threatening to strangle them secretary pompeo give a forceful street in the regan library np he says they will drive the iran exports to zero and reechted zero for emphasis. that's like what we did to japan before pearl herebier. we economically strangled that country and case of japan get out of china or fight in the case of iran change the behavior, stop supporting terrorism. agree to a decent nuclear deal when you back a country like
that in the corner there has to be a risk that the country lashes out even against a bigger power. >> do you think, bob, the likelihood that iran moves to close the strait of hormuz is low and that's what oil prices tell us today? how do you interpret the move. >> i interpret it as the market thinking it's bluster from both sides. >> do you think it's bluster from both sides. >> no, i do not. >> okay. >> i think if iran is pushed to the wall they have to raise the risk let me say this in 2012 they enriched every day and oil was $100 bucks they had leverage over president obama now they are not they are not enriching and oil is $67 iran has to insert the threat. i think it's a credible threat to the strait of hormuz get the price up and get president trump to want to do a deal. >> how high could oil prices go in that worst-case scenario. >> we would measure the inincrements in $5 to $10 a barrel if we closed more than several days if it wasn't a one
to two-day affair. the key thing is whether iran can move first whether they can get the mines into the water before we can stop the boats because that turns a short-term affair into a longer term problem. we get it done but more like several weeks. >> got it. >> not a couple days >> bob mcnally from the rappeden energy group. >> we have a news alert on nike we head to sara ice sfwloon looking through a memo right now that went out to nike employees this morning in which the company announced it's raising the pay of as much as 10% of nike's total fork frs. a quote from the memo that went out. it says we stray strive to meet the diverse needs of employees and support a culture where employees feel included and empowered. as for the specifics, the memo just said ten% of our population will receive an adjustment across levels geography functions and brands all levels
that is. they are offering a sort of different which to measure performance as it relates to bonuses, including companywide performance versus team and individual and a little bit more stock choices. this was first reported by the "wall street journal" which is citing about 7,000 workers to receive increased pay. they get that from the 10% mentioned of the 70 or so thousand employees at nike worldwide. this is interesting because it comes months after a scandal that shook up and led to the depart yur of more than 11 key executives within nike now nike never outlined with the scandal was about but it related to workplace culture we another there are issues of a brchlt o-like culture and perhaps women not feeling equally represented paid or or promoted issued we talk about with a lot of companies. >> does that explain why they are doing it why are they doing it eyed. >> that's pretty much the
inference you can make they're not spelling it out. but clearly nike has been looking inside and reevaluating measures of culture and the way people are promoted and paid as a result it looks like they are making changes to do so. they've already made some inside changes to promote different people and to have more female representation at a higher levels and this now they are raising pay to be competitive perhaps and probably respond to a lot of the employee complaints that led to the scandal earlier in the year. >> all right, sara thank you very much. sara eisen reporting from the nyse. >> meantime shares of hasbro up at binthn 13%. wh'sehd at jump? next (siren wailing) (barry murrey) when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. evaluating patients remotely is where i think
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originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life. shares of hasbro taking off on an earnings boat. we get headlines from the earnings call. courtney regan here with more. >> they had a nice beat. they beat on revenue and earnings the earnings up.48 it looks like a lot of the foist r us issues has been worked out of the system at least in the u.s. operations. overhang and difficulty in europe and some interesting comments from the conference call about chinese production
right now, most of the company's production for the toys is still done in china backup but they've been working on rest lessening that over the years not tied directly to tariffs but in general diversifying where products are made. they had about 30% of manufacturing is outside china that means 70% is increase they are working towards 40% of manufacturing being outside china. they're not giving specific territories countries or even companies that they are looking at but they've identified other places where manufacturing could be done to still meet the high quality. >> so costs were going up in china labor costs. >> exactly. >> however, you have to think also that tariffs would have an impact right. >> yes. >> if you are producing there and the president wants to put tariffs on anything there. you produce it somewhere else to bring it in without the tariffs. >> a lot of retailers over to a time have been diversifying for that reason because labor is getting more spebsive they are looking at bangladesh, vietnam cambodia actually pakistan is another area for at least some apparel
manufacturing but as tariffs come into fla that increases costs more the problem as we've been talking about it's very difficult to move big manufacturing quickly. so it's been happening over time and a lot of the retailers right now are just using the lobbying groups to get to congress and get to the administration to explain how hurtful this is. in the meantime doing what they can, continue to move their partly cloudy sky out of china but it's not going to happen fast if the tariffs come into play there is some pain. >> margins came in better than consensus estimates. was there any talk about the call about input costs, namely oil costs. >> that's a good question. i'll have to review in details i'll be honest i didn't catch every last bitful the call hi to pop in and out they talked about gross mrj margin and they said there is nothing stopping them from getting back to 62% gross margin that's a goal they've had in mind they want to get back to that point fairly optimistic most of the call from the cfo and ceo comments analysts trying to get them to
dr. drill down on tariffs but they weren't giving specific under the influence saying we are moving out of china. this is a goal. >> best day. >> 14%. >> since february. >> thanks. >> don't miss the exclusive interview with ceo tonight on mad money. brian gold ner there with jim kraemer. 6:00 p.m. >> earning on deck from tech big name google parent alpha bet, will the search giant return record results? plus tiger pulling in monster ratings r fothe open championship petition bring you the eye popping numbers when power lunch comes back goooooooaaaaaaaallllllll! that...was...magic. willingham tucks it in and puts the championship to bed. sweet dreams, nighty night. as long as soccer players celebrate with a slide, you can count on geico saving folks money. fifteen minutes could save you fifteen percent or more on car insurance.
the open championship drawing some of the best ratings for the event since the tourn of the millennium the connection between the year 2000 and today well golf fans can't get enough of tiger woods eric joins me with the story. >> that's right. a lot of people watching golf they think why so much attention on tiger woods but the media executives will say this was the highest rated final round. the number the highest rated since 2000 in the british open that was the year that tiger
completed his career grand slam. here we are 18 years later with ratings we hadn't seen through an entire adult's lifetime the coverage was up 38% from raft year. it was the most streamed golf event for nbc sports the viewership in all tournaments in year, 5 55% higher when tiger competes compared to when he doesn't. that is for any tournament during the year broadcast or cable on a typical broadcast television, 1.3 million more viewers when he is there and just for nike having that logo in front of all those fans, that was worth $6.2 million in marketing brand exposure just for nike just from tiger >> it certainly indicates that he can be very competitive, probably win on the tour maybe win another major. >> and he was leading -- tied for the lead in the final round. i think that is why you are seeing these numbers pop but interesting that he has these big numbers even when he
was in the back of the pack. but you read the sports columnists and they say as soon as tiger takes the court, they don't talk about anyone else but it is a tricky thing because that is what the fans seem to want >> all right thank you very much. all eyes, and i mean all eyes, are on alphabet with just a little over an hour togo before the company's quarterly results. also on our radar but not on our eyes, big earnings week ahead for amazon and facebook. so what should investors expect? don't overt your eyes because mark mahaney with rbc capital is here to tell us. mark, what are you looking for from alphabet? >> we're looking for approximately $32 billio -- revenue and $9.70 in gap
earnings the kconsistency is important this company produced 23% revenue growth for 33 straight quarters, and people want to see that again that is the first check box i'll the second one is this should be -- or last quarter should have been the peak operating expense quarter. for the first time they gave positive forward expense guidance and they said that their biggest structure all expense item what they call traffic acquisition costs, that growth should start moderating so people will look to see whether that line item did in fact moderate. and then third, people will be listening for any color commentary around the eu android fine anything they could say about the risks to the business model going forward would be very helpful. >> and what would be the weak spot that you would have your eye out for, what would be the one area that if this number comes up a shade light, you'd worry? >> well, what has caused the stock to trade off more
consistently over the last four or five years has been an expense neglect sif sative surpe less likely to happen now. or because they are spending more on the other investments like waymo so if there is a fly in the point. it would be they are heavying up in investment in the waymo or life sciences and we didn't expect it. i don't think it will happen, but that's what we'd watch for >> if there had been thinking that gdpr would actually benefit the larger platforms, and this earnings report we might actually get color on that, baked into your estimates this a which are higher than consensus, do you also believe that >> we weren't expecting that to happen, but anecdotal evidence seems to be that it may have had a small near term positive impact on the large platforms like google and facebook for two reasons. one, these two spent an enormous
amount of time just making sure that they could afford it and they spent the money in resources. and second thing is both of these companies get a lot of what is called first party data, so will he donwil they don't ne marks. so there was less controversy for them as they went into the actual implementation and at the end of may those two factors mean this probably was a little bit of a bump up for them in revenue just from gdpr. >> and give us a thought on amazon >> amazon's probably right now the most beloved of the faang stocks the fundamentals, revenue growth is accelerating and margins are expanding. because aws is again one of the highest marching businesses is showing a little bit of acceleration microsoft's numbers seem to support that and the other thing is
advertising or ams, advertising marketing services and that is also a high margin business so we'll expect probably another operating income surprise to the positive this quarter like we have from the last two because of aws and because of advertising. if they show that, the stock can continue to move higher. >> mark, all eyes on these two reports later today. > yok u. >>check please is next need a change of scenery? 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.
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something that struck me in today's show is the head of the cattle man's association to talk about the impact of tariffs and how it is hurting beef prices. and once again just like the guy who is in charge of the soybean association, unwilling to really say negative things about the president. actually incredibly supportive of the president's mission >> of the mission to open markets. >> not the means >> they don't like the means >> the means are right idea, wrong way. which actually delivering alpha i think when we asked what do you think of the president's trade policy, that was the one that got the plurality of votes. >> but they both sounded relieved that there was -- they said a president who is really finally taking a stand in a way that we hadn't seen before >> check back in six, eight months >> yeah. >> and see what really happens >> if farmers start losing their
jobs or reducing the size of their herds, it could bea completely different story but that whole notion that the midterm elections, that will force the president to resolve this, maybe not so much if you have the support of these industry associations which could be hurt the hardest. the theme that i'm watching is bitcoin if you haven't checked bitcoin for a while, and i don't blame you if you haven't, but look at where we're trading right now. coin base exchange, 7743 actually saw the best week since april just last week there had been some thought that there could have been short covering we spoke to ceo of one of the largest exchanges, he didn't see any evidence of that but it is moving higher so bulls are feeling emboldened at bitcoin making a run to 8,000 at this point >> and i'll talk a little bit about tiger because i was one of those people who actually watched the golf tournament because he was in it
and contending until he hit a couple wayward shots on the back nine he is compelling television when he plays and plays well. and there were a lot of very good players at the top of the leaderboard. so i guess congratulations to tiger. >> always a show thanks for watching "power lunch. "closing bell" starts right now. good afternoon time for the "closing bell." financials powering higher it is a ten year yield rises more on that move coming up. and major changes at fiat chrysler as iconic ceo is replaced due to his faltering health big question now what is next for the auto giant. >> and i'm josh lipton in san francisco. alphabet kicking off a key week of big tech earnings when it reports in just about an hour. the one number you need to watch ahead. and i'm sara eisen in for kelly ev