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tv   Closing Bell  CNBC  December 31, 2018 3:00pm-5:00pm EST

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good way if that's possible. we'll be tracking your progress through waze or something like that. >> norad like the santa tracker. >> god speed. >> same to you. >> thanks for watching "power lunch," everybody. >> "closing bell" starts right now. i'll see you on "fast money" at 5:00 if i make it alive. ♪ welcome to the final "closing bell" of 2018. >> we're running out of year. i'm mike san tolli and it is, of course a new year celebration in dubai. these are pictures of them ringing in 2019 in dubai from the world's largest building and, of course -- >> the tallest building. >> we're just nine hours away from our own celebrations here in new york. one hour away from the close of the markets. >> it's great that we get to have these global markets.
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final hour of trade of the entire year. we'll strart with the check on the markets as we begin the hour we're. the dow and s&p still on track to post their worse september -- december since 1931. nasdaq on track to post its largest monthly drop since november 2008 and for the year, the big winners on the dow, merck, pfizer and microsoft. it looks like,mike, we'll hold the rally. we'll see what happens. >> yes. there was some expected buying just rebalancing coming in to today. it seems like it's holding up right now. we were higher. the dow was 255 or more at the highs. we'll break down the big themes of the show and what investors need to know for next year, among them, of course, china trade. we have the latest from washington on hopes of renewed talks with china. >> reporter: this all hinges on an unexpected tweet from president trump over the weekend. the tweet said that he had a
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long conversation with president xi and that the, quote, deal is moving along very well. if made, it will be very comprehensive, covering all subjects, areas and points of dispute. big progress being made. the china state-run news agency put out its own details of the call. it said the two leaders wished each other happy new year and the g20 meeting was successful. teams from both countries are working to implement the consensus. he said expressing hopes that both teams can meet each other halfway and reach an agreement beneficial to both countries. it proposed a must measure to ban forced technology transfer and it lowered tariffs on u.s. auto but will it all be enough for president trump? and that's what china will know when they visit beijing next week. president trump is facing a shutdown here in washington,
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divided government on capitol hill, he might just be in the mood to look for a win. back over to you. >> any sense of what is in the trade deal that's coming together quite nicely as the president says, what the specifics are? is it more than china buying soybeans >> we don't know what the consensus is despite repeated requests to both ustr and treasury on this. i think part of the issue here is that both sides still really need to agree on what the parameters for this discussion are, what are the sort of measurable milestone that they'll have to achieve in order to make progress that is sufficient to president trump, the chinese have been upset because they feel the ball keeps shifting. they're sort of charlie brown and lucy. the president keeps moving the ball on them. that's part of what they'll trying to pin down over the next month. they've only got three months now left to make a deal before
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the next level of tariffs kick in. time is running out. >> thank you for the update. let's talk about how this impacts the market. joining us to discuss the final trading day of the year jonathan corpino and rick santelli as always in chicago. jonathan, the president says that it's looking good for a deal when it comes to china trade. do you buy on that headline? >> no, not yet. we need more information from that. getting tweets that come out of the white house over a quiet weekend like we saw this weekend i don't think holds a lot of weight to it. is everyone paying attention to tariffs and what's going to happen we certainly are. is that going to really impact or move our markets when some sort of deal or negotiation comes through? i don't think so. i think there's a long-term ripple affect that comes from this and we don't know the true impact for months, quarters down the road like tax reform. everyone was looking at the landscape and the blueprint of what it was going to be like but not fully knowing how it was
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going to impact companies and individuals was very unknown. tariffs are going to play that same role too. >> surat, we're 10% down from the s&p from where we were when they met at the g20. we thought it was make or break. we needed some kind of progress or negotiation to bear fruit or else the market will have trouble. the market had trouble, so is it still as important a factor in getting the market out of this fix it's in right now? >> two things, we need specifics and that's what happened when we came out with a tweet that said things went well. if you don't have some specifics and certain things like intellectual property, those things actually addressed and i think the second thing that we have to look for is to say, what is this going to have on earnings right now nobody really knows so we've gone through once we get the first settled, the second one is did this become self-fulfilling and the companies will bring down
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guidance so a lot of the stocks already reflecting that and maybe we're looking to the other side and the market can say, okay, we can now see the whites of the eyes as opposed to things are just battled. >> do you think the market has the earnings for next year correct right now? >> the market today has it pretty accurately in the sense of earnings are coming down. it's a question of when do they come back up again and i think the market's saying we don't know if it's coming back up. we think it's going to flat line and not go up for a couple quarters. >> just this idea of -- powell softening his tone will all be potentially reasons for the market to get out of its own way, so where do we sit with that possibility that the market just kind of looks the other way at positive catalyst do you think we're still in that mode right now >> i think we are. we have to get through the government shutdown. will clearly look at tariffs
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interest rates with the fed. all these different factors there. we went from six months, nine months ago of any negative headline on the tape didn't affect the tape and the market kept going up. we're at the opposite point right now. there's so many different headlines out there that we're discussing that none of them are really going to let this market move higher yet. >> rick, how do you think about biggest risk factor for 2019 >> i think there's a variety of risk factors and it's ironic because if you recall when we came into 2018 the markets were on fire in january both equities and interest rates. the story back then was, oh, my god, interest rates are going up, but we finally all calmed down and decided they were going up for good reasons which implies that lower interest rates are just more palatable. look what's happened. in november, ten-year note yields were at 324, they were up 83 basis points on the year. now we're at 268, we're up 27
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basis points on the year. people don't look happier to me, investors aren't happier. the notion of interest rates is a big risk if they soften too much. granted there's a lot of logistics on why rates came down, especially considering interest rates ignored much of the volatility in october that wasn't until november that they paid attention and even over the last three to five sessions when things have been better for equities, the interest rate complex all of a sudden isn't paying attention to the good news on equities and it continues to slide. there's capital requirements by large institutions that would warrant maybe some buying of treasuries and that could be part of the effect. i think the biggest risk for 2019 is counterintuitive as it sounds is interest rates continue from these levels to move lower, not a good thing. >> what would that mean for stocks >> i don't think that would be a good thing for stocks. it wouldn't be good for the financial sector. it would actually be telling people that there's a real recession coming because the
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cost of capital's going down. you need stabilization in the ten year, you need rates to go up and a lot of that's on global growth. we need the rest of the world to come back and say things have stabilized and that could be the catalyst that will let the market go. >> when you're talking about the messages and, rick, just to get back to you, you have good context there for the fact that we did have this panic about the absolute level of rates going up early in this year and then we had a panic because the yield curve is getting too flat. we've widened out a little bit on the yield curve, i wonder if there's a buffer in there if, in fact, there's mechanical factors that are suppressing longer term yields even where they are right now. >> reporter: yeah, no. there's a shock absorber built into the marketplace when economies, whether domestic or global or equity markets don't seem to be quite right on their axis, rates are supposed to go down, but that's in a true message of the market era. we're not there any more. we don't know what's below the surface of the markets. we don't know how we've built
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upon some of the qe years and where real price structure is in market terms and i think that makes it so much more complicated. >> jonathan, what are the factors you'll be watching wednesday when we try to figure out whether the last few days have just been an anomaly for the year-end and rebalancing and tax loss selling and all those funny things or whether there's something to read into what happened >> we'll have to wait until next week. we're closed tomorrow so the rest of the week will be somewhat of a quiet week. i don't think will get much additional information out of washington pertaining to the government shutdown but i think once we get through next weekend, we get towards january 7th, government shutdown is going to be the primary thing that we'll be looking for as to how this gets resolved and how it gets resolved quickly. >> we'll get a jobs report on friday, at least. >> that's right, we will. up more than 6% from those lows on december 26th.
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we've already had relatively strong bounce. that's guys for joining us. appreciate it. and still ahead, we're bringing you our favorite charts of 2018, we meaning sarah and i and what they could say about the market heading into the new year. plus more and more analysts are blaming this late year volatility on one particular group. the key factor that could explain the big rallies of the last few trading days next. and we want to hear from you, reach out to the show on twitter, facebook or senlds us an email. we're asking today what you think the top business story of 2018 was. i'll be reading some of your responses at the end of the show. dow's up 164 with a little under 40 minutes to go before the close. what do advisors look for in an etf?
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♪ welcome back to the "closing bell." live shot of times square where people are already gathering and it has started raining here in new york city as well.
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cold, rainy and -- >> locked down all day and we'll have i don't know how many thousands getting wet. >> love it. here are your winners in the dow today and there are a number of them. most dow stocks are higher with the dow up 166. goldman sacks, walt disney and j&j. goldman sachs is the biggest loser on the dow for the year. >> that's a little comeback move but disney and johnson have been outperforming. >> disney got a bear call. >> they did. has it been a wild end to 2018 some analysts blaming the heavy foot steps of big institutions, leslie picker is at hg. the one part of your beat, the hedge funds were blamed for the liquidation, some of the beating up of the market and now we're looking at pension funds and what their role might be. >> there's a different culprit for each day, mike. it was supposed to be a sleepy week on wall street with many
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market participants away for christmas and new year's and there's one type of investor that has been lurking amid the volatility and that is the pension funds. today is actually the deadline for pension funds to rebalance. they tend to do so on a quarterly or monthly basis. the few days leading up to december 31st are critical ones for asset allocation which means essentially the waiting's of equities versus bonds versus alternatives like private equity and hedge funds. but because domestic equities declined so dramatically during the quarter and especially relative to bonds, pension funds exposures to equity funds shrank as well. therefore they needed to be big buyers before the end of the year to rebalance their portfolios in accordance with thargts. several analysts have said pension funds large scale buying of equities was a big driver of the surge on wednesday and thursday and possibly a little bit today. wells fargo estimates the amount to be $60 billion.
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that's how much pension funds took out of bonds and put them into equities. wells fargo calls this rebalancing unprecedented and historic and within a market comprised of fewer traders. these moves can make a big difference, guys, due to the holidays. >> leslie, that may be the good news if you're looking for a strong close to the year but that gets used up and i guess we have to know how many other types of investors who are also trying to keep some kind of a target allocation would be rebalancing into equities at the beginning of next year as well. >> reporter: exactly. obviously this was a december unlike many that we've seen in modern history with such significant declines in all three of the major indexes. that throws a lot of different types of investors into this rebalancing phase, pension funds being the most noteworthy because they're such bow hee moths and they don't do day-to-day tradings but in january a lot of people will come back from vacation and say,
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this is a new world in 2019, what do we do on the asset allocation front and how do we see 2019 changing the game whether it's with the interest rate increases or otherwise? and so a lot of people are going to come back and take those things into consideration. >> is there a certain type of stock we should be looking for that pension funds typically buy or that's too hard >> i think these big institutions really do take advantage of some of the etfs and index funds to get that broader market exposure. you should pay attention to that. we did see a lot of volume in etfs last week and interestingly we didn't see as much volume in the trading of the underlying securities, the individual names. so there was a very interesting discrepancy there which i think is part of the reason a lot of people are pointing to the pension funds in the first place as being the cause for some of the odd market behavior that we saw, the odd spikes on wednesday and thursday and so i think you
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should definitely take a look at some of the etfs and the passive instruments exposed to the broader markets. >> got it. leslie, thank you. now we've got a little under 40 minutes to go, little over 40 minutes to go before the closing bell. the major averages are all higher except for the russell. the nasdaq's only up a quarter of percentage point. the dow the strongest of the group up .7%. health care consumer, discretionary technology all leading higher in the s&p. still to come the market has been hanging on every fed word all day long, all yearlong, excuse me. the chairman is slated to make another major speech later this week. we'll discuss the fed's game plan ahead for 2019. despite the market down turns, shares of amazon still managed to climb 30% this year and they're setting the stage for big moves in 2019. new details on its whole food strategy in the new year coming
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and now you can watch cnbc live with a daily free preview. >> let's just say it's your opportunity. >> the cnbc app. download it today. ♪ the market is still holding on to modest gains as we head into the final 35 minutes of trading. the s&p up about .4%. the dow is the leader or about 182 points.
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nasdaq up just about .4% as well. let's check out some individual market movers. canada goose jumping today after opening its first door in china after being delayed in two week. the delay was due to construction issue and made no connection to increased tensions between canada and chinese. you see that stock is up more than 5% today, although it had a terrible december. this is a $69 stock december 3rd, so it really fell apart as the market had a hard time. you had that arrest in canada. i don't know if that has anything to do with it, but is it a weather stock where do you come down on the whole canada goose product >> people are going crazy for it. do you see that little patch with canada goose and you pass the store in soho and there's a line. >> people said it's a fad. >> it's very expensive. >> we pushed back. my older daughter wanted one and
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we pushed back and she fell back on sam. >> it's like montclair, canada goose, the trendy down puffer coats. it's cold outside and the stock had been a winner. it had been winning ipo that's for sure. a lot of people looked at this delay as a sign the trade war was hurting but because they have that brand symbol that's so recognizable, it feels like they're everywhere. it's doing very, very well. i'm watching another fashion company michael kors. it mentioned it'll be changing its name effective january 2nd. the ticker symbol will change from cpri on that date. stocks up a percent. it's had a terrible year down 40% so far this year. i remember talking to the ceo. and one of the ideas he gave me of why they chose that name is because when you enter the
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island of capri, i don't know if you know but there are three giant sea rocks coming out of the ocean and that's the three pillars of this new kors, versace and jimmy chew. a european name and symbolism with the three rocks and that's one of the key questions for whether the stock can turn around and whether they can execute this transaction. i went to the fashion show in new york. it was amazing and star studded. kim and kanye were there. >> we'll see if that works. >> i don't know. >> you do have the other companies that are in fashion apparel getting away from the founders' name or the legacy brand like coach and all the rest of it. i guess with mixed success but we'll see. >> yeah. we have about 35 minutes left before the bell. the dow still up about 160. s&p 500 holding on to a gain about a third of 1%.
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russell slipping below the flat line. apple has lost more than $300 billion of market cap. one top analyst says apple will climb back over a trillion in 2019 and he'll explain why ahead. and after the break from a box office record to the oust of les moonves. larry havrety joins us with the key themes to watch in the space in 2019.
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welcome back to the "closing bell." most sectors within the market are actually higher today on this final closing day, final trading day of 2018, although a lot of those sectors that are green today are actually still officially in bear market including industrials, financials, materials and energy all off more than 20% from recent highs. time to get a update with sue herera. >> hello, everyone. here's what's happening at this hour. if you were hoping to ring in the new year at disney's magic kingdom in orlando, you're probably out of luck. the park has reached capacity forcing disney to send out an
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alert on twitter directing guests to its other florida theme parks. the fcc, the latest government agency being forced to suspend operations due to the government shutdown. the closure will impact daily operations such as electronic filing systems, but not the office of inspector general. beer laws are changing in colorado starting tomorrow, grocery and convenient stores with beer licenses will be allowed to sell full strength beer, not just the 3.2% varieties. the old law dates back to the end of prohibition. and it doesn't get much cuter than this. a group of giant pandas and their cubs playing in the snow. they're so adorable. the fuzzy animals put on quite a show for visitors in china and they're having a little snack at the same time. that's the news update this hour, guys. back over to you. >> all right, sue. >> yum. >> i've known people who played with them and they are playful.
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>> baby pandas >> they're like dogs. >> they're cute. >> they are cute. only about a half hour to go in today's session and in the year, markets still holding on to this mild rally. let's get a look at the biggest movers of this day. bob, we'll start with you. >> heading back toward the highs. not a lot of pattern to it, probably apropos of the final trading day of the year. goldman sachs was the worst performer of the year but it's down double digits. merck and pfizer had great year. boeing was great going into the fourth quarter. it's wilted too. still up 8% on the year. dow laggards were chevron and exxon. that's the worst performing sector in a long time. as far as the santa claus rally goes, the last five day, first two were up on the santa claus rally. we're up over 3%. the average 1.3%.
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we need another two more days will see if we can eek out a gain there. health care and utilities are up. techs flat, financials and the rest are pretty bad here. energy are 20%. it's a long way down. don't see that very often. guys, back to you. >> bob, thank you. let's send it up town now at the nasdaq which is underperforming. >> because communications are lower. we're getting a bounce in biotech and chips but for the year communications, chips, bio techs all in bear market territory. big cap tech as bob mentioned is the best performance. that's only in correction and we see that in what we are looking at in terms of some of the best performers in those fang stocks. among the contributors to the
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upside here from nasdaq despite the fact that it is in bear market territory. among the big cap tech names moving up more than today. amd has seen a huge decline from its highs earlier this year, nonetheless, its up 79% for the year. the best performer in the nasdaq 100. apple, of course, is not joining that thread today. apple on pace to be the second biggest drag on the nasdaq 100. the biggest, facebook, which is now in for its very first negative year, down tremendously in bear market territory and facing more headwinds as we go into 2019, guys, back to you. >> all right. some of our viewers think the decline in facebook might be one of the business stories of the year. >> getting some good answers on that. >> absolutely. verizon successfully avoiding a blackout of channels like espn and abc after striking
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a deal. joining us now to talk about all things media larry haverty. good to see you. >> hi, mike, sarah. >> these things are a game of chicken. i wonder what you think, though, let's talk disney first, though. in terms of all that's going on with the company. they're making this big transition this year. stocks outperformed year-to-date. >> i think disney basically, mike, has all the marbles and there's a saying in the gaming world, the race isn't always won by the strong and the swift but that's the way to bet. once the fox deal is completed, they'll just have a dominant position in hollywood, over 40% share of box office and they're investing massive amounts of money in what i think are going to be very creative theme parks. they're just at the stage where they're letting nice people in the investment business take a look at some of the technology and i'm thinking it's pretty whiz bang.
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it's mind-boggling consumer franchise. it's selling for less than stocks like colgate and proctor & gamble. very stable, competent management. all the ts are crossed and is dotted. that's going to lead the parade out. the negative on disney, of course, is they'll spend massive amounts of money getting this streaming business started, but the reality is hollywood had its blinders on when it came to netflix. they created the dragon and the dragon is taking some money out of their cash flow now and they have to do something about it and really disney and time warner had no choices other than to get into the streaming business and take the cash flow hits. >> for the past year, past few years, really the prospect of deal making has driven so much of the performance of this sector. are we done with the mega deals in media >> i absolutely think so and as i've said before, some of the deals weren't exactly the best thing.
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i mean, verizon -- it's hard to say how they didn't lose close to $5 billion buying yahoo and i think time warner telephone company is going to be good, but telephone company has taken on a massive amount of debt -- >> you're talking about at&t >> yeah and all of the free cash flow is talking about to getting that debt down because the management of a telephone company, utility type vehicle really can't stomach that debt even though it's at a pretty good rate. so i don't think you'll see a whole lot of deal making other than cbs and viacom got to get together. they totally lack scale. >> it was posed as netflix versus traditional media. that's become more complicated. it doesn't seem like a zero sum game but where does that leave you with regard to netflix as a business and stock >> i look at netflix as a consumer and as a stock because if it's -- if it doesn't hit the
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consumer button, it's really not going to be business. it's a fabulous, fabulous consumer product. they keep rolling out absolutely great content. then, however, i look at netflix as a stock and i think, well, there are problems. it's got a monstrous multiple. it's over 70 times current cash flow and it's growth basically -- it has a culture so that it has to grow or else the shareholder base is going to go some where else. the growth has to come from foreign markets and brazil is not the united states. india is not the united states. these markets have infrastructure difficulties. the consumers there are largely going to want native content. rupert murdock years ago lost billions of dollars trying to figure out india and it's remained an amorphus situation. netflix has way more risk than the market is giving it credit for. i also want to see how this
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content spending actually looks on the cash flow statement after the first quarter's released, so i'm on the sidelines on netflix. >> what do you think apple has cooking in tv content? >> that's really a deep, dark secret. i don't think anybody's getting into the skunk works out there and the history of the company is extreme secrecy -- >> it feels like they're working on that. >> they're not doing nothing, but in the scale of things with apple, it's kind of like a side show and the reality in apple i think is the services business and the services business is growing in the neighborhood of 15, 20%. it has a mind-boggling high marginal profitability. you went into the apple stores this christmas and i was in five or six of them and it's really an unpleasant experience because you can't find any one to help you because they're too busy helping other people and if i can get a business like that that is essentially capacity
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constrained and the problem is there's too much demand and i'm only paying less than a market modable for it, i think its really a no-brainer and the free cash flow is either going to be used to increase the dividend or to buy stock and, you know, we'll just have to see when he talks to people about what he's going to do with it at the end of the first quarter. i think it's going to be all good news. it's very hard to lose money in apple. it went down close to $400 billion from its peak, mike. >> it sure did. larry, thanks very much. >> thanks a lot, mike and sarah. going to the final 20 minutes of trading. we still do have a pretty decent rally. s&p up .5% and the russell is in positive territory by almost half a percent. amazon expanding its whole food stores. we've got the details next. and what do you think the top business story of 2018 was send us your thoughts. will read some answers at the
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end of the show. we're getting some good ones coming in. longel bk teth"csi bl"acafr e break.
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♪ welcome back. the dow climbing again.
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up to 232. here are the losers on the dow. what do we got they're not losers. they're all up. every stock in the dow is up. exxonmobil just about flat. coca-cola, intel and chevron are pulling up. amazon expanding its whole foods grocery store. >> "the wall street journal" does report that amazon is looking to expand in areas of the country where it doesn't have any locations. part of the strategy for the expansion would reportedly be able to accommodate more amazon deliveries. according to "the wall street journal's" sources, amazon prime is a two hour delivery service for certain items including some food. its free for prime members in more than 60 cities currently. there are then 30 cities where
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online grocery pick-up from whole foods is available in a half an hour for prime members. "the wall street journal" reports that amazon is looking to expand these fast delivery options to all of its 475 whole foods stores. prime benefits like select discounts on some items were rolled out to the entire whole foods fleet in 2018. now when amazon announced it was buying whole foods in the summer of 2017, you'll remember it sent ripple affects throughout the grocery industry around the world but whole foods grocery market share has remained relatively small estimated to be just around 2% according to several retail consultants. still there's fear that it's only a matter of time before the competitive pressure ratchets up and a segment that's already dealing with razor thin margins and we know jeff bezos has never been afraid to sacrifice profitability for market share. >> i was just looking at a chart of kroger which fell when that
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deal was announced and it's climbed back up. if anything, courtney, what the deal has done is lit a fire under some of the competitors like kroger, like walmart to really speed up their online delivery. kroger getting into the warehouse business and all of their online efforts because amazon's whole foods has far from won or made any real dent in terms of their market share. >> that's a really good point because if you look at where the u.s. is now compared to say the uk market when you're talking about online grocery delivery, we're much further behind in both what we offer and the adoption, frankly. when you have a competitive force like an amazon, it does exactly that. it lights a fire under everyone else to look at what they're offering and can they remain competitive. so in the end, i think the consumer ends up winning out. some grocery prices have fallen but it's so far been hard to see really a big effect from amazon buying whole foods when it comes to price deflation across the
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industry but there's still a lot of time and a lot of possibility left for that to change. >> true. courtney, thank you for the update on amazon whole foods with an expansion plan. we have about 15 minutes to go before the last bell of 2018 and it looks set to finish off the year and the month both pretty turbulent on an up note. the dow is climbing 223 points. s&p 500 is up more than a half a percent, nasdaq gaining more than a half a percent. and the russell has made a comeback. >> some of that reallocation trade has kicked in because that small caps have lifted just recently. up next, our favorite charts of 2018 and what they might mean for 2019. [leaf blower] you should be mad at leaf blowers. [beep]
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you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.
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people around the world are counting down to the new year so here on "closing bell" we have a countdown celebration of our own. our favorite charts of 2018. this is nerdy. you start. >> it is. these are the charts from my
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perspective that tell the story of this year. i'll start with the chart of the forward pe multiple, the s&p 500. this shows massive compression in the valuation of the u.s. stock market. earnings up big, stocks down a lot. you have to go back i think to the mid-90s to see a year where you had this much of a devaluation of stocks. basically this you're at multi-year highs, now you're basically below the average for the past five year. the question is cheap enough at this point. >> what are earnings going to look like next year? one of my favorite charts is actually copper. we talk a lot about the shanghai composite, the chinese stock market being down. the worst of all the major indices. how about copper we haven't looked at this for a while. it's down 20% for the year of 2018. i brought up china because a lot of it is tied to the chinese economy and the slowdown and all the ripple effect that's causing. economies around china are slowing global growth is no longer marching up together. that was the story last year.
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this year it's slowing and there's copper. >> here we thought it was inflationary and now not so sure. i'm going to look at corporate bond yields. this is triple b rated bond yields. it started the year around 3.5%, now you're up 4.7% or so. this is just another area where the cost of capital has gotten more expensive. it's been part of the market people have been concerned with. it shows you that the fed raising rates, risk appetites going down is more of a headwind. >> not recessionary yet but a sign that things are tightening up. my next chart is the russell 2000. small caps were supposed to be the safe haven this year. they were insulated from the strong dollar and the trade wars and everything else that was causing global anxiety and a slowdown. guess what they didn't do so hot. down 12.5% so far this year, that's worse than the s&p 500. they turned out to be a safe haven when the trade war really started to heat up, but then totally fell out of bed.
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concerns about fed liquidity, a u.s. slowdown and the fact that the small companies proved to not be the best bet. >> finally, we'll look at the vix we had two big spikes in the volatility this year. the biggest one came out of nowhere, january to february, this is significant too. normally december you rarely see a big jump in volatility like this. were people caught offsides? does it tell you the market's bracing for a tougher market next year? you want to see that continue to go lower. >> there's already levels of fear that suggest it's too much. you know what my absolute favorite is. i've used it before but it's complicated. it's the balance sheet assets from all the four major central banks in the world and it's the year over year change and what we started happening is the fed started letting its balance sheet assets roll off, that's qt tightening that everyone's
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talking about at the same time that the europeans central bank and the bank of england are tapering its own qe purchases or stimulus. what this tells you is the free money starting after the financial crisis to save the world, it's starting to go the other way and whether that's the reason for the stock slide or tightening conditions, that's going to be the subject of debate. >> definitely at least a psychological headwind for sure. >> yes. i've already talked about this with steve liesman. he knows this is my favorite chart and he's also been looking into what the fed is going to do in relation to its balance sheet and whether, steve, that's actually causing some of the market anxiety here. >> big debate about this, sarah. the fed just introduced the balance sheet. fingered as one of the reasons for the recent selloff but is that really the case that's really the question here there's some scepticism the balance sheet is really the full
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couple of the problems we have critics have complained that the balance sheet shrinkage process has contributed to a liquidity shortage but they have not defined exactly what the nature of the liquidity problem is. the fed grew its balance sheet by $3.5 trillion in response to the financial crisis then they did even more when you had continued low inflation and low growth. here are some of the things that qe is thought to have done. lowered interest rates, boosting the stock market, dampening down volatility and creating a floor or put underneath the stock market. maybe all these things are in reverse. the fed argues the effects of qe won't be as extreme. markets aren't in panic right now. the balance sheet already about half trillion below its $4.4 trillion peak. many think the fed has been cavalier about estimating the
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affects of this unwind. to the extent that you were smothering volatility you opened up the pot, you take the lead off and all that boiling steam comes out. i think the fed is underestimating that impact. we'll see if the chairman has heard some of this criticism and if he gives a slower approach to reducing the balance sheet on friday. it'll be a major policy reversal to change the balance sheet before the fed gets around to cutting rates, sarah. >> i'm just curious. this is totally speculative but you covered yellen and bernanke. they were the ones that first put the qe in place, what do you think he would say to these concerns >> i'm not sure what ben would say on this issue. i do know that janet yellen did put in place the plan that the fed is following right now and i think it's worth remembering that the plan was put in place in june 2017 and pretty much dollar for dollar the fed has followed that plan and you know
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who was a governor when that plan was put in place and voted on it? >> she was. >> jay powell. >> he's used pretty much the same plan and just so people understand what the fed said, they said we would not change rate -- or change the balance sheet plan until we got to a point of a substantial reduction in the funds rate. that's the plan. whether they stick to it and whether they should stick to it are two other questions. >> absolutely. will keep debating it, steve. happy new year. ou too. we'll be right back with the closing countdown. 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.
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don't get mad. get e*trade, dawg. the "closing bell" is sponsored by etrade of the original place to invest online. welcome back to the "closing bell." about one minute left in trading for the day and for 2018. losing a little bit of altitude on this rally. the dow was up twice as much as it is right now. the s&p 500 held around the 2,500 level for much of the day. seeing a little bit of the strength come out of it. we have been expecting reallocation into stocks from big pension funds and other institutions. but here we are, s&p down more than 6% but up more than 6% in the last four trading days. >> it's rather remarkable vee shaped we've had. that lows held very, very low. we had a little discussion about this. it only happened four times since 1929. that gives you some hope that maybe 2019 will be an up year
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and it's been a pleasure working with you and a great year being with you. >> happy new year. >> same here. appreciate it. the dow jones up 210 points, s&p 500 closed around 2502. ringing the bell here is the road runner's club. sarah, back to you. >> there it is the final closing bell of 2018, a year that turned out to be pretty tumultus for stocks. i'm sara eisen. we are finishing off on a high note. let's take a look at the final trade of the year. dow closing up 1.16%. that was actually a little lift here into the close, up 267 or so in terms of the points. s&p 500 finishing off the day down a little under 1%. the nasdaq up three quarters of 1%. the russell up less 1%.
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now, your tally for the year as a whole. the nasdaq closing out with a decline of about 4%. it did the best of the big three. s&p 500 down a little more than 6% on the year and the dow jones industrial average cutting its losses here in the final moments of trade down a little less than 6%. there it is, 2018. worse year for stocks since 2008 and at this hour, happy new year moscow. you are looking at a live shot of red square as they ring in 2019 there. let's get back to 2018 market action on the final trading day of the year. bob pisani is on the floor of the stock exchange. bertha coombs uptown and dom chu on the commodities desk. bob, let's start with you. >> reporter: hello, sarah.
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it's good and bad news in 2018. there's a lot of bad news but listen, it was a great year for big pharma stocks. merck, pfizer they led the dow gainers, up 35 and 20% respectively. eli lilly had a great year. its tariffs and a potential global slowdown dominated headlines in the second half of the year. big global industrials began drooping so caterpillar, 3m were among the worst performers on the dow. the big trade of earlier this year was the bet on rising rates. you remember that one? that turned sour as short-term rates rose but longer term rates remained stubbornly anchored. big losers include not just the moneycenter banks like citigroup but the major large regional banks were down 20 to 30%. the biggest decliners for the year were energy stocks down 20% as a group. many oil services firms like
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schlumberger and halley burton cut in half. and other than health care, the only other sector up in 2018, utility names. they rallied as longer term rates stayed low but they're only about 2% of the waiting in the s&p 500 so they don't move that much at all. thru see, health care and utilities outperforming with energy down 20% and, guys, it's fairly rare to see a 25 point spread between the worse and best performing sectors. happy new year, everybody. and a wonderful working with you. >> all right. same here, bob. thank you very much. see you next year. let's head up town to bertha coombs at the nasdaq. bitter extremes for the nasdaq although it did outperform the broader market. >> yeah, relatively outperformed. we hit those all-time highs at the beginning of the year, the last one at the start of the quarter and it was just downhill from there.
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at the end we do see the nasdaq composite outperforming the major indices partly because large cap tech and the nasdaq 100 really was the outperformer not withstanding the problems with faang. the small companies really here that got beaten up especially small cap biotech. that was really the worst part of the health care sector this year. taking a look at those faang names for the last two, three years. these were the names that led us higher. this year among the big losers and big decliners, facebook and apple combined would have been -- if everything else stayed the same, would have left the nasdaq down 100 points for the year. but adding to that alphabet, slightly lower, they were not enough tooffset the other two names that did very well. that's a measure of just how high they had gone, that amazon and netflix, both up 26 and 38%
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respectively were not enough to lift the nasdaq into positive territories. among the best performers this year, amd. there were a few tech names that managed to withstand the die luge here at the end of the year. happy new year to you both. >> and to you, bertha, thank you. dom chu is at hq to track how energy fare this had year. this was a wrong way bet for so many, dom. >> you're right. you were looking at your charts of the year. the pain trading in energy have been very limited. wti crude has been fallen. about 25%. that's a huge deal but even just from the highs that we saw in october here, we are now down around 40% on wti crude so that pain train in oil very much one of those themes in 2018. we'll see if it continues into 2019. one other place to look at is the relative performance of energy stocks to the overall s&p 500. look at that performance gap that we can see between the s&p
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500 energy sector and the overall s&p 500 about 14%. that percentage point in gap there. that's also something to watch as well and the other one that we'll watch as well here for this particular chart is the oil majors. exxon and chevron because on a relative basis they held up okay compared to the rest of the energy complex. as we finish off exxonmobil trading about 24% below its recent 52 week high and chevron just about 19%. all hovering around that 20% mark. back over to you guys and happy new year. >> same to you, dom. thank you very much. appreciate it. joining us now to talk more about this wild year, jim la kant. jim just mentioned earlier. s&p 500 down 6 plus percent for the year but up 6% off those lows just four days ago. stocks are a lot cheaper if you believe the earnings. where does that leave you as an investor >> you shared some really good charts a little while ago.
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we had a 10% down quarter that's really unusual, but investors can be talked off the ledge a little bit here. we've gone through a lot of damage. we have not solved anything technically yet. all major indices are below their 200 day moving averages, but whenever we've had quarters like this, we've had 19 of them since world war ii, the next quarter, two quarters and year were all very robust in the market. i want to go through all the numbers but they were all very good. secondly, tax selling. we had a lot more of it than we usually had because a lot of investors took those big cap tech names. they didn't sell them last year. they took multi-year profits on these things. they had to offset some of those with losses and so you had exacerbated tax selling. finally, we'll have pension that's come back in and rebalancing. ten year treasury, 2.7 and change. that's not attracting a lot of investment money. eventually it'll come back into the market here. >> you're sounding fairly
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optimistic despite the uncertainty we've encountered here, jim. what part of the market are you telling complaints to buy, the most beaten down or the ones that have held up relatively well like health care? >> that's a great question. you can barbell this. you can buy some of these names that didn't sell off because that shows you they didn't sell off when the market is getting trashed here that institutions and mutual funds and hedge funds don't want to sell these guys. like health care they've held up pretty well. do you go back to the beaten down tech names? they're still very volatile. we also like value, though, on the other end of the spectrum and value has really underperformed. it's at multi-decades low but the challenge on value is, 25% of that index is banks and 12% is energy and we've seen what these areas are doing. they're not bouncing yet. i think you have to be patient there while still looking for an opportunity to buy. wait for the charts to shape up a little bit. >> all right. be patient, but close your eyes
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and we hope that -- >> i think we'll see some mean reversion. none of this is justified economically. the economy's doing pretty good. if you look at what senior loan officer surveys are saying -- >> people said that in 2007 as well >> yes, we did. we saw a lot of credit freezing up in 2007 prior to the break in the market. we saw all sorts of underlying fundamentals really start to deteriorate before the market broke. this time with the economically we're really pretty sound, the banking system is really pretty sound and oil prices are trending lower. most recessions are followed by oil prices trending higher. that's not happening. i think we'll be okay. listen, we've still gone through a lot of damage here. it's going to take a while to work this out, but by and large at the valuations we're at now, they're pretty reasonable spot, i think we have some room for upside and the headwinds, the trump trade wars, the federal reserve board, some of these
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things -- and the budget are going to rate probably in the first three/four months of this year. >> a lot of ways to sum up this year, one theme i'm watching for 2018 and see how it actually bleeds into next year is this story of the great tightening. you had the job market tightening up significantly, right? you had more job openings than you have unemployed, 3.7% unemployment, all that stuff has led the fed to do its tightening, the fed is fixated on employment. the fed has tightened four times. a year ago we thought more likely it would be three rate hikes. the fourth one was controversial and that's contributed to tighter financial conditions. a little bit of credit softness on top of the fed rate hikes and that's bnt story of this year, how much are investors willing to pay for potentially peak earnings growth at a time of financial tightening and have we discounted stocks enough to account for what's likely to be that tighter world and, in fact, could you get some
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relaxation >> the question for 2019 is there going to be more tightening, a pause in tightening or an actual easing >> we've never unwound a $4.2 trillion balance sheet before so a lot of this is unchartered waters here and you can use a lot of these historic tendencies. investors can really benefit from these but we're in unchartered waters and we don't know what the fed is going to do. >> what my team is have been the dollar which is one of the forms of financial tightening. it was a star in 2018. it surged about 5% if you look at the dollar index. that's surprising strength especially because this time last year, the dollar was spiraling coming into its worse year in the last 14, so why did the dollar stand out higher this year well, the u.s. was a bright spot in the world, no question about it. the trade war sent money slowing into the u.s. slower global growth made everybody else less attracted
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especially china, europe and the uk. commodities, currencies that got tied to oil like the canadian dollar they got crushed on that collapse. all of it sent money into the dollar and you got fed hiking and strong u.s. growth makes it more attractive to be in dollars. what does that all mean for 2019 well, the strong dollar has already started to fade in the last few weeks or so. we saw a six month low with the dollar versus the yen. that's a preview of what you can expect into next year. more investors are expecting the fed to pause or slow down its hikes. that makes the dollar less attractive and there's building optimism for a trade deal which could cause weakness as well. strategists in foreign exchange are usually wrong. ears what it comes down to, do you think the problems of the world are going to emanate from the united states next year or from the global economy, whether its politics or economics? if you think its starting to shift toward the u.s., that
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could make the dollar a sell but if you think places like china and emerging markets and europe are going to feel it harder, the brexit deadline is coming up in march, that could make the dollar continue to look more attractive. >> you can look around the globe and you can see, look, european stocks are cheaper on a valuation/growth basis and so are emerging market stocks. the problem is, you've got to deal with the dollar. that's going to drive a lot of our investment themes, everything you just mentioned, currencies, et cetera. we think those areas are cheap but remember, if our economy -- let's sail the fed pauses, china just stays still and we don't have to deal with the differation, money could still flow here and not withstanding what the central bank is doing that could make the dollar stronger. >> my one wild card is whether we become, whether the market becomes more focused on the fiscal position of the united states and the return of the
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trillion dollars deficit. it was always looming out there in 2018. it didn't manifest in terms of the market because you've seen rates move lower. i just wonder how that's going to impact something like the credibility of the u.s. dollar. the dollar long-term has been in a secular, bear, down turn. >> if you really want to dial it back decades. >> as the world goes to other currencies, it had a little pop this year along the way but i think the deficit question is lingering out there and could be long-term potentially a weakness. i'm not sure that comes to any sort of hedge. do investors care about the u.s. deficit? >> i'm glad you brought that up because i mentioned we're in unchartered waters. the other reason is because we've never had this much debt in the system before and now the fed has pushed up rates a little bit. i don't know that they'll push it up much more than they pushed it up already but it does mean anybody on revolving credit, anybody that has a lot of debt in their system and depends on
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that could be impaired. so how do we gain growth moving forward knowing that we're at an all-time high in debt? if we learn from other countries when they've hit these levels in debt, it has slowed down growth because a lot of revenue has to go to debt service and so moving forward, not only has the fed put us in unchartered waters with the balance sheet but we have so much debt in our system that it's going to be a little harder economically gaining these moves moving forward. the economy's fine i still think. moving forward i think we'll be okay but i think we have to pay very close attention to rates and debt. >> speaking of worse performing currencies of 2018. >> putting me on the spot. >> jim mentioned debt crisis. so argentina down 50% for the year and turkey, remember, turkey, that was a crisis that made the lira down. >> yeah. if you look at turkey and some of the other emerging markets, they didn't sell off as much here in this recent meltdown --
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>> the dollar softened. >> right. you could see some gains over there in those areas on a relative scale. >> good to have you here. >> always good to see you. i just want to -- i was put up to this. i want to make sure we have a prosperous 2019. >> yes. very good. jim, thank you. i wanted to buy a crown outside but i didn't have a dollar. in august, apple became the first publicly traded u.s. company to reach $1 trillion in market value but the stock has plunged more than 17% since then. we'll take a look at what's ahead for the tech titan in 2019. and buyers having their say in the stock market today. we'll take a look at how buyers are faring in the real estate market. ♪ [ dog snoring ]
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apple finishing the final trading day of 2018 higher but it was a tough year for the tech giant falling nearly 7% in all. josh lipton is here to recap the year that was and look at whether a bounce is coming in 2019. high, josh. >> mike, apple did finish had the year in the red, a tough stretch for apple, that stock down 30% in just the past three months. investors are worried that
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iphone unit growth will disappoint in the quarters ahead, that new iphones just aren't selling as well as some initially predicted. apple's change in disclosure that it will no longer disclose data on the number of iphones it does sell, that must mean units are disappointing and that trade dispute with china, does the iphone maker get caught in the cross fire another disappointing headline, apple never did launch the whierls charger and said would arrive in 2018. >> we'll be working with the chief standards team to incorporate these benefits into the future of the standards to make wireless charging better for everyone, so look for the air pod charger next year. >> reporter: so how do apple bulls respond to all of this i checked in today with rbc. he says apple's actual financial results have historically not been as bad as supply chain data points suggest. in other words, the numbers
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should be better he says when the company does actually report. also the street is discounting he says the contribution of those faster growing services and wearables businesses and valuation now looks more attractive. a lot of the bad news is priced in at this point. guys, back to you. >> all right. josh, thank you. so will apple stock make a comeback in 2019. we've got a bit of a debate here gentlemen, thank you both for joining us. james, you say back to a trillion dollars, why? >> back to a trillion and then some. i think what's happening right now is there's a lot of fear given the fact that people have gotten burned on know kia and rims. what people are not considering is the fact that they don't actually have to grow iphone units from where we are now for the stock to work.
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there's two things happening. that growth alone can propel 5% growth in the top line and double digits in the bottom line and secondly, you will continue to see shares shift away from android to ios devices because of the fact that they are a very privacy focus. that's a big thing for consumers and the fact that they will increasingly lock in people into the ecosystem from all of their services business. i think that 12 times earnings where we are right now and the ability to grow double digits just by keeping flat iphone units, the stock should for no reason from here continue to go higher. >> max, with that valuation down here it really -- well, down the lower end of its range for the past few years, i guess if you're skeptical on the stock you have to think there are big picture issues that will weigh on it from here? >> i do. the sort of excitement around apple is that it's better than a market performer.
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those days might be over. the biggest issue we have here is that the new products haven't been anything like as promised to replace the products that are getting older in the cycle. the big story of apple and the big story of 2019 is the handset, the smartphone went from exciting to necessary. the replacement cycle gets longer. i don't think the phones are poor phones if you look at the three most recently released, they got a big yawn from the universe and for a company that still gets as much growth and as much profit and as much margin and basic ecosystem support whether that's for the other machines or the services as this company does, the sort of -- we're on the back end of the hill. it's not the game changer. it looks more to be voice activated home speakers and they're, unfortunately, offering from apple was something of a thunderering flop. >> two things that the company tends to enterprimphasize, the s
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business and changing the game especially with the watch. why do you think investors have been not given apple credit for either of these factors really and just counting iphones? >> i think that's going to change this quarter. this is the first time that we're going to see the services margin disclosed. everyone talks about the iphone units will stop being disclosed by apple but they're actually going to disclose the margin profile. think about what happened with amazon. you have a key catalyst with respect to that. talking about the smartphone market. the pains that we're seeing across large gap tech is all a function that we're at the end of the smart bone boom. there's -- the market is saturated, period. that means that the companies that will gain advantages and continue to accrue value in this day and age with the end of the boom is the ones that can deliver on the promotion of efficiencies and improving lines like amazon and companies like
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apple that continue to iterate on quality and really put privacy and the protection of personal information to the forefront. you can't say that with android dealing with fragmented set of manufacturers across the world. >> guys, thank you. happy new year to you both for weighing in. >> thank you. happy new year. >> happy new year. this month's market volatility has mike santoli working overtime. he's going back to take a look at the recent outperformance of the safe haven defensive stock plays. >> and whether it will continue. bitcoin not being a safe haven. was it the big financial story of 2018? tell us what you think on twitter and we'll have the results at the end of the show. ♪ ♪ (buzzing)
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defensive plays like consumer staples, utilities, real estate all higher in the last week. michael santoli to look at how long outperformance in these defensive stocks could last. is this where investors should be next year >> i'm going to show you two sides of that question. obviously the preference lately has been for these defensive stocks. splv is an etf that follows the lowest volatility stocks.
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sphb is the highest beta stocks, the most aggressive. when risk appetites are going down, low volatility stocks go up. you see right now that over the course of the year there's been a 20 percentage point outperformance of low volatility versus high beta. that's a change from the summer when you actually saw the aggressiveness of people as the market sort of went for its new highs. does this mean that the overall market is clenching up for something bad like a recession does it mean we have to say that it's time to opt for stability perhaps. let me look back at a few years ago. we had the same relationship, the low volatility versus high beta for 2015 into 2016 and what we see -- i hope we have that, what we did see there is a big peak in this relationship -- there it is. this was -- this is 15 so this is the summer of 15 when you started to see the selloff and this was the oil crash and you had the industrial recession, you had the china devaluation,
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all that stuff feeding into earlier 2016. if you were looking at this right here, you had a 40 percentage points outperformance of those safe stocks and right here is what we call the diamond bottom when the fed started to back off its tightening plans. oil starts to find a footing. then you had, you know, this massive risk appetite resurgence. it's not in a straight line either way. the character of the market can change quickly. it's not so much you canjust extrapolate forward with what the preference has been. >> i think the character of defensive stocks can also change. it's been interesting to see the outperformance of health care and how people are pointing to that as a defensive play with earnings growth, also company like a proctor & gamble or coca-cola and even a sales force, big software companies that has growth as a sort of defensive -- >> exactly. one way to think about it is quality. they have strong balance sheets
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and a sturdy growth model. it's different than just pure defense. >> all right. we'll see what happens in the new year. let's take a look at how we did finish up the day on wall street. higher across the board. all sectors within the market actually closed up on this final trading day of the month and of the year. the dow going out with a gain of 265 points, more than 1%. s&p 500 up about .8%. the nasdaq closed higher, three quarters of a percent and even the russell index of small companies which had been lagging all day long joined the party toward the close of .8%. still the major averages are down close to or around 9% for the month of december and are all lower. time now for cnbc news, sue. >> hello, everyone. a judge has denied kevin spacey's request to skip out on his arraignment in a nantucket
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court next week. the embattled actor is accused of groping an 18-year-old man in a restaurant on that island in 2016. spacey is expected to plead not guilty. oklahoma city police are looking for a suspect who fired shots into a drivethrough window after he allegedly didn't get the sauce he ordered. it happened just after 1:30 a.m. local time. no workers were injured in that incident. security is expected to be very tight at new york's times square where over 1 million people are expected to take part in the annual new year's eve celebration. the nypd is adding drones in addition to its 7,000 officers patroling that area. and if after celebrating tonight, you want to be healthier in 2019, experts say follow these three simple tips. get a support system, remove all the junk food from your home and let your self celebrate the small successes. sounds easy, we'll see.
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guys back downtown to you. >> i'll try to celebrate the small successes. thank you, sue. >> you got it. it certainly was a volatile year for stocks. certain alternative investments delivered big returns in 2018. we'll take a look at the best performers outside the stock market coming up. 2018 was a rough year for many global markets. why one strategist says the worst is still ahead for asia and europe we'll get that next.
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♪ it was a rough year for both european and asia markets but our next guest says the worst is still to come. >> joining us now is brad burning. thanks for joining us. obviously we're all on the lookout for potential inflection points as the year turns. not always as easy as that but you have seen a bit of outperformance in some global markets in this tough month for u.s. stocks.
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where do you think the regional stories going to go next year? >> happy new year, mike and sara. when we look into the new year here, clearly we've had some negative earnings revisions and if we look at those historically, it takes time for the market to catch up with understanding where the fundamentals are going and we had in late 2017, asia and europe hit two standard deviations of moving to positive earnings revisions. clearly not sustainable versus history. those rolled over at 18. we're probably still first quarter, second quarter before we'll get to the bottom fundamentally of some of those earnings revisions for the market to catch up with reality. there are certainly some vacuums yet of the china preordering. and finish playing those through. the good news is we're getting closer and obviously in the u.s. from a regional perspective as we had our struggles in our positive earnings revisions ended earlier this year and now
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we're starting to see the negative earnings revisions cycle start to begin here as well. this is just normal historic volatility around the market catching up with reality. >> so, brad, the story of the year was actually a global markets underperforming the u.s. and, in fact, the u.s. joined the selling very late in the game. are you saying you expect that to continue, the u.s. to remain relatively in better shape than the rest of the world in terms of stock performance >> yeah. as we look at, you know, first quarter we're still going to have the 2019 outlooks, companies will have to go through some resets on those as we look into '19 but we're getting closer to that, but fundamentally if you look at some of the dynamics of the companies in the u.s. and some of the demographics in the u.s., they're still stronger than they are in the rest of the world. the u.s. is in a relatively better position, but as we said, you know, early in '19 we thought the strong consumer would carry us through 2018. we think that will last into about march and april of 2019, but starting in may and june the
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tax benefits will start to subside and so the strong consumer will not be completely go away but it will fade and the element of strength we've had. we think that that's just going to be moving us into a choppy market rather the straight down market we've had here in december. >> what are you assuming here in terms of any kind of policy responses to this environment that we're in right now whether it's central banks or fiscal is it just going to be status quo for a while? >> i think if you look at the fed from a historical perspective, i think they've always been at best a concurrent tool. they're not going to be great at predicting the next recession or the next economic slowdown so they're going to look for the markets to tell them what they need to know along the way. they'll react accordingly. they've moved to data dependent, but, you know, i think those that have faith that want to say the fed is going to necessarily curtail the current trends that they're seeing is a little overly optimistic.
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the fed will follow what the market shows them that it needs along the way. if things get weaker, the fed will respond. if the economy avoids the recession which we expect that they will, having one or two rate hikes next year, they'll follow the path accordingly. the fed will just follow what the markets lead. they're a good put but not necessarily going to be a driver for the market in 2019. >> so how does this all shaping your top picks for the year? >> yeah, it's a great question. i think the story for '19 is the market will be choppy based upon headlines. i think investors need to really focus on fundamental stories and focus on individual stock picks where we can find real growth at real value and if you look at the month of december in the last quarter here we had some stocks that were really punished with the market that still have great outlooks. we see some great mega tends. we had paypal prove to be that it's a winner in capturing the e-commerce mobile wallet
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movement. i think you'll see a real acceleration it had here in the fourth quarter. they're participating in that and winning in that. if you look at other mega trends, what's next, a lot of people, you know, debating about zillow. i know cramer's been negative on it recently. we downgraded last april. there's a new real disruption coming in real estate. they are getting on the sellers side of home sellers rather than just on the buyers side. we think that that could be a billion in new revenues by 2022 and think there's some great opportunities for them for one play and there's others in the banking space. there's a real deposit war, checking account war that's going to break in '19. apple is in to it and so is uber. you'll see major players breaking into this in 2019 as well and the arms dealer for that race we think is green dot is going to be the one that will be the winner as they've already landed a lot of the big
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contracts but there will be a lot more in 2019 as these banks start to face real new competitive threats. >> brad, you've given us some good themes. >> a lot of secular themes to hang your hat on in a shopping market. >> there's a lot to play, thank you guys. the government shutdown has entered a second week. we'll get to the latest, what it means for your money next. the real estate sector falling nearly 7% this year in the market. whether 2019 will be a buyers or sellers market coming up. you always pay your insurance on time.
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♪ the government shutdown is entered its second week. she remains in washington with the latest. >> it is still going on but democrats have now finalized their strategy to try to get the government reopened and once congress comes back in session on thursday, they plan a vote on two bills in the house. the first will fund eight of the nine agencies that are currently closed through the end of the fiscal year. that's about $264 billion in federal spending. the one agency left out is homeland security. that will be addressed by the second bill which would lead department funding unchanged and would last only through february 8th. we expect this plan to pass
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because democrats will control the majority in the house starting on thursday. however, we're already seeing some pushback from conservatives who are definitely not on board. mark meadows, the leader of the house freedom caucus says the measures were not a serious attempt to secure the border or find a compromise. the $1.3 billion democrat wish list that includes zero money for a border barrier is a nonstarter. he's one of the republicans that have been urging president trump not to back down on the wall and he's been to the white house to talk to the president directly about this. if meadows isn't on board with this plan right now it seems unlikely that trump would be either and that means this could all be doa in the senate. mitch mcconnell says he will only call a vote on a measure that the president will sign. if this isn't it, there's no telling when the shutdown will end. back over to you. >> all right. thank you. no real update or progress. the real estate market
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slowing in 2018. will the down turn push into next year? that question next. coming up on "fast money," one top strategist says 2019 will be a do over year for the market. he'll explain. sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪
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♪ times square, new york city, preparations in place. people already gathering in the freezing weather and the rain getting ready to watch the ball drop. >> more wet than cold but not pleasant either way. it's impressive that they show up. >> i would be lucky if i can stay awake to see it on tv. >> dvr. it was a rough year for the home
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builders with major names all trading 20% lower than what they were at the start of this year. here with the outlook is dolly lens and fred glick, founder and ceo of lens and fred glick dolly, start where we are in terms of new york. a lot of talk about the markets way off. where does it seem to go from here >> i don't think it's as way off as a lot of the articles out recently would suggest i think new development is way off. for example, in 2017, 8.9 billion closed in 2018, less than 4.9 billion huge, huge difference. developers may be in a little bit of hot water i think the rest of the market is actually okay people are taking longer to sell all this volatility makes people nervous. there are positives and negatives to all of this >> really feels like the tax changes, especially in places
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like new york, are having an impact is that what you're seeing >> it hasn't hit yet i think next year that will hit. i think people will file their tax returns and say, oh, my god, for the first time in my life, i'm taking a standard deduction. that will really hurt. >> fred, there have been overriding issues or at least background issues on affordability in general for housing. interest rates look like they were going to be a problem for a bit. they backed off. how do you think things are set up right now sincewe have such low turnover, it seems, in residential housing? >> yeah, it's -- like dolly said, there's this wait and see attitude a little bit. sellers are taking longer to sell their houses. they're upset because 20 people didn't show up at an open house and put in 15 offers but that reality is finally setting in with people interest rates, you look ten year was under 2.7 today it's insane if you think about it we didn't get as high a push as we should have i think rates are going to come
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back down. that's going to help spur the market initially it's going to be, wow, we're in the threes again because everything is a little quieter. the market is also changing a little bit because of what's being offered. there's the programs where people are literally buying online without seeing brot i think that's a little bit of a flash in the pan one bad deal is going to kill that everybody will take themselves back on the sidelines, but also, you have technology that is improving, commissions coming down there's no sense in paying 5% or 6% anymore because it just doesn't make sense also, rental properties. it's easier with technology to be able to manage your property or have someone else manage it for you. and you're going to know what's going on with your property quicker. so it's going to be kind of an adjustment to the technology, basically the same kind of market obviously it matters in each
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individual city as to what's going to happen with property values because of employment, et cetera >> so how do the economics shake out right now? buy or rent? which is a better bet? >> you know, each individual person has to look at that themselves generally when you rent, you're not renting as good a product as if you were buying it. you're also not improving it you're living in it as is. it's also a huge lifestyle choice i, myself, if i were to go out and rent, i'd rent something inexpensive in a nice area that worked but if i want to buy, i want to buy something nice so it's a big difference >> i guess which is a better bargain? >> better bargain is probably a rental that doesn't make it better. and by the way, i think the overall story for next year is going to be buy the dip. >> buy the dip in prices >> yes >> in other words, wait for prices to come in? >> i think developers are going to be stuck. they're going to give many more incentives we're finding all kinds of developers coming up from miami
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this winter, all these plans from l.a., from everywhere people are going to have to adjust, and that adjustment will give us an opportunity to buy the dip. >> all right sounds like maybe a buyer's market dolly, freds, thank y, thank yoy much. >> thank you, happy new year >> happy new year. >> and to you out there. up next, a look at the assets that performed better than stocks in 2018 and whether you should be betting on them for the new year, next for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish,
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the s&p 500 closed out the year down about 6%, but if you invested in some of these alternative assets, you would have significantly outperformed the market in 201837. >> coco a up 28% fine wine up 10% classic cars declined a bit, down less than 1%, still better than the s&p 500 i also saw a longer term chart that classic cars have been a very performer >> bitcoin didn't make the list. >> yeah, the alternative fringe there. we did ask, and you tweeted.
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we wanted to know what you think is the biggest business story of the year, the top business story. here are some of our favorite responses. a lot of them about elon musk tweeting elon musk of tesla was a crazy news story of 2018 that was for sure. >> funding secured >> 4/20, all the rest of it. >> francisco saying continued debacle of continued brick and mortar retail such as toys r us, near extinction of sears, kmart, and jcpenney >> that's a thematic look. it's a continuing trend but coming to a head and here's steve tweeting one word, brexit i guess could also apply for 2016 that was a big story then. >> the vote. or next year when the actual deadline comes up and we're going to see what brexit looks like the kid tweets, how wrong all the norms were this year, i.e. the january effect, post election returns, et cetera, and how wrong all the pundits were
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in january about the market direction. >> that's true a lot of the seasonal stuff didn't work. also, this is the first year when you were up through the first three quarters of the year in the stock market and finished with a negative calendar year. a lot of unprecedented stuff >> a quarter negative december, which is traditionally a good month. >> and finally, b-rad tweeting, facebook losing $120 billion in value after hours following earnings this was the canary in the coal mine for f.a.n.g in retrospect, there was a message in that response to facebook we obviously had some stocks that held things together for a long time after most had rolled over >> facebook's first down year. what would you pick? >> i think as a business story, it probably was musk and tesla >> really? >> i think just because of the uniqueness of it what about you >> and tesla actually outperformed the market on the year despite that craziness. >> and made a profit for the first time >> my story of the year had to
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have been the trade war. it was something president trump threatened and talked about in the campaign it actually came true. >> it's true >> we saw tariffs all over the place. business is still trying to figure out how to deal with it >> amazing to think it really just start in february we've been living with it for so long, it seems, but it was this year >> and starting to show up more and more in company earnings >> that does it for "closing bell." >> happy 2019 and a healthy one too. "fast money" begins right now. >> oh, yes, it does. "fast money" starts right now live from the nasdaq market site you know where we are. we're overlooking a packed and soggy times square in new york city about a million people get ready to watch the ball drop the new year celebration is happening around the globe check out these images from athens they've rung in the new year still seven hours to go here on the east coast a little longer if you're out in california our traders in

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