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tv   The Exchange  CNBC  February 25, 2022 1:00pm-2:00pm EST

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right? with that vocabulary jobs, this is an our play. there's risk the deal doesn't work the price is $57.25 i believe. i believe the deal will go through. i'd say it's an 80% chance minimal risk i like that one and own it. >> that does it for us "the exchange" begins right now. >> thank you i'm kelly evans. here's what's ahead. stocks are gaining for the second day in a row with the dow rallying almost 800 points as putin signals he may be ready to hold high level talks with ukraine, but can the rebound last even if the geo politics gets worse we'll ask. plus oil dropping today but goldman's jeff rcurry says we're on track for a potential supply shock. and could the ukraine crisis derail the tightening plan
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we talk about the taylor rule that's sometimes used to set rates. they say the fed needs to hike half a point next month regardless let's start with the markets dom as the latest. >> so many factors in this narrative over the course of this past week the ukraine/russia crisis is at the center of a lot of it alongside the interest rates as we look at the markets overall, the reason it's important is we are roughly up almost 800-some points we pulled back off the session highs. that's up 2.33%. the s&p 4370 almost 2% campaigns there. and the nasdaq is lagging, so to speak, up only 1%, up 135 points 13,609 if you look at the pullback we've seen and the bounces we've seen over the last couple days or so, we now stand with the orange line, the s&p 500 down
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about 9% from the record highs that we've seen. the dow industrials are down about 8% that's the white line. and the nasdaq composite is still down roughly 16% from the record highs that we've seen again, again, the context is important here about just what the pullback has been and the bounce we're seeing also take a look at some of the big e picture items we're focusing on right now. specifically with regard to interest rates kelly mentioned the ten-year treasury note yield. we're at 2%. we saw a big bid of treasuries go down for the ten-year side. two-year, 1.26 % keep an eye on this. the yield curve, the spread between long-term rates and short-term rates continues to compress not necessarily what's viewed as a bullish sign for the market or economy. so watch that. and then three key parts of the market that have seen big bounces and volatility we're talking financial technology stocks. semi conductor stocks and software take a look over the last couple
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days and the lows at the week here and just how far we've bounced. watch for those. they've been beleaguered as of late and some of the stock wes care about the most apple for the weekend, microsoft, and alphabet for the week by curiously, apple is the only one of the big three that's negative on the one-week session. take a look on the megacaps. >> a big rebound over the past session or two the kremlin reporting that putin may be ready to send a delegation for negotiations. even as russian troops are closing in on ukraine's capitol of kyiv. kayla is in washington with all the latest for us. >> kelly, the russian state media are reporting president putin spoke with president xi, among those reportedly suggest russia and ukraine return to the negotiating table, but it's met with a different picture on the ground ukrainian troops and national guard defending the city as russian troops close in. we know 137 ukrainians have
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died across the country, russian tanks and trucks are rolling through. earlier this week the state department warned that russia is performing diplomatic kabuki theater with no real intention to broker peace. amid the uncertainty, the biden administration is hoping to provide some clarity to energy markets. the state department's senior adviser spoke first to cnbc and said europe now has enough natural gas to last through member iea members are meeting to discuss how the increase global oil supply and prices should fall once the market realizes the u.s. will not be sanctioning russian energy outright. >> i fully expect the transactions will continue to be permitted. having said that, there's going to have to be rejiggering of the payment systems and the transactions as several of these -- of the leading russian banks that process the process energy payments are going to be blocked by the united states,
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and are going to have sanctions from europe. >> today ukraine's foreign minister has asked the u.s. again to rally europe behind blocking russia from the swift secure -- s.w.i.f.t. secure payment system >> although, as you pointed out, that would hurt the european economy. so are you hearing anything about what accounted for this possibility that putin is open to the idea of having talks with ukraine? i mean, what would have prompted that we see reports about how from various military experts, oh, well, maybe the invasion didn't go as well as they hoped at the same time, they're still bearing down on kyiv curious what you're hearing. >> it's impossible to know what has led to this reported change of heart, but i would just say that the administration has warned for days and weeks of taking anything that comes out of russian state media or from the kremlin without a massive crane of salt. they have been warning about kabuki theater and warning of
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disinformation suggesting there have been large swaths of ukrainian military surrendering to russian forces. they're worried about morale on the ground in ukraine. the west is worried about morale they're warning that there is a lot of disinformation about what russia wants and is intending. and what the actual state of affairs is so we'll just have to wait and see until we get some firmer information out of other sources that are not the kremlin or russian state media. >> great point kayla, thank you this softening tone out of russia, if that's what it is, look at stocks itappears to be helping them rebound. dow up 718 investors buying in every sector less than 20 s&p components in the red right now. with me is president after potomac wealth advisers. it's been a lot to digest this week, mark >> absolutely. absolutely >> good. >> and we think that's going to continue the news cycle is going to be
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very rapid investors need to be fluid i like the two-day move here, at least the 24-hour move up in stocks i don't think it's going to be one way. while we're bullish on stocks, i expect a lot more volatility we have fed speak next week. that could be a big driver and the overture to have talks in ukraine may or may not be as genuine as we hoped. >> i should point out this may or may not be about that development. if you go back to yesterday, we started seeing strategists like michael darda say it's time to buy the tip. we saw technical buying in the nasdaq 100 we saw technical buying in the nasdaq as it had a 20% pullback. do you think that some of the technicals have helped turn things around here >> yes it was a slightly overbought position look at forward multiples. they're coming in close to historic averages. remember, while the fed is talking tightening, it's still in a liquidity mode, and there's still a ton of liquidity out there. investors are cash rich.
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money has nowhere to go. people were looking -- remember a few weeks ago, months ago, people wanted to buy on dips this is an opportunity for a lot of people who had money on the sidelines. so when we get a technical move, an opportunity, you're going to see sharp moves up, but the risk is you're going to see it goes down algorithms can kick in momentum trades. so this is going to be a choppy market but for now, it looks like it's a decent place for long-term investors to park some money >> brian reynolds is another strategist who thinks we're sort of in the bottoming process right now. i know that you like a lot of the big insurers you seem to be looking for places that as we would say, are often kind of the safetiy plays here >> we want to blend value and growth that's because we take a long-term perspective. on the values side, insurance companies provide dividends, reliable cash flows because of the way they're structured and the underwriting they've internally have really cleaned up a lot of their risks.
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they're no longer in some unprofitable lines whether they shed or reduced the long-term care exposure and the lifetime income annuity contracts the insurers are offer are almost to the wayside. they're difficult to find. most insurers have exited. they've replaced them with lower risk, higher profit. and these risk managers, these insurers, this is the game they play in. and they can profit in and as asset values increase on the equity side and if interest rates settle out at higher levels, we think they get an income statement boost from their balance sheet. i think these two factors of being well-run in better lines of business while their balance sheet portfolios firm up, it's going to make them attractive investments going forward. >> especially like lincoln, met life prudential. you also like a lot of megatype caps talk to me about docusign. if people are in the mood for risk tell me why that pops up.
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>> we went through a massive repapering project it's an amazing product. it creates such efficiencies i think they frankly could have charged a lot more for the service, because of the value they bring consumers not just in our situation which was a large project, but on an ongoing basis. docusign is going to be a word we use in our daily language and business i don't think it was a stay at home play that's going to fade i'd like to see them get their operating expenses down. this is not a one and done pandemic play. this is the way this is going to be conducted in the future >> mark, thank you for joining us today we appreciate it good to be here. >> mark avenue loan. the russia/ukraine conflict driving up commodity prices. everything from oil to aluminum and wheat. corn and wheat are giving back some gains today my next guest predicts prices trimming elevated saying crude could still spike to $120 a
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barrel jeff, welcome to you and i think the most important point to make here is that you don't think these high prices are because of this conflict you think they're fundamentally driven by supply and demand. right? >> absolutely. we look at this trend in oil prices and commodity prices. it dates back to september of 2020 it's been just a pretty much a straight line up since then as inventories draw down, get to critically low levels, volatility spikes. we're now into scarcity premium across the markets it makes them really exposed to any kind of disruption that's what we have going on in russia/ukraine our base case is you're not getting a disruption, because it's just no one is interested in the sanctions announced yesterday are not going to disrupt energy but i think the key point sheer that let's call them shadow sanctions, are leading to disruptions in russian supply.
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crude oil, russian crude trading at a $12 discount to brent right now because people do not want to take this oil due to credit risk, legal risk, sanction risk, operational risk. they don't want to send boats in the black sea. even the chinese are not taking russian material, whether it's crude, metals, grains, whatever it might be. so yeah, the market is off today. but the reality is the physical market, which is already tight, is like getting even tighter and one last point i want to say. while there's a big range of potential near-term price outcomes the structural bullish story is reinforced the sanctions on capital flows, particularly the banks in russia, will make it difficult to invest further. reinforcing this underinvestment pieces >> even china is not taking delivery of russian commodities? >> yep as of this morning, the banks were not providing commodity trade finance to be able to load
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russian oil. even on chinese ships. i think there's not only the issue about financing. there's also the issue, do you really want to send a ship up into the black sea right now it's hard to find crews to do that >> let me ask you about demand what you're speaking to especially is the fact that demand that has outstripped supply if russia can't invest in increasing supply, that makes it worse. but what about those including the fed who are going to be looking at the global demand response here, and wondering if we see a slowdown? >> well, i like to point out a couple things that when we see a fed pivot in rate hikes, 12 months after a rate hike cycle begins, crude is always higher on average, 30% higher so if we were trading let's say 95 at the beginning of this rate hike cycle, it means we're trading 125 or 130 on average throughout historical rate hiking cycles. i want to emphasize it takes a
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long time to slow commodity demand so it's not something you start raking heights -- hiking rates and pivot. these are physical markets it takes time to slow the demand and start to turn that ship around >> i'm sure you're familiar with your cloeg ed morris's arguments at citi -- and maybe we could have the spike first, but that we'll see crude settle in toward the 60s per barrel by the end of the year because we'll see a supply come online we know plenty of people said we could have 20 to $30 of geo political preet premium in the prude right now. why aren't we headed in that direction? >> it's not about the supply and demand of the barrels of nil it's about the supply and demand of the capital used to produce the barrels of oil and the restrictions around invest look at where the share price of the companies are trading. they're not moving you're not attracting capital to the sector
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even the amount of capital in oil right now, they sell into the strength they don't buy into the strength so whether if it's looking at share prices, bonds, commodities themselves, the amount of capital in this space is at still extraordinarily low levels, particularly on a historic basis my response to that is show me the capital and i'll show you the oil. at this point, we don't have the capital. >> fascinating if you're right, high gasoline prices will be a headache for some time. jeff, thank you for your time. >> thank you for having me coming up, we'll speak with james devrides and as we head to break, here's a quick check on the markets dow up 719 just under 100 points off the highs. nasdaq trailing but up 99. we're back in a moment
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for the foster kids who need it most— at welcome back as russia's invasion of ukraine continues and russian troops move been miles of kyiv, we're getting reports putin may be willing to hold high level talks with ukraine i'm joined by a retired admiral, former supreme allied commander at nato and an cnbc analyst.
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kayla warned about russian disinformation it's hard to trust the reports out of the kremlin these days. what would you take of it? >> well, we see nothing but a web of lies coming out of moscow for months about this. including the big lie which was oh, we're not going to invade. we have no intention of invading we will never occupy look where that has gotten us. i think you take everything you hear from vladimir putin and his team, so to speak, with not a grain of salt, but an ocean of salt having said that, i think there are three reasons putin might be starting to think hm, negotiation might not be a terrible thing the ukrainians are fighting back and fighting fairly well ultimately, they may probably be defeated, but they are a tough bunch. they served under my command in afghanistan. we had ukrainian soldiers there on the ground. they're good fighters. number two, putin is seeing the
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effect of these sanctions. and you know, frankly, we haven't hit him with level ten sanctions. he's being hit right now with maybe level seven. he knows what level ten could look like. i think that's concerning. and number three, he is increasingly concerned about the buildup of nato forces on his border which is exactly what he doesn't want to happen so it's logical to me that they would be at least taking a pause and saying let's have a talk >> and yet, at the same time, russia's foreign ministry spokeswoman reportedly suggested that if sweden and finland were to think about joining nato, it would have, quote, serious military political repercussions. so if russia is already on the one hand calculating whether this move into ukraine was a good idea, why would they at the same time be issuing a warning like that to sweden and finland? >> they're trying to discourage sweden and finland from joining the alliance and let me tell you something. the swedish people and finland
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people have strong, capable professional militaries. they deployed to afghanistan under my command i saw them there in the ball cans on operations in libya. they are a-team militaries typically both sweden and finland have maintained positions of neutrality, but gosh, if i woke up in europe on monday watching missiles reign down on kyiv, i would certainly be thinking hmmm, i'd like get one of those nato membership cards. i think you're going to hear more sword rattling from putin believe me, he's not going to invade finland or sweden he knows better than to try that my guess is there will be real sentiment in those countries to join the alliance. another negative unintended consequence for putin. >> how do you think nato stands as of this week? does the alliance look stronger than ever? >> in my mind, it does and if your worse nightmare, if you're vladimir putin, is a
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strong unified nato pushing forces to your border, e encouraging top flight nations like sweden and finland to join, if that's your nightmare, you're in the middle of it. i don't think it's going to get better for putin i think that realization is starting to sink in for him. >> some say the u.s. look weaker than ever. look at afghanistan, and look at we've attacitly allowed in ukrae with the missiles reigning down. >> i think it was part of vladimir putin's cal yuls. i think he underestimated the degree to which this administration was able to pull the nato allies together a strong example is germany's decision to stop the opening of nord stream 2. i think shortly you're going to see the eu announce personal sanctions on vladimir putin and
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sergey love rov. the alliance i think to my eye, is holding together well much better than putin, perhaps thought it would >> absolutely. admiral, thanks again for your time we appreciate it we'll let you go still ahead, could accelerated peace talks put a half point rate hike on the table when the fed meets we'll tell you what the central bank officials are saying about the possibility. plus deere is on the pace for the second straight week of losses for the first time since september. who is spooking inve -- investors? we'll look at what couldhave a significant impact on the industrial giants. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit
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welcome back to the exchange we're just off session highs right now. up 775 on the dow. this rally has been gaining steam throughout the session almost 2% for the s&p. let's check on sectors for the week in health care and real estate they are the leaders with about 2.6% gains consumer discretionary is down about 3% as you can see. here are some of the individual mo movers the semi conductors are set to post a positive week amd and intel up about 5% since tuesday. amd 3% gain. cyber security seeing gains on concerns about how that electronic cyber warfare could break out from here. the ugh etf and palo alto
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networks up. china tech not doing great 5% lower for the week with alibaba and tencent losing about 10%. alibaba had the slowest revenue growth since going public, and now to frank with our cnbc news update >> always good to see you. here's what's happening. we are here. that's the message from the ukrainian president. he shot a short video showing him and a top government official in key v. he says they are staying to protect the independence of their country. the white house says president biden finished a 40-minute phone call with zelensky yn y about an hour ago the soccer finals moved to paris. formula one racing cancelled the russian grand prix, and a song contest, one of the largest contests in the world, said there will be no russian participants this year nato leaders are sending parts of the rapid response force to
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eastern europe to protect allies following the inkrags of ukraine. that's in addition to recent troops on the news, the cdc is expected to ease mask requirements. what it means for mask rules of states and companies that's tonight at 7:00 eastern that's the latest. >> that's a big story. frank, thank you up next, we're live from beijing. with china's response to russia's invasion of ukraine and why its support for russia may be limited look at the home building stocks all firmly in the green with dr horton leading the way today back in a moment
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vladimir putin and chinese president xi holding a phone call where putin allegedly said he's willing to hold high level talks with ukraine we are live in beijing with the latest from china. eunice >> reporter: thanks, kelly the chinese foreign ministry confirmed president putin told president xi he's willing to hold negotiations with ukraine
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the ministry added that president xi told put than he backed the russian leader resolving this issue through negotiations, and that he repeated china's long-held stance that the -- it's very important for one country to respect another country's sovereignty. so far china has been showing a lot of support for russia. essentially refraining from calling russia's attack on ukraine an invasion. at the same time, a recently china has been increasingly showing a certain level of discomfort with russia's move, because as president xi suggested, this move really seems to breach a core tenet of china's foreign policy, and that is noninterference in other states' sovereignty. >> and we wonder how this discomfort, china is feeling about russia's move, how it will impact its take on western sanctions. and we heard from goldman's jeff
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curry, china is not buying a lot of physical commodities from russia at the moment >> yeah. and it's interesting because just -- there's some reports tonight that some of the chinese state banks have stopped issuing u.s. dollar denominated letters of credit for purchases of russian commodities. and so that really indicates some of the limits that china will go for assistance up until now this signaling from china has been that it's willing to help russia kind of navigate through some of these western sanctions with announcements about new energy deals that were signed between president putin and president xi during the winter olympics. then yesterday an announcement of an expansion of the import of russian wheat. however, the analysts that i speak to say that even though china could do more to make things a little bit easier on russia, for example, on the currency, making it a bit more convertible at a speedier pace in order to allow for more
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non-u.s. dollar denominated trade. china at the end of the day is going to do what's best for china. it won't be making a lot of moves, say, for example, on the currency, with so many domestic issues that the chinese are worried about. >> fair enough thanks it's good to see you we appreciate you. my next guest says china is likely feeling conflicted with what's going on. we have senior fellow at the peterson council for economics how should we expect china's stance to evolve over the next couple days? >> thanks for having me. i think china was quite surprised putin actually ordered an invasion. i think they were very surprised, and i think their support for putin to date has been very lukewarm there have been several calls initiated by the rugs -- russians most recently by putin
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trying to get chinese more on his side, but i don't think they're getting anywhere china is not going to recogniz the two break away provinces that putin has now said are sovereign states and i think china will be very, very reluctant to try to help russia move around the sanctions that are being imposed by the west >> why >> in particular -- i think china's financial institutions are very, very deeply integrated in the global economy. china is the -- one of the largest trading economies in the world. it has massive imports and exports of very substantial flows of foreign direct investment multiple times those of russia. and their view would clearly be if they help the russians get around the sanctions, that the u.s. might sanction chinese financial institutions that would be very costly for
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china. much more costly than it's going to be for russia >> at the same time, are we to understand that china basically prizes its involvement in the western international economy over its desire to undermine said economy >> i think so. i think their self-interest is to maintain their ties with the global economy both in terms of trade and investment flows and they're not going to go out of their way to help putin maneuver around the financial sanctions. there will still be some trade, i suppose, but china's trade with russia is the -- russia is a rounding error as far as china is concerned >> are you saying we should almost look to china as an ally here in the international response >> well, i don't think they're going to be an ally. i don't think they're going to speak up strongly in support of the western sanctions.
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i don't think they'll join in certainly. what they will do is not try to undermine them so it's more what they don't do rather than what they do >> and who does that leave if the narrative going into this was that russia and china were leaning on each other to increase their sphere of influence at the expense of the existing international order, then what you're saying would suggest that's not taking place. did russia miscalculate? >> well, you know, i think in the long run china would like to have a larger role in the global order. putin certainly has the same objective, so there seems to be the basis for an alliance. but when you get down to the concrete situation of an invasion of a sovereign state by russia, this is fundamentally against china's most important foreign policy principle which is, you know, state sovereignty. and i think that is going to
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dominate i think the idea that they were going to have an alliance with russia was a little bit far-fetched. >> and finally, the widely -- widespread notion that china might use the disarray as an opportunity to advance on taiwan or might follow russia's lead by saying well, you know, then if this is what we're doing, it's time for us to make our long-awaited move. what do you think about those prospects? >> i think that's very unfounded speculation. you know, you could make the counterargument that the fare might be on china's part that the u.s. would declare that taiwan was a sovereign country, and increase its defense commitment to taiwan, and that's something the chinese want to avoid at all costs >> fascinating >> the chance of a chinese move on taiwan now is approximately zero >> wow nick, great to have you on
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today. thank you, sir >> thank you joining me from the peterso institute. still ahead, recession or no recession. a bunch of inflation and consumer focus data out this week what it tells us about the health of the economy, next. first, prices dropping today. but staples like wheat and soybeans still around multi-year highs on supply chain fears because of ukraine and beijing what it means for ag equipment names next and the dow hitting session highs. 118 exn we'll be right back. the new samsung galaxy s22 ultra meets verizon 5g ultra wideband. ultra-collaborative. ultra-secure. when you buy one, get up to $1,000 on another. verizon is going ultra, so your business can too.
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wheat falling today by 8%. supply concerns and russia's invasion of ukraine have pushed prices to around a 14-year high this week. my next guest says ag equipment stocks should be on the defense as the global market reacts. joining me now is the senior machinery analyst at jeffries. it's great to see you.
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and where does this leave a company like deere >> thanks for having me. obviously both russia and ukraine are key producers of wheat, and to some extent corn as well. this is going to make the global markets tighter, and obviously result in higher prices. that attracts investment the only way is more production. that requires more equipment >> yes this would seem to be wulish the stock is up at least up year to date. that's more than we can say for most how do you think the -- what's the price expectation, or i should say price target on the stock? >> yeah. i mean, we think this is a great long-term story. obviously this ukraine situation is one that is kind of near-term. but at the end of the day, there's a lot of big trends at deere's back, including technology we think the tightness in global markets for crops are going to be sort of something that's with
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us for quite a while due to climate change and so forth. we have a $450 price target on this but this is a long-term story that's just actually kind of helped by this ukraine situation, but has a lot more going for it than that >> yeah. deere is only about 344 today. that's nice up side. it's not the only name you like. caterpillar, cummins tell me about those. >> cat we have a hold on i can see a situation where tightness in oil and gas markets which you guys have reported on a ton, could drive some additional investment there. that would benefit caterpillar later cycle. they should get some benefit from the u.s. infrastructure bill as well although, deere will, too. that's about 25 % of their business important to remember that but that's one that could benefit. and we think cummins is actually interesting here we have a buy rating on that one. if we have issues with the availability of various battery type commodities, that could
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slow the adoption of battery ef kags in a lot of these engine markets. cummins has some great renewable fuel, fuel agnostic opportunities to sort of do decarbonation without batteries. >> that is a fascinating point with a lot of further implications to think through if you're right about batteries finally, are you saying these are more or less boom times for the u.s. farming industry right now? >> yeah. they really are. the only issue the farmers have is that their input costs are up a lot. and frankly, this ukraine situation doesn't help that. but the fact is with higher crop prices, you get higher farm incomes and they traditionally love to reinvest in the core business, so yeah, it is kind of boom time. >> it's a big turn around for a couple years ago and a welcome one. steven, thank you. we appreciate it >> thank you coming up, the ukraine invasion certainly complicating things for the fed they have market volatility, the
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threat of higher food and energy prices we'll talk to john taylor, the economist behind the taylor rule about why he says the fed is off track and needs to get moving.
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welcome back, erveg. market keeps claiming this afternoon. we're up about 850 points. 2.5% gains for the dow the best day for the dow since november of 2020 about 18 months ago. the s&p up about 2%. the nasdaq up 1.25%. a news alert on facebook let's get the latest it's a russia story. julia? >> that's right. meta platforms responding to russian authorities ordering facebook to stop what they call independent fact checking and labeling of content posted on facebook by four russi state-owned media organizations. saying in a tweet just posted, quote, we refused. as a result they announced they will be restricting the use of our services saying ordinary russians are using meta's apps to organize for action
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we want them to continue to make their voices heard, share what's happening and organize through facebook, have a instagram, whatsapp and messenger it's unclear bwhether there will be some accent of the apps metashares trading flat, and it comes as they are working to tamp down disinformation on their platforms. the u.s. consumer holding up reasonably well in january income was flattish in the wake of the child tax credit. real personal spending came in stronger than expected it beat inflation by 1.5%. durable goods orders nearly doubled estimates. another sign of strength how well is the u.s. economy doing and how quickly does the fed need to tighten? joining me is john taylor, senior fellow at the hoover institution. he's best known for the taylor rule a formula for setting interest rates. welcome. it's good to see you >> good to be here thank you.
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>> and i wanted to start by asking about the strength of the economy, because normally we get strong durable goods we go great, off to the races, but inflation makes that picture more murky >> it does the economy is recovering. that's good. but inflation is quite high. especially when the fed is, and i think needs to be adjustments. can't have roaring inflation again. >> we in some ways have the roaring '20s but roaring inflation with it. how roaring would you describe it is it the end of the world if inflation is 3% next week? >> it is not i think the fed needs to begin to make adjustments. they have begun to talk about it people are guessing how many rate moves this year you mentioned the taylor rule. indicating to make adjustments and people are looking at that and making guesses how much the
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fed will move. i think the concerns the fed that the economy will slow and at this point the economy will do better with a reasonable interest rate. >> meaning higher. you think they should do half a point next mono matter what is going on with russia and you kran >> i think so. they are behind with what's happened in crew yan the issues are -- need to be watched carefully but behind by almost any calculation adjustments in this year starting perhaps with the 50 basis points but the main thing is gradual announced plan as much as possible and make the economy adjust better. better to have a more reasonable interest rate. eventually 2 or 3%. >> how far behind are they >> i think they're quite behind.
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by the end of the year 3% would be a reasonable thing and the normal rate is about 4 so i don't know if they get to that rate they have to have inflation to come down. i think you can point to the rise in inflation due to the policy people are saying other things but policy is easy if you like and the reason inflation picked up so a gradual return to normal will reduce inflation hopefully without any cost to the economy. a benefit to the economy. >> yeah. i was going to ask you what the driver is. 5 trillion on the fed balance sheet expansion? throw in the 5 trillion on the fiscal side to fight the pandemic and shrink the balance sheet as quickly as they raise rates? >> stopping the increase in the balance sheet but i think eventually they'll need to raise the limit. reduce the balance sheet as theyen crease interest rate and the most important thing is to get on with the interest rate
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rise the markets expect that more and more the balance sheet should be part of that because it's basically been part of the expang but the main thing is interest rate. >> again, just to explain why you think that when we talk about the issue many say we are already dealing with high prices and low consumer sentiment and wouldn't the fed raising interest rates make the american consumer feel worse? >> i think it would make it feel better what's unusual is the economy is an unusual time. we haven't had this situation before a more normal situation is where the rate is higher and that move is important for a continuing this strong economy. we want the economy to get stronger, not weaker this is the way to do it. >> well said thank you.
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good to see you. >> thank you. >> from the hoover institution. block former square is booming. seeing strength in the consumer. we have the latest next with the shares up almost 25% ger left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq
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welcome back quick check on markets as this strong rally continues this afternoon. about 50 points off the highs. up 782 on the dow. 83 on the s&p. 140 on nasdaq. check out block formerly square. the company issued an upbeat outlook. kate is here with why they're optimistic. >> part is low expectations. block's report and outlook better than analysts feared based on what paypalisade a couple weeks ago
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cash app was a big reason for optimism and block did see slower growth in january and cfo highlighted strong inflows in the first weeks of february and expects more improvement in march. wall street had feared the effect of government stimulus checks ending and despite that cash app saw strong spending volume and paycheck deposits the cfo calling a key barometer of primary banking on the app and 44 million users higher spending on the cash card boosted shares of the cash issuer for block and no mention of inflation or the end of stimulus not having an effect either. a stock difference from paypal the checks ending were the reasons for the lower guidance and stock higher today up 4%
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today. coinbase lower after the earnings last night. beat estimates cited a slump in crypto prices also seen robinhood trading lower today. visa, amex and mastercard trading higher amex is a big winner here. >> are we to infer that cash app is eating venmo's lunch? >> it is interesting it was a big surprise based on the demographic. venmo is seen as a coastal millennial that uses venmo cash app is used based on data in lower income demographics and that was a big surprise for analysts saying they expect things like inflation and the end of stimulus checks to hit
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block further so i think the expectations in that sense lower for cash app and seem to have a different slice of the market at this point definitely competing and cash app is growing it seems like and adding more and more profitable than venmo for paypal. >> surprising but also not thank you. that does it for "the exchange." "power lunch" starts right now ♪ thank you. welcome to "power lunch. here's what's ahead to round up the busy week. is this rebound for real stocks today building on the turn around that began 24 hours ago. the dow having the best day in more than a year now the markets are thinking maybe the worst is over between ukraine and russia is that true one of the big positive news events


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