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tv   Power Lunch  CNBC  February 25, 2020 2:00pm-3:01pm EST

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something like that would probably not cost any more than what we're spending and be popular. >> i want to talk more about this john, please come back we really appreciate it. >> all right >> raymond james health care equity research. that does it for "the exchange" today. thanks for joining me. i'll see you on "power lunch" with tyler kelly, yes indeed, we will see you in a moment. i'm tyler mathson. we start with a market going viral and not a good way they're under serious pressure all the market equities for the second-straight day as coronavirus fears grip wall street the dow sinking another 600 points session lows now 659 points just a second ago that comes after yesterday's historic 1,000 point drop. we'll tell you how bad things might get. plus, how much has to do with bernie sanders and his rise in the polls ahead of south carolina's primary in a debate tonight. we'll talk about that. plus, mastercard, the latest company to raise the red flag about the impact of coronavirus
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on the consumer. we will dig into the fallout there as "power lunch" starts right now. tyler, thanks. welcome to "power lunch, " everyone stocks are selling off hard for the second day in a row. we are near session lows right now with the dow down about 600 points that's a 2.4% drop for the dow for the s&p the nasdaq down 2% today but if you add up yesterday and today, all three of these averages are down about 5% in just those two sessions. take a look at some of the moves weighing on the dow. you have boeing, united health, visa down 4% we were just discussing united health a lot of different challenges there. let's go to the new york stock exchange with a run down on today's selloff. hi, bob. >> kelly, an old saying on bleet if you can't trade on the fundamentals, trade on the technicals s&p 500 the last two days this was yesterday's low,
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mid-morning, another drop volume picked up, trading on technicals this happened a little while ago and the cdc announcementadded to new lows for the day. new lows expanding on the s&p 500. we're seeing a lot of oil companies naturally at new 52-week lows some industrials like h 3m and consumer names a smattering of retail like kohl's also new lows just want to point out, we're not much into correction territory but a few big cap names already there. disney, intel, facebook, microsoft 10 to 15% below the a 52-week highs. if you look at banks no, help with the ten-year yield, four-year lows killing the banks. the big names like u.s. bank, also below 10% correction. the important thing is the overall markets are not variant. s&p 500 still only about 7% below its 52-week high only last week, believe it or not, europe 5% the hong kong is in correction
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territory right now. going to be very important going into the close to see if we can reverse these declines lows for the day right now kelly, back to you. >> i'll pick it up, bob. the bond market, 10-year yield fell below the record-closing low rick santelli tracks the action at cme >> hi, tyler yes f you're a technical statistician, this is your day so much going on you know, if you look at it december chart of two-year note yields, that's last time we closed at these levels but, we've been much lower in the short and let's check out january 2011 zoom on two-year note yields. right there, right around 2011, september, it was at 15.5 basis points the low closing yield the lowest cloed ever was 135 plus july of 2016 darn close in july of 2012 so we still haven't closed let's see. we did make a new all time
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intra-day low trade. 20 years of 30-year bonds never traded intra-day or closed at these levels before. and finally, remember, boone yields at minus 52 in august of 2019 their low is minus 71 they're within 20 bases points of their lows as we continue to make historic lows everyday in the spread narrows with our neighbors on the ten-year boon finally the dollar index since april, yes, we're hovering around 99. the last significant high was september last year, 99.37 so we're a little over a third of a cent away from getting back to levels we hadn't seen since the spring of 2017 the dollar index giving something back but in small portions tyler, back to you. >> rick, what's the yield curve telling you as opposed to the absolute level of yields >> you know the yield curve is telling me that the feds going to have a lot of important decisions to make on the short end, but the fact that there's inversions although the curve is steepening today, to me it's not
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giving you any real glimpse into whether the u.s. is having a recession. it's giving you a darn good glimpse that many parts outside the u.s. are either at or going to be in recession >> very interesting. we'll talk about that in just a minute with a couple of our guests, by the way rick santelli, thank you very much. just minutes ago on "the exchange" larry kudlow says the selling this week could be an opportunity for investors. we don't have the sound an anyhow, i promise you, that's what he said. now with us global chief economist and michael farr president and ceo of farr miller washington welcome to both of you larry and rick just talked about the idea that globally the economies are weak can the world avoid, michael farr a recession if the second largest economy in the world comes in at a 0% growth rate in
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the first quarter and something modestly above that in the second quarter, can the rest of the world avoid recession? >> let's go with maybe right now, tyler i think the key to your question is the duration of how long china stays flat and how long businesses absolutely closed in china. if the schools are closed in china, if the factories are closed in china, if we saw as phil lebeau reported that january car sales were down 92% in china, if we can't get parts for production here, there's a chain effect and a bit of a contagion that will slow other economies. if this goes on through a couple of quarters, yes, it can certainly lead europe and other places into recession and threatens a recession here. >> joe, what do you say? >> well, i think also where we were going into this year fairly pessimistic on growth or at least relative to what most were seeing, i think the world can avoid a recession and u.s. is an
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important reason why but again, our baseline is not a recession but i think again to the gentleman's point, the duration of how long this persists not just in china but how it spreads around the world that will be a key point whether or not it goes into the second quarter. >> let's listen any way to what larry kudlow said a few moments ago. >> if you're an inforvestor out there and you have a long-term point of view, i would suggest very seriously looking at a stock market that is a lot cheaper than it was a week or two ago. >> time honored wisdom there, i suppose, michael farr? >> i suppose, tyler. you know my great friend larry kudlow is a very wise man, but there's another old expression on wall street which is don't try to catch a falling knight. wait until it hits the ground. i think that probably is more important wisdom when we don't know how all of this is going to
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unfold so what i would tell a client and investor is set a couple of levels in your mind. have a discipline here don't react emotionally. don't react out of fear and don't just jump in at the last minute say, stocks go down 10%. i'm going to do some buying. stocks go down 20%, i'm going to do some buying you have to tell yourself ahead of time because when stocks are down 20%, it feels awful you're not thinking things like cheap and looks like an opportunity. you're thinking how to get the cash and get to the door that's when you need to buy. larry is right, but i'll argue with his timing a bit. >> you know, joe, let me ask a question you know, we have seen that manufacturing has slowed in the u.s. over the past couple years, but the services sector of the economy has held up very well. but it is precisely the services sector that would seem to me to be potentially in a virus outbreak the most vulnerable >> yes in fact, i would certainly agree, tyler anything that really requires or
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involves human to human contact. so, leisure, hospitality, clearly the airline industry, typically strength and stability for the u.s. economy, other developed markets, that's what is probably one of the more disturbing aspects of this potential breakout because you know manufacturing, much more cyclical but also much smaller share of the economy. >> joe, i want to ask about something else that mr. cud low said when he talked about the prospect of a v-shaped recovery in china and second-half export driven rebound in the u.s. i ask you now that the dow is down 815 points today. >> it's unfortunate to see these events i would underscore let's not panic. we were going into the year -- we didn't know when this would occur but the markets were frothy in one way. take a step back and look at the facts. it's likely china will contract in the first quarter the persistence of the spread
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outside of china we do not know. i think the good news is that the global economy, the u.s. in particular, and china's level of growth it wasn't like that was materially weak going into this downturn so that's one solace noting that the federal reserve and other central banks may have to wade in here if these trends continue. >> joe, on exactly that point a moment ago we were down 846, sort of the most recent session low. keep scribbling on my paper as we have to update this mr. cud low was asked about a response from the federal reserve and he said publicly or privately he was not hearing anything like a half point rate cut especially an emergency one. but do you think the markets are throwing a tantrum at that answer >> well, i have been a little surprised in terms of -- >> go ahead joe and then michael. >> i've been little surprised at how much the bond market has
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rowed. we had one or two easings in the outlook this year. i think that's increasingly likely they will wait to see how it starts to imprint the economic data you overreact at the same time you see potentially stability in the virus front. we may not know. so i think the federal reserve will be prudent not necessarily commenting on this i think it would be concerning the market would potentially say do they know something we don't. >> it may be data dependent. but maybe what we want them to be is data anticipatory and move ahead of any clear signs, which larry just moments ago said it's not showing up in the numbers he's looking at. >> it would be nice, tyler f they had the right tool for this particular job a couple of weeks ago i gave a speech at university of delaware with fed president, philadelphia fed president, a ion's company thing at the university of delaware they asked in that question, if
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this really gets slower out of the supply chain issue in china, will it -- should the fed cut? and he said, of course, my opinion only, not speaking for other governors, but it doesn't do any good to cut a quarter of a point in the u.s. if you can't get factories open in china. in fact, fiscal stimulus or monetary stimulus in china really doesn't help get those factories open it's not a low rate. it's not accessibility of money that we're looking for to get this economy going again we got to get rid of this disease so we can get people back to work if it goes on a long time, we could see a v-bottom, but for china it's going to be a bigger problem if they're offline longer people will change supplier, get suppliers in mexico and other places. >> if they can get them and replace those supply chains. michael and i were at a conference yesterday in florida together, very enjoyable one at which an eminent economist said in front of 600 people, this may be the last gathering of this
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sort that we all go to this year what happens, gentlemen, if there is an outbreak that is traceable, say, to a big theme park in orlando or los angeles, what affect would that have on american's willingness to go those places, to get on an airplane, to travel to a convention or a conference and what would the broader effect of that be? joe, you first and then michael. >> well, again, let's hope that we don't cross that threshold. k but if we would have a significant increase in outbreaks in the united states, clearly in my mind i would expect a recession it would start off in the hospitality sector air travel would grind to a hau halt much like the early days of 9/11 at this point, the v-shaped recovery that some anticipate, that is less likely because now you have job losses that start to --
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>> but joe, let me just jump in here before we go too far down this path. you know, there's a difference between china where things are literally shut down and between the u.s. where people wouldn't travel the way they previously would have just because you're not traveling somewhere doesn't mean you're not partaking in the economy, the economy is not growing, just a different kind of spending a different kind of travel why would that push us into any kind of deep recession causing job layoffs that you're talking about instead of changing where the money goes >> to be clear, i think similar analogy, this is an assumption if you have an air travel ground to a halt, this is not our baseline we do not see a recession in the united states. i hope it would be mild. it would be something where you would have 0 growth, marginally negative because of the uncertainty which was our theme this year. consumers would still spend but the high discretionary items, points of strength, housing,
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automobiles, travel, those things would hit and that would leave imprint. you would see potentially modest job losses but nowhere near the sort of potential that certainly we saw in 2008 and 2009. >> michael, tie it off for us. >> you're asking about a scenario. >> we're in the world of speculation and hypothetical and i don't want to be too alarmist here, but that's what ed heimer said yesterday this may be the last conference that a lot of us will go to this year >> you know the danger is to be too mall thuz yan when we look at the same data sets and extrapolate them health care in the united states, science technology the physicians we have available to us versus remote areas of the world leave us in much better shape. the cdc issued a warning we need to take it seriously, of course if you look economically and think about a cold severe winter, people don't go out as much and shop as much.
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you have a little bit lower economic activity, but we get through. but, you know, we have -- the united states has a fabulous free market economy. we have an educated work force we're connected by computers you never bet against us, but this looks like there will be something of a dip and if it's prolonged it could be severe and the world likely isn't going to end at all and we'll come out of it but being careful and cautious, knowing what you own, why you own it with good balance sheets and good cash flow, not too much debt makes a lot of sense. >> gentlemen, good conversation. thank you very much. joe davis of vanguard, michael farr, good to see you as well. >> thanks. losses are accelerating here the dow is down more than 700 points 736. was down 859 or there abouts at the low just moments ago let's get a trader's take with virtue financials joining us live from the nyse why did markets sell off so distinctly in the last hour? was it kelly's conversation with
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larry kudlow >> maybe it had something to do with it. certainly we were going to test important levels 31.50 was support level. we were trying to test that. we saw the technical move earlier today when we saw the market really drop when it broke through yesterday's lows right now if you don't have any idea what you're trading on, you're trading on technicals bob brought it up numerous times today. so, in the absence of any new headline, that's what you're doing. and we're -- hopefully we don't test another low which would be 30.75 on the s&p >> 30.75, matt s that the level everyone is watching >> well, i think that's the deepest level. hopefully we don't get there by any means. hopefully we saw it bounce close to 31.50 here. that's an important number but again, i hear keep hearing words like i hope and i wish you know, we don't know what this is going to do yet. so i think people are being very conservative it's very hard to buy into this dip because you don't have any idea why it's selling off. same reason we saw on the way
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up, right, no one knew why they were buying. they were buying because everyone else was. until we get some kind of clarity, you'll look at technical levels as important points. >> what would clarity look like? >> you know, clarity could be the fact that they found some kind of cure for this. right? how could we distinguish this between what we saw the effects of the flu does every year i think that's something that maybe the cdc comes out with something that says along those lines that would be a positive step but until that, i don't think you can put a wall around this and stop it. right now there's just too many unknowns. >> matt, we're looking at crude oil and focus here at the moment as i think we briefly went belo $50 there. you can watch a ton of different things, coppers, metals, gold, look at what's happening in rates today. so is there anything to you that kind of really captures the psychology here? >> well, what's interesting last week we saw gold take off to the upside and hit highs we saw bond yields at lows but
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we saw the markets at hies someone was placing a large bet that something was going to happen in the near term and it did happen, right? the equity market pulled back pretty significantly you're seeing gold sell off today. maybe there's a little profit taking in there. you mentioned oil. oil broke below 50 that seems to be a number held numerous times so maybe we see a bounce there so there's a lot out there to maybe get short-term trades on i don't see anyone too excited to say this is going to stop at this point and i'm going to load up the boat. >> all right gentlemen, matt, thank you very much we appreciate your time today. thank you again. well, the cdc today saying americans need be ready for the coronavirus to spread in communities here in the united states meg joins us with more. >> hi, tyler they're saying not just to be ready fwou be prepared for potentially significant disruption to our day to day lives. the cdc telling reporters today it's not a matter if the novel coronavirus spreads to the u.s. but when and how much severe disease they see
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americans should talk to their children's schools and day cares, businesses should look into telecommuting and the health care system should be able to provide options for tell le health. the spread is now happening in countries outside of china in south korea, japan, iran and italy. nih director saying the level of person to person transmission in multiple different countries it's inevitable the novel coronavirus will come to the united states. though they're on track to begin a human trial of a vaccine made with bio tech company it wouldn't be available for deployment for at least a year to a year and a half, guys. >> we asked larry kudlow about this idea that a lot of the drugs, a lot of antibiotics and drugs like that in this country come fromchina, meg do we need to be worried about shortages there. one interesting thing, now that the cdc warnings will be on top of everyone's minds. we have seen people clear out the face mask inventory.
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will we see the same for aspirin? >> possibly. we could see that. we are already have a drug shortage problem in the united states of antibiotics, of some complex chemotherapies this is already an issue so if there are constrains on the active pharmaceutical ingredients the original oppone components that make up medicine, there could be a focus on that and stress >> it's not that the drugs themselves are manufactured there, it's that the constituent compounds that go into the drugs are manufactured there. >> that's right, some of the earliest ingredients. >> it doesn't matter because you can't make it if you don't have the juice. >> where would you say real quickly in terms -- some of the stuff you described is more high end, day to day painkillers and things like that that people take, are any of those particularly reliant on factories in china and do we know what the status is of those kind of supplies getting back up and running? >> i reached out to
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johnson&johnson about that, one of the biggest makers of tylenol and motrin, they weren't expecting a disruption that was a couple weeks ago. i'll touch base again. what we know is that is a large proportion of imports of those things that come from china. we could make some here in the united states. so it's not clear we're going to see an issue immediately. >> that's super important. meg, thank you the coronavirus numbers do continue to climb. both in china and outside the rest of the world. as people continue getting reports from countries such as italy and iran about the spreading number of cases as those numbers continue to pile up the total confirmed case count now exceeds 80,000 with deaths surpassing 2,700 the white house is asking a $2.5 billion budget to combat the outbreak with us now to discuss is dr. john torres. good to see you, doctor. do we know what that 2.5 billion is going for >> good to see you as well 2.5 billion he just announced is
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essentially a start to make sure things are starting to get prepared it's inevitable it's coming here not so much if but when it will happen it could depending on how robust it is cause a disruption in our lives. the cdc is brushing off their pandemic response. this doesn't mean we're close to a pandemic they want to be prepared and that's part of that $2.5 billion. they're talking about things like possibly shutting down schools, shutting down big events, doing more telework. but also getting that public health sector set up so it's able to take care of not just us here but the president said we want to take care of other countries that can't take care of themselves or having difficulty, make sure we help them as well because like the cdc said and nih said, if it happens in the other countries, japan, south korea, iran and italy, that means it's going to come here at some point, too, because it's hard to keep this border completely closed if it starts coming here, it could disrupt a lot of things around here. they want to be ready for that. >> so let me ask you,
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hypothetically, if the olympics started next week in japan, would you go or would you cancel them >> i think if the olympics started next week in japan i would go but i would be very careful about what i did when i was over there i would make sure i did all the things i needed to do, number one, i had any flu shot, constantly washing my hands, not touching my face, all those appropriate things and avoid the contacts i know are sick at this point. but i'm just one person going over there a whole community of people over there, that could cause a completely different issue because not everybody will take those types of precautions and it could spread further. there's a difference between the olympics starting right now or next week and the olympics starting three or four months from now i think we're going to see a change in the coronavirus over time we're just not sure which way it's going to go and in china they said they noticed it's plateaued over the last few days hopefully the other part of the world starts seeing that as well and what the world health organization said was let's give it six weeks and six weeks we'll have a lot more information on where this is going that seems like a long period of time but you have to remember the coronavirus this one has only
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been with us for a few months to begin with. >> dr. torres, it's meg terrel if we do go into these mitigation efforts we need to do environmental efforts like keeping everything really clean, wiping off surfaces. i have a kid in day care he gets sick multiple times every winter what is the likelihood we can actually contain coronavirus like this that a lot of people have compared to spreading like the flu. can we actually do that by keeping things clean and washing our hands? >> it's going to actually be a huge step forward to try to keep it as contained as possible. things are going to breakthrough that containment we know that regardless of how much message we put out there, how often we're saying clean these surfaces here is how you do it. here is the equipment to do it, it doesn't get done at that 100% level. even in hospital settings. so it's hard to keep it completely contained that's why they have a second step where if it does start breaking out into community, they start going into that community and quarantine certain areas to make sure it doesn't spread from there. they have contingencies for
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these types of things. children, small children the hardest thing to teach them is keep their hands away from their face and wash their hands constantly it will be very tough especially at that level to keep them from getting sick but, hopefully it doesn't spread much further than we think it's going to spread at this point. which again, it's being very well contained here. one of the things i said is it's not so much a community spread as a family-type spread. meaning it's not going permeating throughout the communities. the close contacts at great risk right now. hopefully it stays that way. >> yeah, important distinction dr. john torres, thank you we appreciate it today >> you bet. as the market sinks recession fears are growing, too. could the coronavirus be a tipping point for the global economy? let's bring in alexa crow. alexis, good to see you. and as larry kudlow pointed out and we discussed last hour, a lot of economies were quite weak going into the coronavirus japan down 6%. germany was struggling so much worse will this make the picture look
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are we talking a global recession which understandably is not well defined. >> absolutely. if we think in terms of economic activity just putting the markets aside for the moment, while we had manufacturing in contraction mode for much of 2019, some of the world's major exporters, you know, namely japan, germany, even looking to italy, you know, services and consumption have really carried the bulk of economic activity, employment gains, wage gains if you think of someone hobbling on a crutch, services and consumption have been our crutch and now all of a sudden you knock the crutch away, you have a major issue in terms of economic output across the world. >> so if that's the case, talk to us about just what the first quarter gdp numbers might look like worldwide and importantly the u.s. is not that exposed about 13% of our gdp is exports. so, about 1% gdp number for the u.s. sound still about right to you first quarter? and does it look like now that
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weakness might be dragging out further into the second quarter? >> yeah. i think you're still seeing robust forecasts on behalf the imf put out robust global forecasts just forecasting contraction for china namely i would be slightly more conservative mainly looking at services activity in the u.s. obviously we saw softer services pmi activity, q1 of this year coming down. i would certainly be concerned for that outlook also we forget the extent to which 42% of revenue from s&p 500 is earned abroad 8% of that largest category in asia another 8% in europe so thinking about just the double impact to some of the largest employers in the united states, services and manufacturing and retail communities. >> when you think a lot of the large s&p 500 companies, they get a lot of their revenues sometimes 50%, sometimes a little less, sometimes around there. outside of the united states either in asia or europe what is the hitto their revenu likely to be and how does that
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play through the system into their stock prices >> it's severe both in terms of the supply chain as well as the sales. so, again, if you look at some of the dow 50 companies have had between 14 to 17 consecutive quarters of double digit growth in china you can say good-bye to that i think for the first half of the year that's just in terms of the sales outlook. u.s. companies sale $220 billion worth of goods to mainland chinese consumers every year we also forget in this polarization between the u.s. and china we forget about the eurozone as well as you mentioned so we have 8% of revenue from the s&p 500 coming from the eurozone and with this spread from italy to austria to switzerland, a lot of the finance ministers talking about a potential epidemic outbreak within their respective eurozone economies, the knock to the european component on sales and supply chain can be severe. >> alexis, let me ask you because obviously someone in the position like yours does a ton of international travel. where would you go and not go
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right now? what are your thoughts about getting on a plane >> i just returned from canada i think canada was a safe bet. but i think europe is starting to look dicey. so we started to see some of the major banks put travel bans on italy. obviously investment bankers need to go and look at the deals that they're transacting on. shutting down deal in northern italy, one third of the gdp of the country. i think that's very concerning the european outlook is what's very grave and obviously we continue to monitor the situation closely with regard to asia, but i think those travel bans are staying in place. >> asia is a no-go as far as you're concerned >> that's what we're seeing with a lot of the airlines as well. i think just risk off at the moment. >> alexis, we appreciate it. alexis crow joining us today. look at oil right now. we mentioned earlier it dipped below $50 a barrel as coronavirus fears accelerate where are we right now, brian, below that level, 49.83.
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>> we talked about it yesterday on "the exchange" which is if you didn't have some of this inventory build buying people i'm talking to all day long that suggest we could be 10 or 15 bucks a barrel lower i think great to have alexis on, friend of mine and super smart >> you're talking about 35 to $40 crude if it weren't for that front loading of supply right now. >> yes. >> wow. >> china 14% of the world oil consumption. take 30% off, $4 million a day venezuela and iran are down a lot, libya almost completely as we talked about the other day. thank goodness if it wasn't for that, we could be at $40 a barrel. >> supply would be much higher than the demand. the dow is now down more than 900 points, down about 920 and energy shares are off 19% for the year. >> i know you're a math guy, tyler. 71 billion that's how much market cap exxonmobil has lost this year.
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>> lowest price since 2006. >> this year i just ran the numbers before we came down prepping for "fast money tonight. 71 billion lost this year. >> incredible. >> the average return of a stock that is primarily operating in north dakota, little more expensive region i'm averaging some of these names is down over 40% in a month. nobody is trying to be a grim reaper when it comes to this, but let's factor the world economy in four slices shall we pizza tyler with four slices the u.s. is the biggest slice. china is pretty big. europe is the same size as the united states and the rest of the world agoragated is the other fourth we see europe now slow in addition to china, you have half the pie that is being slowed down that's a demand destruction scenario that the oil markets did not anticipate >> and they had a lot of negativity priced in let's back up for a second because we rarely, rarely see
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days where we have the s&p down 3% two sessions in a row which is kind of what we're looking at now. the last time it happened was in 2008 what do you think -- brian, you watched the headlines the last few hours as we all have what are the headlines you think spook the market the most right now? is it seeing just the levels we're talking about, hey, you know what, oil goes below 50 that's a sell program. the ten year yield hits a new record loes. that's a sell program. maybe the federal reserve is not any talks right now with any urgency to kind of come up with a big rate cuts. >> listen, i got into oil and gas because in '08 when everything was ending it was the only industry adding jobs for a couple of years. that's why i got into it, not because i have some affection for high crow carbons. just felt real i think we have a couple things going on you had forced esg selling all these pension funds for two years we can't own fossil fuels, dump them. that's been a far sale leading presidential candidates of the democrat side get up on
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stage and say we are going to end fracking or fracking on federal lands. that's couple million jobs by the way all aggregated in. now you have demand destruction. it's like from greek mythology what is it the serabus, the three-headed dog and you have the three-headed dog right now that is nipping at this industry and you may say, who cares about fossil fuels they're tiny about 4.4% of the s&p 500. that is true but energy prices i got bad news for everybody out there are still one of the best leading indicators we have of global gdp -- >> that's what i was going to ask you. are these oil energy prices telling us where the economy globally is heading or is it the inverse of that? >> can i be a politician and say -- >> it's both. >> i hate to be the two handed economist. you've got too much supply the u.s. because of all the debt levels u.s. producers have to
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pump they have to keep pumping oil. >> to pay their debt. >> they need debt. they need that cash flow so, we're at 13, 13.5 million barrels. no indication in the short-term that's going to go down. you have oversupply. russia -- saudis want to cut they want opec to meet and want a deeper cut i was just talking to some people in the saudi arabia contingent this morning via whatsapp but russia won't get on board. not yet. russia is a pet row chemical state. >> they need the money. >> they're like a giant u.s. producer they need that cash flow as well how many times has the u.s. oil and gas industry produced its way down >> you made an interesting point earlier. if you threw back in libya's production, venezuela's production. >> libya is a million off. >> right. >> they're 3.715 years ago, one ship a day. >> took them and took iran and
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put that back in. >> 2 million. >> you have even lower prices. >> my math, i went to an engineering school, that's 3 to 3.5 million barrels per day back on online in a market already oversupplied >> look at that exxon price $54 a share. >> what was it at the start of the year >> 71. it was 70.34 and went over 71 intra-day briefly on january 3rd. that's 71 billion in market cap roughly 4.3 billion shares outstanding. carry the 1 divide by 2, 71 billion in market cap loss this year by the way, chevron and exxon, they are part of the dow. >> yeah. >> not a big part. and smaller everyday but they matter. >> still there. >> talking about a couple million employees, also. by the way, bonds are moving watch the hyg, throw that up, high yield junk bond etf, 11% is energy you may not care about energy from a stock perspective, but from a credit perspective, it's the third highest weighted
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sector in the hyg the most widely traded junk bond matters for credit markets. >> great point, much bigger for credit equity. >> you ask we deliver. >> washington, virginia tech. >> virginia -- >> i-81 and 64 corridor. thank you. >> brian, thanks so much brian sullivan we appreciate it. right now the dow is down roughly 900 points 888.65 technology getting hard hit in the selloff the nasdaq down more than 6% in the last three trading days. josh lipton has more on what we are charitably calling the tech reck josh >> ty, big tech taking on the chin here apple microsoft amazon and alphabet lost collectly $464 billion in market cap over the past four trading sessions take apple investors nervous there because china is nervous consumer in market also a vital link in its supply chain. made 90% of its products
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assembled over there amazon near correction falling below 1 trillion in market cap half of its business is selling own inventory and other half is selling third party products much come from smaller businesses located in china. microsoft, ever core's noticed the company has limited exposure to china any selloff here investors feeling more generally nervous and taking profit after a monster run. course not just the big cap players, the chips also now in correction all down hard from their recent highs. >> josh, we appreciate it. >> josh lipton big selloff over the past two daysnow is mostly related to worries about coronavirus. but look at shares of united health, the worst performer on the dow yesterday down 12% in a week now in large part a reaction to the bernie boom. let's talk about this, these markets today, brian gardener joins us he is washington research analyst at kbw. great to see you, brian. listen, before we get into the
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united health issue specifically, can you just give us some thoughts now that we have really severe market declines for two day ins in a row now. how do you think this plays politically? >> it's a great question you know, it's going to be interesting to see if it comes up in the debate tonight i think longer term -- if this is a longer term fphenomenon, th disruption with the coronavirus and the global economy leads to a u.s. recession, then i think it upsets the conventional wisdom that is prevailing which is a trump is the favorite to w win in november. then it calls into question his chances. let's see how this plays out i think going into the weekend i don't think anybody saw this kind of severe selloff coming. and we don't know how long-term any of this is >> one followup often we talk about the recession as a binary
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scenario we're talking about probably a 1% handle or print for first quarter gdp. if this lingers now as people react with the cdc headlines out there today into the second quarter, that's again going right into the middle of campaign season. how long of sub 3% growth will it take to have a similar effect as if we were in a recession in terms of the resident's re-electability? >> a lot of times there is a lag between economic performance and how it flows through into politics i mean, '92 the economy was already recovering didn't help president bush 41 get re-elected even though we were 3% or higher in gdp growth already. we didn't realize it let's see how close it is to the election, how much lag -- if there is a severely slowing economy, how it flows through. and on the other side, you know, how what kind of distress do voters feel going into the election that it is a
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sanders/trump choice, how much trust people have going towards a democratic socialist candidate? it's new grounds that no one has seen in the united states. so, these are open questions look, if mr. trump's economic approval numbers start to deteriorate, then i think he is in some trouble. that is his strong point his overall job approval numbers have improved but they're still mediocre compared to a lot of predecessors his economic numbers are terrific there's a disconnect if the economy starts to teeter and his economic numbers start to head back towards his overall approval numbers, then i'm less confident in his chances of being re-elected. >> but i wonder, brian, voters are pretty smart, you know, in lots of ways individual voters may not be smart but collectively i think they are pretty smart.
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i wonder if voters if the economy starts to deteriorate in the united states because of coronavirus, i wonder whether voters would blame president trump nar? he had nothing to do with it with that happening. >> tyler, i think you raise a great point. elections are decided at the margins. so it is what -- how does the marginal voter change? we're in a highly partisan era where the trump base and the democratic base regardless of who their candidate is going to be, they are locked in at the margins, the ndecides, how are they going to change in the last election where you had the winner losing the popular vote but winning the electoral college, which is what matters, but winning that electoral college basically by three states with less than 100,000 vote differential total, 10,000 in the state of michigan, so we're talking about the collective wisdom but the real
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question is the marginal voter the voter in michigan, how do they change their mind does this impact more than 10,000 people that switch back to the democratic party? i don't know these are questions that again have to play out over time if it's bernie sanders, i would argue the democrats are in real trouble regardless of the economy because you're talking in a previous segment with brian about fracking senator sanders wants to ban fracking doesn't play well in the commonwealth of pennsylvania and so it's a key state for democrats to hold on to. so, you have the corona issue, the economy, policy agendas from various candidates how they play into specific states. >> very interesting. kelly had a guest on last hour at the very end who was saying if you take through some of the policies on the left be it medicare for all kind of thing, just watch and see how many hospitals go out of business.
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>> absolutely. >> if medicare rates are then the law of the land for repayment to hospitals or to doctors. and what happens then to a company in senator klobuchar's minnesota like united health they're going to lay off workers. that's jobs, man. >> right but it was an interesting anecdote over the weekend because going back to the nevada caucuses and the democratic caucuses and the culinary worker's union sat out, basically didn't endorse but senator sanders did extraordinarily well with labor. despite the attacks that he is going to take away their gold-plated health care plans which they have fought for through collective bare gaining and replace with medicare for all. one of the union workers and voters saying, well, if he lost his job, he would have nothing and he kind of likes the sanders plan because it's a backup of guaranteeing him a health care
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plan i'm not arguing in favor of that, i'm just pointing out that's how some voters think about it i hear your point on jobs, but if the economy deteriorates because of what we're going through and economic anxiety starts to pick up and people become more worried about their futures and looking for economic security, can i see a scenario in which there is a movement towards sanders by some blue collar workers because they think that he's going to take his proposals, take care of them longer term, it's a viable argument i'm not willing to say it's going to happen, but certainly it's more viable than i think a lot of people think it is. >> brian, it's great to see you and hear from you on a rough day, a rough couple of days here on wall street brian gardener with kbw. the dow is down 836 points. the dow selling off hard
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again. it is now shed nearly 2,000 points over the past two days and for more on the selloff, let's bring in chad morganlander with washington crossing advisers chad, welcome. where are we in this selloff what does it feel like to you? >> so it just feels as if there's this tremendous amount of uncertainty we can still continue to see selling pressure over the next several weeks until there is a better handle on how this virus is spreading but going into the year, we were hitting higher highs, multiples were quite elevated. and expectations for earnings growth as well as global growth were quite optimistic. we believe now that that has to be revised down substantially. >> it's often, isn't it, chad, when the market is selling as high as it was and by lots of measures it was really quite tippy. it's often the unknown unknowns that trip you, the things that are not on your radar screen that cause the problem, right?
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>> that's 100% correct and hence the reason why you're seeing multiple compression right now. with that said, we believe though that over time over the next 12 to 18 months when this starts to slowly slow down and we get a handle on it, you're going to see tremendous amount of fiscal stimulus from china as well as potentially from the united states as well as monetary support overall so this all depends on what your time frame is as an investor if you're a hedge fund at this point, you may want to buy protection but if you're a long-term investor, you want to have a much more circumspect handle on what you're doing within one's portfolio. >> is the bond market telling the fed it needs to cut in march? >> i mean, the federal reserve, the expectations are that the federal reserve will be cutting over the next several months by a quarter of a point
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so the bond market is reacting to the potential global slow down our expectations for global growth is roughly 3% going into the year where i believe consensus was well above that. we believe that consensus is now going to have to mark their global growth down by happen perhaps another half a percent overall that's what the bond market is reacting to. >> chad, finally china growth numbers are going to be terrible japan was already a basket case. germany didn't look good how low do you think the u.s. first quarter numbers are going to be and how prolonged is the hit to growth do you think >> so, certainly the number for q2 will be marked down expectations were 2.25 for 2020. we believe for next quarter that may have to be marked down by another half percent overall economists as well as market speculators are trying to come to terms with this demand
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destruction as well as capital investment for the next several months, at least, is going to be quite soft so, you know, this is the reasoning behind the instability within the risk markets, why spreads are starting to widen out on a high yield side so you can continue to see a little more selling pressure over the course of the next several weeks. >> okay, chad, thank you, sir. chad morganlander, transports are one part of the market getting hit particularly hard, sinking into correction after new data on freight traffic here and around the world, not painting a pretty picture. morgan brennan has been digging through the numbers. what do investors need to snow. >> we're on pace for back to back 3% or greater declines in the dow transportation average just to start the week the last time we saw moves like that it was nearly four years ago. obviously passenger airlines getting a lot of attention today given the very big moves to the downside that we're seeing in american, southwest, alaska, united and cargo airlines, names like ups and fedex some of the
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biggest losers key reason, air freight data, getting some of the freight numbers in the midst of the coronavirus outbreak for january, a report came out today report today showing asia pacific numbers and eurozone numbers. recent data suggests that the coronavirus is already driving negative consequences more dire than sars and can produce short-term economic calamity rivalling the 2008-2009 recession. that may sound sensational, but there are all charts and data points to back up that claim just to put it in perspective. hong kong volumes in january, down almost 11%. shanghai volumes down almost 12%. these are levels that were already depressed because of what we saw in air freight due to the trade war and tariff situation. >> that's been one interesting thing going on here. usually people look to transports, because they say
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that's the leading edge of economic activity, but in a way that's been the hardest-hit sectors. is it possible, instead of it as this goes so goes the rest of the economy, is it more hopefully everybody else isn't quite's bad. >> i will say also in this report, showing a strong correlation between asia pacific air frayed and semiconductor billings indexes when you see a drop-off in that asia pacific air frayed number, at some point you tend to be semis fall off as well when you're talking about supply chain halts and the like, you're talking about something like the impact and ripple effects, but also the chips are the building blocks for autos, industrials and all these different industries as well it's something to keep an eye on, especially since they've been a leading part of the market up to now. >> and getting hit the hardest
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now. morgan, thanks. >> morgan, good to see you the dow off the lows, down just 780 points it was down more than 9 had you been at one point. the democrats now blasting the administration about the response to the growing coronavirus crisis sue herera has a news alert. >> indeed i do chuck schumer has been very vocal on the hill today and very critical of the trump administration's asking for funding. he basically says they have been incompetent and the money they are asking for is too little too late >> decisions were made based on politics and optics, rather that on the informed opinion of our scientists and doctors it's like the soviet overruling the scientists at chernobyl to avoid embarrassment to the regime and connecticut senator blumenthal is also calling for a congressional investigation into
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whether or not the funding request by the trump administration is an adequate amount, given the fact, as we've been reporting all day, that the cdc has basically warned americans to prepare for the spread of the virus. so there is a lot going on on capitol hill behind the scenes that is part of why wall street is selling off in today's trading session. obviously there are many things connected with the coronavirus, but when senator schumer came out and made that statement, we did see some reaction not only in the stock market, but in the bond market. >> thank you, sue. mastercard is warning about the impact of the coronavirus on its business visa and american express all getting hit hard in today's sell-off kate rooney joins us with more >> we've seen the payment sector absolutely booming this year, priced for perfection. the coronavirus is turning out to be a bigger headwind than than be thought. mastercard with its worst day since 2011, the ceo stepping
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down as well visa hasn't gone the same route, but mentioning investor day a couple weeks ago saying potentially if hotels and flights are impacted, and any sort of consumer impact, visa will feel the effects. paypal is seen as a bit of a safer bet, more tied to e-commerce, but that is also still down square has zero exposure to china analysts say that's more of a risk story. but the payment sector really getting knocked off the pedestal here. >> i guess that's to be expected, kate the one question -- or the within concept people keep coming back to, worst case, all will be shopping on amazon and using the online payments and doing everything from their homes that they can as possible. do you think that's oversimplified of the way that the economy or the payments or
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that these card companies work these days >> analysts have already been mentioning that, especially with paypal they says e-commerce is a bit safer. the way these card networks work, they still benefit if you're paying online square, divorce is a more resilient name, and then of course you have fears larry kudlow earlier was talking about that, but analysts are looking that way kate, we appreciate it let's talk through the impact on retail as well dana has a look at some of the retail names that have supply and demand, we heard from a couple of them today home depot macy's a bit of a story. where do you see the biggest effects? given that they need the tourists in order to benefit
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their sales, giving the fact that -- are very is important to their overall sales penetration, so luxury will be an impact. i look up and down the supply chain where there's an impact. whether it is apparel companies and manufacturers, overall 72% of footwear is typically made in china. today wolverine worldwide put out their at the -- given the fluid situation that it is, many companies aren't willing to give out specific numbers this is the first within that did. when you hear more numbers along the way. >> i great luxury, would that would be hurt, now it's italy, a big consumers are, and also a being manufacturer of luxury goods. >> exactly. >> but talk to me about the nikes, the adidass, tho adidasen the middle market, will they be
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hit as well? >> of course the other impact you'll have is price increases, because everyone will want the goods out of there as quick as they can, and air freight costs don't come for free. >> what about the second half? larry kudlow said his hope is we have an export-led rebound in the u.s. economy in the second half of the year, because of the ordering times and supply times, when you look at retail, do you see any sign that we might have this pent-up demand that gets pushed toward the back half? >> you probably will have some, but a lost sale is a lost sale you just don't make up a sale that's lost. you're hearing that companies overall have inventories essential through easter, some have a bit past that, but the back-to-school ordering process starts to take place sooner or later. as a result are there going to be less goods? and will consumers have to pay a higher price for those goods if there's any impact of
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coronavirus here in the u.s., consumers confidence has been holding up the market. if we have a weak link in consumer confidence, that's a concern for the back half of 2020 >> do you think there's retail that's more insulated, and the china effects than others? and they would include such names as tjx, costco, some of the home retailers and so forth. explain the reasons there. overall if you have goods that are more needs-based, that will hold up better think of kroger and walmart. nearly half of walmart sales or mo comes from groceries, consumers continue to need groceries. >> we were talking about at the top of the hour, as we saw oil go -- it's not the stimulus that it once was, we used to talk about retailer lice nordstrom with an over-concentration in texas. are there retailers you think
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could suffer >> i mean, overall, when you think about lower gasoline prices it could be the lower-end retailers. when you think about texas, yes, we do have a bench that will be impacted by that we've a tough start to the year in retail. we've seer some off-off-mall tenants close. think about pier one this puts more pressure if we don't have an -- >> you say that tiffany was not down that much today >> tiffany sold. maybe if they would have waited six weeks, it might have been less >> dana, always great to have you here >> are the will, one more check. the dow down more than 700 points we were down, what, 900-some
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when you're in these tough down markets, that's -- we'll see what happens >> you felt rich last weekend and now you're down for the year >> thanks for watching "power lunch", everybody. "closing bell" starts right now. >> where the market is plunging for the second day, it is dow now down over 700 points that comes off yesterday's sell-off >> and we are on watch for coronavirus briefing this hour from the department of health and human services, today marks a stark change in tone we'll, of course, bring you that news conference as soon as it begins in the meantime we have breaking news from the fed related to the effect on the global economy steve liesman has that for


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