tv Squawk Alley CNBC December 26, 2018 11:00am-12:00pm EST
♪ ♪ good wednesday morning welcome to "squawk alley." we're here at post 9 of the new york stock exchange. morgan and jon have the morning off. an important day to watch stocks, trying to bounce back after suffering the worst christmas eve trading session in history. the dow was up as much as 282 points at the high today, s&p and nasdaq down from their most recent intraday highs and the dow still on pace for the worst december since the great depression "the new york post" is calling it a holiday meltdown, but the
president is taking a different tone saying now may be the time to buy. >> we have a normalized interest rate a normalized interest rate means it's good for a lot of people. they have money in the bank and get interest on their money. for many years nobody got interest on their money. but i have great confidence in them i have great confidence in our companies. we have the greatest in the world and they're doing really well they have record kinds of numbers. so i think it's a tremendous opportunity to buy really a great opportunity to buy. >> joining us this morning, washington crossing advisers portfolio advisor, chad morganlander and charles and also bob pisani. good morning, guys, good to see you. charles, you don't get the president of the united states commenting on the stock market all that often what were his comments yesterday due to sentiment >> he probably doesn't have a lot of effect, but we actually happen to agree with him in this
case the core -- a lot of people said it, but it's true. corporate america is in good shape. sure, earnings aren't going to grow 25% next year like they did this year but we still think they're going to grow high single digits. this is why stocks returned such wonderful rates of return over a long period of time, more than 10%. you have to take this temporary pain and volatility, which is so hard for so many people. many people would rather earn just 3%. if you invest in stocks, you'll earn more than 10% in the long term but you'll have to take this short-term volatility. >> if the financial advisor in chief is correct and it's time to get in stocks, chad, are there specific stocks people should be thinking about or can they go in and just invest in an etf or invest in one of these passively managed funds and expect to come out on top in 2019 >> yeah, so our long-term expectations for individual equities here in the united states is roughly about 5% to
6%, well below the historic average of 10% with that said in mind, we do see seams of opportunity within various sectors. for example, we still like consumer staple companies as well as health care companies. we believe those could do very well in 2019 into 2020 also we would allocate some assets towards utilities at this inflection point so although we are optimistic in the long run for financial perspective for an individual investor to beat the rate of inflation, we would continue to be somewhat more pragmatic and balanced within one's portfolio. >> bob, i think you could find a lot of agreement on people who look at fundamentals and say stocks are at a discount, things aren't so terrible, but not a lot of motivation to act quickly on that. >> no. >> it seems like earnings estimates might have to come down and it's all this tactical technical noise whipping the market around. >> the funny thing is the comment that the economy is doing well is not very helpful to the stock market because we all know it's a discounting
mechanism. we're trying to figure out what's going to happen six months to a year from now. we know the economy is good now. we want to know where it's going to be in june, july, august of next year and that's what the stock market is trying to figure out. the stock market is discounting a lot of bad news. i've been very simple on this. suppose we go instead of 8% earnings growth, we say zero and stay at $162 that's the current estimates then you have to figure out what's the right multiple. we've had 15, 16, 17 multiples for the last ten years, indicating growth, historically higher than normal now let's say it's going to be lower than normal, pick 14 or 14.5 if you get 14.5 times 62, you get where we are now, 160. that's discounting a lot of bad news right now so people will keep asking me where's the bottom i don't know, but i can tell you right now we always know these things overshoot the market is anticipating a pretty poor 2019 and we're already there.
so i think there's more upside risk than downside risk right now. >> if flat earnings are your bad case that would suggest. >> well, every macro strategist's bad case, right you look at a chart of 19 targets, no one is looking for negative return or s&p earnings. >> the other issue that's important is look what happens historically so the average decline in the market is about 25% for a recession. this is a recession that hasn't happened yet but let's assume it happens. we're already down 18% from our recent highs the market is already two-thirds of the way to talking itself into recessionary -- typical recessionary decline in the stock market it's another sign of how sort of oversold the market has become we're anticipating partly a recession that nobody thinks is actually going to happen in 2019 this is a sign of the extreme sentiment that we're starting to see. >> so how much of this for portfolio managers, chad, charles, maybe you can jump in here, is just about managing
investors' expectations at this point? >> well, i would say that going into this slide, this correction, all asset classes, either on the credit side or the equity side were priced to perfection not even taking into account any type of cyclical nature to the overall global economy. as you started to see in 2017, you had this synchronized growth pattern. in 2019, it looks as if there's going to be at least deceleration that's going to be somewhat synchronized. put onto that quantitative tightening which is dampening pe multiples to bob's point and one has to be a little more cautious this could all turn around the federal reserve could come out and say they're not going to be quantitative tightening and they're going to pause in an emergency meeting, whenever that happens, and the markets will start to gap higher and you'll start to see a firm footing. >> is the risk of the economy overheating? go ahead, carl --
>> no. >> is the risk to the economy overheating completely over? is that not something that the fed has to consider? >> i wouldn't be concerned about an overheating of the market or the economy. >> let me talk about that one. i would say, yes, inflation, which was a very real fear that a lot of us had even six months ago is now much less of a risk at least in the short term, with oil prices down from 70 something to 40 something, that is going to help relieve pressure i do want to comment i think bob did exactly the right analysis to say the current market is fairly priced, you've got to basically say we're going to get no earnings growth think about that for a second. with all the stock that has been bought back, you would have to get negative operating income growth to get flat earnings. plus we're going to have gdp growth in the first and second quarters we're going to have wage growth because the american worker has more money in his pocket the american worker is paying less for gas than they were six months ago, so we are going to have earnings growth next year
which is why we just think the market is attractive. >> i'm shaking my head to chad's answer, bob, because to go from the fed saying this is an extraordinary moment, almost too good to be true, to having us talk about emergency meetings and balance sheet adjustments in 12 weeks -- >> yeah, that comment from mnuchin on friday was a bit strange because my understanding was that this was simply a discussion with the government shutting down and relevant people in the government, including mnuchin, saying okay, guys, let's just monitor the markets while the government is shutting down. this is a perfectly prudent thing to do. and yet somehow the thing got twisted into, oh, we're worried about liquidity. it was badly miscommunicated to me not terribly important relevant but not important but sounded panicky. this goes into that political risk question. i wonder, chad and charles, is there additional political risk in 2019 that we need to take into account that somehow the market is having a hard time and this is one of the reasons we're in this new leg down that we've had?
>> bob, i think you're 100% right. i think political risk but, for example, the trade issues, that is political risk that has a dampening on pe multiples here in the united states and across the globe and that is a general concern. in the united states as well there's some political risk as we all know and you've been reporting on it. again, that's a headwind a lot of this, though, could be transitory like the federal reserve ceasing to increase rates over the course of the next six months or a massive fiscal stimulus plan that comes out of china that lifts global growth estimates for 2019 into 2020 >> charlie, i know you're always -- you're a value investor, always looking for cheap stuff. but anything that surfaced in the last few months in all this pain in the markets that you've been attracted to in terms of names or sectors >> absolutely, i'm glad you asked that question. anything that is at all cyclical, that is at all tied to the economy has gotten extremely
cheap. one name that just surfaced this last week is tiffany tiffany was trading at more than 150 very recently. now in the mid-70s if i was shopping at tiffany this weekend for some last-minute gifts and it was packed, selling $1500 bags, selling diamond rings you just put them in that little blue box and magically they become worth 40% more so tiffany had a great year and the stock has gotten extremely cheap. every time i come on the show i talk about goldman sachs at less than book. there aren't a lot of absolute rules in investing overthe last 50 years, if you can buy an investment bank for less than book, it's a great opportunity. >> below 152 today that's been getting so many people's attention charles, chad, thank you, guys bob, thanks to you bob mentioned that 2350 number, that's where we're chopping around right now, about ten points higher. when we come back we'll talk with the toys "r" us ceo jerry
storch then it's the final holiday shipping record card for the year for the likes of fedex and u.p.s. what that means for investors coming up. later, why one strategist is calling the recession risk excessive. a busy hour still ahead when "squawk alley" comes back. this music is supposed to relax me, though. ♪ maybe you'd mellow out a bit if you got geico to help you with your renters insurance. oh, geico helps with renters insurance? good to know. yeah, and they could save you a lot of money. wow, suddenly i feel so relieved. you guys are fired. get to know geico and see how much you could save on renters insurance. 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.
this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today.
well, it's really a tale of two retails, both the best and the worst number ever. retailers are having their best holiday season in six years. amazon announced record-breaking sales and mastercard says total u.s. sales, excluding autos, rose a little more than 5% but for investors, december is logging its worst-ever performance. the xrt retail etf is down 16% this month joining us now, former toys "r" us ceo and target vice-chair, jerry storch and here scott mushkin. the bricks and mortar retailer showed a little muscle this holiday season what's behind their story of resilience >> well, the consumer is on fire they have a lot of money in their wallet and they're spending it. there has not been one piece of bad news out of the consumer in the future as you look forward, eventually the market
continues to be off, it will affect consumers it filters down starting with luxury consumers who are very stock market dependent and eventually making it if the market continues the way it has to the man on the street, but it certainly has not done that yet. they're out there, they're spending the stores have been crowded physically this year, which is very interesting of course the internet itself is absolutely on fire, up over 20%. >> so if consumer confidence is leading here, when do consumers start taking their cue from wall street and start feeling their nervousness about what is to come in 2019 >> when they don't have money in their wallet and right now they do they're employed and they have rising wages so they feel really good about what's going on and they're spending it. they always spend it when they have it. >> scott, the sales numbers were great this year. it came in as a lot of analysts and industry insiders had predicted.
it doesn't tell the whole story, though talk to me a little bit about expenses and what it's doing to margins. >> sales are really strong, the consumer is on fire, but the challenge is profitability will these retailers see profit. the xrt is down 17%. the challenge is we're now in the amazon world, but it's beyond the amazon world. we're in the uber eats world we're in the immediate i want it now world. and the challenge for retailers is making that profitable. amazon is playing a whole different game than everybody else, and can target make that profitable, delivering it to your house. >> and they're spending a ton of money on promotions at the same time. >> it's a very promotional environment. they're having to deliver it to the consumer when and where they want this is becoming enormously expensive for bricks and mortar retailers as the consumer -- anyone under 35, it's really the amazon generation. they redefined retail as you know it. you don't really have to go out anymore. you don't have to go out for
christmas to shop. you don't have to participate in black friday you can do it all from your computer. >> amazon is up today, but down still 30% from its high. it had this tremendous run into the summer is this environment a challenge even for al semazon or are they ultimate winner? >> they're hands down the ultimate winner. as we think about christmas and the holidays and how consumers changed their shopping patterns and how amazon is cubing out their distribution centers really solving for it used to be price and convenience, now it's basically price or convenience, not price and convenience. amazon is way ahead of everybody. >> from an investor's point of view >> buy it right now. we're here at the new york stock exchange you buy it with your eyes closed, as one of my former people said. >> given the strength of the consumer at least as far as we can see, don't you think the market is trying to sniff out a
potential no-deal deadline with china in march >> well, who knows whether it's forecasting recession next year, rising costs due to the transfer of sales from a more profitable bricks and mortar perspective to the online arms of these same retailers, whether it's rising wage costs, whether it's tariffs, there could be lots of reasons. while i agree with everything i've heard, there are winners and losers we're undergoing a retail revolution some people make that transition well and some won't. amazon of course will be one of the winners but so will walmart, so will costco they're low-cost producers doing great on the internet. they're going to figure this out and make a lot of money. walmart's last quarter was very instructive. yes, they saw rising costs due to the internet and some compression on their margins, but they more than made up for it through efficiencies elsewhere in their system. so walmart, costco, amazon of course, t.j. maxx, the dollar
stores, there are a lot of retailers who are really well positioned to make this turn and offer a retailer of the future that's both bricks and mortar and online. >> who do you see as the losers then, jerry? >> well, there's absolutely no doubt the traditional mass market department stores are suffering badly. sears is a lost cause. penney's is one-half of 1% of becoming a penny stock there's probably room for one mainstream department store like macy's if they can get the internet and omni channel right. there's probably place for one luxury store so one of each in every category one in electronics like best buy, there's room for that but not the overstorage situation we have today. >> what do you think about winners and losers who do you see going into 2019 >> the one company we ignored in
this conversation, but home depot. so it's all really about more sales per labor dollar home depot is investing a tremendous amount in its distribution and direct to consumer capabilities. >> but those materials will all get hit by tariffs presumably in 2019 will that affect the bottom line >> there's no doubt we have the cyclical when the market pulls back like this, you look at what companies your fantasy list of companies we talked about costco jerry mentioned that amazon, home depot has got to be on that list you know, as you break below 150 at home depot, you have to buy it forgetting about the cycle. >> scott, thank you for joining us jerry, a pleasure. thank you for your insight. well, the official holiday shipping record card is out for the likes of fedex and u.p.s our frank holland is back with the details. >> the week before christmas is essentially the super bowl for
the three major shippers and today we do have their holiday e-commerce report card the post office delivering at an on-time rate of 99%. they're coming out on top with u.p.s. and fedex just behind anything above 95% is considered excellent. overall the shippers saw their best on-time rates since 2013. they also saw a record amount of e-commerce deliveries, 2.5 billion total. this year we had 32 days between thanksgiving and christmas, the highest number of days possible. during this month leading up to christmas, which includes thanksgiving week, black friday and cyber monday, u.p.s. had the best performance this included a lot of returns and exchanges from people doing a little holiday shopping for themselves going into the post-christmas return season, cbre forecasts $37 billion of returns this season, up 27% from 2016, but the companies are not seeing the benefits in their stock price. u.p.s. is having its worst month since 2009 following the financial crisis,
fedex seeing its biggest monthly decline since 1987 back over to you. >> that's a lot of returns that tells me we may need more algorithms in our lives so we pick the right present in the first place and skip all those returns. the u.s. federal government now in its fifth day of shutdown with no end in sight. >> i can't tell you when the government will be open. i can tell you it's not going to be open until we have a wall, a fence, whatever they'd like to call it. i'll call it whatever they want. but it's all the same thing. >> what does that mean for the markets? and for the thousands who remain out of work? but first, take a look at the worst performing stocks in the dow so far in today's session. we've got verizon, ibm, goldman a t ch lomore on "squawk alley" still ahead. don't go anywhere. shield℠ annuities from brighthouse financial
keeping the government shut until funding is secured for his border wall. here is the latest from washington. >> reporter: lawmakers are preparing to return to washington tomorrow and republicans, democrats, the white house, everyone is warning that this shutdown could drag on now, president trump told reporters yesterday that he doesn't know when the government will reopen but he's not backing down from his demand for border wall funding in any bill meanwhile nancy pelosi said she will bring up a measure to open up the government next week when democrats take control of th lower chamber. i'm told that vote will happen on january 3rd and the question will become will the president sign that bill as you said, this is a partial shutdown about 25% of the government is affected about 380,000 workers are furloughed, meaning that they have to stay home from work and don't get paid about 420,000 employeesare working without pay, so that includes all those tsa airport
screeners during this busy holiday travel season. they are working without pay so certainly many federal workers and their families are feeling the pain of foregoing a paycheck from a macro standpoint, the economic impact is limited, but not insignificant. s&p put out this analysis. quote, the negative multiplier effect from a protracted shutdown would compound the effects of fading fiscal stimulus and act as a drag on an already slowing economy. s&p estimates the hit to gdp at $1.2 billion for each week of the shutdown the former white house economic advisor under george w. bush, his rough estimate of the cost, guys, about $100 million a day back over to you. >> one reason we'll be paying more and more attention the longer it lasts. ylan, thank you. when we come back, why one tech portfolio manager says he is not recommending an aggressive return to tech stocks just yet what is he waiting for e w l ndut
nearly 1500 more were hurt and another 159 remain missing aerial footage revealing the devastation on the country's south sumatra coast. and japan is deciding to withdraw from the international whaling commission and will restart commercial whaling next july it will be hunting for whales only in its territorial waters and exclusive economic zone. australia says it's extremely disappointed with that decision. a spokesperson for the russian foreign ministry says the planned withdrawal of u.s. troops from afghanistan is a step in the right direction but the kremlin says it will believe it when it sees it. pope francis celebrating forgiveness during his blessing in front of 25,000 worshippers in st. peter's square this morning. he said st. stephen, the first martyr of christianity, was the model of forgiveness that's our cnbc news update for this hour. let's get back to "squawk alley. watching the dow erase its early gains as investor focus
remains on the fed and the future of jay powell's tenure as chair. for that we'll go back to steve liesman at hq. >> the president's top economic advisor affirming to reporters in just the past hour that the fed chairman's job is safe here's the transcript of what we came up with nbc reporter nichols says is the fed chairman's job safe? kevin hassett says yes, of course, 100% yes question, again 100% the fed chairman's job is not in jeopardy by this president hassett says absolutely, that's correct, yes president trump did continue his criticism of the fed on christmas day saying it was raising rates a little too fast but maybe a little softer saying he was confident the fed would get it pretty soon here are the president's complaints about the fed he said rates are rising too fast actually they're running at half the pace of '04-'06 hikes.
some of what's going on in the markets could be in response the president is claiming it's not supporting fiscal plans. actually monetary policy is independent of the fiscal authority. one problem with president trump is his problem is not just with jerome powell, it is trump's fed to a large degree. five of seven seats filled, four of them are trump appointees, four of them in december voted for the rate hike and a good number, though we can't know for sure, support additional rat hikes next year. lael brainard also voted for it. investors claim the pace of the hikes combined may be too fast but many also complained instability in the administration, threats to remove the fed chairman and the tariffs. now, maybe these comments by hassett can begin to ease that bit of instability out there, carl >> steve, you know, as we keep
reminding people, we have eight live meetings for the fed next year is there going to be a press conference after every one we're less than a month away from the january meeting how do you think kind of the fed speak will proceed from here, at least the cadence of it? will we start hearing from lots of policy makers in the next several days >> yeah, we'll hear a good amount you're right to point this out, mike, because i think it's going to create more volatility in the markets. i was a huge fan of the fed doing the press conferences once a quarter. i'm not sure what the fed chairman has to say once a month or once every meeting. the trouble is that now we go in with the volatility of thinking they could hike or not hike at any meeting and so the fed will have to kind of -- i guess the best way to put it is retune its communication strategy for a press conference every meeting and the fact that these meetings will now be considered by markets to be much more live than they were in the past >> well, we'll be tuned in to whatever they say for sure,
steve. thanks very much >> sure. tech, by the way, is the market's brightest sector at the moment, up more than 1% as a group. the biggest story remains nasdaq's descent into a bear market so are valuations low enough to buy in this group? weighing in now jason drahoe and paul meeks good to see you both jason, from a broader asset allocation perspective, it was all tech going into the summer valuation premiums have come down but is it a place where you feel like it merits a big bet right now? >> if you just look at tech versus the yoeoverall market, it got up to 15% and now it's at 5% you can say tech is cheap relative to the market and increasing recession is almost a base case in tech even the secular growth stories aren't immune in that scenario so right now for tech to outperform, the cycle is not
ending and you need better data on that front. right now it's going to take a couple of months before investors get comfortable. valuation alone is not a reason for people to buy. >> and just to be clear, do you think right now the market is priced as if recession is a base case because it adds 20% in three month but we'd have to live through a lot of bad. >> say it's a 30% or 40% chance that in 12 months you get a recession. most economic models are saying the probability of recession is like 15% in the next year so there's this disconnect between what the economic data is saying versus what the market is pricing. >> paul, i know you've been sort of in the wait to buy camp for a while. we've spoken a few times now has the damage been widespread enough for you to change that at this point >> the way i look at it is we're going to get another data point from not just the major tech companies but from most tech companies and that's going to
come probably fast and furious beginning in about the third week of next month and with all the political instability, and i'm focused on that, i don't believe that we are going to eke ourselves int a recession. we're going to grow u.s. gdp at about 2% next year, which is, yes, going to be down from 2018 but be much better than at least the rest of the developed world. so i think at some point, and i'll be the first one to get on the air and tell you when, that technology will be rebounding and it may be when he get to december 31st of 2019 the best sector of the 11 but to tell you the truth, mike, i've seen a lot of this. i think the fundamentals are okay, not great. i think the valuation is very intriguing, but i need to see at least some more data, whether it be macroeconomic or microeconomic that gives
analysts on wall street a chance to yet again lower their revenue and eps estimates for the future and then once we see that catalyst, it may be time to go all in. >> paul, i wonder, we talk so much about hedge fund exposure and how it impacts overall pricing in tech. do you think the easier trade for some of these funds is going to be to flip back into the western digs and microns or stick with the adobes and those hit less. >> i think the business models are more stable for some of those software service companies rather than the semi conductor companies. with the semi conductor and semi conductor capital equipment companies, you'll really have to be spot on, calling the cyclical turn and i'm not comfortable there yet, but i am pretty comfortable if you have a long-term perspective, even today, buying adobe, auto desk, microsoft, and some of that ilk. >> you know, it's curious
because there's been so much volatility, if investors don't have the stomach for that, even some of the stable sectors have been on some shaky ground. we've seen some slippage in utilities and consumer staples is there a place to ride out 2019 where you don't rock and roll all the time? >> in terms of sectors, the past couple of weeks you've had some defenses do well and others not. you've had some cyclical stocks doing well and others haven't. it's been a little hard to get a read the past two or three weeks. light volumes have been a factor you think about overall sectors, though, something that can give you cyclical growth and reacceleration there but also at the same time something that's going to be a little more defensive. >> like what >> in terms of cyclicals, thinking about sectors that could be in the tech space that are a little bit more immune to kind of the global cycle paul alluded to i.t. spending in the cloud space, that's
something that can do well if the economy stays strong on the more defensive side, something like staples versus utilities which have become quite expensive relative to the market so we're at a point where we have to be a little more selective both across sectors and in sectors. >> how much are you looking at leverage and how highly leveraged some of the companies are or as a sector how highly leveraged they are >> that's an excellent question because when you take a look at thesis balance sheets, particularly as folks become a little bit more worried about the macroeconomic, they are going to shift away from the weaker balance sheets. so yes, particularly in this environment, an excellent question that you asked, i am very wary of companies that are leveraged too much >> but on that point i think if you look at companies that have weaker balance sheets, like more debt outstanding versus strong balance sheets, the market has been differentiated from that. i think it speaks to the fact people are getting more
concerned about the credit markets. we've gone a month without any high-yield issuancissuance if you have a lot of debt outstanding and can't refinance it, those companies will be hit harder so it becomes a little bit of a stock picker's market in terms of differentiating those that are immune from weaker growth versus those impacted the most by it. >> you know, jason, you win points with the interviewer if you say excellent question i'd like to -- >> excellent question. >> paul did that very well, almost as though you've learned at somebody. >> i'm a veteran. >> it was really good, paul, thank you so much for that. >> yes, jason and paul, we leave it on a high note there. appreciate it. thanks a lot. meanwhile, the markets -- the dow is back up 212 points right now, the s&p is up more than 1%. so you had a little bit of a morning rally, a lull, and now they have kind of taken it back to the highs the dow on the verge of 22,000 again. not even getting back nearly monday's losses. straight ahead, can apple change the narrative around its
stock and growth in 2019 you'll find out in our cnbc tech playbook that's coming up but first, rick san telltelli, are you watching this day after christmas? >> as i look up as treasury rates, i notice here we hover on a 10-year note about 50 basis points lower than the high close of the year. will that help some of the stock drop that's what we're going to talk about after the break. duncan just protected his family
with a $500,000 life insurance policy. how much do you think it cost him? $100 a month? $75? $50? actually, duncan got his $500,000 for under $28 a month. less than a dollar a day. his secret? selectquote. in just minutes, a selectquote agent will comparison shop nearly a dozen highly-rated life insurance companies, and give you a choice of your five best rates. duncan's wife cassie got a $750,000 policy for under $22 a month.
on deck at halftime, will the markets hold their gains this time around the dow is up 200 but we've seen this before. could be another wild couple of hours of trading scott meyer will call in at the top of the hour. remember, back in april he said stocks would fall 40%. he's on track to be right. we'll get his views right now. and after christmas maybe you have some money, some people gave you some cash and you're looking to pick up some stock bargains we'll name some names that could be a value in this crazy market. that's coming up at the top of the hour on halftime report. i will sending it now to carl. carl, i hope you and your family had a great christmas. >> thank you very much watching oil here today. a pretty interesting session as oil was down, way down and now up almost 2.50 >> a new tune for oil today. crude prices surging the u.s. benchmark wti up nearly about 6% today on pace for its
best day of the year and best day since november 2016, rebounding after that big sell-off on monday now, the surge in oil prices pushing energy stocks higher as well we're looking at marathon oil, hess, conoco phillips and anadarko leading those names despite the surge today, oil prices are still off more than 40% from their 52-week high on october 3rd. back over to you >> leslie, thank you very much let's hop over to the cme group and get the santelli exchange. good morning once again, rick. >> good morning, carl. you know, as i look up at interest rates, they have had a pretty good-size drop. look at november 1st to today. look at the double tops at just under 3.25 in 10s and we're trading right around 275 but we also forget we need almost to remind ourselves whether an analyst, an
economist, a strategist, a trader, a manager of portfolios, all have to remind themselves almost on a daily basis that it is different this time i hear so many comments, especially with the issues regarding our president, the head of the central bank, what's going on in the markets. we talk about, for example, the pace of other corrective or reversals of policy from stimulus to tightening we look at this particular chapter and we say, well, it's actually a slower pace than some of the previous. but it's different we have so many issues of central banks still unresolved that we cannot say that just because we're doing something in a similar fashion as we did in the past, why do we have such a strange outcome. it's because this policy has been applied in a strange environment. really, we need to remind ourselves all the time, market
signals. just recently many have questioned market signals. traders have questioned market signals for a handful of years my point today specifically is back in the day when one trusted signals, that the stock market wasn't built on a house of cards, post crisis, only to stabilize at higher levels with a weak foundation, the market signals of the stock market always seem to be telling us what the economic landscape would look like in a couple quarters ahead can we be confident in that? that's why we used to say when rates came down due to stock market issues, it wasn't the stock market per se, it was the economics that the stock market was divining for us looking in its crystal ball but at this point it's hard to say. we have no idea how reversal of policies in europe, japan or the real reversal of the economy in china are all going to play out while we try to normalize. one thing is for sure, rates have come down about 50 basis
points they're still about 35 higher than they were and we don't know where they really should be to begin with but when i look at today we have another auction. we have 5-years. tomorrow we'll have 7-years. the size of these auction packages, $113 billion this week, it's humongous deficits, all of those issues will limit how much help you get out of lowered market rates not controlled by the fed, or are they and finally, we have to hope investors will continue to look at the yield curve as an opportunity and give us more of a shock absorber effect with low interest rates carl, back to you. >> rick, thank you rick santelli. when we come back, why amazon's push deeper into the cloud may trigger a wave of consolidation in that space come 2019 take a look at some of today's laggards the dow continues to reclaim what was a brief trip into the red. the s&p is up almost 31 points and we are just 30 points shy of the dow's intraday high.
3rd, down some 35% can things turn around in 2019 our josh lipton is taking a closer look. >> reporter: the tech sector started the year off with a bang and then fell hard on a range of worries from trade to rising rates. here are three predictions for 2019 one, amazon's cloud drives consolidation, making new moves in the cloud introducing new server chips and bringing cloud technologies to the data center forces others to react, maybe buying other companies to catch up two, google makes moves in china. google's ceo ovitz pichai was grilled that doesn't look likely but google will attract more of china's 800 million internet users with apps, investments and
licensing deals. three, apple shifts the narrative and will build a new case why it's a smart investment offering data into loyalty and engagement as it tries to shift investor attention away from unit sales and faster growing services business. >> josh lipton joins us now to talk about more on tech. one of the other things and maybe the doigoogle in china an the regulatory threat, too who knows if that develops further next year. >> i think ramping regulatory scrutiny is a potential headwind i have questions about how much a headwind that will be in 2019. when you watch our politicians and lawmakers interacting, the way president trump interacts
with pelosi and schumer, the way lawmakers grilled or tried to grill pichai on capitol hill is this a group of people that are going to come together and be able to propose and pass regulation here? maybe gdpr light in 2019 i find it tough to believe that same group we're all watching can negotiate a new regulation that will have any teeth in 2019 >> i'm sure you saw this, a wish list for apple investors next year accelerated buyback, more transparency and a studio or something. >> yeah, so that's interesting on the acquisition front, carl apple doesn't do big acquisitions $3 billion for beats was its biggest.
i think apple thinks if they want new technology they have smart engineers and can build it i do think there's an interesting narrative that takes shape in 2019 when it comes to apple. the bull/bear debate, obviously the bears are out in force that stock is down about 17% this month do we get even more new metrics. you mentioned services, carl we'll get some new insight there. it speaks to a lot like customer loyalty and wearables. the watch and airpods. any metrics next year will be interesting. >> good stuff, thank you a nice upside reversal the dow is up 300.
a pretty nice test there around 2350 or so >> it seemed people were bracing to see if there was another one of these selling waves that came into the market. we didn't get it and the market blasted. s&p back to where it was 11:00 a.m. monday. >> shaking that off. >> good to have you. let's get to sully and "the half." all right. thank you very much, carl. welcome to "the halftime report." scott is off i am brian the final week of the year may tell us a lot about trading next year >> stocks, bonds, commodities, all down in 2018 on this final week of the year, our attention turns to what could turn around in 2019. wall street has a long list of concerns from washington to the factories of china with the government shutdown heading for