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tv   Closing Bell  CNBC  May 23, 2019 3:00pm-5:00pm EDT

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your show. they truly have an understanding of that culture and they don't seem scared about any of this just yet >> kate, thank you very much why don't we take a quick check of the markets as we head into the final hour of trade. the dow industrials a bit off the lows but not very much 424 points lower thanks for watching "power lunch," everyone >> "closing bell" starts right now. >> welcome to "closing bell. i'm sara eisen >> and i'm wilfred frotd we've got 59 minutes left of the trading day. we'll tell you everything you need to know before the market closes on this wild down day >> here's what's driving the action today china trade rhetoric is heating up, especially in the chinese media where the global editor says the u.s. is becoming a fachist country. more chip companies cutting ties with huawei. and the data
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german business confidence hitting a four-year low. >> we will have experts here to help you break it all down including goldman's head of commodities research jeff curry. energy, by the way, the worst performing sector right now. oil prices are plunging. >> joining us for the hour to help break everything down is stephanie link, cnbc contributor from tiaa and nuveen company look at best buy as o'a poster child for today's sell-off good numbers, decent guidance then, they start talking about tariffs and higher prices for tourism and back the stock gets cut along with all of retail >> it really was a good quarter. they actually gained market share. one one comp very impressive and better than expected but that had nothing to do with what happened with the stock today. it's was the conference call where the ceo said 25% tariffs is much different than 10. all of a sudden the stock just tanked because obviously earnings now have to come down again no matter what they did in this current quarter >> if you look at the next round of tariffs if we do go through with it, laptops, cell phones, some of the biggest imports on
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that list. who from the 25% tariffs. now it looks like it's more like 25% to 30% in some cases. so clearly without having any real understanding of where numbers are going how do you value these things you might say it's cheap but it's not cheap if numbers have to come down another 10%, 15% >> the utx bottom of the dow down 4%. and on the old price move energy bottom of the sector let's dig deeper into this sell-off bob pisani's here at the exchange bertha coombs looking at tech rick santelli's watching bonds phil lebeau has the latest on bonds seema mody's watching retail and diana ole sic watching housing bob, let's give it off with you. zbla lost collateral damage from the trade wars cart pilar down 12%. mid 130s a little while ago. but we've had other more important damage yields had been moving down dramatically sought banks have been having problems jpmorgan's down 8% or 9%
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goldman's down 8% or 9% this month. we've had oil come down dramatically in the last few days and global growth concerns slow down. exxon down 8%, 9% so far this month. everybody says oh, other names are up we have merck's up, pfizer's up. coca-cola's up about 2% this month. folks, if global growth expectations have to come down on the trade war concerns, earnings are going to come down for all of the global companies. doesn't matter if you import from spain -- or excuse me, import from china or anywhere else those numbers are going to come down as well guys, back to you. >> thank you, bob. tech stocks getting hit hard today as well on china trade fears. bertha coombs has more on that >> the chip sector is down for the third straight day now off about 18% from its historic high a month ago. secretary of state mike pompeo on "squawk box" here at nasdaq this morning said expect more tech companies to joint likes of panasonic and british chip maker arm cutting ties with huawei
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netapp doesn't do business with the chinese company but analysts -- snops sis a direct supplier to huaweiand says it has cut ties and trims its guidance but beyond that the chip automation firm still sees strong growth and it's up today. sara >> all right, bertha, thank you. let's send it down to rick santelli at the cme group in chicago with a look at how bonds are performing amid the sell-off on multiyear lows on bond yields >> at least 1 1/2-plus-year lows as a matter of fact, throughout the day ten-year comps continue to move back through time as we move down from 2.36 down to 2.29 rook at a two-day of two years down nine basis points ten-years are down about the same there's not a lot of implication on the curve although 30-year bonds are down a little bit less because they'd been a bit spongier you can see there as we sit right around 2.30, haven't closed at these levels since october, october of 2017 it isn't unique just to 10s. whether you look at 10z, boons, gilts, 10-year gilts in the uk
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all the major sovereigns are seeing a flight to safety. the dollar-yen the dollar is against the yen here yen is doing better than the dollar, and it's getting very close to the worst levels against the yen since february the vix is trading 17. its last big high was around 20. you've got to be ware yif those risk parity traders coming in selling stocks if it gets much higher three-day of the dollar index, it did a u-turn. it didn't actually tick out the close -- it did take out the close intraday, not on a closing basis. want to watch that for tomorrow. back to you. >> rick, thank you very much for that now, boeing is on watch today as the faa meets with regulators from around the world about the 737 max. phil lebeau is in fort worth, texas with more. phil >> hey, wilf, this meeting's been going on since 9:00 this morning and basically it comes down to this the faa leadership discussing with their counterparts from around the world the status of the 727 max. that means what happens with the
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recertification process? when does boeing potentially file an application? when is the recertification fight? awful of those details are being discussed. there's no time frame for lifting the grounding of the max though foreign regulators have increasingly been saying you know what, once they submit their application for the software fix we want to check it out ourselves. that kind of scrutiny. guys, back to you. >> phil thanks very much for that boeing is trading down by 1.2% today. stephanie, you're a holder is it now more trading in line with china trade fears than perhaps the 737 max fears? >> actually on a relative basis it's outperforming today the markets, outprormg the industrials as well. i think it is really about the max really you have to get this thing resolved you have to get this plane back in the air you have to get confidence again to surround the product and the safety and that's going to take time. at this meeting today no one was expecting certification but faa's truly trying to get all of the regulators on board at the same time. so that there's no surprises and that maybe we can have a timeline eventually up to when
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we're going to get the certification done >> keeping an eye on retail as more earnings come in. seema mody is watching that sector today seema. >> earnings from major retailers have sent the broader sector down 9% for the month. saying tariffs at 25% will result in price increases and it will be felt by the consumer that's back down nearly 6% other companies like carnival, rite aid and jcpenney all down 5% to 7% worth noting there are a number of companies within the retail space that are sitting on big stock drops. gap, tiffany, even crowinger down 30% from their respective highs. and that's why again one of the big losers in today's trade. guys, back to you. >> seema, thank you so much. stephanie, it's been a hard week for the retailers. where do you want exposure >> i want them in the big boxes. i don't want them traditional. either sector leaders like costco i still think that --
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>> diehard costco fan. >> anytime i -- >> shareholder as well as stockholder. >> yes i am a shareholder i definitely frequently go there. i would say every time i try to trim a position in costco i regret it because the stock continues to be a compounder such a great story because of the revenue and its description. some restaurants, i like mcdonald very much i like the transition there. >> trade wars? >> they could be but i love it because they are doing great things fixing the company, restructuring the stores and that sort of thing. revamping their entire product and that sort of thing so there are pockets of consumer that i like. and then within kind of discresh i like nike and the turnaround story in under armour. there are spaces but you've got to be very careful >> housing in focus on the back of weak sales data diana, what's in focus there >> sales of newly built homes fell more than expected down 6.9% in april from march still
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up from a year ago but it's likely because the builders are still putting up mostly move up homes not the cheaper starter homes and that's why the median price shot up nearly 9 prs to a new april high good news for the builders though is mortgage rates are tanking today as the yield on the ten-year treasury plummets which mortgage rates loosely poll and we'll have more of course watching that for tomorrow back to you. >> thanks very much for that let's talk about the market action scott wren, global equity strategist at wells fargo investment institute scott, thanks for joining you. what are you telling your clients today, hold strong or cut your losses and sell >> wilfred, here's something we've done over the last couple of months. we had obviously a huge run-up from the christmas eve panic low. we felt there were a lot of uncertainties out there. we've been leaning hard toward stocks in multiple years we backed off and we're neutrally positioned now we're unfavorable or under weight on small caps, u.s. small caps we're overweight or favorable on e.m. but net net we're pretty neutral
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on stocks in terms of serktsz we still want to lean toward industrials, consumer discretionary, tech, even though clearly they've been hit here but in our opinion the expansion is not over. so what we're doing is watching this obviously, we've been volatile in a fairly narrow range the range has opened up a bit today. almost certainly we're going o'touch the 200-day moving average. we could easily trade through there. i think we're going to be sharpening our pencils and looking for spots to put some cash to work >> like where in particular, scott? >> i tell yoyou, sara, our clients, retail clients in general have a little bit of cash we raised a little bit of cash when we backed off stocks earlier in the year. industrials, consumer discretionary, technology. you know, we look at emerging markets as well too because our retail clients as many on the street are, they've been under way international anything
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we want to take advantage of the opportunities. of course in order to do that you have to have a belief that this expansion is going to continue, that at some point down the road we are going o'get some positives out of these trade negotiations, which we think we will. now, has that ban pushed off based on what's been going on the last couple weeks? i think it has and the probability of a successful deal has certainly gone down a bit, but we still think there's a raeblg chance we're going to see something positive but the timing on that is pretty difficult right now. >> some of those cyclical trade link sectors like industrials and tech, can you get into those broadly or only certain stocks >> i think you want to be really careful. i do agree with stock you that want to have some cyclicality because the valuations are very attractive and where we are in the cycle. we're not in the ninth inning so to speak but i think you have to have a barbell in the short term because those serktsz are getting hammered and oil in particular today if that
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actually continues to slide then it's going to be very difficult for not only energy to outperform but industrials because that feeds into the energy food chain. that's difficult on technology you have to get some sort of resolution on huawei you don't want to even touch the semiconductors you don't want to broad brush buy them all because there's too much uncertainty there in tefrmtz clouds and software stuff i like that sector but listen to what netapp said today, cios are backing off because of the trade concerns. >> ibm >> this is a really big statement from the ceo and that's why the tom has gotten hammered. but i'd be very careful because i think software is very overowned. >> thanks for joining us from wells fargo. still ahead on "the closing bell," energy is in a bear market more than half of the s&p 500 companies are in correction or worse. we're all over today's big sell-off as weapproach the close. after the break, senator chuck grassley said this month he's not a fan of taffris.
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up next he'll join us live with some reaction to the escalating trade fight with china [ alarm beeping ] wake up! there's a lot that needs to get done today. small things. big things.
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chairman of the senate financial committee chuck grassley from the great state of iowa how much relief does this give to the farmers >> first of all, it will be in three trantranches hopefully no more than 5 billion will have to be used because we'll get back to negotiating with china now, i can't predict that. all i know is our side is willing at the drop of a hat to go to beijing to do more investigating but china is going to have to go back to where they were on the 10 yard line of getting the ball over the goal
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in the meantime they've moved it back to the 30 yard line and you've got to negotiate in good faith and that's not good faith negotiation. so if we get this settled with china i would suggest only about 5 billion of the 16 billion will be used. but the thing i should always start off with is this that farmers don't want aid. they want trade. they want markets. you work for decades to build up markets. you've got to be a credible supplier of your goods and these negotiations have interfer interfered on the other hand, the farmers know that china's been cheating for three decades and at least two decades they've been in the world trade organization they ought to live by the rules of international trade, and they don't. and farmers know you've got to get china to quit stealing our intellectual property. >> overall, senator, where do you and the farmers you represent stand? still in support of the
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president's tough stance on china but leading to a need for aid instead of trade >> the answer is yes but i also want to back that up with this. every farmer including my family that farms, and i'm part of that, you always have a lot of anxiety when it looks like the government's interfering with you because the farmers got to count on the market. you can't ever count on politicians. >> do you think that the president is going to get the support in the next election that he got in the last election from a rural state like yours, the farm belt, given how much pain these farmers have undergone as a result of the trade fight? >> as of now, yes. but don't forget, it's 15 months away from election season. and a lot of things can happen in 15 months but also, a lot of good things could happen and that would be if the president has the same success
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with china that he has now with mexico, canada, getting our pork into argentina, getting our beef into japan, negotiating looks like it's going to be easy with japan. and so he's had a lot of international trade victories. but china is the big kahuna that we've got to deal with >> i was looking at your twitter feed earlier were you not suggesting there that in fact if china plays hardball and there's no deal at all that that will embolden the president against the democrats in 2020? >> it will and the extent to which china continues to be the same cheater in international trade that they have been for decades and having government interfere with normal free market principles, i think that makes the president's position look stronger but also they ought to know that
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when trump sets his mind on doing something he's got stick-to-it-iveness and they ought to take that into consideration. they need to take into consideration that they're the second biggest economy, we're the largest economy, and the two of us together by cooperating cannot only help each other to a great extent but we can also help the entire world because look at what reduced tariffs have done tone hans the lifetime of everybody around the world from the standpoint that 70 years ago the world had 50% of the people in poverty. today it's less than 10% that's been freeing up of trade. >> senator, just switching geographies, is the eu an ally when it comes to trade or are they as much of an enemy as china is >> no, not as much of an enemy as china
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because europe lives by the rules of international trade now, let me answer your question from two standpoints one, europe, canada, the united states, and japan have been having four or five meetings in recent months to have a united front against china. and i hope these three entities can back up the president, even though the president can't negotiate for canada and europe the goals that trump wants in regard to china europe also wants. it solves some of their problems the other thing is in regard to our negotiations with europe they're very difficult when europe will not negotiate agriculture. we have to have comprehensive negotiation with europe. that's agriculture, manufacturing, and services. but europe's taken a position no negotiations on agriculture. that's about the only difference
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with us and europe on trade generally or in regard to our own negotiations >> senator, i just want to point out that the dow jones industrial average is down 334 points another 1% decline today it's been very volatile lately as these trade tensions have flared up. how do you think about whether it's going to be worth it given now we're really starting to see the markets, the economy, in places like retail which is not getting a bailout, like the farmers, they're all warning about the hit they're going to take >> first of all, i can understand why people that are in the stock market for a living worry about those things but if you're in the stock market for the long term, you've got to -- you cannot give anything but success credit to trump. because when he took over the economy everybody thought it was going to tank. look at how fabulously it's
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increased. because of the tax cuts, because of deregulation, and just the certainty that that brings to business in america. so we ought to applaud where the stock market is. even if it's down today, just think how much it's up in the last 2 1/2 years >> senator grassley thanks for joining us >> glad to be with you >> let's send it over to mike santoli for a look at today's market dashboard mike >> thank you very much here's a look at what we're going to be hitting through the end of the show. volatility going get a snapshot of where we sit on today's jumpy action also take a look at sentiment. some risk readings out there to see just how risk averse the market is on a day like today. and then later on take a look at the market in the context of the broader range it's been trading. volatility, yes, the volatility index is up pretty substantially today although to be honest it's actually a bit of a contained move relative to how much the market has jumped.
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what you see over here is above 17 two weeks ago when we first initiated this sell-off after the trade reescalation the vix hit 20 three or four days in a row. we clearly are below the 20 range. what i do want to point out is we never did go below 15 in this little stretch right here. it looks a little like that which is a fall off last year where you had a decline off spike highs but it chopped around for a while, obviously volatility surged in the fourth quarter and that was no good, the market fell apart. but right here it seems like it's a pretty measured move. tomorrow's a friday before a three-day weekend. there's going to be a" drag lower on the vix just because it's got to price in three days november market movement we'll see how that plays in the next 24 hours sxlp see you in a bit. 36 minutes to go before the close. dow down 354 points or so. s&p 500 off about a% or so we've pretty much been steady at these levels throughout the day. 1.4% on the s&p.
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only utilities and real estate are higher energy and technology are the biggest losers up next a sea of red for the market but some auto names are actually getting a green light from wall street firms we're going to round out the biggest analyst calls on the day. next also still to come, e -o being felt around the world in europe and elsewhere. we'll xlr that what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to for a prospectus containing this information. read it carefully.
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. uber with a buy and $50 price target saying they are confident the company can quadruple bookings by 2025 >> upgrading farri's outperform from in line saying the company's revving up in a time of backfires and loup ventures outlines tesla's china risk the stock fell and turned around on a reuters report the company produced close to 900 a day this week bringing it close toyotas target the tesla note seems like it's a small downgrade in the fafs a sea of big downgrades. from one of the big bulls. you must acknowledge that's a
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tough thing to do but it doesn't really alter the narrative in terms of the downgrade, just fractional in terms of production number expectation. sxwle doesn't normally come out too negative on any of his buy stocks at all. a good point you just made i think this company, it's a great product, it's a really tough stock. i have so many names that are down i can choose from in the auto industry, by the way, that are much cheaper, that are earning real earnings, that have margin up side opportunity and have leadership that knows what they're doing i just know this is a very, very tough clock. at the very tame time the valuation just doesn't make sense in a very volatile environment. >> what's your preferred auto stock? >> i actually like the auto parts. some of the auto parts like lear or active. they've gotten hit very hard but they're very cheap you've got to get the china resolution under way but i'm staying patient because i know they are long-term leaders as you expand within the auto --
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in the cap if you will, the technology and electronics and that's how they're going to win. >> the other interesting thing about the ferrari note here is that for a traditional all t aae note argues this is a company that can in fact control its own destiny and does have pricing power, much more of a luxury good than an auto traditionally is the case they're making as well as a nice outline of all the latest models. >> maybe i should test drive a few? >> he'll see if we can arrange it >> we've come back a little bit since the top of the hour. still down 318 points. the loest day on the dow was 444. china trade rhetoric heating up, especially in the chinese media where the global times editor in chief said the u.s. is becoming an economic fash of the country. the trade war is starting to look like a trade war. microchip companies cutting ties with huawei, for example and german business confidence
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hitting a four-year low. all of that weighing on the market but as you said just off those session lows in the last half an hour >> time to get a cnbc news update now with sue he resha hi, sue. >> hello, sara hello, everyone. here's what' happening at this hour the senate reaching an agreement on a $19.1 billion disaster relief package after months of negotiations the deal comes after president trump agreed to sign the package without any funding for the border a vote in the senate could come a bit later today. forecasters say the upcoming hurricane season should be normal but cautioned that these days normal means a lot of activity the national oceanic and atmospheric administration announcing their predictions in washington today >> the atlantic hurricane season outlook calls for a near-normal season with a 70% chance of 9 to 15 named storms with top winds at least 39 miles an hour. of those, four to eight will become hurricanes, with top
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winds of at least 74 miles an hour and a pair of barges broke free from their moorings on the swollen arkansas river in oklahoma and slammed right into a dam. one of the barges immediately sank the other went down within a minute the dam itself, however, did not appear to be damaged you are up to date that's the news update this hour guys, i'll send it back to you >> okay, sue thank you very much for that we have 28 minutes left of trade as we said the markets are off their lows but still down sharply 300 points or so for the dow the s&p down 1.2%. after the break we'll take a look at retail investor sentiment amid the volatility and why it could be a sign of where the market's heading next. and later the energy sector back in bear market as crude oil turns in its worst day of the year good thing we've got goldman sachs's head of commodities here today to tell us yes thinks oil see more down side ahead as we head to break here's a look at the s&p 500 sectors on a
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big down day in wall stree di o in some traditional defensive groups utilities and real estate. everybody else is lower. i don't know what's going on. i've done all 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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welcome back let's send it over to mike santoli for a look at his second dashboard, retail sentiment. mike >> yeah, wilf, we get the weekly american association of individual investors poll on thursdays. today it did show a pretty significant pullback in bullish investors, those who said they were bullish on the market over the next six months. down five percentage points in terms of bulls mid 20s. the long-term historical average is around 36% bulls. and you see there are more bears than bulls however, the number of outright bears also came down a bit really people are neutral. what i would say is roller sentiment is moderating. you've definitely had optimism come down but it's not as if people are panicking and fearful. you look at a chart of bullish sentiment over time you'll see it's one of the lower readings of the last year right here obviously was more -- fewer bulls back in december but you're pretty low on this chart. as you can see, though, in 2015-2016 we kind of oh yo-yoed around this zone quite a bit so when the market stays under
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pressure this will probably give way. i don't see it as a clear sign that retail investors have kind of flushed out all their optimism but it's moving in the right direction in terms of whether stocks can bottom relatively soon. >> sort of goes along with your last chart the vix isn't at panic crazy fear levels. i just want to ask you about the action we're seeing right now, mike little bit of a bounce in the final half hour. >> you're not seeing it attached to really any headlines. although right at 3:00 eastern time bond yields did lift off their lows the 10-year yield bounced off of 230. a minute later stocks bounced. i mean, they're just chasing the bond market around right now that's the locus of a lot of the fear, this growth scare we're now in globally. i think that was probably the proximate cause. also the s&p spent a lot of time sitting right on top of the lower end of its recent range. support levels around 2800 it didn't break. maybe that was enough to give a little bit of relief at least pour now >> when you hear things, stephanie, like we're not at payne levels on the vix or on
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retail sentiment, how does that make you feel? what does that signal? >> i think retails, he hthey mi the whole rebound from the december lows. actually took out $80 billion from november to december last year and then over $100 billion they've taken out year doto date so they have been pulling back for a very long time i don't really read a lot into it other than they're cautious that makes me more positive as a contrarian and trying to be a contrarian but you know, we are kind of hostage to every day these headlines. you have to either ignore them or you have to pick your spots and just have faith in the long term that's what our firm does. >> you like some of the brands the strong brands. >> i do. i always look at if i can get the number one or number two player in any industry with a good balance sheet, great cash flow, fabulous management team, if i can get that kind of
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company on sale when it gets hit with everything else for no reason, that's when i get excited. in december we all stopped here and those were the levels. we are getting close in some sectors here for sure. so i have been picking, but i said before you have to have a barbell to protect on these really bad days. little bit of of defense, little offense. >> morningstar 2017 fund manager of the year tells us what she's watching in the global markets >> plus we'll head to the floor ad'sakonhe securities to get a trer te t sell-off. he'll trade the close just minutes before the bell rings. back after thi
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welcome back our next guest says trade war tensions are actually creating opportunities in some cyclical stocks sarah keterror from causeway capital joins us with more on that some of these opportunities you're seeing, though, they're overseas, is that right? >> that's correct. measured as the isa index saw a 20-year valuation low versus the u.s. market. there are plenty of opportunities abroad >> and european banks top that list i guess we say this every time you come on. if you look at deutsche bank
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they have continued lower throughout the time you've called for this sector >> we didn't buy them all but there are some with very committed managements working tirelessly to streamline their businesses like unit credit in italy an come out of the banking system, and it will because there's no other way the banks could then lend and offer credit to economies that need it >> what about the idea, sarah, and i've heard this from a lot of especially bullish fund managers that the u.s. is the global safe haven right now. our stock market, our dollar, that's where the money is flowing. because we're feeling this global slowdown less than anybody else why do you want to be outside the u.s. >> outside the u.s. the economically defensive stocks are safe havens. you have to pay a lot for safety we're not willing to pay 27 times earnings for european beverages, for example they're the same stocks they
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always, were just more expensive. and i say the same is true of the u.s. market in aggregate it's an expensive market relative to the affordability of non-u.s. but you have to be willing to take some risk and the economies outside the u.s. are not looking as robust in general especially europe and japan that make up the large part developed world. but within that are some fantastic businesses for example, industrial automation, robotics, like a.b.b. listed in switzerland or it's a competitor, another large market share company in robotics in japan called sonic they're both cheaper than they've been in a very long time, and this trade war has brought them -- the stocks into value buying range, which is exactly what we're paid to do. our clients ask us to upgrade. they want us to make sure we get a lot of great quality companies in the portfolio when others are pessimistic. >> thanks very much for joining us
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stephanie, deutsche bank 0.2 times book it's pretty cheap. >> sorry then. even ing is at .7 times tangible book i never thought i'd see the day. if i had my choice between u.s. banks or european banks, hands down because the valuations have already come down. they're not as cheap but for good reason. they're much better capitalized and they are taking market share. that's where i would go if you're going there >> you've got to follow bond yield. yesterday breaking 2.30. we have got 15 minutes to go in today's session. up next we've got the one move to make before the bell rings. it's our last chance trade >> and as we hd bak heatoreere are the biggest losers in the s&p 500. "closing bell" back after this
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welcome back 12 minutes left to trade we are down 330 points on the dow. at one point 4% on the s&p stephanie, chance for your last chance trade >> united healthcare the stock is down 13% from the december highs it's had a miserable last couple of months. not just because of the
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political concerns fundamentals are just fine this company just beat and raised guidance. they have a great balance sheet, great management team. this is the kind of story i was saying if i can get the number one player on sale for 15 times 2020 earnings i'll take that all day long so i've been adding that >> health karros a defensive play half of them stay in the political crosshairs >> and that is why this stock and the hmos in general have been down because of sing many pay. there was a hearing yesterday in washington that actually was a little bit more favorable in terms of more democrats maybe not going after the single pay, saying that the obvious, how are you going to pay for it quite frankly. right? i think that cooler heads have prevailed. the group, the hmos have actually recovered fundamentals are quite strong. i'm going to use this as an opportunity. i've been underweight health care and i think i'd rather own health care than staples ute ilths. they're a lot cheaper.
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>> worse performing group of the year earnings coming out after the bell solomon has a preview of hp enterprise and hp inc. seema mody watching deckers. >> with hpe analysts are expecting flat or slightly lower revenues anything better than that will be key here. idc telling us the company's been trying to boost operating margins by cutting costs and going after margins with segment. investors are watching for any progress there now to hpq the street expecting an eps of 51 cents, which is about a 6% increase compared to last year in the past year they've met expectations three times and beat once. any major departures from that would be noteworthy. guys >> okay. rahel, thanks very much for that let's get to seema mody now for the key things to watch and ross and deckers. >> given the recent decline in retail stocks the market will want to know if ross stores' attractive pricing will work well in the current environment and whether the tariffs whether
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directly or indirectly will ultimately hurt its margins. it's worth noting that hedge funds recently disclosed a stake in ross stores deckers, this is a stock that has held up relatively well. over 40% over the past 12 months strength in its ugg brand boots last quarter will be a key metric to watch along with any commentary on tariffs. deckers, sources roughly 30% of its products from china. wilfred? >> seema, thanks very much for that up next we'll be back with the closing countdown. we've got all the angles kofrds with our closing bell a-team >> and after the bell goldman sachs's jeff currie on the oil price drop today that's after the close we'll be right back. dow down 350 points. to a single defining moment...
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and even explore what-if scenarios. where's gate 87? don't get mad. get e*trade and start trading today. welcome back just six minutes left to go in today's session. we're down 320 points on the dow. stephanie is here with us. we talked a lot about the trade-affected names we haven't talked about the energy affected names. bad sector to be in today. >> really getting crushed. absolutely it is trade. but i think it's also global pmis and the global slowing story. >> u.s. inventories have continued to be high >> when oil rallied this much, up 50%
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i woul >> the etf for chips hit a new low today. around 96 -- tracing back gains going back to february or so back above 100 as we do into the
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close. that bounce really attributable to intel take a look at intel had been lower today has been up 1% and qorvo starting to move up higher a lot of these off the lows. nonetheless a lot of damage still in the chip space. bob, let's send it over to you >> that modest rally notwithstanding a lot of damage has been done this week and this month. dow du pont is down 20% in a month. that is a pretty startling number we've seen double-digit declines in qatar pil sxr others. 3m another good example down 13%. plus down again this week. jpmorgan down 7% goldman sachs down 7% or 8%. oil's down on global growth concerns the last couple of days and we've seen big oil service production companies down. new 52-week low there for halliburton. the big question is now what about the more defensive names, the mercks, the pfizers, the coca-colas generally have been holding up
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pretty well. but if global growth expectations come down there's not going to be any hiding in those names. they're going to have to go down because they have global exposure even if they're not importing anything from china. >> there's the closing bell right now. we're going out just off the highs of the day dow jones industrial average down 282 points. let's go to wilf and sara over at the closing bell. if you're just joining us, good afternoon welcome to "the closing bell." i'm wilfred frost. >> i'm sara eisen. along with mike santoli, cnbc senior markets commentator, here's where we're finishing up today on wal session dow jones industrial average down a little more than 1% loss of 286 points a lot better than we we were at the lows, down 444 points on the dow. recovery starting at 3:00 p.m. final hour of trade.
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and all the way up until the close. still hit pretty hard. the s&p 500 down 1.2%. the nasdaq got hit even harder, down 1.6%. technology squarely in focus whenever these trade concerns flare. and the russell 2000 index of small caps sort of risk-on barometer lately down 2% >> industrials, tech, energy we saw a big move in yields. we're talking about falling below 2.4 on the ten-year yesterday, below 2.3 today that meant utilities high, financials lower, weighing on those sectors. >> i think that's the big takeaway for today is it wasn't just about the stock market. bonds have been calm pretty much but not today. we saw that drop below 2.30. 17 1/2-month lows for the ten-year treasury yield. concerns about global growth and if you don't believe the bond market look at oil which notched its worst day of 2019. >> we have earnings watch as
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well eric chemi standing by for hbq results. seema mody with results on ross stores and decker. we'll bring you those as soon as we get them. >> joining us to talk about the market today, stephanie link is here nuveen liz young, director of market strategyies.cmy investment management we did see a recovery toward the close but still a lot of sectors and a lot of individual stocks got hit pretty hard. >> concentrated little growth scare today. i think that's the way to think about it it wasn't just about what was the latest headline on trade it was those pmi numbers around the world. and in the u.s. as well the market number. you've got a little bit of that yield compression once again down out of the range down o'new lows that's an excuse for the market to sell. there's been a lot of deterioration already in the market as we've been talking about the cyclical stocks have been blasted pretty well during this whole episode it's hart of the same process. what's been going on for three weeks is going on today, which is people trying to figure out
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what the growth impact is going to be of the trade frictions on top of what we already expected to be a little bit of a slowdown tactically the s&p bent but didn't break it kind of sat there above 2800 for a long time. tomorrow's a preholiday day. seems like kind of a let's put in our bets at the end of the day and see what tomorrow brings >> the european pmi and other sentiment data certainly nothing to celebrate within them but if you look at relative to expectations what & what was forecast the u.s. miss this morning was actually slightly bigger people starting to fear that the trade tensions are really going to hit u.s. growth as well as the market >> i do think so because it's less expected. and if you look at how the stock futures traded into the open and then we got that market number, that's when you accelerated to the down side. that's when the bond market -- >> you're talking market manufacturing. >> market manufacturing index. >> in the u.s. also new home sales weren't too hot. liz, you've been pretty cautious on this market and defensive you've got to be feeling good. what do you say to people, it's only 4 1/2% from the highs
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>> coming into the year i don't think anybody expected us to be up 19% by the end of april we had room to movethis down that 18% or 19% was free money the market was rewarding just putting a floor by the fed and all that volatility. now with volatility still subdued and a little correction because of trade i think the market is trying to make the point, figure out how long is this going to last, how much is it going to bite into growth and into earnings. and our view is if it lost through the end of june, then you're really going to hear companies guiding down you're going to hear growth expectations guiding down. and in a year when we thought it was going to be to begin with that's a big question mark >> looks like it's going to last longer chinese state media outlets have dramatically revved up criticism of the trump administration's trade practices just in the past few days an editorial from today in xinhua calling the u.s. version of fair trade "at best
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simplistic and at worst carelessly selfish and short sighted. another piece this week in the people's daily, these are all stitt-run news organizations said "bullying from the u.s. stains its credibility." and some strong words from the editor in chief of the chinese publication "global times" saying the u.s. threatens to become an economic fascist country with its push to ban huawei stephanie, when you wake up and you see these kind of headlines and this kind of rhetoric out of china, what do you think >> i know it's going to be a tough day, obviously until we can put some numbers around it. part of it was there were a few companies that tried to put numbers around it. network appliance, that conference call was a really down conference call about investment spending. that's just beginning, right and we talked about best buy too. the commentary we're able to put into our model lower numbers and that's obviously not sitting well with the market but it was good news, that we are seeing a rotation.
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we're not seeing this massive decline in the overall market. it didn't feel good today. but at least money is getting rotated around and that's been the theme all week long. >> the thing i'm watching here clearly the rhetoric has stepped up domestically and clearly there are? tariffs imposed by china that left stoep for them to do that because of the trade balance but keeping an eye on the currency because if they let that depreciate significantly further i think that's a sign that they're really upping the ante >> that's the way they fight back >> that's the way they can fight back and mike, you remember from the start of 2016 that hurt the u.s. market significantly because of the fear of ex-porting deflation around the world we've seen a 2 1/2% move already which is a mott in the lalot in month. >> august 2015 it was definitely out of left field to some degree and was a big shock devaluation but i do think that is a way to look at it in terms of the tangible ways the retaliation can happen as opposed to getting the public
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in china geared up for a fight >> so liz, to you, and your sort of defensive stance, at what point, though, do you look at utilities which dow utilities are at a record high and say these valuations on utilities companies are staples or reits or just not really palatable? >> there was a point made earlier on the show that you have to barbell the risk of it and that's very true investors have to balance protecting against near-term volatility that's probably here to stay until we get some sort of resolution in this chapter of the book the trade book is not written yet. you don't want to come out of the market, though regardless of how high valuations get, even in defensive sectors. because you do still have to be present to win and if we get good news on any of this trade you're going to see a pop back up. maybe not a pop above where we were before, probably closer to the highs of 2900-ish. but you still see some of that positivity >> earnings hitting the tape hewlett-packard, hpe are both
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out. >> two different hp companies as that company is now split up i'm going to start with hp inc that's hpq if you're looking at the ticker that is your printers, your computers, pcs that company as you can see up about 4% they beat on the top and bottom lines. they actually beat on both their pc segment and their printing segment. pretty strong earnings report there. i actually talked to the ceo a couple minutes ago and he telling me, saying that in these guidance numbers going forward the guidance is reiterated, actually up by half a cent the mid-point there. they're still including the tariffs we know about, the actual tariffs that are on the books. but any future tariffs that might come, there are too many variables there. they're not really including that in the guidance going forward. that is hpq. ha ticker with the strong earnings so far. moving on to hp enterprise, ticker hpe, that company as you
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can see, i guess we don't have an after-hours number there but beating on the eps number, even though it was a miss on the revenue number, the reason there, they are shifting their product mix, they're getting away from some of these lower margin servers you might sell to the big names like an amazon or a microsoft. they're going for higher margin servers you would sell to smaller companies. even though they didn't make the numbers on revenue, they made more money for those numbers, and that's why you're seeing the bottom line beat for them. that is hewlett-packard enterprises hpe. that's both of your hps, wilf. back to you. >> thanks very much for that both moving about the same amount, up about 2 pirs after hours. stephanie, which one do you want to pick out? >> i think hbe no one cares about the quarter. they care about the position they were just in. hp inc. it's interesting because the gartner data intraquarter showed they were gaining share in pc ands supplies. that's good. remember last year they actually didn't have a good one
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me had inventories that were built. they missed on operating margins. nice to see them bounce back as well very cheap tocks >> tem suffered today. down 1.7%. this level of earnings beat-s that enough to change -- >> unfortunately, no only because neither of these companies is much of a bellwether really cheap stock priced for zero growth. so i think today what was interesting about the overall tech sector was the previously bulletproof stocks were taken down a little bit. like big software names. salesforce that showed you just a more generalized money getting pulled out of -- >> i think to stephanie's point there's fears about enterprise spending, about business spending when you're talking about confidence and the threat of more tariffs and higher tariffs. >> i do think it's part of the latter stages of a risk off move you sell what you can. >> but everyone wants you to sell semis and buy software. i've read about ten notes in the last two weeks -- >> what the charts tell you to do
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>> that's right. that's the charts. if you're looking looking for real value and you wouldn't to be a contrarian you need to do the opposite >> it's going to be the epicenter of this trade piece for as long as it lasts. i don't think you need to get out of tech but this is not a bellwether name. this is a company that's going to change the overall sector tech going forward you have to be choosy in it but it's still something that if you're a cyclical investor and if you're somebody who thinks the economy's going to stay strong and the consumer's going to stay strong you want to have some exposure there >> no better example, guys, than apple which lost another 2% today. when you've got trade front and center as a fear, it's still up for the year double digits. but the gains are -- >> apple is a sentiment thing. it's a china play. probably one of the most widely owned -- so essentially it is always a source of funds when we're pulling back in this way and i think it's also very
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direct the perceived risk in china is extremely direct for a high priced product they -- >> not just that but a lot of their growth in terms of sales they're squeezed on both ends. >> and the next round of tariffs, 300 billion, which i keep bringing up but i think is being priced in more as the prolonged fight goes on. cell phones are one of the biggest influences on that list. >> yeah. there's estimates by morgan stanley that 23% hit to earnings if i go to 25, i think we're starting to price that in. but this is interesting. stocks still up on the year. >> more than 10% nimura put out a note today, melissa alexander their economist, now saying 65% chance that that next 300 billion goes into a fund. how do you start to price that in where do you go? >> that's something that in f. it does go in effect it's kind of a benefit because you can model it out
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you can start to narrow what is the intrinsic value, what is the cost pressure on these companies. what you want to look at from an investor's perspective is what do these firms have to fall back on if that cost pressure comes into play? what we found the first quarter was not all that inspiring beats on revenue earnings were okay but revenue wasn't all that inspiring. and you need that top line growth to really absorb some of the cost if it can't absorb the cost and it does get passed on to consumers. that's where we see inflation come back but not in a healthy way. costs are up and companies can't absorb it. >> more earnings on deck ross stores and deckers. seema's got it >> two retailers let's start with ross store earnings and revenue came in better than expected but q2 guidance was light currently down 2% in after hours. two other things i would mention, the company referencing an increase in freight and wage
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costs. additionally continued underperformance in ladies' apparel. that is something similar to what nordstrom told us yesterday. that stock down about 2% but it sa a good year over the last two years 15% year to date. deckers good beat on its top line guidance is mixed. still the stock up 4%. uggs sales for the fourth quarter decreased about 7% sara, back to you. >> seema, thank you very much for those. stephanie, either of these stocks you like? >> i don't own either of them. i think the off pricers are a bit rich and not surprising that the freight costs hit them again this company just got -- they had their c.o.o. leave so they're looking for someone to replace and i think it's a big loss. if i'm going to go either -- >> they had a great quarter. >> they did. but the price for what they're showing. and i just think there are
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better values elsewhere. deckers is up. the stock was upgraded earlier in the week and i thought that's the kiss of death. if they're doing a really good job and they've got great plans people want. obviously, they are delivering >> stephanie, great to see you as always. liz, nice to see you as well >> more on the sell-off where investors can seek out safety. >> oil prices keep falling whether there's an opportunity to buy oil at these levels don't go anywhere. we're back in a couple of minutes. here's one you guys will like.
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time now for our sector spotlight on today's sell-off. meg tirrell standing by with a beat check on the pharma space wilfred is digging in on the action in financials and goldman sachs's jeff currie is here to talk energy which got flushed today. meg we'll start with you on pharma >> pharma stocks have been a bit better than the rest of the market today as you check out pfizer merck johnson & johnson abdi, all down less than 1%. merck and j & j up in the green. sector's steen as a defensive play and all the concerns about trade even biotech stocks which are typically more volatile down slightly less than the rest of the stocks but health care is the worst
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performing sector in the s&p and that's because of political concerns heading into election season guys, back over to you >> meg, thank you. let's get to wilfred, who's looking at banks and also kind of -- they weren't at the bottom of the market. >> no, i don't think they'd be celebrating today's moves. interesting thing on trade-related market sell-off days is that banks always get lumped in despite having very little non-u.s. revenue. let's look at bank of america as an example because it's broad like the others in terms of business model but also has a u.s. focus 89% in the u.s only 4% in asia. why is it down on a trade day as it was today because of course there are fears on global and u.s. growth, which banks are linked to. and more importantly that fear has pushed yields lower and flatter and that affects the bulk of what is bank of america. most of u.s. banks business, u.s., consumer, and commercial banking.
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overall, the banks basically in line with the market year to date both sort of up double digit just about mike, that's the key with these in terms of the -- the valuation does stick it in the milled as opposed to linkedin, the bottom when it comes to trade-related issues >> exactly started out cheap and unlocved and remained that way but you're right captive to the story whether it should be or not. >> s&p 500 officially back in bear market territory. that means 20% off the highs crude oil falling more than 10% in the last month. tunning in its worst day of the yield today. >> jeff currie goldman sachs head of commodities research joins us now to discuss. big move today were you surprised by the size? >> the trade war had a big factor to play but i think you had positioning in the market as well as supplies we'll start with the trade war we estimate if you get a full-blown trade war which even our economists are pushing toward a 50-50 coin toss of
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deal-no deal, it will be worth about 200,000 to 300,000 barrels a day on demand. take that over six months it's worth about $2.50. a lot of it i would chalk up to trade war. but let's not discount positioning. yesterday we broke the 50-day moving average this morning the 100-day and the 200-day moving average you put that together the ctas are now short. as we know thinking about commodities more broadly the systematic traders can run this market strongly. the supply dynamics are still very supportive. if you look at the front spread on brent it was up to $1.30. that is a very, very tight market why? the saudis have said they're not going to supply the market unless they see shortages. you have some microtightness there but it's being offset by other factors. >> there's also some in the background heated rhetoric happening toward iran at the same time. do you think that's playing a role >> well, offsetting what's going on in iran is you have libya right now producing at the
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highest level since 2013 at one point 3 million barrels per day. you had nigeria and angola come in sooner than expected. here's the one take this. since february the united states, the shale producers are up 800,000 barrels per day that's nearly 1% growth in supply over a very short period of time. we are losing 800,000, 900,000 barrels per day out of iran. you've got to put in the context of those other supply increases. >> when you say trade war could be worth $2.50 per barrel, what specifically is that just a global slowdown effect of the trade war? >> our economists estimate right now a drag of about .2 percentage points. if you get a full-blown trade war they take that up to half a percent. the extra .3 of a percentage point worth somewhere around 300,000 barrels per day. that's where we come up with that number. so yeah, the longer it goes on the bigger -- i want to emphasize our base case, our economists still stand by this morning is they still see a deal
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but you're weeks from a coin toss on that >> jeff, when you consider all of the market fears out there, the trade war fears, the fact that central banks have not tightened so far this year as perhaps had been expected, are you surprised you haven't seen gold up more year to date? >> there's a tug of war going on in gold. on one side you have all those factors leding to strong physical demand. etf demand is strong net spec position is strong for gold even central banks' purchases of demand but the offset is hey, this fear out there has created a stronger dollar you saw the u.s. treasury went sub-2.3% that stronger dollar put downward pressure on gold at the same time you get those upper pressure dynamics on physical demand they've been rangebound. 1270 to $1300 range. >> that slower growth trade of copper these moves on the commodities, on global growth overdone, would you be a buyer >> buyer on copper, absolutely
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let's take a step back and figure out what was going on in iron ore it tells you a lot about you why want to be buying copper here. iefrn ore hit $100 a ton last week what was driving that? really strong demand out of china for new housing starts steel production over the first three monthsthe higher housing starts. combine that with that's what got us up there. we think it's peak tightness land sales have started to come off which means iron is going to come up. copper is the completion stage of the housing we dtd start, we've seen the run-up in iron ore now you're going to see the follow through in copper we expect it to trade back up to 6500 it's trading 5925 right now. it was at 6500 just several weeks ago. as you see the follow through into the housing completions in china you have mine disruptions, we're a strong buyer at these levels >> jeff, great to see you. >> thanks for having me. >> we've got another earnings alert and seema mody's got it
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for us seema. >> stock is on the move here auto desk earnings missing street expectations. 45 cents adsquauflted versus the estimate of 47 cents revenue at $736 million. the estimate of 740 million. shares are down 6% a slight miss on subscription revenue as well. wilfred, back to you >> seema, thanks very much for that still to come here on the "closing bell," we'll discuss how much more down side risk to the market there is if the trade war continues. >> up next we will break down the charts to look at the crucial technical levels the s&p is right now fighting to stay above. and the potential fallout for stocks if we do dip below that mark we'll show you the charts, next. for your heart...
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containing this information. read it carefully. let's head back over to mike santoli for his final dashboard of the day a look at the long-term s&p 500. look how you used alliteration for all of the titles. >> i tried i cannot promise every single day we're going to manage that we're riding the range today i would say longer term. we keep talking about how the s&p 500 during this little pullback is down only 4% or so from its record high and that is absolutely true. but that record high was really not that high above the prior high and it basically looks like kind of a long-developing trading range. this is right up through today i was talking all afternoon about the 2800 level that's kind of where we are -- where we're kind of hovering above. why it seems somewhat important here is i'm going to actually
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clear that because this is really where it is that's where we topped out a few times back last year and even before we hit the highs in september. and it seems to be a level that separates a market that is holding on to its up trend or is back into the slots. this number right here is actually about 50 s&p points january of 2018. above where we closed today. clearly we're kind of looking through something on a longer-term basis. i don't think it's all about the fact that the trade war got going here this was a very, very aggressive high valuation, high momentum top, and we had a long time chopping around in there i think this is just kind of the late cycle to and fro as we try to figure out how to assimilate the fed tightening and whether the segment's going to last a long time or not >> does that same sort of question mark apply to the nasdaq and the dow, russell as well >> pretty much the russell is in much worse shape. the russell seems like a pretty profound laggard at this point but the nasdaq -- higher highs
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but it's pulled back more, it's broken down above some levels. people are mention the 200-day average is right in this zone. we finished right above it it's just below 2800 that's the up trend line it hasn't been that decisive during this market when we've kind of broken below it. it's tended if anything to be a slingshot higher so i don't know that that's critical but right now we're in a position where it looks a little bit tenuous >> okay, mike, thanks so much for that time for a cnbc update with sue herera hi, sue. >> hello, wilf hello, everyone. here's what's happening at this hour president and mrs. trump joining soldiers at arlington national cemetery for a memorial day tradition. for more than 60 years soldiers from the 3rd u.s. infantry regiment have been placing flags on every single grave site at arlington for memorial day the department of justice announcing 17 new charges against julian assange, including espionage charges connected with publishedand classified material. but the government has never successfully prosecuted anyone
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other than a government employee for disseminating unlawfully leaked classified information. nasa revealing its plans to return to the moon by 2024 officials unveiling its lunar gateway partnership, bringing together the agency and commercial providers to enable moon exploration gateway will be a lunar orbital station that will serve as a staging facility for human exploration of the moon. and back on earth, queen elizabeth visiting british airways headquarters in heathrow airport to mark that airline's centennial the queen was taken on a tour by b.a. ceo alex cruz she also met staff members, who were dressed in various uniforms dating from the 1930s to the present. you're up to date. that's the news update this hour sara, wilf, i'll send it back downtown to you. >> all right, sue, thank you up next we've got much more ahead on this market sell-off. hotween the u.s. and china
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it was a wild day on wall street the dow closed only lower 286 points i say only because it looked scary there for a moment the dow was down as low as 444 points a more than 1% decline across all the major averages we've got the sell-off covered for you from every angle bob pisani at the nyse with the biggest movers today bertha coombs covering it at the nasdaq and rick santelli at the cme with the bond report bob, let's start with you. >> we talk about the semis and industrials getting hit. but the damage is a little broader than that. i just want to show you what's been going on for the week in some of the big dow names here we've had two consecutive days of really rough time for the oil stocks exxonmobil down 3% goldman sachs, the yields have moved down all the banks have 3406d down. down 3%. nike big exposure. 15% of revenues from china and a big importer, double whammy they're down 2%. for the month you can see the broad damage going on. sectors. semiconductors down. bank stocks down energy
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and there's consumer staples and health care. they're flat and that's why the s&p is only 5% off its highs my prediction is we will see those sectors come down if we continue to see concerns about the trade war. global growth comes down, earnings everywhere comes down back to you. >> thanks so much for that let's go over to bertha with more at the nasdaq bertha >> you know, wilf, semis continue to be hit hard. we had a little bit of a move from the lows this afternoon as intel turned around. intel's done about 5% year to date the overall chip sector is up still 14%. but it's getting hit hard. a month ago you'll remember we were at all-time highs now we're edit closer to bear market for the sector overall. but another interesting buxing the trend story was synopsis 24 hours ago posted earnings the company is exposed to huawei did trim its outlook but said that situation is kind of contained and it continues to see other chipmakers continuing to have demand back over to you guys.
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>> bertha, thank you cme for a bond report on a big day. rick santelli has that for us. rick >> if you look at a two-day of 10s, 2.31 we're down seven basis points lower levels on closing basis since around halloween of 2017 the dollar index on a two-day it's down about a sixth of ad re earlier in the session like the dollar-yen the yen is a flight to safety currency sometimes the dollar is. we know sovereigns are all sovereigns acted like treasuries today but the dollar did a uturn after making a fresh 24-month train day high it rolled down a bit we want to pay attention to the 98.20 level for tomorrow traders get nervous when it pops over the last high, right around 20 wilf, back to you. >> rick, thank you very much let's bring in savit
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savita sameranian, bank of america merrill lynch. with this big sell-off great to get your notes and some of your buy ideas. buy machinery. why should people do that? >> what we need to watch at this point are a few key factors. so far industrials, semis and the more global cyclical areas of the market have gotten hit the hardest. i think those are buys unless we start to see companies dramatically changing their behaviors. in the interim when we know less about how trade is going to resolve itself and this could be a long messy overhang on the market the safest place to be from a cyclical perspective is financials and i know financials aren't normally thought of as a safe sector but i think in this case financials as an area of the market that has less direct exposure to china through tariffs and imports and exports and moreover i don't see any
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real stocks for the u.s. economy yet. that may be the better play to hang out and wait for some of this headline risk to fade another area that looked really interesting after today is health care, which is a sector that was flat with political risk and i don't think that's going away but that is an area where again, investors can look at it as a place to sort of camp out amidst a little bit more tension around trade. >> given the vulnerability, savita, of the market and a day like we saw today, what places would you avoid? >> yeah. so i think the real risks are in the small caps and we've talked about this for months i think investors have been hiding out in domestic u.s. companies. they're seen as a safe haven against multinational risk through tariffs and direct exports. but the problem here is that smaller companies tend to have multinational companies as their sole buyer so they tend to be harder hit by
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global slowdown. and that's what i would still continue to lighten up on. what really frightens me a little bit is if you look at multiple compressions since last year when trade and tariff talks really started small caps have been the most resilient area of the market they've seen very little multiple compression whereas every other area of the market with significant risk has sold off, has traded off, has seen anywhere between 10% to 15% multiple compression i still think are too risky to buy here >> savita, banks buy or sell? >> banks >> what's that >> i said bank stocks. should you buy or sell them? >> yes fang we're under weight services. it's really about crowding, a sector that's gotten a regulatory free ride for the last, you know, couple of decades. and now all of a sudden we're
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starting to hear more and more friction within the sector around data privacy. we're starting to hear risks around governance. i think this is the sector that is super crowded the average mutual fund has a 60% overweight in fang stocks. this is a loved area of the market that could be a source of liquidation if we see redemptions from actively managed funds. this could be an area, a source of funds that some managers decide to get a little more defensive. i think this is one of the most risky areas of the market from just a pure crowding perspective. >> savita, thank you he's hard to understand. >> you're welcome. >> good to see you >> that's why i keep the questions short and to the o int. toquick. >> still ahead, david jeffers' hedge fund could be coming to an end. details when "closing bell" comes right back
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let's check in on some of the day's after hours movers hp beating on top and bottom lines. beating on eps but missing on revenue. nonetheless, that is up also deckers beating on revenues. though its earnings per share number wasn't comparable to wall street estimates but it's up 3%. and ross stores beating on both lines. under pressure, though, after second quarter guidance came in light. down 2.7%. >> hedge fund titan david tepper considering turning his fund into a family office leslie picker with more on that
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story. >> the question now is when does he plan to do that david tepper has held discussions with limited partners in his hedge hundred appaloosa about one day converting to a family office. are now, the timeline to return capital to those lps has not been established, and i'm told it could be this year or years down the road. so it's unclear what exactly tepper's motive is behind the move his returns have been pretty fine 25% annualized returns since inception in '93 and last year i'm told he beat the market. his own capital already represents 17% of the fund's $13 billion worth of assets. but if he returns capital he may liquidate some current holdings. the largest of which at the end of the first quarter were micron, pg&e, and allergan those holdings may have changed, though, in the seven weeks since q1 ended guys >> 70% of his a.u.m. is already his own money. >> exactly >> if he's a family office can he keep the other 30% if they decide to accept the changing terms or it will have to be his
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own money within the family office >> it's unclear. there are certain regulations and stipulations if you manage outside capital. especially if you manage money for, say, an endowment or a pension fund there are strict regulations as an asset manager you have to follow in order to do that now, if you are a wealthy individual and you want to give him some of your money to continue managing, i'm not exactly sure if those regulations and kind of the registers aspect of being a hedge fund that's structured as a gplp would still apply i'm guessing it may not. but i think it will be interesting to see as these discussions continue to take hold whether he is able to do that. >> it's also part of a huge trend. all the big hedge fund titans that we think about. >> jeff mirld hp highfield last year converted to a family office of course there's the example of steve cohen who converted to a family office and now he's back managing outside capital but you're right, there are a
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lot of hedge fund luminaries that have moved into this family office world because it gives them a little bit less headache. they can manage money in the way they want. they don't have to be so focused on returns and so focused on appeasing investors because of course at the end of the day it is a client-facing business that they can really kind of look at the markets in a way that's fun for them and these guys are billionaires. so you know, at the end of the day they don't really have to be working, especially if the gam isn't fun for them anymore >> it also shows, though, the generational shift and these guys are kind of moving off the scene but they haven't had either an interest or an ability to create a true institution that's going to live past them it's basically this idea of founder-operator and you shut it down when you're done. >> you don't give it to your kids >> and that's a key issue for lps too that are giving money to these hedge funds. they want to know the succession plans. especially for a lot of these funds that have name brand managers at the top. what does the succession plan look like and can this fund outlive you and if not is it worth it for me to do all the diligence, to give you money or should i be looking at maybe
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a larger diversified asset manager who i know will be around for a while >> buy a sports team and then you're kind of like move on. leslie, thanks very much >> thank you >> up next the china factor. retail stocks in focus how the biggest names in your shopping mall could be impacted by the trade war that's coming up don't go anywhere.
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retail, another big market mover today with best buy and l brands still reporting better than expected earnings and reporting lower after citing potential impact of tariffs from the chinese goods. that was really the story of the retail season. let's bring in paul trussel from deutsche bank and retail advisers good afternoon to you both stacy, i'll start with you is it overdone, some of the
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commentary about the impact of trade? is that being used as an excuse or do you think this will be a big hit in the year ahead? >> i think it depends who you are if you're using it as an excuse and i thought it was quite refreshing that best buy said hey, the first charts only hit our cost of goods by about 7%, but hey, the next tranche will be more significant as we see these 25% increases come in, and by the way, while, you know, appliances, the volumes kind of came down a little bit when they raised prices, this was a less discretionary purchase, when you see the whole consumer electronics business actually really raise prices. that is going to hurt demand, and i think best buy is really open about it as walmart has been that the first tranche you can kind of split the love around and share it between everybody and push it to the vendors, but the second round will hit the consumer in pricing. >> who will feel it the worse in the retail universe?
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>> with this next tranche, we think that specialty apparel retailers and department stores with very limited pricing power and a meaningful portion of their sourcing coming out of china probably gets hit the worst. it's a material risk for the whole group. our math suggests that if retailers were to eat the entire cost it would actually impact on average earnings by 35%, and margins by 230 basis points, now to stacy's point, a lot of retailers are very vocal in saying that they absolutely would try to push this through to the consumer, and that could be as much as a their 2300, you know, amount that's added to th consumption issue. >> stacy, where is the selling in retail been overdone. what's your top pick >> so you know, i think home depot becomes quite interesting
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here because they had a lot of deflation. lumber was down 60% year over year so that's a short-term blip they had compares against the hurricane set, but that business is as strong as ever and it's a market share business and they're doing smart things online, and of course, target, you want to own traffic stories and there's been so much talk about average price increase stories. you want to own where the traffic is going target is exactly where that's happening. half of their comp came from store traffic. so i think you want to stick with those stories >> does the market have it right in focusing in on these sort of broad line, and not just tariff, but can they withstand the digital threat or falling through the cracks and smaller names? >> the reality is that in addition to tariff concerns, there has been a little bit of a weaker consumer to start off the year and that's continued even into the second quarter and so you do need to look at companies
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that have scale, that have pricing power, that have really a niche and thatability to, yo know, really meet the customer where they are from the omni channel standpoint that's why the top picks for us in this environment include walmart who obviously has a big grocery business and is growing online over 37%, but we also like a company like lululemon with significant product innovation of very limited sourcing coming out of china and then a niche business like off-price apparel retail in burlington which has company-specific drivers with the new ceo coming onboard this fall >> guys, thanks for joining us paul trussel. >> thank you >> thank you >> coming up, president trump just making some new comments on huawei we'll tell you what he said next [ alarm beeping ]
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let's stop talking and actually be more diverse. as investment management professionals, let's measure up. cfa institute. >> president trump just taking some questions from reporters about the trade fight. eamon javers has the details. >> sarah, until now, white house officials have been very clear when they talk about the huawei action they've taken on national security grounds not necessarily related to the trade fight that's going on. it's coincidental it's happening at the same time, but the president was just asked in the white house a few moments ago about the huawei tension and the
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chinese trade negotiations and whether there's a prospect of a deal he linked, for the first time, i believe, the huawei and trade. here's what he said. >> it's probably a good possibility. i don't know how janet can do this because i'll be honest. we're getting hundreds of billions of dollars brought in to our country, but huawei is something that's very dangerous and what they've done from a security standpoint and from a military standpoint. it's very dangerous. it's possible that huawei even would be included in some kind of a trade deal. if we made a deal i can imagine huawei being possibly included in some form of or some part of a trade deal how would that look? >> it would look very good for us >> how would you design that >> it's too early to say >> the president there raising the prospect of using huawei as part of the bargaining chips overall and the trade negotiations between the united states and china that is an interesting comment, to say the least coming from him
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and the president also noncommittal on this idea of democrats on the debt ceiling remember yesterday he said you can work on one track or the other as democrats investigate him or work on legislation we were told by senior administration official that the president still intended to work with democrats on debt ceiling negotiations today and he said we'll see. he was more equivocal about that nonetheless, i believe that the senior administration official would still say they are working here on the debt ceiling negotiations and we shouldn't necessarily read too much into it, guys >> thanks very much for that mike, i guess we sort of assumed that huawei would have the confirmation >> obviously, the government would have pre-existing concerns on huawei and it's not that it came out of nowhere and this is just tying it together more exblee explicitly >> historically, it tends to be
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a listless day, average move is barely above the flat line over the last -- since 1971 you've had slightly more up days than down -- five moves up or down of at least 1% and that's almost over the last almost 50 years and it would be interesting to see tomorrow because we're in this highly stressed position if we get this action that's for tomorrow. >> "fast money" begins right now. >> "fast money" does begin right now. live from new york's times square i am brian sullivan in for melissa lee, your traders are tim seymour, karen finerman, tim grasso and guy adami they tried to make a valiant comeback in the last hour. does that mean a comeback of trade war fears may be finally dying down or is it going to get worse from here? a top technician will be here it you think more selling is to come plus the consumer caught right in the crosshairs and the threat of rising tariffs looming and we've got a pa


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