tv Closing Bell CNBC May 28, 2019 3:00pm-5:00pm EDT
good stuff in here the other thing we were saying with her before she left is most people are either worried about going too tech or not tech enough she has a better balance here. >> she said let your kids help design whatever rules you apply to their devices sometimes they will come up with stricter rules >> thanks for watching "power lunch," everyone >> "closing bell." i want to put rules on them. no rules here. welcome to "closing bell." i'm sara eisen >> and i'm wilfred frost a have good afternoon to you 59 minutes left in the trading day. we're going to tell you everything you need to know as an investor before the market closes as we hover near the session lows >> here's what's driving the action today in that stock market president trump said he's not ready to make a deal with china. 10-year yield is dropping. we're seeing new lows there. and consumer confidence is surging. >> tom lee and morten's jeremy siegel will tell you where they think the market is heading from here former chrysler president jim press on a potential merger
between fiat chrysler and renault. >> joining us for the hour to break down the market action is john petrides from wealth management welcome, john. >> thanks for having me on >> this optimism fades into a pessimism. it's sort of a trend what's driving it? >> first of all, can the month of may just be over? we've had a strong rally and then may has thrown cold water on the markets, although we started up 13% i think you saw some optimism coming out following elections in europe and the fact that the coalition to break up the eu did not gain as many seats as the market had maybe feared. i think that was the positive. and obviously the president's tweets on we're not near a deal on china is driving the headlines, and that's why we're seeing the market dip lower here >> at the session lows the vix has already picked up and is at session highs as we approach the highs. are you keeping an eye on that as well? >> yeah, absolutely. again, we finished positive every month through april to start the year we're hoping for the same. in volatility you're seeing returning to normal what was off
very low levels. expect volatility to be around for a long time. >> let's focus in on the stories moving the market today. bertha coombs is tracking this today. surge in the chipmaker stocks. particularly amd phil lebeau covering deal news in the auto world. wilfred frost is watching jamie dimon's changing tune on the trade war. and rick santelli following a drop in bond yields. bertha, let's start with you on the chips. >> yeah. a huge day for amd new pc and gaming chips over the weekend. analysts and cowan pretty bullish saying amd with its announcement stole the show at the compewtext industry trade show pricing was one of the big notes there relative to intel game chips. amd a standout on a day that chips right now flat to down for the most part. may is on pace in factto be th worst month for chips since november 2008 back in the midst of the financial crisis. large cap tech fang names also under pressure this month but helping the nasdaq 100 outperform today amazon looking
at its first back-to-back sessions since may 16th when it's actually seeing guidance. back over to you >> thanks, bertha, for that. quick question john on the chip names. what's your take at the moment and how much is priced in on the trade war? >> at the beginning of the month really i think intel's three-year outlook where they lowered their guidance really threw the chip sector into a tailspin and that's what you saw reverberate. obviously the issues with huawei, the legal issues on qualcomm hasn't helped the sector i do think it's really interesting today amd's bounce amd was always the perennial redheaded stepchild. and the thought amongst investors was that intel kept it around, didn't put it out of business many years ago, just so it wouldn't have regulatory pressure on monopolistic interests in and of itself and here you go today positive comments that amd at the expense i guess of intel and nvidia. >> turning to the big m&a news of the day fiat chrysler and renault holding talks to create the world's third largest automaker. phil lebeau has those details
for us in chicago. hey, phil. >> we've talked about the numbers, why this deal at least on paper seems to make sense but we haven't talked a lot about one of the key figures who's been driving this potential merger and it's john elkin, who is the chairman of fiat chrysler. he's been in this role going way back to before fiat chrysler, back to when it was just fiat. if these two companies get together, remember, it would create the third largest automaker. a lot of the synergies would drive $5.6 billion in savings. but for john elkann and the anieli family, remember that's really who he's representing here as really the driver behind this, look at what it does for exor that is the investment vehicle for the anieli family and look at their investments and how it's paid off over the last 15 to 20 years. they have major stakes in fca, ferrari, cnh, case, new holly. you see the tractors around. as well as the juventus football club out of italy. and exor, all the way back to
2009, this is a holding stock that has continued to grow in value. and so a lot of people look at this and strictly say the auto companies you have to also focus on elkann's role along with the anieli family's desire to see greater diversification in that portfolio and greater growth and all right, phil, thank you we're going to talk a lot more about that one first, though, is juventus good? >> juventus. silent j they've dominated the italian league for the last five to ten years. they haven't got that european crown, though. they hope for now would get them this year. but financially it's done great. signing ronaldo. you called that. what was expensive on the surface -- >> i didn't know thanks jamie dimon making fresh comments on the impact of the trade war on business. and wilfred, you have been all over these headlines >> this is not a silent yamie. it's jamie dimon he's struck a more concerned tone on the topic this morning
>> trade is a real issue i think trade has gone from being kind of a skirmish to being far more important than that and if this goes south in a bad way and you have surprises, other surprises, it could be the chain of confidence, change how people are going to invest you already see businesses starting to think about moving the supply lines and stuff like that obviously that can slow down business investment and cause uncertainty of all different types. >> that was quite a marked turn. but overall he remains optimistic about the u.s. economy, was relaxed about credit, especially the consumer, and said that it isn't likely to see a recession coming up and that we're in the last third of the economic cycle but that could mean five more years from here now, speaking at the deutsche bank conference in new york, he also called rivals wells fargo irresponsible for letting tim sloan leave without being ready with a replacement
john, overall this is a similar tone we've got but it's clear a lot of big ceos have noticed this change in tune on trade and are concerned where it goes from here the question is whether it's priced into the economy yet or not. >> i think whenever jamie dimon speaks the world has to listen just because of the institution that he oversees but i don't think he said anything outrageous. he's just stating the facts. you can see actually in company earnings those companies that get more than 50% of their earnings in this past earnings season we went through reported lower earnings growth, significantly lower earnings growth, than those that did not have the international exposure. obviously trade wars in china, china's 15% of the global economy, growing over 6% if that slows down that's going to drag the global economy with it that's where he's holding caution. >> yeah. and you see that caution in the bond market today. u.s. bond yields falling to their lowest level in nearly two years. rick santelli has more at the cme group. rick >> yes we had two auctions today, sara, two-year and five-year the two-year was absolutely
stellar. so many must believe that rates aren't going to be higher anytime soon and maybe the fed will be brought into the game. you see that one week of 2-year dropping down. trading 2.12 and that might be the boiling temperature of water but it certainly isn't boiling in the treasuries and all high quality sovereigns around the globe moving lower. look at one week of 10s they're going to close at the lowest level since fall of 2017 the guilt in the uk 92 basis points that goes back to 2016 no matter how you slice it even though we had a very strong consumer confidence number much of the day has leaned better than the rest of the globe, we are continuing to go down with all sovereigns as very nervous global investors unsure of the footh of global economies. wilf, back to you. >> rick, thanks so much for that we have 51 minutes left of trade and we are near those session lows down 94 points on the dow. joining us to discuss, tom lee from fund strat global advisers and michael feroli from jpmorgan
michael, i'll start with you just off the back of rick's comments there, how much we've seen yields move in the last couple of weeks. is the data on the economy matching that in the same sort of level of bearish tone as the bond market move is? >> i don't think so far the data is matching that but i think some of the forward-looking indicators are sending a cautionary signal. and i think something we're getting really concerned about here is capital spending and last week we saw some of the data on capital spending that predated some of the intensification of the trade war. already it looked pretty soft. that's probably not going to get helped much by what we're seeing with business sentiment lately i'd say the spot data we have right now suggests an economy that's still growing, you know, at or above trend, though there are a few cracks showing up. again, not in the household sector consumers look fine. but it's really businesses businesses are going to lose caution -- i'm sorry, confidence and that shows up in weaker capital spending and potentially hiring i do think the bond market is picking up something here that there are some cracks in the facade that the bond market may be discerning here
>> what are those cracks in the growth outlook, tom, or what you have been bullish on the u.s. market and sort of even -- i've seen you tweet and repeat the idea that the u.s. can be a safe haven even when you do have these trade and growth concerns heat up. have you changed your view at all? >> no, we haven't. i do think that there are some reasons to not be too bearish. among them being the u.s. is the safety trade and as michael's pointed out there's? real resilience and dynamism in the u.s. economy but of all the parties affected by this trade war, i kind of think jamie is the front end of ceos beginning to cry uncle. and i think that ultimately puts some pressure on the u.s. to maybe come to a resolution sooner i think there's probably a lot more commitment on the china side to endure more pain >> on that front, though, tom, would you say the political side has come around to support the president more clearly on his hard line, which perhaps gives him a little more wiggle room to continue to push hard? >> yeah, that's right.
i think from a political perspective i think the democrats and republicans in congress support what trump's doing and i think that's helped embolden him on a hard line. but i think what's changing is ceos want to get in line and start to notice their book to bills getting hit, conditions are slowing, financial conditions tightening. these are things that ultimately raise a lot of risk about what it means for as michael said capital spending but also hiring if hiring happens consumer confidence will weaken >> michael you've recently adjusted your call or expectation for the fed. what do you think the fed's going to do this year and why are you changing your mind >> we've always thought they'd be on hold this year now i think their rhys accideise looking more balanced between the next move being a hike or a cut. i think they probably would only cut if they felt that growth were deteriorating to something like trend growth or even below trend growth i think that risk has really
grown in the last few weeks when we look at some of the data second quarter we have it penciled in around 1% gdp growth we'd obviously want to average that somewhat with the first quarter. but that is getting you a little bit dangerously close to trend growth and i think in that environment the fed may feel that some extra stimulus may be needed for the economy. i do think -- it still looks to me like the fed is on hold that's certainly the message they've been sending in the last few weeks. but i think of the odds of the next move being cuts as we've seen some of this business caution evident in some of the surveys we've gotten recently. >> john, how much would the markets celebrate if they did see a cut? >> it would be tremendous i think. i think that's part of the reason why the stock market sold off last week when the fomc meetings were released, that there wasn't more language of the fed to cut by year end i think expectations of that were starting to build there is still a big gap between the fed's plot and where the market -- fed fund futures is
expecting the market to be by the end of 20120 and really since the crisis the market has been right. the market is the one that's been pricing in the fed is going to be lower for longer than what the fed would have liked to have been and what the fed is trying to price in. i think the market would really love to hear that and stocks would boost. >> what would happen if the fed didn't cut as officials indicate they're not going to do, tom would that dent your bullish thesis >> no. i think we're in a period of xhop and it's not because the economy's terrible it's just there's no visibility and there's risk aversion. i don't necessarily think a fed cut changes that i think the fed being ready to support markets is a really important support for markets. i would say that's more important. but at the end of the day we need this ability. >> quick question on bitcoin is it benefiting from the trade war? is it a safe haven or is it benefiting for its own reasons >> bitcoin's correlation has now turned negative against a lot of
risk assets, which is interesting. and i think we're seeing real demand pick up in asia for crypto since it's moved above its 200 day, bitcoin's really been a different market and we're getting to the point where institutions are starting to have to rethink this. i think they thought it was a broken protocol but now that it's back to almost 9,000 people are take a second look >> in terms of the crypto in a non-correlated trade su need more time and more market movement to really see how it would work in 2017 that was the story it was a non-correlated asset. that clearly broke down in 2018. the fourth quarter when the market blew up you'd expect bitcoin to have a rally and it didn't. you're only starting to see that now 37. >> yeah. >> i think you need more time to -- >> keep in mind that at the current price bitcoin has only been at this price 3% of its entire history which means -- >> we have no idea what's going to happen. >> exactly but it also means that you're
not really buying it that far off its highs. at 8,000 it's moved into new highs wouldn't take a lot. >> tom lee, mike feroli, thanks very much to you both for joining us we've got a news alert contessa brewer's got it for us. >> wynn resorts has paid its $35 million fine to massachusetts gaming commission. that was the discipline for multiple instances of failing to address serious accusations against founder and former ceo steve wynn over a decade or more more interestingly here, the board is pushing back against these gaming regulators' decision to fine personally ceo matt maddox half a million dollars and force him to have an executive coach. maddox, though, has apparently decided not to appeal. that allows the company to move on wynn resorts has paid maddox's fine as well so in spite of all this back and forth about whether mgm might buy encore boston harbor from wynn resorts, that was a talk that was moving forward full speed ahead, it looks like it will be wynn resorts that opens
encore boston harbor on june 23rd in everett, massachusetts, guys >> contessa, thank you very much for that we'll keep an eye on it as we know you will for us coming up shares of apple down double digits so far this month and one analyst says the destruction of chinese demand could be coming. he'll join us to break down the trade war fallout. later, wharton professor jeremy siegel said earlier in the month that stocks could drop as much as 20% if the u.s. and china continue to dig in on the trade war. well, we're going to get his updated thoughts on the latest tensions and here's a look at the dow a we head to break losing steam we are at session lows, down 110. 45 till the close. we'll be right back. welcome to seattle. where people are into coffee, tech, and retirement planning. the perfect retirement for me is doing the things that i want to do, not the things i have to do. unlike seattle, less than half of americans participate in their employer retirement plans. so what keeps people
we're going to go inside with when the bond market closed we saw those yields close near the lows of the day. there's the dow tumbling out of bed into the close the low of the session is down 120. we're down 103 right now the biggest losers are intel, exxon, goldman sachs and dow >> the ten-year 2.26 yield at
the close, a 19-month low. let's send it over to mike santoli for his market dashboard. >> that is in fact part of the dashboard today. we'll look at stocks versus bonds both in the short term and the interplate over the last year also going to get to the auto trade with the big car merger news today breadth check into the close kind of a key swing factor today as well. also a possible volatility signal for the coming years, not just coming days first stocks versus bonds. take a look at the chart of the ag etf this is the barclays aggregate bond index etf it's basically all u.s. wrapped together treasuries, mortgages, and private sector debt all in one. look at the strength of this chart right here this is basically kind of looks like a momentum stock. all you're really looking for is it's a little overbought it's a very strong trend we did get a little overbought there in march and then went to new highs. this obviously means a big bid for safe yield around the world. big beneficiary there. now take a look at stocks versus
bonds over the last year this basically shows from bespoke investments whether stocks or bonds have been outperforming over the prior year the 30-year treasury versus the s&p 500. you see when this is higher stocks are outperforming so right here stocks were doing really well back into the highs back in september. obviously this is december when stocks were suffering and bonds were doing well. underperforming by 15% stocks were here you go. we dip back into negative territory over the last 12 months it's been about a two percentage point advantage for bonds over stocks it doesn't mean you have to go to the depths. i'm focusing on these areas where we dip negative on a yearly basis happened a few times last year before the highs and then also earlier this year. that's the bold case that basically yields have been compressed enough, maybe stocks can get some relief. no signs of it this afternoon. >> to what extent do you think
the bond market is trying to move ahead of the fed, as it were and if it doesn't get the rate cut that perhaps it's pricing in that it's kind of bearish for both sets of markets? >> it has happened before that the treasury market has kind of overplayed its hand and overanticipated a fed rate hike. at this distance to the implied rate -- ease the rate cut, at this distance of several months it's not really predictive so i wouldn't focus too much on the implied prediction for a rate cut but look, the short end of the treasury curve is really saying it's very confident right now and pricing in a slower growth environment, not much inflation, but could be driving the fed toward unease by the end of the year >> see you in a bit. thank you. still ahead former chrysler president jim press lays out the biggest challenge that could stand in the wave a fiat chrysler deal with renault >> after the break a number of firms raising red flags over apple's china exposure the analyst behind one of those calls will tell us how much aof hit could be coming to apple's bottom line. ps
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. tracking this market for you into the close, really saw a sharp downturn about an hour ago. not severe we're down about .4 of 1%. but it is a lot worse than we looked this morning. as far as what's wrking in the overall market the only sectors that are higher right now are communication services and technology barely.
financials, materials, utilities, energy all the biggest losers if you're looking at sector groups in the s&p 500. it is really a stair step down starting around 2:30 or so we'll see where we go in the next half hour >> as you said, yields softened into their close as well and the dollar strengthened a little as well in this final hour or so. >> no major headlines. we did get the bond market closing and you mentioned yields near the lows of the session >> exactly time to move on to some individual stocks and get the word on the street let's check in on some companies getting wall street's attention today. beyond meat soaring after jpmorgan, bank of america, jefferies and goldman all initiated coverage jpmorgan with the most bullish goal, a price target of 97, saying the meat substitute's revenue could exceed 5 billion in 15 years. i'll say that again. price target of 97 not that far from where we are at the moment. 15 years out is their prediction for total addressable market of 100 billion for them to grasp 5% of that or 5 billion some lofty valuations based on today's
sales. >> he's a food analyst and he covers usually boring consumer staple stocks. i'm always calling him up on this he said he's getting grief on it. but it's because they started trading at 25 times sales, right, john? so when you're going to start at that base i don't know what's appropriate. >> are we going to start valuing these on price per patties there's no barrier to entry into this business and as far as i know the peppercorn diner where i live in new jersey has been offering a vegetarian burger forever. >> this is not a veggie burger this is a plant protein. >> are there substitutes to non-meat it doesn't have to be this by the way, the company is not profitable and has under $100 million in sales and we're at a $5 billion market cap now. 46 times -- i mean -- >> last week bernstein initiated and we all thought that was bullish and it's already blown past their target price. some lofty valuations. activision blizzard getting an upgrade to buy at goldman saying they see a potential inflection in the earnings trajectory for
the stock and that is an attractive entry point up 2% today. >> this call got a lot of attention. citigroup slashing its price target on apple saying the trade war could cut china sales in half meantime, callahan maintaining a positive view on apple and a new note but also laying out a retaliation scenario that could damage apple if chinese consumers do start seeking revenge for the trump administration's huawei ban. let's bring in the analyst who made the call from cowan chris shankar, managing director at the firm. what did you analyze with respect to china sales and how at risk they are >> overall 20% of sales for apple comes from china about 65% is actually iphone and related revenue from china is 20% hardware sales which is iphone, ipad and imac.
based on that you get a impact on eps next year we also looked at an extreme scenario where if china outright bans iphones which seems like a very long shot but what does it mean to earnings it impacts it fy 20 eps by 26% one thing i'd also highlight is this is such a fluid situation we saw in january there was an anti-iphone sentiment in china which changed in february when apple gave a sweetheart deal during the chinese new year there were some pricing cuts it's definitely a fluid situation. >> how long does this need to prolong to be long-lasting damage for apple in china? so much of apple's iphone case is based on the operating system and ecosystem you get hooked into if someone does move on to a new phone whether it's huawei or anyone else that means android could they lose those customers forever? >> there is definitely that risk one thing is when you see the
customer base the most loyal customer base for apple does happen to be in the u.s. followed by europe china's probably the most fidgety pr the loyalties can switch based on the price of the device so i wouldn't say the customer is as loyal but there are folks who do subscribe to the services which is mainly the games they download on the app store are relatively more loyal to iphone. most of them are probably not. >> how do you think about the price target with that kind of huge risk out there? >> what happened with demand destruction going down, the most case is 100% demand disruption implies a 26% hit to earnings. that would make my price target be more like 200 versus 245. but clearly like i said this is a fluid situation, nothing has happened yet but we're just analyzing the series of outcomes based on what's happening. >> krish, thanks so much for joining us >> time to get a cnbc news update with sue herera hi, sue. >> hello, sara
hello, everyone. here's what's happening at this hour at least one person is dead after a tornado hit the city of celina, ohio the tornado struck monday night taking down trees and power lines and damaging or destroying 40 homes celina's mayor jeff hazel says the city is moving forward >> there's been significant damage in our community this time and i think what makes this even more difficult is knowing that it happened to homes, it happened to real people, our neighbors and our friends. and i think it's tough because we always think of home as being a safety zone and a place we can go and relax and be secure oklahoma goes to trial against the maker of opioids it is the first state to take on johnson & johnson and several of its subsidiaries oklahoma says j&j misrepresented the effectiveness and risk associatedhighly addictive drugs. the company denies those claims. and the scripps national spelling bee is under way outside washington, d.c. 562 spellers from all 50 states vying for the title.
this is the second year of a program called rsvb, which allows spellers who were knocked out of their regional competitions to apply for a wild card entry to the main stage good luck to all of them that's the news update this hour, guys i'll send it back downtown to you. >> it is fun to watch. sue, thank you >> you got it. >> odd after the break one analyst says if you're not already in fiat chrysler there's a clear name to buy ahead of that potential deal he'll tell us what that name is, next puppy school is in session.
25 minutes left of trade here are the three things driving action in today's sessions treasury yields closed at a 19-month low trump says he's not ready to make a deal with china and consumer staples are also leading the declines which has us at session lows down 170. >> let's send it to mike santoli for his second dashboard the auto trade mike >> we didn't get a widespread rally on that news today about renault and fiat chrysler proposing a merger but there was some selective strength and it shows you the broad context for this proposed deal right away. if you look at some top five or five of the biggest plays on the auto sector, here's the global
auto etf it's up about 1.8% and you see toyota, volkswagen, which are the two largest global producers and this merged company would be third it did get a little bit of a benefit. i think the hope here perhaps is you would get on a net basis a reduction in global capacity for autos, which could help across the board. but the u.s. makers not really getting a lot of lift. that broad u.s. stock market decline probably weighing there. but look at the cars etf it's a global auto stock etf against the overall s&p 500 over the last year. you see profound underperformance this basically shows you the market's saying we're past peak cycle for autos right now and not only that we don't know what the next cycle's going to look like there's a huge investment phase coming even if we do, hidden downturn. sought stocks are cheap. market suggesting maybe cheap for a reason we'll see longer term how this idea of a merger is received by the street. >> mike, thanks so much. joining us now to talk about the proposed fiat chrysler and renault merger, richard hilger, morningstar analyst.
thank you for joining us is this purely a defensive cost-cutting scale move or are there strategic reasons one company has that the other does not? >> i think it's a combination. by the way, thanks for having me today. the combination of the two would provide significant economies of scale especially in the small car area where profits are none or slim as well as fiat chrysler having been a laggard in electric vehicle production. this would give them some valuable technology from renault, which has been one of the leaders in producing electric vehicles. >> john, do you have any thoughts on the deal and how you would be playing it? >> i think it's a trend of high capital intensive cyclical industries merging we saw in the 2000s the rails merged the last ten years we've seen the airlines merge this could be the start of the autos starting to merge. and i take more of the side of it's two smaller players merging
together to survive in a very changing cyclical auto landscape as mike highlighted in his calls. we're ten years post the recession. cyclicals usually do well out of the recession. with interest rates higher it's more costly to borrow to finance your cars. car sales have clearly flattened out. so -- and with the teslas and e-market, e-cars coming onto market it's going to spend a lot of money for these companies to survive. i'm on the camp of the merge to extend shelf life. >> which do you buy on that? >> i wouldn't buy any of these companies but in the car sector in general we like volkswagen. we think a long time has passed both the diesel emission scandal. volkswagen's stock has been punished because of it they paid out billions of dollars of fines we think on a summer parts business the stock is not being appropriately valued for the brands they own such as audi, porsche, lamborghini, bentley, bugatti. if you you give those brands anywhere close to the valuation that ferrari gets i think the stock would be worth significantly more than it's
currently valued >> richard, back to the potential merger, how realistic is for two big national flag carriers, talking about the fiat part and the renault part, to successfully merge and successfully execute the cost cutting and economies of scale particularly when you consider the level of unionization of their workers? >> mm-hmm. i think it's more likely than not that the deal does get done. but it obviously does have some hurdles that it's going to have to pass. i think an example of a merger that has taken place against the national champion backdrop is the peugeot opal vaksal purchase there you've got a french national champion that's acquired a german automaker. and they've been able to make a go of it so i think there's, you know, good opportunity for these
companies to be able to do the same there's already been some talk that there's going to be no head count reductions at the factory floor. so we think the head count reductions would more likely come out of staff. >> richard, thanks for joining us we appreciate it >> thank you >> now the dow is coming off a five-week losing streak. its longest in eight years up next wharton professor jeremy siegel will tell us what needs to happen for the market to get back on track. session lows, down almost 200 points it's been a bad final hour of trade. don't go anywhere.
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so let's get after it. ♪ everything is all right what would you like the power to do?® ♪ all right welcome back we have 17 minutes left of trade. stocks are selling off as we approach the close seema mody is on the floor of the stock exchange with more on what's driving this selling. seema. >> it's a bond market. what we're seeing there driving stocks lower the inversion of the yield curve as it relates to the three-month and 10-year yield continuing now at its
deepest since august of 2007 so yet another sign of growing concerns around the trajectory of the economy and also the impact of this protracted trade dispute. take a look at the s&p 500 sector you'll see that typically lower yields leads to interest rate-sensitive sectors like utilities and real estate to outperform but that's certainly not the case today utilities leading us lower down about 1.6% the biggest movers on the dow currently intel, exxonmobil, proktder & gamble. we started with these three names higher but as you can see leading us lower with intel down 2.4% guys, back to you. >> seema, thank you. interesting that some of the bond proxies like utilities and staples which usually dowell when the yields go down are also getting dragged into today's sell-off right now it really is kind of turning into an ugly session >> sure. the other thing to point out down 0.8% on the s&p we're now much worse than europe and certainly than asia today. often it's when those markets are open it drags the u.s. down. today the opposite's true. >> let's bring in jeremy siegel
professor of finance at wharton for his take on the market jeremy, coming off of five down weeks and another sort of session where the optimism has faded quickly and we're selling off pretty hard into the close, what's your level of bullishness? >> well, the market wants one thing with two words, a trade deal of course with china that's the 800-pound elephant that's there it's hanging over the uncertainty. what that will mean in terms of a supply chain, in terms of retaliation, in terms of war, whatever you name it. this is the biggest negative on the market but in addition, the data's not strong at all this quarter most of the economists i follow are saying this second quarter looks under 2% some have even marked it down closer to 1%, which would be one of the worst growth quarters under the trump presidency i think it's a toxic combination
of a weakening economy with the threat of a trade escalation that i think is definitely the reason stocks are driven down. >> professor siegel, on the topic of the trade war, if when this all kicked off a couple of years ago we were to say that it would still be going today and more so stilt escalating today, wouldn't we have expected a much bigger pullback in equities right now? we're still not far from those all-time highs >> we're not far from all-time highs because there's an expectation in the market that trump has got to do a trade deal the re-election is coming up it's got to be higher a year from now than it is right now if he wants to really have a good chance i think in this election. listen, we've got a trade deal with europe. we had a trade deal with mexico and canada and with an expectation we're going to get a trade deal.
the reason we're only 3%, 4% down is i think there's still like 80%, 90% expectation we're going to get a deal. but every day, every week that it doesn't happen puts a little bit more uncertainty onto that probability. >> so what do you do if you're sort of a medium to long-term investor, jeremy do you just wait it out, the turbulence, and hope as you said the president wants to see a higher stock market into the election or are there certain moves you'd be making? >> well, i'm nottoo much of a short-term trader. i still think there's good solid long-term values there that are now again being -- how much short-term downturn? stocks are only still trading 18, 19 times earnings. listen, we've been talking about the interest rate. and by the way, that is definitely a worry this inversion of the curve. you know, i've been on record here on cnbc saying that the fed's last rate hike was a
mistake. i mean, they should be thinking of lowering it into the future and maybe the data will force their hand to do that. that's really very, very contrary to what, you know, has been the mode this year. but you know, those interest rate trends are something i think are a short-term worry for the economy and the markets. >> john, on the topic of trade, one stock that you've held and it's sold off on the trade news is fedex but you're sticking with it? >> fedex is an earnings call that i think everybody should listen to because it's a great barometer for the global growth. and every time they report they talk about slowing global growth but i think at 11 -- nine times earnings with the barriers to entry that business has, you may not have found the bottom here in fedex but i do think a lot of it's priced into the stock and you get a really high-quality company right now trading at a cheap discount to its long-term intrinsic value.
>> jeremy siegel, thanks for joining us >> thank you for having me >> now, we only have 11 -- a little bit over 11 minutes left of trade up next your last chance trade and today it is in the energy space. you don't want to ssmi it. we're down 190 points on the dow. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.
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earlier today i asked global payments' ceo about the consumer and the risk to his business if we were to see a downturn in the economy. >> we have every burger king in north america, every tim horton's in canada, 40,000 k through 12 schools, a third of the universities in the united states you're going to send your child to school by and large regardless of the conomy by the way, that's public schools as well as private schools. about 40% of the revenue of global payments today is really not tied to the economic environment. >> and by the way, this was the third payments deal we have seen this deal. total payments surging about 5%. global payments down 3%. >> okay. it's time for aur last chance trade with john petrided
you've gone for kinder morgan. >> we think the energy sector is attractive in general but kinder is one of the largest pipelines in the u.s it has a $6 billion backlog. currently a 5% dividend yield of which the company's going to grow 25% by the end of 2020. they have an investment-grade balance heet and i think a lot of investors are still burned from the 2014-15 run-up of the nlps, the oil and gas pipelines which people are tripping over themselves for no longer nlp status by the way. you get a lot of safety that's a mid-stream partner here and you get a big yield in a low yield environment. >> up -- 30% year to date. john, thank you. it's been nice having you here today. john petriddees. plain view wealth management deirdre bosa with a preview. what do we watch >> sara, workday is up more than 35%. good news may already be priced in and any disappointment could bring that stock back down to
earth. the company is known for its cloud-based hr software but investors are really excited about the moemtum behind its newer financial management products workday does not break out businesses so we'll be looking for color on the call which kicks off at 4:30 p.m. the street is expecting earnings per share of 41 cents on revenue of 814 million back over to you >> deirdre, thank you. up next we're back with the closing countdown. we've got all the angles covered with our "closing bell" a-team dow down almost 200 points lots of talk about the angst being reflected in the bond market we'll be right back. the ai i want? well, insurance it's all about trust and speed. i need it to guide this analyst to customize flood coverage for this house. so that this team, can inform this couple, that their payment will arrive faster than this guy. hey. ♪ ♪ so whether i'm processing claims due to this fine gentleman...
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on an options trade it's a paste. it's not liquid or a gel. and even explore what-if scenarios. where's gate 87? don't get mad. get e*trade and start trading today. under three minutes left to go time for the closing countdown let's break down the action. tom white joins us from td ameritrade to trade the close. mike santoli with his market dashboard. bertha coombs at the nasdaq with the movers seema mody at the nyse first let's trade the close. tom white from td ameritrade, what's driving the sell-off, now down 200 points with minutes to go >> it's got to be the bond market here, sara. if you take a look at, it it's kind of been pinpointing this divergence that we've seen yields falling, stock market still at elevated levels
we've got the s&p 500 down just over 4% this month you would expect it to be more dow industrials still only down about 4% since that five-week sell-off started you've got to look to the bond market it's telling the equity market something. and the investors are trying to figure that out. and i think that's why you're seeing the weakness and they're selling any rally that we see. >> tom, just quickly, lots of commentary around apple because of china trade fears how are you trading that >> if you take a look at apple, the implied volatility's relatively low in about the 40th percentile into the end of the week and the straddle's only trading just above $4 for the next three days so under a 2% move either way is what the option market's pricing in we typically see a lot of call activity on any downturn in apple. we're just not seeing it calls versus puts as far as volume goes, about even. not expecting any move away from this 180 level in apple in the near term as far as the end of
the week >> tom white, thanks very much for joining us let's send it over to mike santoli for a look at the market breadth. mike >> it's been negative all day but not terribly lopsidely so given the fact we did have a fairly steep sell-off in the last hour. look at new york stock exchange advancers versus decliners it's been about one to two it's really not that terribly a washout, but it shows you the steady declines. i did want to also show you new highs and new lows on the nyse steady stream of new 52-week lows almost every day. close to 100 a day it shows you the market's been kind of ragged even when we've been going higher. this is sort of a drag at some point the market's going to get too oversold and bounce right now it seems like a bit of deterioration under the surface. nasdaq's been an outperformer all day. let's hear about it from bertha. >> we're slipping into the red but amd is hold k up after announcing some new pc and gaming chips i would caution there is a large short position there but on a day when chips more or less continue to be the whipping boys communications are actually the
real standout in technology with facebook and others doing pretty well today considering let's hand it over to seema at the nyse >> right at the close the dow closing right around the low, 216 points s&p 500, though, closing above the psychological level of 2800. now time for the second hour of "the closing bell. if you're just joining us, good afternoon and welcome to "the closing bell. i'm wilfred frost. >> and i'm sara eisen along with mike santoli, cnbc senior markets commentator. the dow, s&p and nasdaq also closing at the lows of the session. there's the russell 2000 as well you know, we saw gains earlier this morning the dow is up as much as more than 100 points. closing down 238 s&p 500 just holding above that critical level of 2800 2802 is your close down .8 of 1%. it's not severe but it is compared to the morning action and if you look at some of the
damage being done, we're going on five weeks now for the stock market communications services the only group to close positive. what stood out to you? >> yields lower as we said throughout dollar higher as well. that didn't help the sentiment and that continued throughout the afternoon session. as you said, not severe, the declines, but it's broad 10 out of 11 sectors lower and we have got three -- four sectors down more than 1%. >> here's what's weird if all the angst was about the bond market and we did see that 10-year yield go to 2.26 that's a low level and more negative inversion which was something scary that happened in march, we saw a more negative level, then why did you see the defensive bond proxy groups like consumer staples and utilities get beat up today a little unusual to see that but they have been big outperformers lately >> and financials weren't awesome which you might have expected in that yield environment. >> selling into the close. joining us to talk about the market today is charlie bobrinskoi ian weiner from drexel hamel joins us as well
first mike we'll turn to you and find out what you were watching into that close. >> more of the same. the market was definitely on the heavy side light volume, low energy all day. 6 of the last 11 trading days the s&p 500 has either traded at or below 2820. so we've kind of been kind of visiting and revisiting and revisiting the -- >> 2800. >> this is the new low close for may. and 2801 was the new low print essentially, we've been kind of softening up this area for a while. it does show you there's a bit of a gravitational pull to start the week also has been a pattern. we do have these sell-offs overseas market etfs outperforming today. the emerging markets etf was up half a percent on the day. there's weird rotational stuff going on and sara, you mentioned the yield proxies within the stock market i won't predict, it but sometimes it's those sectors in the stock market that kind of preview when they feel like the bond market move has kind of run its course so in other words, they sometimes lead and say maybe, you know, maybe we've gotten all we can out of this down move in
yields i don't know if that's true. also a different -- >> you're paying more credence to the move in the stocks thoon the actual bond market >> the utilities will kind of tell you if we think like this yield move has gotten tired or not. who knows? we basically saw selling in the indexes today and that could bring everything down. but it's just one element to keep in mind >> as we said, we closed at the session lows and seema mody's been on the floor of the stock exchange throughout the session. let's get to seema for an update on what led us to that low close. >> and wilfred, as we've been discussing it's what the move in the bond market means for equities there was a number of stocks across various sectors leading us lower led lower by intel down about 2.6% on the day. what's interesting is what the bond market is telling us about the trajectory of the economy and this long drawn-out trade dispute. what kind of economic impact that will have on the u.s. we get the revised second quarter gdp numbers this thursday and china pmi on friday. two important metrics to watch
when it comes to economic data what was interesting about these sector performers typically when yields move lower bond proxies like real estate and utilities outperform but that is certainly not what we saw today. and a big reversal for technology we were pointing out earlier today the standout in technology shares but technology ending lower by a third of a percent. tomorrow retail on deck. capri holdings, the parent of michael kors, canada goose, and costco costco really close toyotas 52-week high it's had a tremendous run this year we'll have to see what those three retailers have to say about the health of the u.s. economy and any impact of china on its business. guys, back to you. >> thank you very much charlie bobrinskoy, what are you doing? five weeks down in the market and a sharp turn lower in the final hour what do you do in this kind of market >> yeah, i have to say that i have to respond to new facts i've been pretty bullish on your show for a long time i felt the economy was stronger than people thought. and i thought we were going to get a trade deal i still feel very good about the
economy. i still feel very good about corporate earnings but the trade facts are just worse than they were there were people that i respect in the administration like larry kudlow and mnuchin who were saying we were going to get a trade deal and i thought we were and now i'm not so sure and the market isn't either. and that's a big deal. we've got on the one hand better economy than the market thinks earnings are going to be better than people think. but a trade deal is not a tiny thing. >> do you agree with that? do you think the risks on trade are not priced in? >> oh, i don't think they're nearly priced in at all. i know you were talking about important levels but how about the dow transports at 10,000 i mean, they're your lead indicator on the economy and they've been negatively diverging for a while. so i also agree that the trade war is much worse than people think but i don't see what's so exciting about the economy and i think the market's starting to tell you, given the dow transport action, that the economy is actually going to
slow so to me the risks are asymmetric and i'm at about a third equities and i think you really, if you're bullish at this point, you've got the fed, which is significant, but i'm not sure what else you have at this point >> asymmetric to what extent what sort of percentage down side do you expect in the s&p 500 in the near future >> i think it could be down 10% into the third week of june. i think as this thing starts to kind of roll into that g20 my guess is the rhetoric's going to pick up and at that point you're going to start to seep into, you know, kind of earnings and preannouncements as we look into q3 and look at the ihs data last week there's a lot of uncertainty out there. and i'm not sure companies really know what to do at this point. and if they start raising prices a lot it's going to be a problem for the u.s. consumer.
>> thanks very much to ian and to charlie for joining us. we've got an earnings alert. it's on workday. deirdre bosa has the numbers >> hey, wilf that's right enterprise suffolk, the stock beating expectations adjusted eps of 43 cents that is a two-cent beat. revenue of 825 million 814 million was expected looks like we only have guidance on subscription revenue. the company lifting it for the second quarter and raising it for the full year the stock, as i said, is trading, now flat in the after hours. but remember, it has been on a tear this year up some 35%. now, investors are going to be looking for any color on how its finance products are doing where many see future growth coming from. but remember, its core sales still comes from its hr products now, another reason the stock is interesting could be seeing the gains it is this year, it's less affected by u.s.-china trade tensions and of course it's part of the fast-growing enterprise
stocks that have done very well this year. looks like investors still trying to figure out how to read this quarter, though slipping into negative territory. guys >> okay, deirdre, thanks very much for that. don't miss jim cramer's exclusive interview with the ceo of workday that's tonight 6:00 p.m. eastern on "mad money. mike, what's your take on this one? it's been on a tear. >> a huge tear it has been the subsector of the market that's worked best, which is software as a service anything enterprise software, i think investors want to hide here just because it has a strong secular trend and i would say if it doesn't trade off on good news it's slightly surprising and probably a good sign because it shows you the people who are in it are not hot money looking for kark out on one number. >> just want to revisit the overall market and what happened today because it was sort of surprising to see the magnitude of that decline in the final hour a lot of people citing the bond market and the 9.2 negative basis points at the three-month and the 10-year inversion
showed first happened in march. people kind of brushed it off. it doesn't always mean we're in recession. is that what gets wall street worried when they see that number going to deeper levels? is that really -- >> i think it's something that crystallizes the general overarching anxiety which is out there, which is how much longer does the cycle have, how many risks are there to a recession or a global stall and is there anything we can do about it? that allgets manifest in the bond market. i think the ongoingness of this situation where it's -- there's nothing to feel the vacuum except for this disinflation and deceleration is all the storyline right now. until something comes along to disturb that look, maybe it could be a rotation because by the way, we have month end. bonds have outperformed stocks by 6 percentage points in may. you really should see just a mechanical rotation from bonds into stocks. we don't know if we're going to see that >> three more days in may. >> volumes today weren't particularly high coming off the weekend. did did that kind of accentuate
these types of moves into the close? >> you don't want to overstate the move it was just honestly, it sort of rolled down a hill it wasn't as if there was some kind of panic and burst of selling. it was just heav heaviness, no impetus to buy the dip today >> former chrysler president jim press weighs in on the proposed renault merger >> and one wall street firm believes the trade war will cut apple's china sales in half. find out how that scenario could impact apple's stock that's up later on "closing bell." ñqçsço
welcome back let's have a look at the intraday chart of the dow. really paints the perfect picture. started with small gains, which for the high of the session was 132 points on the dow. held them for most of the session, picked up the selling at about 2:00 p.m. and that accelerated into the close. as we discussed when the bond market closed, which was at the lows of the session, 19-month low for the 10-year yield, one of the reasons that played into that, the sort of bearish signal that that sent also just some fears on the trade war. nothing huge necessarily picking up but more fears as we approach the close. near the low of the session, down 0.9%. the vix was up to 17.5
volatility did elevate the dollar rose as well. volume's not hugely significant today. a little bit softer on the volume front >> we're all tracking the moves between the u.s. and china on the trade front. woke up to a headline this morning that president trump did say in japan he's not ready to make a deal with china and then there's also the incremental moves that china has been making. no massive headlines here but if you put it all together i think it tells you the right story here's what investors had to process today. china's threatening the rare earth metals exports to the united states. "global times," which is a state-run news organization, has a very widely followed editor on twitter, who made it pretty clear that he thinks that according to people he's talking to china's seriously considering this maybe not a huge import to the u.s. but a very valuable and important one. also just wanted to highlight a few other things that happened today. a chinese chip maker delisted from the nyse. yes, maybe its adrs weren't traded that much but that happened and china's opening up access to china's largest commodity
exchange take the little moves altogether and you're seeing china's digging in its heels against a fight and there are moves it can make besides just tariffs. >> two analyst notes out today kind of gaming out what it means for apple and saying that the doomsday scenario actually modeling out no sales in china at all, which nobody says is going to happen but it just remains top of mind because of all those. >> i think it's worth putting on the other side, yes, that's where the market closed, at the low of the session, but if it was on china fears and elevated -- china closed up on the session. 0.6% you said all those bearish notes on china came out -- on apple came out apple only closed down 0.4%. that starts to suggest maybe is this already priced in to some of those trade-related stocks in apple of course down around 12% over the last month. >> it's just incremental focus on the down side, on slowing, and without anything to much counter it in real time. that's the way i would view the actions. >> switching gears, huge story today.
two of the world's largest automakers driving toward a possible merger. phil lebeau with all the details. phil >> reporter:sara there, were a flurry of headlines, especially late in the weekend-b this deal possibly coming together and how quickly it came together let me bring you up to speed on where things stand right now renault's board is considering this merger. by the way, this merger would create the world's third largest automaker with sales last year that would have topped 8 million vehicles so you're looking at a huge possible automaker coming together two stats i want to point out from the proposed merger fiat chrysler says that renault and them together, that merger would save $5.6 billion in synergies, things like cost efficiencies, eliminating platforms, commonality of engines. most analysts are looking at that saying i think that's highly overstate the other point that's getting a lot of attention, fiat chrysler says there will be no job cuts if this merger goes together and a lot of people are saying with so much capacity in europe how is that even possible? jefferies out with a note today
saying it is hard to disagree with the logic and with the net synergy. so there's one positive common for you. meanwhile, deutsche bank not buying it. it writes in a note, the analyst says even if the deal might look good to fca we wonder what fca is bringing to renault well, they bring a market cap of $30 billion. and if you take a look at shares of fiat chrysler going back to when it first was listed on the new york stock exchange, back in 2014, the market cap has essentially doubled, guys. so they have been effective at growing the business, especially by leveraging ram and jeep and that's what fiat chrysler says they bring to the merger. >> phil, thanks very much for that let's discuss it further jim press is here. he's the former president and vice chairman of chrysler. has worked as an adviser at renault and nissan for the past decade jim, thanks so much for joining us >> my pleasure thank you, wilfred >> talk to us about what you think is driving this deal simple cost cutting or is there some more structural areas that
people are missing >> i think it's going to be a historic deal. the consolidation in the global auto business is something that has to happen. you know, we've had nine years of good growth from the recovery sales globally have slowed down. markets have really given up retail volume. china, europe, and north america. so the pressure on profits is increasing at a time when the investments required for the new technology of autonomous vehicles and electric transition, all of that is adding a significant burden on investments. and so the synergies, the cost savings, but the forward-looking reality that fewer auto companies with much greater span of control and synergy will be those that survive and succeed in the future. it's a forerunner, and i think we'll look back and see it's the beginning of the next generation
of really large alliances and mergers. >> do you have any specific names and predictions? >> well, i don't you know, volkswagen and -- has been working with ford that could become something much greater. i know gm and honda have been working together bmw and mercedes have had some joint ventures toyota with mazda. that level has started you know, it's interesting this particular combination, actually its roots run all the way back to 2007 when chrysler entered the initial period not knowing it was a depression but recognized the need for alliance and scope. steve fineberg from cerberus had the foresight and actually had fairly substantial conversations with nissan and the alliance at that time. and it made a lot of sense if you look at the product
portfolio, the geographic coverage it made sense then didn't get together because of the credit market situation but even makes more sense today with investments that are really looking at these companies in the eye. >> but jim, is this purely defensive? does it mean we're going to see more renaults sold in the u.s. or more jeeps sold in france >> well, first of all, the brand may not be but the platform underneath the sheet metal will. right now the fca strength in suvs and trucks and as you know in north america, that's now 70% of the market. and fca doesn't really have cars and this suv, truck growth is spreading globally so i think you'll see the common platforms. one of the great platforms that nissan renault has with the cleo that platform becomes available and gives cars to fca. there are no cars right now in
fca's showrooms. and it also gives access to markets not just the france and italy where those companies have their european strength but globally i don't think it's defensive i think it's really forward thinking >> jim press, thanks so much for joining us >> thank you >> the only point i was going to add, sara, is the idea of two sort of national flag carriers in europe, france and italy, i mean, they're not pure flag carriers anymore, but the idea of them merging five years ago would be pretty unheard of and i just wonder if this does all go through, it shows a political will to approve that sort of thing, both across to eu regulators and within the individual countries, and i wonder what's next what other sectors are enough under pressure that this thing becomes politically possible in a way that -- you still of course are suggesting the banks are in that kind of space. but the idea that bmp paribas and deutsche bank could merge as recently as three years ago waunz heard of
if this gets approved that kind of thing is on the table >> interesting they said no layoffs, right >> that's the biggest question mark if that is really the case, then how many synergies come through? >> it becomes more politically palatable. >> exactly up next we'll break down the rk vatitntsee whether the rece maetolily is here to stay don't go away. more "closing bell" back in a xul of minutes
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the dow closed down 237 points at the low of the session. there are the dow losers united healthy at the bottom just over 2% intel, p & g, exxonmobil and goldman sachs down 1.8 mers. >> let's go to mike santoli for the final dashboard of the day on volatility. >> on volatility and also on the yield curve. combining those would things both really in focus today this is a chart from morgan stanley from mike wilson the strategy group at morgan stanley. takes some explaining here the orange obviously is the treasury yield curve three months to ten years which we now know has become inverted again this chart itself is inverted. therefore, when this is going up it means it's below zero now when it goes lower this is going up and it matches up with the volatility index the yield curve chart, though, is pushed forward o'by three
years. in other words, his point is that when you get a flat yield curve for the next three years you tend to have elevated volatility it means you're getting to the end of a cycle it means the markets are wondering are we going to run into a recession, is the fed going to ease, is it going to be on time, all the rest of it, which causes market volatility to prove it so to speak you look at the past three cycles so this again, this yield curve is pushed forward in time but it matches up where you had this rise in volatility into recessions a couple of different times which coincided or basically was led by this flattening of the yield curve. it's a highly engineered chart, which is why you have to say okay, maybe a grain of salt. but his case is that it's not just like we're going to see a passing storm of volatility like we see in december and it's going to go back to all calm again. >> fascinating lots of as you said engineering there. but a good chart good analysis. time for a cnbc news update with sue herera hi, sue. >> hi wilf. hello, everyone. president trump and the first lady back in washington after a four-day visit to japan.
but the president won't be home for long next week he is off to the united kingdom, france, and ireland. then it's back to japan for the group of 20 summit in new york embattled attorney michael avenatti pleading not guilty to charges that he defrauded his most famous client, porn star stormy daniels. his bail was set at $300,000 avenatti agreed to have no contact with daniels while the case is pending. ikea is revamping its app to give customers a way to purchase items online for the first time. the world's biggest furniture retailer is scheduled to be bu the app in france and the netherlands before hitting other major markets this year, which would include the u.s. and take a look at this. volunteers jumped off a platform hanging from the second floor of the eiffel tower pretty thrilling ride down an 800-meter zip line perrier set up the zip line to set up its partnership with the french tennis open, which will continue until june 9th.
i can't believe that's just the second floor of the eiffel tower. i can't even imagine whoo >> i'm be sure i would welcome that but the view from that was pretty cool. i think it would be worth the fear for the view. >> absolutely. >> thank you >> you just close your eyes i guess. see you tomorrow, guys >> no, open them >> then you don't get the view >> but i'd be scared >> sue, thanks up next, trade fears weighing on apple's stock overt last month find out whether it's a screaming buying opportunity straight ahead and speaking of trade, jane wells looks at the first goods arriving by ship to be hit by the new tariffs. jane >> wilf, this came from china and so did this. this is being tariffed this is not. when we come back, the real cost to american households now that the first ship has gotten here that's what happens in golf nothiand in life.ily. i'm very fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself.
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people wake. and smile, when they see the sun. not that one. this one. it makes knowing when to take your prescriptions clear as day. up to fifty percent of people don't take them properly. so at cvs pharmacy we got up early and built a system that helps calculate each person's ideal schedule. it's great for doctors. and caregivers. at cvs pharmacy, we're just trying to help more people have more mornings. stocks seeing a big move lower into the close it was an ugly run let's check what drove the late day sell-off seema mody at the exchange bertha coombs at the nasdaq. >> down 237 points for the dow we were up about 130 points in
early trade today. so a big reversal for the dow, s&p 500, and the nasdaq, all closing lower, led by the dow, down about 1%. when it pertains to the action in the bond market, let's just put this move into perspective 10-year yield right around 2.26%. that's after trading just around 3% in the fall of 2018 so it's certainly a notable move that investors are trying to make sense of. there are also signs of economic weakness the durable goods numbers tumbling in the month of april and of course consumer sentiment on the flip side hitting the ball out of the park but the durable goods number certainly something investors are trying to understand more. the stock reaction was evident all 11 s&p sectors closing down. growth-sensitive sectors like industrials and tech led us lower. and even financials. the big banks. as investors assessed the impact of lower yields on margins also take notice some of the consumer-driven companies like kraft heinz at an all-time low today. j.m. smucker, kellogg, campbell soup are all leaving the
consumer staples sector to the down side. what worked for this sector? the dollar was higher. emerging markets and crude just below $59 a barrel >> let's send it to bertha coombs for what's happening at the nasdaq bertha >> thanks, wilf. we basically saw the inn and the yang today as far as technology particularly in the chip space amd the best performer in the nasdaq 100 after some pretty bullish comments at an interstate conference about its new chips. it's now positive for the month. up about 5%. on the other side you had intel today which was one of the biggest drags both in the dow and the nasdaq 100 and not getting any boost at all from its presentation at the same industry conference and chips now down about 15% for the month. the worst monthly performance for the sector since november of 2008 and those consumer staples also affecting here kraft heinz the worst performer as it continues to struggle to file its annual report and remain in compliance here in the
nasdaq, 129 new lows back over to you >> bertha, thank you very much for that now, we've got a trade triple play the first cargo subject to the new 25% tariffs to arrive in the u.s. this weekend. jane wells has more on that. meanwhile, china's alibaba reportedly weighing a $20 billion listing in hong kong leslie picker is all over that story. and huawei is reassessing its relationship with fedex. frank holland standing by with that but jane, let's start with you >> well, this is the first ship behind me here at the port of long beach, which has come from china since the new tariffs hit. but only 12% of the containers on there from china are being tariffed stuff like furniture, not apparel. still, an ocean freight consultant who works with fortune 100 companies tells us american companies are paying on average $15 million more per ship starting today. so what's the reaction well, these new nikes are from vietnam. but for all the talk of vietnam, here at this port only 5% of the imports are coming in from vietnam. 69% still from china and even though we're not paying
tariffs yet on most of the stuff we get from china, new york fed economists estimate the average american household will pay over $800 this year because of the tariffs. guys >> jane, thank you we also want to dive into china's alibaba, reportedly weighing a $20 billion listing in hong kong leslie picker has more on that is it trade related? >> that's right. alibaba executives have floated this idea of a second listing in asia for years dating back to the company's $25 billion ipo here in the u.s. in 2014 but the question now is what might be propelling this decision forward and how much, as you mentioned, sara, is the trade war playing an impact here the obvious answer is cash the company has more than $31 billion on the balance sheet but another $20 billion from geographically diverse sources doesn't hurt as it seeks new investments to grow. and also pointed to the potential for alibaba to get a higher valuation in asia as well but the ongoing trade war should
not be discounted here as u.s. investors often view alibaba as a proxy for the chinese economy. if they had hong kong-based investors me might see a much more diverse view of what this company is >> if it goes through it would be interesting to see what the valuation multiple is if it's different. lots of things are listed in london and hong kong for historic reasons and there's often a little bit of a multiple difference i wonder if this went through if you'd see quite a big difference in hong kong investors willing to pay up and discount any of the political risk on alibaba in a way u.s. investors might not >> normally you see that get arbitraged away over time. that gap between the two valuations close over time but since they're doing a new listing they would essentially be revalued for the investors over in asia that would be participating. another point to mention here too, i think this is kind of far from the realm of what executives are thinking about over there but steve bannon, one of trump's former advisers, did say that he thinks that chinese -- that our
markets should be closed to chinese companies. i don't think they would ever take the step, the s.e.c. would ever take the step to delist chinese companies that are currently trading here but it could be a way to kind of hedge that if they wanted to maybe diversify their listing. >> thank you very much for that. now huawei says it's reviewing its relationship with fedex and frank holland has more on that for us frank. >> shares of fedex down just about a percent after huawei announced it's reviewing its relationship with the shipper after packages addressed to huawei in china were routed to the u.s. fedex saying those packages were inadvertently misrouted. the company going on to say we were not requested by any external party to divert these packages in china. there's a lot of suspicion the misrouting is related to the trade war and the commerce department placing huawei on the entity list, restricting dealings with u.s. companies before a temporary exemption was given. u.s.-china shipments represent just about 2% of fedex revenues. analysts estimate that huawei
accounts are a fraction of that. back over to you >> frank holland frank, thank you citigroup meantime cutting its outlook for apple's earnings saying the trade war will likely cut apple's china sales in half. let's bring in steve milanovich from wolf research steve, do you agree with that assessment what are we talking about? 20% of total sales now from china. >> that's right. about 20% of apple sales are in china. they're already down quite a bit. i think for them to go down half sun likely but it's possible if you get a real anti-american fervor going in china. at this point there aren't tariffs in china on apple products but things aren't heading the right direction and apple's very much caught in the middle because there could be u.s. tariffs on their products and we calculate maybe $100 to $150 per iphone more expensive and apple either has to price up or take that hit at margin at this point we think 10% to 15% of earnings are at risk. but worst case might be closer to 25% or 30%. >> steve, in a recent note you outlined three existential
threats to apple, one of which was china turning against them what are the other two and have they played out as well? s first of all the attack from below. a cheaper phonethat's at a similar performance level. this has been a long-term concern. it really hasn't happened because apple's kept that premium brand. but you can argue in china it is happening today. i mean, huawei has a great phone at a lower price than apple and apple is losing share in china so i'd say in china that one might be occurring the other is if something were to go wrong with the avp store a couple years ago we were concerned with facebook messaging, for example, cutting into the app store that has not happened. but more recently you've had the supreme court give the go-ahead in terms of consumers suing apple for monopolization in the app store. that will take years to play out but you've got a number of issues and then china being the third so there are plenty of reasons that he i think it's too soon to be buying apple here >> too soon, steve, to be buying it so what sort of evaluation discount do you think is appropriate beyond what already
is in the stock? >> well, the stock got up to about a market multiple at its peak and it's backed off a bit since then our target price is actually 200. so i think over time it could get back to a market multiple. in the meantime you've got fairly poor earnings momentum, you've got a lost uncertainty. as we just discussed you could have further earnings down side. so i think the risk-reward here is slightly negative so you could still have another 10%, 15% down in the stock ultimately i think apple's very viable but i would like to see it at a lower level. also i'd like it to be closer to new product. you're not going to have anything in the iphone this fall that's probably that exciting. and even next year 5g i'm not convinceed is going to be a huge catalyst. >> steve milunovich, thank you very much. >> thank you >> much more on the sell-off still ahead. up next we'll break down the stocks with the biggest declines into the close >> plus find out if plunging earyies will help revive the struggling housing market. we're back in a couple of minutes.
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...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade. . individual names that lost steam in the final hour. rahel. >> an accelerated sell-off into the close led by a number of health care names. gilead and mylan among the stocks that saw a sharp move to the down side. gilead finished down 4%. mylan another name down only a bit oft highs of the day but finishing down more than
6% let's turn now to some of the transport names. j.b. hunt and southwest. both saw sharp declines into the close. that's a sector that investors have been watching closely as a potential sign of broader economic weakness. the group isn't trading in correction territory down nearly 14% from its recent highs in mid september wilf >> rahel, thanks very much for that the 10-year treasury yield meantime hitting the lowest level since october 2017 sending mortgage rates plunging. joining us now to discuss, caliber home loans ceo thanks very much for joining us. great to see you you were head of citi mortgage's department during the crash. do you look at the market now and see any worrying red flag similarities as you saw then >> i don't the reason is i think that the market is pretty much performing at its long-term trend levels. i don't see any major deviations from the trend there are some individual markets, though. as you know, the u.s. doesn't quite work like a uniform
market so there are some individual markets like let's say dallas or miami which look like they've deviated a little bit from the trend but it doesn't look like it's a speculative process in that it will come down to its -- revert to its mean to a natural process for home prices. >> the 10-year yield closing at 2.26 mortgage rates continue to plunge along with it if we break below that 4% level, does that bring buyers into this market >> i think so, sara. a couple of things one is if you really look at the equilibrium between renting and buying it's pretty much been at a point of indifference where it didn't really matter whether you rented or bought for the most part but i think thaek librium is now shifting in favor of buying. with home prices cooling down at the same time that rates are coming down it's actually going to be pretty good for buying we think. we were seeing already in the last -- >> why didn't we see that in march? >> we were seeing that now caliber one of the largest
lenders in the country we were seeing applications starting to pick up. in fact, our spring is turning out to be pretty good relative to last spring and i think that the leading indicators are showing the market is picking up and to be a strong june. >> is the lending industry there to accommodate that choice for purchase versus renting for people who are first time? because it seems like that's been a sticking point, that people didn't have a down payment. it wasn't necessarily just an even choice. >> i think for the most part it is when you think about the role that the fha has played in giving people the ability to have a down payment or get in with a lower down payment i think there's a reason why the fha loans have done as well relative to fannie and freddie i think there's plenty of overcapacity in the market rate now which the market -- the lenders were trying to get rid of which i think is now still in place. so i think there is plent plenty of capacity both from a credit standpoint and a capacity standpoint >> earlier today jamie dimon
said overall he's not too concerned about credit quality but one of the risks some people point to is the fact that even if the big banks' credit quality remains pretty strong that the non-bank lending area is a risk. and of course caliber is one of those areas. is that a risk that people are overworrying about, that in fact you guys have just the same sort of lending standards and make the same assessments as any of the big banks would? >> yes the answer is yes and no meaning if it's worth worrying about then you get into the speculative phase in this cycle. i don't think we are there yet we could have gotten in there if rates had kept going up. but as a non-bank we are especially focused on making sure we stick to credit quality given all our experiences from the past as experienced bankers we don't want to go slip in that direction. i would say that the mainstream banks on the other hand have been overconservative in lending and have left behind many borrowers that deserve to be given a mortgage and were denied
a mortgage >> your comment about rates is something to focus on because talking about corporate debt levels earlier today jamie dimon's point was yes, absolute levels are much higher but interest payments are still low because rates are so low what about focusing just on corporate debt more broadly? do you think if rates did go up we'd be facing problems? and how much would they have to rise for those problems to rise? >> i think what applies to corporates applies to consumers and to institution and to lenders in pretty much the same way. there are two risks. one is that it's the consumers' debt servicing capacity goes up too much one should be concerned. when we were at 4% i was concerned if the 30-year went up to 6% i would be concerned so that would be a 50% increase in the debt for the consumer the bigger issue is what would happen to lending institutions, especially non-banks, if rates went up a lot and margins came down a lot would that trigger a liquidity crisis in non-banks? and i've talked and written about this a lot and i've said
the systemic risk in the system could be high if non-banks -- if we didn't think through where the security crisis could take us to. >> sanjiv, fascinating conversation >> good to see you >> thank you stocks have staged a late-day sell-off next we hear from a top strategist about how you should be investing in this environment. re? can you feel calm in the eye of a storm? can you do more with less? can you raise the bar while reducing your footprint? for our 100 years we've been answering the questions of today to meet the energy needs of tomorrow. southern company
stocks selling off into the close today. look at that intraday chart of the dow. we were up a hundred points at the open and it was the final hour of trade that started around 2:30 when the bond market closed that the market took a tumble and stumbled all of the way into the close at session lows down almost 240 on the day joining us by phone to discuss is richard bernstein, ceo and
officer at richard bernstein advisers what are you telling your clients? >> our portfolios are pretty much geared for a pretty unsettling environment and we're focusing on larger cap, higher quality, more stable companies and history shows when you get this kind of environment with tremendous uncertainty, and that's what tends to outperform. >> what do you think, though, is the trigger today for the selling particularly in the afternoon. was it that yield move that we pointed to >> i think it's a couple of different things, but i think the key word that i mentioned, will, is uncertainty there are a lot of uncertain indices that are at unprecedented levels and various surveys that are out there and they've been at a higher level for several years now, but this level of uncertain, i think is really what's driving it so what does it on a day like today? i think you had people sort of believing that trade wasn't
really an issue, that maybe everything would get settled and it was just a distraction, and i think in the last week, and i think even today you have people starting to believe that trade is a real issue, that could really derail the economy and i think that's kind of what you're seeing and, you know, so then the yields started falling and i think it just set off a number of different things. >> mike, just quickly on the uncertainty thing spiking, could that be spun or if you look at bearishness indicators that that marks a bottom >> eventually it becomes that. eventually people overlearn the idea that things were uncertain and fixate on it too much and they don't have the moment, and that is the big question and you're seeing some anxiety building indicators although richard, i would ask, though, they mentioned the quality theme and quality as a style for investing right now and i've seen some work that ispremium valuation terms in the overall market and it's pretty high right now and are people overpaying for that quality
theme at the moment? >> you know, mike, that's a great question and we asked that a lot because our portfolios were geared in that direction and i get asked that all of the time and i think people forget that the time to buy cyclicals is not when their p-es are low, but when their p-es are infinite because that means they've had no earnings and it's the beginning of a profit cycle and the profit cycle, by definition is determined by cyclicals and i know that sounds stupid, but that's really true and what happens is at the peak of every profit cycle, quality looks expensive because sicyclicals a on the p-e earnings and their multiples are depressed so this is want unusual to see the peak of a profit cycle and one has to remember and look forward in time towards trough earnings and if you value stocks on trough earnings right now, i think you'll find that quality is not very expensive at all. >> richard bernstein, thanks for
phoning in sure, my pleasure, thanks. a rough day for the bulls. coming up your wall street look ahead and epke things you want to watch when "closing bell" comes right back software the standard.en se let's create new plastics that are highly recyclable. it's going to take input from everyone. so let's do it all, together. ♪ ♪ let's expect more from technology. let's put smart to work. ♪ ♪ is this ride safe? i assembled it myself last night. i think i did an ok job. just ok? what if something bad happens? we just move to the next town. just ok is not ok. especially when it comes to your network. at&t is america's best wireless network
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>> after a tough day for the bulls, slew is set to report tomorrow courtney reagan all over that. julia boorstin on disney >> investors will have some questions about how the company is going to deal with the impact of the trade war since some sporting equipment is on the list of items now subject to that 25% tariff. capri holdings, formerly michael kors also reporting. tair expected to fall 2% the last four earnings reports have volatile and inconsistent stock reactions and pvh reports after a week after announcing stephan larson as its president. will fred? >> thanks very much for that disney's box office boom kicking off a huge week for the media giant. hi, julia. >> hi, wilf. >> disney's "aladdin" reported better than expected bringing in
$114 million over the four days proving the success of disney's strategy of adopting old and animated films this comes ahead of a lion king adaptation in july and a mulan adaptation next year aladdin's debut comes ahead of galaxy edge opening on disneyland on friday the $1 billion land will have one ride at launch and another ride coming later this year as well as ten eateries and shops and we will be there thursday with a look at this big investment from disney back over to you >> julia, thank you very much for that it would be an interesting sneak peek i can't wait for that lion king adaptation >> beyonce >> killer. >> all around. it will be great, but we need to focus back on the markets. mike, i guess significant sell-off into the close, but less than 1% and we have to keep that in perspective. it's kind of where that happened and it's significant and it's the 2800 level on the s&p and it's a two-month low, and if you
keep an eye on the chart over the last year and a half or so, we've only spent three or four months above this level and it looks like it might be in danger of succumbing here, and i think we're in the zone of figuring out if we're in an uptrend or not. >> thank you for watching and that does it for closing bell. >> "fast money" begins right now. >> "fast money" does start right now live from the market, i am brian sullivan if for melissa lee and your traders are tim seymour, care know finerman, dan nathan and guy adami tonight it keeps getting worse for investors in semiconductors and the semis slammed on track for the worst month in a decade. one technician says the game may be over and he'll tell you what names he's buying now. from a semislump to a social sag. people are fleeing facebook and people will tell you what's hot and what's not and what it means for these high-flying stocks, but first.
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