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tv   Closing Bell  CNBC  December 3, 2019 3:00pm-5:00pm EST

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american axel, a lot of the supply chain is still in china even though gm may manufacture locally, these are going to get hit. and so we're watching some pretty steep declines across the board here >> all righty! >> should be an interesting session. >> should be >> next hour is coming up. >> thanks for watching "power. >> "closing bell" starts right now. don't go anywhere. >> it does, indeed welcome to the "closing bell," everyone i'm wilfred frost, here at the goldman sachs post today, down sharply, almost 4% over the last two sessions banks leading the sell-off yet again, a sell-off that puts us down 0.9% on the s&p 500 59 minutes left of trade >> and i'm morgan brennan in for sarahize pn. let's take a look at what's driving the action president trump signals a china trade deal could be delayed until after the 2020 election. france and the eu said they were read to retaliate if france imposed tariffs on french luxury goods like champagne and handbags major averages are down more than 2% over the last three
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sessions we have all the angles of this market sell-off covered for you, though but first, joining us for the hour is aerials investments director of research, charlie bobrinskoy here at post 9. thanks for being here. >> thanks for having me. >> pulloff -- pulloff, correction, sell-off, pullback, was this over due? >> well, no, things changed today. the momentum had been wonderful around trade and people say that people spend too much time worrying about trade. i actually don't think that's true free trade is very important and people say in 1776, the most important thing written was the declaration of independence. it wasn't, it was "wealth of nations" by adam smith the idea that trade helps us all is something that the markets believe in and when that gets called into question, you get an appropriate big reaction >> do you think that it is, especially based on the comments we got from president trump today, do you think that the market is, especially with this pullback that we have seen today, do you think the risk has been adjusted enough or do you think that there is really a much greater possibility that we don't get a phase 1 deal
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>> you know, i hate to say "i don't know," but i don't know. he is -- one thing you've got to say about president trump is he's negotiated a lot of big things in his life and if you talk to banks, he's a very tough negotiator. he knows it's very important not to let the other side think you need a deal. so today i think he was clearly signaling the chinese that he doesn't have to have a deal. and maybe he was sensing in negotiations that they were dragging their feet. but one thing is clear, if we don't get a deal here, that is not going to be good for the economy and is not going to be good for the stock market. >> the stock market is down over 1% on the dow. let's drill down on the key stories we're focused on around this sell-off. kayla tausche has details on those china trade comments that sent the market tumbling deirdre bosa covering new trade tensions with france and bob pisani here at the exchange tracking all the biggest movers. kayla, let's kick things off with president trump's china comments this morning. >> president trump is playing hardball on china with less than two weeks before those consumer-focused tariffs kick in suggesting he may punt the
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low-hanging portion of the china deal to next year and doesn't mind the market impact of doing that >> i have no deadline, no. in some ways, i think it's better to wait until after the election, you want to know the truth. i think in some ways it's better to wait until after the election with china >> the commerce secretary wilbur ross telling cnbc this morning that barring a big development, the truariffs on december 15th will go into effect, but trump has shelved tariffs four times this year just as a measure of goodwill without a major announcement 12 days, as we know, is an ep ten eternity in this washington news cycle and the direction can change with a phone call or a single tweet we'll have to see what happens over the next week >> 12 days certainly an eternity, kayla, as you know better than most also, we know that there's often a lot of division and some members of the negotiating team that are closer to the president than others. do you think secretary ross fully represents the president's
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view on the december 15th's tariffs? >> it's a fact that he is not normally included on the principles-level negotiating calls. those are normally lead by steven mnuchin and lighthizer. it's fair to say that secretary ross is not up to the absolute latest in any of those phone calls if one has happened in recent days that the white house has not told reporters about so it's unclear whether he speaks on behalf of the entire administration or if it's just his view at that point but as i said before, you know, the president can make these decisions on the fly, as he has, if he feels, when he wakes up one day, that he has the desire to postpone these tariffs without a deal, without a development. he can do that or if he feels like he wants to go tougher on china, he can put the tariffs in place, too. i think it's also -- just one other comment is, you know, you have to imagine that president trump's phone is going to be ringing off the hook from corporate america, too
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when he originally delayed this part of the tariffs, it was because tim cook and the ceo of hasbro, brian goldner, had personally been lobbying him to do that. and so you have to imagine the toy companies, the electric companies -- the electronic companies, they are going to be calling him and trying to utilize the same channels that they did previously to explain exactly how damaging this would be to them >> we'll continue to monitor all of these developments. we know you'll bring them to us, kayla. thank you. china is just one front in the trade battle the trump administration also says it is considering new tariffs on french luxury goods and that it all has to do with the country's digital tax. deirdre bosa has those details in san francisco for us. hey, deirdre >> reporter: morgan, tech once again caught in the trade crosshairs the trump administration announcing it is targeting $2.4 billion in french goods with new tariffs. this in retaliation for the country's digital services tax that would hit the largest american tech companies and platforms. president trump admits that he's not the biggest fan of these
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companies, but says it's not europe's place to tax them >> they're american companies and we want to tax american companies, that's important. we want to tax them. they're not for somebody else to tax. >> he also called the european union, quote, friends of ours, and said, i'm sure we can work something out. but if they're unable to reach an agreement, retaliatory tariffs could be as high as 100% on things like french wine, cheese, and handbags and guys, it could further slow international efforts to negotiate some kind of truce on digital taxes. morgan, wilf >> yeah, and i think that was sort of a key linchpin in france implementing this digital sales tax, they said, we'll roll it back once the oecd actually comes up with a bigger, broader temp pl templa template and it's in focus now with all the other different countries around the world it's not just france looking at their own similar taxes. >> morgan, you're absolutely right. it's more in focus, but i don't
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know if that means we'll see any progress it speaks to how difficult it is to come up with these international regulations to monitor some of the tech giants. so, yes, the ocd is supposed to put something in place that involves input from america, but that has been very slow going, which is why you see france go ahead with its own regulations, its own taxes, and why you could see others like italy, the uk, other europe countries go ahead with theirs, also. >> thanks so much for that certainly true if the oecd had moved ahead as one, it would have been harder for the u.s. to retaliate. but france planning ahead gets this type of response. now moving on, what does all of this mean for the market bob pisani is on the floor of the stock exchange with the latest movers, largely all of which, bob, are to the downside. >> and you heard about tariff threats on two fronts. the usual global, cyclical sector's weakest transports, weak throughout the day. that's federal express and other names like that.
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the railroad is weaker, semiconductors, second this has been a fabulous performer all throughout the year, but they move up and down on trade talks, as well. banks, big move down in bond yields today, quite notable. and that is very difficult for the bank stocks. they've had a great year and retailers are always a target, the xrt, down almost 1% today. utilities, one of the few sectors on the upside. i want to point out the energy stocks, a bunch of them still at new lows, even though oil is up today and oil is up 20% for the year, new lows for cabot, occidental apache. we've had production levels very high and demand is a bit lower than we've expected. so where are we? what are we doing here is there a chance for a trade deal are we de-escalating or ramping up the problem is, we don't know. i asked art cashin about this earlier. three scenarios out there. number, we have no new tariffs keep the existing ones and keep talking no deal. the market would be very happy with that. that's an example of lowered
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expectations how about, we have the existing tariffs still there and the additional tariffs of 10 to 15%. that's the current scenario. the market would have a modest sell-off and we've been dealing with that the last couple of days the big problem would be if we have additional tariffs of 50% or more, and a much bigger sell-off than we're seeing right now. back to you. >> bob, thank you very much for that also worth pointing out in relation to today's sell-off here, in fact, china, even though china paused before those comments by president trump were higher, germany and italy were both higher today. france and the cuuk were lower. let's bring in scott black, president of delphi management thank you for joining us how significant is this escalated trade rhetoric in your eyes, if the december 15th tariffs were postponed, would that still be pretty positive outcome? >> well, if they postpone them, it would be a move in the right direction. if you look at the world trade figures year-to-date in terms of dollar value, they're down 2.8%,
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and if you look at the world bank forecast for this year's world gdp at 2.6, it has dramatically slowed. this is the lowest level since 2009 and obviously, the united states is going to slow from about 2.5 to 1.7 in real gdp so unfortunately, these trade barriers are deleterious both to the united states and to the world economy as a whole >> scott, given the fact that the selling at least today has been pretty broad-based, do you see opportunities. is there value to be had right now in this down gravity >> well, the overall market's expensive. if you look at the s&p based on $166.60 next year, which is up 5%, it's around an 18.5 multiple it's not cheap and the russell 2000 and the 2500 is selling over 19 1/2 multiples. you have to do item selection. there are individual names that are cheap, but as a homogeneous group, the market is really
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fully priced at this point >> charlie, clearly you're bearish on the impact of these -- the potential for the trade war to escalate again. that said, do you take any comfort in the fact that the president has said this when we're really near all-time highs, when consumer data, retail sales has been strong and that we saw him pivot quite clearly a year or so ago, when the market did tank and the data did tank meaningfully, does that encourage you that he's not going to push this to the brink? >> i think that is the most encouraging thing. we do know he's a negotiator he has often in the past said things to try to get a movement on the other side. that's the optimist in me, but we are close it's december 15th it's not like we have a lot of time here. and we had had such positive things coming up that is what was so startling. all of the comments had been about, we're planning the event, we're looking in our calendars today was the first time that things looked really seriously worst. >> but the fact that bob pisani just laid out three different scenarios that could all basically take place over the
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next week and a half, as an investor, they're all very different. how do you position yourself coming into that >> the reason we've had such a great year in the stock market this year is because a year ago, everybody was very worried about trade tensions and pa recessi s in earnings. we've done so well because a lot of those problems have gone away my only concern at this point is that people are now feeling pretty good about things they're feeling pretty good that brexit will not be that ugly, that we're not going to have a recession or a trade war all of a sudden, the assumptions seem pretty positive, if one of those goes the other way, we have some exposure >> scott, the banks have had a great october/november, but have pulled back significantly at the start of this month. is this a buying opportunity >> not yet i mean, we own jpmorgan and morgan stanley, goldman sachs, and they're cheaper, but as the yield curve flattens, that's not good and as you know, from the bigger banks, they're dependent on investment banking deals and
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private equity, itself, and the deal flow is down and so overall, you're not going to have good growth in earnings next year, and they're all like 12, 13 multiples i think goldman is a little less, selling below book but i think if we do have this trade war, i think you still have to lay off the banks as the yields decline in here i would not be buying them at the margin, as they say. >> so scott, if not the banks, what do you like right now what are you buying right now? >> okay, i've got an oddball tech company called siena. it's a $36 stock they're big in optical switching. they're the dominant force with the number one share in the united states. they do no business in china, so you have no exposure they'll earn close to 260 for the october fiscal next year, which is a 13 multiple they have excess cash on the balance sheet of about $140 million. they generate nothing but cash and earn close to 17% return on equity as i say, as a 13 p\e, i think
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it's a good value and the earnings will be up nicely 260 next year against 215 this year. for people who are looking for yield -- go ahead. go ahead i have another one it's located in boston it's bain capital specialty financing. it's a $19 stock it's a bdc, business development corporation. they'll earn about $1.70, which is an 11 p\e. it has an 8.5% yield the stock is selling at 96 cents on the book and there are no bad loans and a minimal exposure to energy there are about 130 portfolio companies. the average loan is $19 to $20 million. they've never had a default. and you know that bain is a very well-run company i think this is an interesting play where you can get some yield without having to worry about sleeping nights. >> scott, thank you so much for joining us great to see you, as always. >> thank you so much for inviting me. >> charlie, as a fellow value investor, any of those stand out
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for you? >> the last one was more of a yield play and i'm very nervous about people stretching for yield right now, particularly after today, where the ten-year was starting to act like it was getting to a reasonable level. so these yield bond substitute stocks make me nervous >> still ahead here on "closing bell," we've got much more on today's downturn and the market's rough start to december mike is going to break down one of the key sectors that's led the sell-off, coming up. >> and later, we'll speak exclusively with the ceo of cleveland cliffs on the back of his company's takeover of ak steel. his a rationale for the deal and his new thoughts on argentin and steel. a lot coming up on "closing bell." stay with us there's a lot of talk about value out there. but at fidelity, value is more than just talk. we offer commission-free online u.s. stock and etf trades. and, when you open a new fidelity brokerage account, your cash is automatically invested at a great rate -- that's 21 times more than schwab's.
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42 minutes left of trade major averages are lower, though off lows of the session. the dow is down a little over 1% the s&p is down 0.8% the nasdaq also down 0.8%. the small caps, though, are actually outperforming versus everything else, up about half a percent. in general, biggest drop for the major averages since early october. >> with 41 minutes left of the
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session, let's get over to mike for today's market dashboard hi, mike >> we're going to get at this market from a few different angles first to ask if it's a little dent in the rally or something worse. try to put this move in context in very heavy metals we've got some news in the steel industry take a look at how they have performed in the face of a lot of tariff news and everything else chains and sprockets, is the cyclical rebound still in force. tempered hopes, valuations coming in from stretch levels. so take a look at the s&p 500, just to see how this move fits in with the overall trend. and obviously, it doesn't look like too much when you're talking about a one-year basis or a year-to-date basis. it's basically a little bit of a giveback and i'll point out, this is really the zone where it becomes perhaps something more than just a very, very routine pullback. if you get below 2035, people will be forced to ask was the entire breakout around a new
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high something just a fakeout, or was it actually just a retest of that or something worse. also, the 50-day moving average, even though it's not something that usually stops declines or something like that is usually in that zone you have a couple of more pcs to the downside before you have to really ask if this is anything more than something routine. and then take a look at the big growth stocks. f.a.a.n.g. and the nasdaq 100 have been leaders here on a year-to-date basis but i would point out that the qqq, the nasdaq 100 did sell off more than the market did yesterday. it's also underperforming today. what that tells me, this is a general step back from risk on the part of traders and investors as opposed to trying to assess the actual potential damage from a reescalation of the trade war. that's almost a good sign. apple is down and giving back a lot of the gains that we had there. apple was up $140 billion of market cap in two months plenty to give back there. right now, it doesn't seem like there's a trend change this is kind of a f.a.a.n.g.-like etf.
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today, alphabet is up on the day. and that's about 10% of that etf, even though it has underperformed large cap growth for the year >> mike, thank you charlie, looking at these charts right now, i guess your reaction, especially given the fact that we have seen a steeper sell-off in the last couple of days for the tech name, how much of this is profit taking >> i'm going to keep coming back to trade and say it's a small -- this would be a real big issue if it really comes through it's a small move so far the market has still not lost a lot of sleep on this, but i don't think this is technical or about f.a.a.n.g. stocks. i think this is about trade and trade really matters >> shifting gears to another big story today. elon musk arriving in federal court in los angeles ceo of tesla and spacex will be testifying this week in a defamation suit brought against him by a british man who helped with the rescue of the 12 boys and their soccer coach from a flooding thai cave back in july
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2018 misundersta munnsworth is accusing musk of being a pedophile and suing for compensatory damages jane wells is in the courtroom musk's attorney opens that this, quote, is a case about insults, not statements or fact so we'll keep an eye on that in the meantime, we've got about 38 minutes before the bell the dow is down 286 points or 1% right now. after the break, a roku reversal that stock seeing a major comeback after plunging in yesterday's session. we'll break down the note that turned things around, though >> plus, can earnings help get the market back on track we're looking ahead to results from salesforce, workday, and more hitting after the close today, 37 1/2 minutes left of the session. don't go anywhere. driving specific sectors of outperformance. where a rising middle class powers a booming auto industry... a leap into the digital era draws youthful populations to
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welcome back 35 minutes left of the session the dow down just over 1%, as you can see. down 280 points. the low of the session was down 458 points we're actually pretty close to the high of the session, chfts down 272, as you can see down 280 at the moment only three stocks in the dow in the green. merck, verizon, and visa at the bottom the likes of dow, intel and goldman sachs. >> welcome back to "closing bell." it's time now to get to word on the street and roku climbing after needham today raised its price target to $200 a share from $150 the firm calling roku the
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winning a gre gaaggregator roku has an install base of 42 million or 40% of the u.s. connected homes. this comes after morgan stanley downgraded the stock yesterday, which had sent shares falling. you can see those are recovering, up 6%. piper jaffrey, meantime, upping its tesla price target, calling it a, quote, must-own stock. the firm saying that tesla has recently been flexing new skills, such high-volume manufacturing and more frugal capital spending those shares are up about 0.5% right now. piper jaffrey also calling tesla's new cyber truck awesome and the only pickup worth ordering there you go another opinion. >> meantime, lululemon could be the next nike according to
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cowen, rising its price target on lululemon cowen saying lululemon's growth and durability are similar to nike's, and if it can sustain its nike-like free cash flow multiple, it could see a $40 billion valuation and a stock price of $300 or more. i would point out on the roku call that needham has had quite good calls on this, if you look at the chart on the back of that note they've been pretty on top of roku's price action for a while and put it as their top pick for the start of the year, it's up some 350 plus since the start of the year ckudos on that. in terms of these three different stock calls, charlie not three classic charlie bobrinskoy stocks. which would you have gone for? >> certainly not tesla tesla, way too many people like the technology i'm frankly surprised elon musk has gotten away with some of the things he's gotten away with in terms of public pronouncements and hasn't really seemed to pay that much of a price for that.
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lululemon, again, a combination of retail and fashion, which -- fashion attire, which i don't think they're nike at all. i don't think that's a good comparison at all. i'm going to go 0 for 3 -- >> why not, though >> they have free cash flow to be had and they're growing, why wouldn't they be like nike >> if forced to pick one of those three, i guess we would go lululemon. my wife would support that on christmas day. i've bought the product and i can't say that about the other two. >> i like that i like the facial suppressiexprn wait until we ask you about netflix next here are the three things driving the action president trump signals a china trade deal could be delayed until after the 2020 elections france and the eu say they're ready to retaliate if the white house imposed tariffs on french luxury goods like champagne and handbags and that has stocks deep in the red. major averages down more than 2% over the last three sessions
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and speaking of that delay, it's been more than 52 days since the administration announced it had agreed to a phase i trade deal with china the president that day saying we've come to a deal, pretty much subject to getting it written. and now, of course, with today's news, it appears we may have to wait until after the 2020 elections. huge ups and downs, as usual, in that >> it is time now for a cnbc news update with sue herrera, though hey, sue >> hello, morgan hello, everybody here's what's happening at this hour democrats on the house intelligence committee, releasing an impeachment report, alleging that president trump committed an abuse of power by trying to enlist the help of the ukrainian president to open a criminal investigation into former vice president joe biden. intelligence committee chair adam schiff spoke moments ago. >> this report chronicles a scheme by the president of the united states to coerce an ally, ukraine, that is at war with an adversary, russia, into doing
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the president's political dirty work >> a convicted felon has been charged in last month's shooting death of detroit police officer rasheen mcclain. officer mcclain was killed and another officer was wounded while they were conducting a search following a home invasion on a lighter note and a story to warm your heart, after last night's snowstorm, a 99-year-old woman in albany called police to ask for some help with shoveling her driveway three police officers jumped into action, working tirelessly to clear the snow. we'll leave on a high note that is the news update this hour wilf, i'll send it back downtown to you >> looks like it would have been tireless work as well, plenty of snow >> absolutely. >> sue, as ever, thank you see you next hour. let's get back over to mike for today's second sblauinstallmentf the dashboard. >> some metals plays have traded very heavily in the market in the last couple of years let's take a look. and i know steel is in the news today with this acquisition we have by cleveland cliffs of ak steel. we'll be talking about that next
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hour but here is how the sector has fared since the 2016 election. you see this initial burst of enthusiasm for the entire sector this is the global steel etf cleveland cliffs and newcorp you see point to point, not very good performance, given that the overall market is up a lot and what you'll see here is this run into january 2018. the overall market peak, march of 2018 is when those steel and aluminum tariffs were imposed. and initially people thought it was going to be a positive, but it led to capacity additions did nothing to mitigate global overcapacity steel prices are way down. and just look at ak steel. this is an 11:$11 stock at the highs. it's being acquired for $3 and change obviously, not the way people thought. the market was correct there would be a reflationary tail wind to the cyclicals and all the rest of it, it did not play out for this sector which is
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structurally in bad shape. >> looking at this chart, you could call these the other momentum names with some of the swings we've seen over the last couple of ears but it's interesting, when we did see those steel tariffs levied last year, initially steel prices jumped and there had been an expectation that that was going to push inflation out to manufacturers and dent margins, yet, steel prices have come down and you are seeing that reflected in these stocks, as well. >> that is very true it did not follow the script people thought it would and steel costs have not been a major swing factor in terms of manufacturing, so that is certainly the upside of what's going on in this chart >> okay, mike, thanks very much. see you again later. we should point out, coming up, the ceo of cleveland cliffs will join us exclusively to discuss his acquisition of ak steel and how the trade ward with china is impacting the metals industry. don't want to miss that. we have 28 minutes left of the session before the bell and the dow at session highs at the moment, albeit still down the best part of 1%.
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down 270 points still. coming up, we've got your last chance trade charlie is picking a cheap financial-related stock. fancy that plus, we've got a big lineup ahead to break down the sell-off into and after the close wharton's jeremy siegel, can accord's tony dwyer, and dan niles are are all with us ahead. here's a check on bonds, treasury yields plunging ae inis investors looking for safety currently sitting at 1.71%, the ten year note. "closing bell" will be right back (vo) the moth without hope, struggles in the spider's web. with every attempt to free itself, it only becomes more entangled. unaware that an exhilarating escape is just within reach.
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stocks are falling after president trump suggested a trade deal could wait until after the presidential election. however, stocks have cut their losses in the last hour or so with the dow down just 294 points just about 1% right now. it had been down more than 450 points at the low of the session. for more on today's sell-off, let's bring in jeremy siegel, wharton school professor of finance at the university of
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pennsylvania professor, great to see you today. thanks for joining us. what do you make of this market's sell-off we're seeing right now? do you see this as a pullback or as something deeper? >> it's trade, trade, and trade. that is by far the dominant issue, i think, that's affecting the market before thanksgiving, everyone thought a deal was going to be imminent markets, you know, bought up to all-time highs, 2, 3%. now, you know, trump is saying, maybe not. and you see the sell-off honestly, my personal opinion is, this is just a negotiating tactic you know, be really tough, right before you make a deal i still think he's going to make a deal by the end of the year. if he doesn't and trade tariffs get put on on december 15th, whoo i don't know if i want to be around equities then >> what about if we split the difference on that, jeremy
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i think last time you were on, you said if we got a phase i deal, that was worth about 10% of upside. what if we don't get the phase 1 deal, but also don't get december 15th tariffs and essentially we just kind of go on into the election with the current status quo what's that worth? >> well, i think that's a muddle through. if we just have a standstill, where we are now, deferring anymore tariffs, but not taking any off. people will say, all right, we are where we are, let's take a look at earnings this market is not cheap 19 1/2 times this year's earnings i look at 18 1/2 next year's earnings i don't think we'll get as high as 10 to 12% so you can have a lot of bad developments come on with that sort of valuation. it's not a disaster, but it's much more modest and much nor choppy, i think, if we get a standstill >> so, of course, what is an investor to do i mean, today the posturing is much more defensive in terms of stocks it's real estate and utilities, the only two sectors in the s&p in the green
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you see bond prices rising and the bonds dropping gold is up are these the places where investors need to be right now given all the uncertainty? >> really, that bond -- what we saw today just reemphasizes that treasury bonds have become the hedge asset against equities boy, look at how they rose today so strong and the equity market over the last couple of days have sold down 700, 800 points that's what it's being bought at yields will stay really low with treasuries being a hedge asset like this. so, you know, people are going to begin to think, where am i going to go for income and i think this just reinforces the fact that it isn't going to be -- stnit isn't going to be bonds. that's why financials are under pressure obviously, lower interest rates are not good for financials, but defensive stocks, anything that gives you yield will do pretty well in 2020 >> charlie, how much could the
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fed offset any of this negativity another rate cut does that offset things equally to no trade deal >> actually, no. i would be very nervous about a rate cut, because that could mean they're seeing problems in the economy that they hadn't been seeing. frankly, i don't think we need a rate cut i think that would be a, frankly, a bad sign. >> so, professor, is the u.s. still the place to look in terms of assets and where investors want to be putting their money right now? or are there other markets, other places across the world that look better >> well, i mean, as i've been saying for a while, you know, we're at 19 1/2 times this year's earnings, s&p operating earnings, which is what i look at that's on the high side, not given interest rates, but certainly not low. your 15 in europe. you're 12, 13 in many emerging market countries you're 15 in asia. some places lower. in the long run, i think that's
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going to be a benefit. but, you know, again, we'll see. the dollars are very important we've had a little bit of weakness in the dollar that actually helps our stocks and our s&p. we'll see where the dollar goes. but on strict valuation, foreign stocks are cheaper than u.s., no question about it. >> yeah. we'll see where it all goes. thank you for joining us, jeremy siegel >> thank you >> we have got less than 20 minutes before the bell. here is where we stand with the major averages, all still in the red, although off lows of the session. up next, we've got your last chance trade plus, famed tech investor dan niles will join us to tell us whether he's seeing any llff ad e ortunitiesmith se-o ♪
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♪ ♪ don't get mad. get e*trade, dawg. welcome back elon musk aririving at court moments ago in los angeles, preparing to testify brought by a british diver. let's get to jane wells, who's at the courthouse. jane, what's the latest? >> well, he just arrived a few minutes ago, which is interesting. we have video of it after jury selection, after opening statements he could potentially be the first witness to take the stand when court resumes in about a half hour. as you said, this is all about
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tweets regarding that. his attorney argued in this opening statement to the jury said that these tweets calling brend brendon undsworth a pedo guy were just joking, taunting tweets, a fight between men. he said undsworth started pit undsworth says, in fact, musk did call him a pedophile the judge said to the jurors, the case really rests on this, whether a reasonable person given in context would take those tweets to mean that mr. musk was called mr. undsworth a pedophile. >> jane, thank you 15 minutes left to go until the "closing bell. charlie, what's your last chance trade? >> i'll go with a low p\e financial service fimrm with a great moat around the business it's western union and you'll roll your eyes at me, but they have a wonderful business. which is sending money overseas. if anybody -- if you have a working class person who's got a
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family in an emerging market, it's very hard to send money overseas to that family. western union has a dominant share. they'll have 10% growth in earnings this year and the stock is trading about 10.5. >> i joked, but i'm not rolling my eyes. i love low p\e financial companies, as morgan knows all too well >> up next, 14 minutes left of the session. we'll take you inside the market zone, as markets are sliding we're down 300 points on the dow. (soft music)
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just over ten minutes left in the trading day we are now in the "closing bell" market zone, commercial-free coverage of all of the action going into the close >> cnbc senior markets commentator mike santoli is here as always to break down these crucial moments of the trading day. and we have charlie bobrinskoy, as well. we are down 274 points on the dow with ten minutes left. we start with president trump's comments on trade, sending markets lower today at the nato summit in london, trump weighed in on the timeline for a china trade deal >> the china trade deal is dependent on one thing do i want to make it i have to deadline, no >> mr. president -- >> in some ways, i think it's better to wait until after the election, you want to know the truth. i think in some ways, it's better to wait until after the election with china. but i'm not going to say that. i just think that. i just tell you. >> let's get a check on the stocks most impacted by new worries about a trade deal with china. seema mody has the details for us hey, seema
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>> hey, morgan well, apple and possibly its customers stand to lose if those december 15th tariffs do go into effect analysts at wedbush forecasting a 4% hit to apple's next-year earnings now, chipmakers given their tie to apple and china are under pressure today and the prospect of those phase i deals not getting completed, big machinery and farm equipment names are trading down on that risk shares of deere continuing to fall after reporting dismal results last week, due in part to the trade uncertainty lastly, this latest trade salvo taking aim at france's luxury sector lvmh off by 2 to 3%. those four companies alone make up nearly 20% of france's bench marc index and contributed roughly $18 billion in combined u.s. sales last year so we'll see if the administration moves forward with those tariffs guys, back to you. >> seema, thank you very much for that mike, clearly trade is a big
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factor everyone is focused on today. do you think it is just that or the fact that we did also get some negative data, and that sparked the poor sentiment >> i would say those two factors plus just the set-up the set-up that we had gone straight up 9% since early october without any pullbacks. i think today is obviously a recalibration of the probabilities for a substantiative trade agreement but it's not so much an immediate binary, buy stocks if we get it, sell stocks if we don't. i think it was just an adjustment and some of the assumptions that were underlying the rrl thally that we go. got extended a little bit. especially when it comes to something like apple >> yeah, it's up more than 60% on the year so far >> i want to dive in now into the banks, which are the worst-performing sector to date. two main rans feasons for that. the first recent outperformance, bank of america against the s&p 500 since the start of the quarter. october, november, incredibly strong, as december has kicked
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off and the market has had a wobble for whatever reason you can see, it's pulling back in a relative sense, more than the s&p 500. but still up net quarter to date the other reason is yields this trade fears has put pressure on the yields here is bank of america again as the most yield-sensitive stock used today to indicate things against the ten-year yield, just over the course of the last week you can see today in particular, a big slide in the ten-year yield and bank of america stock tracking the same applies to most of the banks. and charlie, you can be bullish long-term on the banks, but again, highlight how sensitive they are to the yield curve? >> i think the point is that the interest rates had been moving up higher. they got sneaky close to 2%. and we started to get a much steeper yield curve. it's not the absolute level of yields, it's the shape of the yield curve, banks tend to borrow short and lend long so it was just a big reversal today. that was a 15-basis points move. that's a big move and the bond market, pretty negative for earnings in the short-term >> biotech is one of the few
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bright spots today meanwhile, meg terrell has the details. >> it's nothing like a couple m&a deals to send biotech investors into a state of euphoria and today's came with a premium of more than 100%. and gene therapy company audites is being acquired. whether deals actually beget more deals is an ongoing question in the biotech space, but it's certainly helping with sentiment. the biotech etf is up 8% in the last month, dramatically outperforming the broader market guys, back over to you >> it seems like there's been a number of positive results, early reports as well from the sector how much is that driving it in addition to consolidation? >> clinical catalysts are huge that's one of the pillars of biotech performance. fda approving drugs early. that's a major thing great clinical data, that's another thing. and m&a, these are all things that spur biotech prices higher.
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any political focus on drug prices could bring them crashing back to earth. but for now, that seems to have left the conversation and people are just focused on hopefully more m&a >> meg, thanks very much for that now, sales force set to report earnings after the close deirdre bosa has a preview for us >> software stocks, well, they're getting hit in the december sell-off today. these etfs giving up ground once again. so sales force earnings in about an hour could be key the company just wrapped up its big dream force event here in san francisco a few weeks ago, where marc benioff said that revenue would double in the next few years. tableau and meal soft expected to be drivers. sales force is underperforming the tech sector as a whole this year this quarter, the street is expecting revenue of $4.54 billion on eps of 66 cents >> very similar question
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mike, how were you kind of rating sales force alongside the other big software companies that had done so well this year? >> complete sat it out you could be generous and say it's consolidating this monster gain ahead of many years before that, but it's not really in the sweet spot they love microsoft's platform, they like a lot of cloud-centric enterprise software. sales force, thosugh has been treading water and trying to grow into a towering valuation >> mike has more on the market internals today, as well mike >> yeah, you would think it's more of a washout than the numbers bear out, morgan if you look at the volume, up and down volume of the new york stock exchange, it's certainly skewed to the downside, but really not dramatically so a lot of times, if you see a 1% plus decline in the morning, you expect it to be 80, 90% to the downside, nothing like that. nothing like a washout it's pretty well mixed right here i want to take a sector look, kind of a contrast of real estate against the banks there are kind of two sides of the yield equation, and they
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were moving together for a few days and today you see the outperformance by real estate. but honestly, yields have not collapsed. a big move in the bond market, but the ten-year has held above some key levels there, i would argue. so that's not really falling apart either the vix obviously popped earlier, well above 16 and now it has accustomed down we're within a 1% move of the open of the s&p 500. it right now looks like what we saw back in march when it was a similar 2 to 3% decline from a high and nothing yet like what we saw in august, where it was more like a 6% drop for the s&p 500. >> charlie, the fact that the selling does seem to be pretty broad. case in point, you can look at the weakness we're seeing in industrials and point to trade, but even groups like aerospace and defense and specifically some of those defense contractors that don't have exposure to china have been selling off this week as well. what does that tell us >> well, defense is complicated, because it's typically a defensive sector it tends not to be recession sensitive. so it tends to be a place where people go when they're worried
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about the economy. but some of those defense names make a lot of money by selling they're hoping to sell product to china longer term so i'm going to say it's name specific lockheed martin has been a straight line up for seven or eight years. a little weaknesses here a little bit like salesforce they're trying to grow into the valuation. >> we've got two minutes left to go let's send it over to rick santelli for a check on bonds. hey, rick! >> hi. boy, the bond yields traded a lot like equities. down, down, down look at some 24-hour charts. and remember, this isn't just here this is a global phenomenon with sovereigns look at our tens, down 11 basis points at 171. let's look at bunds in germany, down seven basis points. let's look at the french oat, also down seven basis points look to the north, canada. down nine basis points now, this might not be shocking to anyone, but it certainly is a different set of economies with the same type of sovereign markets. bertha, even though we're above
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8,500, the market is definitely trying to get up closer to unchanged. >> yeah, it is >> we are off of the lows here nonetheless, we are still seeing a big drag coming from the chip sector on those trade worries, enunciated by the president earlier today. chip equipment makers are among the worst hit. alphabet, though, is bucking the trend today. it's initiated at an outperform with a $1,500 price target at citi and at piper. and that has the stock bucking the trend. also, health care today, which is also what's helping smaller caps do a little bit better, dexcome, in fact, at an all-time high, even after its glucose monitor had some i.t. issues over to bob. >> you're right, bertha, health care did have a very good day. defensive names did pretty well. merck, for example, one of the few stocks in the dow on the upside we had johnson & johnson, coke, also down, but down very modestly health care continued to do well hospitals were well. ten innocent health care, new 52-week high there, up 1.4%.
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gold stocks also did really well today. in fact, we even had a new high. yumana gold, 52-week high. there's the closing bell we had a $1.3 billion buy program going into the close that's what lifted us. dow jones industrial average almost 200 points off of its low earlier in the day, closing 280 points to the downside >> welcome to the "closing bell," everyone. i'm wilfred frost. >> and i'm morgan brennan like with mike santoli. taking a look at where stocks are settling in this down day. losses for the major averages, but well off of session lows the s&p finishing down 20 points or about 0.6%. the dow down 278 points, near the highs of the session, 1% drop nasdaq also down half a percent. and the small caps, the outperformers relative to the major averages, only down 0.3%
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>> joining us to talk about the market day, ariel investments vice chairman, charlie bobrinskoy, as well as tony dwyer. good afternoon to you both mike, kicking things off with you. morgan just said it, well off the lows by the end of the day, only down 1.5% over the last two days >> what started friday looks like a fairly minor shake out so far. i think we did get a little bit stretched and extended people thought everything was lining up for the seasonal year end rally. everything meaning turning up higher in industrial growth for the world. we thought we were going to get a trade deal in the bag. and of course, sentiment was negative a couple of months ago. it turned very positive. i think basically this has been a rethink of how sure we're going to have clearance of the tariffs. and also, a reset in acceptability. beyond that, i don't see much going on it was a skimming of the froth off the top of the market so far. >> tony, up until yesterday, really, the narrative in the market seems to be that we were
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seeing a bottoming out in terms of the manufacturing slowdown. and we were moving towards at least some sort of trade truce, a so-called phase i deal with china. has that all just gone out the window if so, what does that mean for the markets and the pullback we've seen today >> morgan, the definition of insanity is doing the same thing over and over again and expecting a different result and doing it anyway. and trying to figure out the trade stuff is i don't think it is about the trade stuff that's the excuse for the decline in the last day, just like the ism was part of the excuse for yesterday what it comes down is something mike referred to the last time i was on set with you guys, we got off air and you looked at me and you said, wow, it's nice to hear somebody positive that's how bad sentiment was in early october. it's just got to the opposite point. i was on the other side of the trade and i was feeling as dumb as a fence post, because i'm looking for this overbought correction that wasn't materializing. it was a market that was just a little bit too set up for a sharp pullback and that's -- and it was looking for an excuse and we got one in
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trade. >> so where are we now are we in the middle of those two extremes or close enough again to a buying opportunity with -- as we just said, with a couple of percent of declines? >> wilf, it's a great question and you know, i use these four key tactical indicators. one is the percentage of stocks above the ten-day moving the average, which is only about 20% or so are above the ten-day moving average earlier in october, and the indicator we look for is one that drops to less than 10%. in addition, you look for a vix that's over 20 what i try to do is remove my own opinion or my emotion, because corrections are only natural, normal, and healthy until you're actually in one and by definition, emotions run hot. neither of those indicators are at a point where i would say, wow, you're on the cusp of a real rally but just to give you a little bit of -- to quantify the downside, when the market is up, when the s&p 500 is up more than 20% through the end of october, which it was, you've never had a negative, since 1950, a negative
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november and december period so we're 1.8% above that october 31st level so you're downside risk is about 1.8% in theory and on the upside, your median gain is about 5% so your risk/reward, the sentiment, sefeverything is abo plus or minus. i don't have a great, you've got to go buy the next tick kind of feel or sell the next tick kind of feel. >> charlie, given the conversation we've been having over the last hour, your response to that >> i think we're going to go one way or the other way pretty big. i think if we get a trade deal, we're going to have a better economy next year. we have these cyclical stocks that are going to move higher. and i think it's going to be a 5 to 10% move if we get a trade deal if we get a real trade war, an increase in tariffs, i think we'll get a significant move down i thought it was in everybody's best interests, both the chinese and president trump to get a deal that's where i've been leaning, but i think, frankly, the muddle
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through scenario is unlikely >> i was only talking about into year-end, morgan >> got it. >> that's into year-end. next year, i'm not i'm very bullish for next year >> okay. well, we've had a number of top strategists and money managers on cnbc today. here's what they had to say about the sell-off >> we certainly have a mercurial president and different days, you have different tweets and commentary, so hard to forecast the vicissitudes of that >> you are seeing flows very sustained trends of flows coming out of the winners and moving into the losers. which is why i think we could see a nice value-driven market, which is something we haven't seen in a very, very long time >> the individual names that are cheap, but as a home genmhomoges
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group. >> if he doesn't make a move and trade tariffs get put on my december 15th, i don't know if i want to be around equities by then >> tony, i'll come back straight to you you said you're very bullish next year. is that regardless of what happens on trade >> it is look, nothing's happened on trade this year and we're up -- i know we had a bad year last year, down mid-single digits wilf, the guys printing the money globally continue to tell you that there are going to be increasingly accommodative on bad economic news and they're not going to raise rates wilf, 11 years into the economic cycle, you have not had inflation get above their 2% target there's a solid shot that the fed isn't going to raise rates in the next few years. so, similar to the 1998, 1995 analog that we've used before, you've got kind of the mother of all fed puts with powell's statement. the fed is worried about low
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inflation being a problem, not high inflation they're trying to get inflation higher that is not bad for asset prices >> mike, it's also the end of the year i wonder how much of this is technical, as well you know, this idea of, you know, shifting your investments for taxes and given the fact that we have the s&p up 23% year-to-date sale? >> i think there's a little bit of attention in terms of the psychological drivers here or the motivations for how to operate in year end. i think there's a reluctance to sell early, because you want to play that and let your winners ride but you also, once the market starts to get wobbly, there's a strong instinct to lock things in i think tactical, your hedge fund money is going to try to be a little bit cute about figure this out but right now, it's not unusual to have some kind of pullback into mid-december. at this point, it's very hard to judge if this is the start of
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anything real. >> i want to go back to the vix, how could an indicator has it been when it's fallen to the levels like a 12 >> it's not a great indicator when it's low. low is telling you, we're in a calm market. we're not really set up to absorb a shock, but the better indicators are when it surges to a high and then spikes and you just saw that in august. that tells you, okay, maybe fear is having a crescendo and you can get some relief rally. at this point, it's not telling us all that much except, investors are increasingly a little bit en garde. >> going back to that montage of commentary we played a few moments ago. one of the comments about shift into value right now, do you believe that's the case? we've had some head fakes around it >> i believe that, but i've also believed it for about the last ten years and have been wrong. for the last hundred years,
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value has beaten growth by an average of 200 basis points for the last year. right now, the aerial fund is trading at 12 times earnings compared to 18 1/2 for the s&p we would agree broadly and some of the people said in the commentary, the overall market feels fairly priced or maybe even rich. but value stocks, industrials, financials, good financials are trading at very attractive prices >> other than lululemon, which you were banging the table on early. >> right >> all right workday earnings are out kate rogers has the numbers for us >> this is looking like a very strong q3 for workday. we're going to take you through the numbers here eps coming in at 53 cents adjusted the street was looking for 37 cents. research, $938 billion that's beat. analysts were expecting $920 million. subscription revenues also coming in higher than anticipated at $799 million. they also said that fourth quarter subscription revenue, its guidance, it was slightly above what had been projected
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earlier. workday is also saying it currently has 3,000 customers and 42 million users the stock is up just by about a third of a percent right now, but year-to-date, it's up nearly 10%, guys. back over to you >> kate rogers, thank you. mike, i mean, up 10%, underperforming the broader averages, and what we've seen in some of the other tech companies, especially those -- >> and also, down significantly from july. so i think you had this real huge run through the summer. not really catalyzing too much of a move, even though the stock is like 50 bucks off its high. >> charlie and tony, we'll say thank you to both of you for joining us great to see you, as always. up next, we'll discuss how the trade war with china and new tariffs on brazil and argentina are impacting the steel and iron ore industries when we speak exclusively with the ceo of cleveland cliffs, which is acquiring ak steel "closing bell" back in 90 seconds. don't go anywhere.
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t. rowe price experts go beyond the numbers to examine investment opportunities firsthand, like biotech. because your investments deserve the full story. t. rowe price invest with confidence. welcome back another earnings report out. its sales force. d has it for us. >> adjusted earnings of 75 cents per share, so that is a 9 cent beat on the bottom line. the street was expecting 66 cents and it is a slight revenue beat the street was expecting $4.45 billion. however, the stock is weaker in the after-hours by about half a percent. it likely has to do with the company's fiscal 2021 full-year
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revenue guidance, which came in a little light now, dream force, remember, marc benioff said over the longer term, over four years, salesforce would double its revenue, but on the call, which kicks off at 5:00 p.m., analysts are going to want to know how they rp reconcile that disappointing one-year outlook with that optimistic four-year outlook and also how the recent large acquisitions fit into the picture. back to you. >> thanks very much for that don't miss salesforce keith block breaking down those results with jim cramer on "mad money" tonight at 6:00 p.m. eastern time we've got an analyst coming up later in the show, as well mike, quick take on this decent beat, but only up a little bit >> offset by the muted guidance, just a little bit of a staticy message about next fiscal year it doesn't seem as if it was really wide of the market in terms of overall expectations, but maybe not enough to really get the stock moving, of course, on the call. we'll see if we hear something that does -- >> salesforce down about a percent now in after-hours trade. now, the dow closed down 280
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points, which was well off the lows of the session, which was down 460, but still down a full 1% let's get a look at the biggest movers on the new york stock exchange bob pisani has that for us hey, bob >> well off the lows a big buy program going into the close. $1.3 billion, lifted us nighly as we close. a lot of the damage done and typical trade-related names on the weak side. semi-conductor names we have had a great year overall. we saw analog devices, tushe usl all to the downsides logistics names were weak. and the global industrials, c t caterpillar and cummings on the downside that had a big effect on the bank stocks today including the regionals like fifth third european luxury stocks, president trump and president macron had a fairly conciliatory conference they said very nice things to see each other, but didn't bring
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anything off of their lows most down 2% in the merge. >> cleveland cliffs is having its worst day since october 2016 the stock finished down about 10.5%. this as the company announced it is acquiring ak steel in an all-stock transaction, valued at $1.1 billion joining us now in a cnbc exclusive, cleveland cliffs ceo louren louren lourenco goncalves so first, why the deal >> this is a great transaction for us we are becoming a fully integrated super producer of high-grade steels and we conservative our ability to produce high-grade pellets and hbi to the iron ore market so it's great to be integrated downstream why now? because the price is right, the
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moment is perfect for ak steel the moment is perfect more cleveland cliffs this is more correction. tennis not a bad day for cleveland cliffs, this is a great day. >> although the share price is down although we understand your point. ak steel, clearly to your point that it's an attractive price is down significantly it was above 11 just early 2017, over the last couple of years. are you therefore seizing an opportunity that has been created for you by the president's tariffs? >> nothing to do with tariffs. what happens is ak steel has 63% participation in the automotive market that's the best mix that you can have no other steel mill in the entire world is able to replicate that, no matter if it's in europe, or in japan or jfe or in korea. we have with ak steel, the perfect position in terms of supplying high-grade,
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high-value-added steels. that's what we are attracted to in terms of this acquisition >> and certainly we saw ak steel finish up 4% today, whereas cleveland cliffs sold off. i think one of the things that has certainly been radiating out from wall street today is the fact that ak steel is is a customer of cleveland cliffs and there's this idea that perhaps iron ore profits are going to be eroded in favor of the profits and the profit margins for the steel part of the business >> morgan, this can't be farther from the truth because we mine in minnesota and michigan some of these lands roare ownedy publicly traded trust. so ore moved into our hbi facility in toledo, ohio, that we're about to start up in the beginning of next year, they are moved in -- between our internal facilities at market price so we'll continue to move iron ore to ak steel at market price.
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so that margin will be preserved and of course, the margins of ak steel will be preserved, as well >> and it doesn't change your relationships with other purchasers of your ore >> no, all contracts are in place. they are comfortable with us we are comfortable with them and we'll continue to supply them with no interruption. >> i want to come back and talk tariffs to you we've discussed at length the tariffs on china we know your views and that you support the president. what about on brazil and argentina? your compatriots, your brazilian-born man, are they as bad as china do they deserve to face these types of tariffs or argentina, whoese currency ha suffered for all sorts of others reasons, they're not devaluing their currency >> well, both countries have been countries that their currency have been giving them a very, very unfair. >> sure. but you and i know this very well, lorenzo. argentina is a great example
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you wouldn't want to have the economic situation they have that has led to that fall in the currency they are not devaluing their currency did they deserve these punitive tariffs? >> that's a good question for president trump. >> but you've been on to support him on tariffs on china. so you've got to be fair, as well, on tariffs on other countries, including your own nation >> my name is the united states of america, first and foremost >> of course, but where you were born >> as far as brazil, there is a lot in in the brazilian currency that's not as pristine, as you believe. there's a lot of manipulation. there's a lot of low-cost embedded in iron ore from brazil, that's all about the weak currency. they compete in the market place and compete with others that don't have the same type of advantage. they don't compete against us. they don't sell a pound of iron ore in the united states i have already explained here in your show, that we produce
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pellets. we are environmentally compliant and they don't they have introduced center feed it's a different market, different product. as far as argentina, they're completely irrelevant for the steel business and for the iron ore business >> we're out of time always great to see, particularly on a deal like today. lorenzo goncalves of cleveland cliffs up next, much more on the sell-off we'll get dan niles' take on some buying opportunities amid today's downturn that's ahead gold!
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nice rock. it's time to drop gold. go digital. go grayscale.
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welcome back to "closing bell." let's send it over to mike santoli for his third dashboard of the day mike >> asking right now if the chains and sprockets of the market are still in line, still in gear to drive that cyclical rebound that we've seen in the last few months. take a look at this etf compared to the s&p 500 it is called the rwcd. it is actually a single etf which is cyclical stocks over defensive stocks so it's long cyclical stocks in each sector, short defensive ones it's a small etf it just started earlier this year, but as a proxy for this trade, it functions pretty well and you see, there's been a pretty big giveback and today it
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underperform dramatically, but it's still built up enough of a cushion of performance, especially since august, which i think is the significant day this is a six-month chart. august is when we really saw that climate in the defensive trade and the rebound. so right now, i do still think you can say that cyclicals are outperforming on an ongoing basis. financials, as well. although, again, it's a little bit ten wous auous and there's some giveback on that trade. >> it's been a wild day here on wall street. stocks getting slammed on trade tensions after the break, we'll hear from famous trade iesr n nvtodaniles. his take on today's action where and he sees buying opportunities. hi, my name is sam davis and i'm going to tell you about exciting plans available to anyone with medicare. many plans provide broad coverage and still may
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welcome back time nor a cnbc news update with sue herrera. hi, sue. >> hello, wilf hello, everyone. here's what's happening at this hour the house intelligence committee released a 300-page report on the impeachment inquiry of president trump, accusing him of soliciting election interference from ukraine and obstructing the committee's impeachment inquiry. >> this is the result of a president who believes that he is beyond indictment, beyond impeachment, beyond any form of accountability, and indeed, above the law. >> nato leaders including president trump arrived at
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buckingham palace earlier today. meetings ahead of the nato summit started out tense president trump slammed french leader emmanuel macron for saying the alliance was experiencing a brain death trump called macron's claim very, very nasty and insulting and here at home, a student and a school resource officer were taken to the hospital with non-life-threatening injuries after the second shooting at a wisconsin high school in as many days police say a 16-year-old student at oshkosh west high school stabbed the school's resource officer and then the officer shot the student you are up to date that's the news update this hour morgan, back downtown to you >> sue, thank you. let's get a check on the biggest movers on the nasdaq today. bertha coombs has that for us. bertha >> morgan, as you can imagine, the uncertainty over whether those december 15th tariffs will or will not go into effect, weigh on tech. apple, of course, would be highly implemented in terms of its sales in china, not to
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mention what it would bring back here to the u.s., it's one of the biggest losers and we also saw a big drag coming from the chip equipment space. cadence, which actually designed software for chip design was one of the biggest losers today, along with chip equipment makerses on the other hand, we saw biotechs today moving higher on an m&a deal which saw small cap auden audenties. finally, tilray having hit an all-time low this morning after the federal regulators clarified that banks no longer have to report suspicious activity reports for hemp growers that gives a little bit more hope of what we might see eventually, potentially for pot. over to you. >> bertha, thank you very much for that now joining us on the phone, dan niles from alpha one capital partners to talk all things tech, as usual dan, good afternoon to you thanks for joining us. >> my pleasure, wilf
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>> kicking things off with a big picture question in terms of how you feel about the overall market levels and sentiment, are you net long, net short at the moment >> yeah, we actually have more shorts on now than we do longs, by a small margin. i mean, our view is pretty simple you've got the earnings on the s&p up 1% for the year the s&p is up 23% for the year and the multiple has expanded to extremely high levels. and so for us, the risk/reward really isn't there, especially when you have, you know, the trade deal, which is still obviously up in the air. and the market is only down less than 2% from its all-time record highs such as last week. so it's not like it's actually even given back that much. we're more defensively positioned and we think that's a good place to be right now >> dan, what do you make of semis right now? i know we've had this conversation with you in the past, but given everything that's played out with the latest trade rhetoric today
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alone and the sell-off we're seeing in those names, where do you stand? >> yeah, i've been covering the semiconductor sector since 1990. and the problem i have with that sector is, you look at it and you go, revenues are down 13% for the year especially is down about 20% for the sector and the sector is up 44% for the year and they're at the epicenter of this conflict with china so if a trade deal doesn't go through, they're going to get hit even more. and quite honestly, even if a trade deal does go through, it's not going to matter that much, other than a short-term bounce, obviously, which we'll get into stocks because the thing people should be focused on is, you know, companies like huawei, which obviously the u.s. government is, you know, fighting against, they showed a phone a few days ago that has no u.s. parts on it, on their highest end 5g phone. and you're going to see this ecosystem developing in china with their own semiconductor supply chain that does not
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include u.s. companies and that is a leverage issue that is not going to change with or without a trade deal. >> how surprised were you by that, dan, that announcement with that phone? was that something you had already factored in as to whether to be bullish or bearish on the sector, or were you hugehug hugely surprised to hear that huawei was able to move that quickly away from u.s. components >> that's a great question, wilfred. i wasn't surprised that it happened i fully expected it to happen. i was surprised, as you rightly alluded to, to the speed at which they were able to make it happen and that was very surprising to me what was even more surprising is that you didn't see u.s. chip stocks that were in that supply chain, a lot of the wireless vendors, getting hit off of it that's something you immediate to think about obviously, this fourth quarter is already done, the march quarter is done. the real issue will be on the phones that are designed for the next holiday season coming up a year from now, where a lot of these companies, they may not be in it, because the thing i think
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people are forgetting is that this is not a financial situation for china, this is almost a national security issue for china, where day don't want to be beholden to u.s. companies for the help of their chinese companies. and for them, getting u.s. chips designed out is a security imperative, not just a financial one. and that's a fact that most people are really missing. >> it is a keep point, dan we're talking to you a lot about what you don't necessarily like in the market right now. what do you like >> yeah, there's actually a fair bit of stuff i do like i do think after a couple of years of hype, augmented reality is going to be a really big deal next year, because of 5g phones. 5g increases the data speeds by 10x. so you know, next year, if you want to buy wilfred that tie, you'll be able to put your phone and shine it on him and be able to see exactly how it looks on him and what size you need to get, et cetera >> perfect >> and you'll be able to do the transaction right on the phone
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wilfred, you're all set for next christmas. but the lasers that you need for that, a company called lumenta makes them is trading at 14 times earnings if there is a trade deal, hay do a lot of optical business with china. we like that we like the public cloud we like amazon now that the profit picture has been reset for the fourth quarter they're half the public cloud market and are still growing 30% year over year nvidia amd supplies the chips into the cloud market. and facebook, back to the augmented reality, they're going to be able to buy things on instagram directly off of facebook that's great and streaming, we love disney. they've got the 10 million subscribers. so those are themes that we really like. and quite honestly, we're looking to add to some positions if the market actually does correct more on more tariff noise. >> dan, we have some breaking news that cnbc's just been able to confirm and that is that larry page is
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stepping down from his role as ceo of alphabet. google ceo will take over the alphabet role. what's your immediate reaction on that? >> don't get me wrong. page is one of those people who will go down in history, obviously. you look at how -- googling has become a verb, right there's very few people who have started a company are the name of the company has become a verb so he's obviously a great visionary, because he hasn't been that involved with day-to-day operations for a few years. i don't see that as a big deal the stock will have a negative reaction, i would think, tomorrow because of it, but from a day-to-day operations of the company, i don't think it will operate it that much obviously, bill gates is not there. they've done very, very well you'll probably have a one-day negative reaction, which you should, in honor of what a great founder he was of google, but
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other than that, i don't view it as a big deal. >> strategically, what are the big questions that sundar pichai has to answer for google or parent company alphabet? >> i think when you think about google, they're actually a very interesting company in that there are a lot of different products on the horizon, potentially, that could be interesting. obviously, autonomous driver, there's a massive market for that and so, that's something you really need to think about when it comes to them the other thing is, you associate google with the cloud. but when you look at the cloud market if you take amazon, microsoft, and google and add them together, day do about $50 billion worth of revenue in the cloud. the problem is -- amazon is twice the problem as microsoft and amazon is eight times the size of google that's one of those other things that they'll have to really deal with, all right, how do we get bigger and stronger in that? and they're also obviously trying to do their own phones,
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et cetera. a lot of these businesses have lower margins. so there's going to have to be some bounce in between the two but obviously, google is one of the greatest companies ever founded. there's still a long runway to growth only about half the ad dollars are online right now and there'll be more and more going online so it's hard to -- those are obviously longer-term questions that need to be answered as they move into these different areas and trying to gain traction, which has lower margins. but for this price, the stock is obviously not overvalued at all. they generate tons of cash it's a great company, no question >> yeah, dan, to dig into it a little bit further, we had aws chief andy jassy on the network with jon fortt earlier today and one of the things he put to rest was any kind of speculation that the cloud business at that company could be spun out or separated. but it does raise a question, whether it's alphabet or whether it's facebook or some of these other big-cap tech companies,
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whether there is more value to be realized with some of these businesses becoming stand-alone. your thoughts? >> yeah, i mean, i view it as, if you think about it from a longer-term perspective, these companies have these various businesses, sometimes you use one business to fund another, i'll use amazon as another they don't make hardly any money on their retail business they make an egregious amount of money off of the advertising business and web services and that funds the retail expansion. if you were to break that up, obviously, the web services business would be great and valued, you know, highly, the advertising business, et cetera, but you look at the retail business as a stand-alone, it doesn't work as well same thing with google the way they're able to fund all of these other bets and things that they're getting into where they're losing a ton of money, is because the search business is so incredibly profitable for them you contrast that against, for
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example, an uber or a lyft, which is also in sort of that driving space, whatever, they don't have other businesses that are making a ton of money to offset the massive losses they're incurring in those businesses so for me, i prefer when you get these businesses together and you can use the profits from one to really build the base for the new business that you're trying to get into. and if you look internationally from a longer five, ten-year perspective, china, which is our number one competitor, they're not trying to break these companies up and that really bothers me with these elections coming up, because a lot of the candidates are put itingworkers, we've gott break up big tech. you break up big tech and you'll put these u.s. companies at a big disadvantage to their international competitors that are doing precisely this conglomeration approach to try to take over more and more markets. that's how i think about it. >> dan, certainly true that
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relati regulation and the political environment are a big first thing to tackle for the new ceo of google. stick with us, we'll bring in kara swisher as well what's your first take on this breaking news? >> well, it's not that big of a surprise both larry and sundar have not been that involved in google for a long time. and sundar has been running, in essence, the company, google itself, the search business. this is just putting him in a position that he was doing anyway, really >> it's an interesting move, but not unsurprising >> you've just spoken to the company. is that right? what can you give us in terms of extra color? eric schmidt, of course, has been ceo before, ie, a nonfounder in that regard, so the transition shouldn't be too complicated? >> it's not changing anything. again, both larry, we haven't even seen him anywhere he hasn't been the public face and sundar has increasingly been
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the public face, in what is a company that is still centered around search. most of it doesn't make money. obviously, the two big engines of that company are youtube and the search business, both of which are doing very well. and also, under a lot of controversy. and so, you know, around either employees or fake news or political ads. so it really is important to have a single leader at the top and not sort of a floating meter, who, you know, is kind of a wizard of oz like character so sundar has worked his way up from the bottom. i met him when he was a product manager at a relatively low level of google. so he knows the company very well he's someone that, you know, sort of bleeds google, essentially. and so he's the obvious choice for this the question is, can he really assemble a strong team under him to run the various parts of google and the challenges they face especially around issues around employees, which got a lot of ink earlier today.
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or their issues around political ads and struggling around ai and quantum computing and things like that. >> yeah, certainly issues we've been discussing, kara, all year long let's bring in our own deirdre bosa, as well, in san francisco for more on this story and the leadership change at the top at alphabet hey, deirdre >> hey, morgan that's right, this blog post was just posted by larry page and sergey brin. looking through it they lay out the reason why they're stepping away. it says with alphabet now well established and google and other operating effectively as independent companies, it's the natural time to simplify our management structure so here they do say that going forward, sundar will be the ceo of both google and alphabet. he'll be the executive responsible and accountable for leading google and managing alphabet's investment in our portfolio of other bets. but as you've been hearing from kara and dan niles, page and brent have not been as involved in the day-to-day of the company, but they do leave at a
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time where alphabet is facing a number of challenges from their internal workplace culture to regulations. so does it make sense to have one person lead all of it? it certainly comes at a very critical time. and pichai definitely has his work cut out for him looking also through this letter that they just posted not long ago, they say this brings humility and a deep passion for technology to our partners he's worked closely with us for 15 years so you know, it's a big change for this company, but in terms of the day h-to-day, it probably doesn't change a whole lot but it is a big move the letter does say that they will remain on the board as members. >> thanks very much. stick around, as well. mike, want to come to the stock price performance of late this year it's been a bit behind the other big tech companies, but still done well. >> and it's not far off its highs. and it's interesting to see
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after-hours in response to this news, the stock is kind of inching higher i don't think it's because there's going to be some grand strategic pivot or anything like that, but i think all else being equal, what wall street wants to see is a professional manager, somebody who, of course, has done great thing with the core business, and is not as taken with the founder's mythology, i think, frankly, of google, and also, you know, the other bets, as they call them at google, which is the longer-term -- again, i don't think it will change that much financially, but people have the muscle memory of microsoft in their minds when you had a 25-year veteran of the company take over from sort of the founder class that's done well for microsoft i think it's one of those things, it doesn't change the overall story, but maybe an incremental positive >> dan niles, to mike's point just there, whether it was nadella or schmidt the first time around, pichai this time around or tim cook, who stands
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out as being the best ceo that's taken over from, in all cases, you know, awe-inspiring, incredibly impressive founders >> the latest expansion with microsoft, their ability to do well in the cloud. that's pretty impressive bill gates obviously presided over an incredible company and then went through a tough stretch with ballmer and i think the most recent run is obviously incredible in terms of how much ground they've been able to make up on amazon with public cloud, so when you look at it, microsoft is probably one of the best and i think as kara and mike pointed out, there really is no change day-to-day. this isn't that big of a deal, quite honestly as i said, earlier, and you know, there's a lot of challenges, you have to manage through. there's no question, especially
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the political challenges he's not as aggressive a ceo as some of the other ones in the industry so it's going to be interesting to see how he deals in pa very aggressive government that pretty much hates big tech right now and that's going to be a very interesting thing to see him manage through and you know, he's already been doing it, it's not like it's going to be new, but it's probably going to get worse next year to some degree with the elections coming up. >> yeah, that's an important point, kara, because when it does come to interfacing with d.c. regulators, lawmakers, president trump, it has been pichai who has been the person going and having these meetings so far, as well. so i wonder how much that will i guess contribute to his standing now as ceo of alphabet, given the fact that the company is under so much scrutiny >> he's running the main company. i think it will be interesting to see what other executives there emerge
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there's the cfo, but a very powerful character within an executive within the company, who's done a lot of the cost-cutting the founders have done a lot of moon shots, but haven't really done very well but i think you'll see who is going to emerge as key eople, obviously. kent walker, legal is a very important executive there. and that's really what kind of people are going toe merge discussing things. you might see a lot of more of susan. and is right at the dead center of those political issues, so maybe she'll take on that. sundar is a really earnest and he's a very different, very low key, like tim cook is, like satya nadella is he's an era of these executives that aren't larger than life, they're very can-do people and they've done very well even though we tend to celebrate these founders and their
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creativity, a lot of the real growth has come at microsoft under satya nadella, another very similar character to sundar both immigrants from india both really worked their way up, same thing with tim cook, worked his way way up it's a really interesting time for those tech ceos in that regard >> dan, should facebook be looking at this and wondering whether they should transition at least some of the power from their founder? >> absolutely not. mark zuckerberg has done a fantastic job at the company he's still, you know, incredibly young. and he's still got a lot of vision for that company. so i don't, you know, for me, if he leaves, that's a problem. it's obvious he's one of the greatest founders out there in terms of what he's done with facebook and all the things he's done to try to futureproof
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himself, trying to move into ecommerce with checkout with instagram is a great move, because we've got a lot of instagram stars that are making a lot of money so why shouldn't facebook benefit all of that? he's got a lot of growth verdctr still left at that company for me, facebook, it's got the same legal challenges with politics going forward, but in terms of outlook, there's still a really good runway for growth and i think zuckerberg is the right guy to lead that that's not to say there haven't been missteps along the way. obviously, they should have more aggressive about policing the platform, et cetera. but you've had all of these ceos run into issues from time to time and, you know, they're going to manage through it so i really like him as ceo there and i would not want to si see that change. just like i wouldn't want to see bezos being out of amazon or something. that would also be horrific. >> we'll leave it there. dan, kara, our own d. bosa
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amazon stock up about half a percent on that news up next, we have much more on this major google shake up. larry page is stepping down as stepping down as ceo we'll break down the details when "closing bell" comes back nice, you ready to go again? are you ready, dad? i'm ready. imagine if your life insurance could help you live for today and safeguard tomorrow, so you're ready for anything. life insurance designed to protect generations of families. that's the power of pacific. ask a financial professional about pacific life.
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if you are just tuning larry page stepping down as alphabet ceo, the stock up 0.6% in the after hours trade the google ceo sundar pichai obviously heavily involved anyway with running the main part of alphabet but also the whole company will be taking in full as larry page steps aside google stock up 0.6% up next maerarst cd munozing a major buyback. details when we come back. to managing your fleet... to collaborating remotely with your teams. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.
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>> announcer: presidential comments on trade spark a market selloff. what market action could signal for investors. in what has already been such a busy news day, we have a news alert, master card and kate rogers with the details. >> hi, morgan. master card announcing the board approved a cash dividend of 40 cents per share, 21% increase over the current dividend, and approving a new share repurchase program of $8 billion. the company saying that's effective once it completes the current 6.5 billion-dollar share repurchase the stock higher by more than 1.5%. >> kate thanks up 1.6%. alphabet announcing that larry
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page is it stepping aside. google, ceo, the subcommittee, sundar pichai will remain in that role but also become now the ceo of alphabet, the parent company. let's bring in gene murnt, luke -- from luke ventures on the cnbc nunls what's your stake? is. >> now you know, wilf this is largely expected how long he has been with the company. but also he has been in the delegate and elevate role for the last several years i think that i was not surprised to see the news. on of that google is entering a different phase. this is no longer about crazy innovation like five or ten years ago. this is about navigating i think what is a progressively more complex policy environment and regulatory environment and so i'm not surprised to see him stepping away at this time kind of relieving himself of some of those -- i think some of the work, heavy lifting around the policy piece, which
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undoubtedly will be the harming of google over the next couple years. >> gene, that's where my next question to you was going, the fact that pichai is taking over as both ceo of google, a role he held, and ceo of alphabet now. how does that speak to how the parent company more broadly is thinking about priorities? >> well, the biggest question i have is just around the other bets segment so a priority will be the policy piece. >> yes. >> i think one thing larry has been particularly supportive of is taking broad strokes with the other bets that, my biggest question wanting to hear from sundar in terms of his commitment to what has been a fundamental piece of goog the 20% time that spawns some other businesses and commitment to innovate outside of google proper. >> do you think we're seeing other changes within the management ranks given in promotion for pichai
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>> yeah, there -- i suspect there will be some other changes coming it's always historically the moves have been a good time for housekeeping you think about what's happened at for example at apple in the last few years a lot of change at the top too i would suspect other news to follow. >> gene, thanks for joining us appreciate the late call-in. quickly po antoinetta point out something ed lee tweeted, a times reporter and cnbc contributor that sergei bryan and larry page do have 51.3% of the vetting rights something surnd has zero of. with the hand over, a reminder the stock up about 0.5%. tech sold off today, a bit of a boost, in fact now punched but potentially a boost tomorrow. >> it has been a outperformer and safe haven name. i don't know if that's driving the full action. but we pulled off the lows in
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the overall market i want gotten the bull's attention, the three-day shakeout but i'm not sure at this point it's telling you whether it's deeper. i think it's honestly the economic data more than anything else and the trade deadline. >> a big selloff on wall street more analysis on on google on cnbc but out of time on "closing bell." >> "fast money" begins right now. >> live from the nasdaq market site over looking new york city's time square, this is "fast money. i'm melissa leave. trader are pete najarian team seymour, karen finerman, guy adami. market tumble as the trade war heats up we look at the key levels that could set the tone to the end of the year but the looming activators with go onthe breakdown the and one bright as opposed to spot amid the sea of red tesla named must own by piperafter can the share


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