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tv   Power Lunch  CNBC  July 5, 2017 1:00pm-3:01pm EDT

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judge. i'll be surprised with more moves. >> we have 4.3% unemployment and close to full employment. >> i'm almost looking at the relationship of rates and trades that you all - >> you need wages. >> all right, guys good stuff. >> thank you. >> see you back tomorrow all of you, as well. "power" starts now. north korea ramping up president trump is angry and will china finally step up and help solve the korean crisis your money shaking it off. are earnings strong enough to shrug off increased tension with pyongyang? holy breakdown, a part of the retail world that is absolutely blowing a gasket today. so turn the key, crank it up, "power lunch" starts right now and welcome to "power lunch. the major averages cutting the losses trying to stage a turn around here. nasdaq moving higher trying to
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avoid a four-day losing streak higher by more than half a percent. energy losing. chesapeake, range resources leading the declines and big between 4% and 6% because crude oil is sinking right now prices lower for the first time in nine sessions by a big decline look at wti. off by more than a buck of 4% to $45.40 tyler? >> thank you welcome, everybody here's what else is happening right now. big deal in the payment business vantik making a $10 billion offer for the uk's world pay group. jpmorgan at an early stage of considering an offer for world pay but now doesn't plan to make a move and move over intel. samsung now on track to become the largest chipmaker by revenue. walmart getting the green light for acquisition of the men's retailer bonabos. beginning with developing
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news of north korea's new nuclear threat kayla in washington with the latest this hour on that missile launch on the fourth of july kayla? >> reporter: tyler, there's new developments of the u.s. knows about the launch captain jeff davis, a pentagon spokesperson telling reporters the launch could have absolutely posed a threat to commercial air and sea traffic and didn't pose a threat to the u.s. or its allies both the missile and its launch point were new to the u.s. and expressing confidence in the defense systems and calling a aggressive research program, the u.s. has not yet seen an ability for north korea to carry a nuclear warhead on a missile emergency security council meeting to be held in a few hours. president trump stressing to egypt's president in a phone call all countries must abide by security council measures regarding north korea. commanders said they're patient
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for now. u.s. general brocks said, quote, we are able to change the choice when so ordered by the national leaders and a grave mistake to believe anything to the contrary president trump will meet asia pacific allies among others including russian president vladimir putin at the g20 meeting later this week. economic adviser gary cohn said a primary meeting to jump start the world economyand ensure a playing field for all. the north korea situation, though, could overshadow many of the conversations, particularly michelle, those with china. >> yeah. absolutely a lot on the international docket, especially coming the north korea and china. thank you, kayla regardless of who is in the white house, u.s. diplomats long insisted the country with the most power to change north korea is china and has tle trremendou leverage and almost all of north korea's oil comes from china chi in's first quarter exports
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to north korea, they're up 54% over the last year so china has plenty of direct leverage over north korea but also has indirect leverage this is an annual report from the u.n. security council which is a team of investigators that do nothing but investigate compliance with u.n. sanctions on north korea this report is the most recent, out in february showing that chinese companies provide the financial to make the weapons program possible it is 326 pages and the words china or chinese appear 312 times, more than any other country. it shows more than half a dozen chinese front companies to transfer money, provide financing for foreign investors or export arms just some examples of the many the international bank of martial arts in pyongyang serving foreign customers. investigators found guidelines of chinese and english and this
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is the plaque on the door written in korean, chinese and english. another company china gold exchange trade opened a bank in north korea in 2013 and a chinese official gave a speech at the ribbon cutting ceremony explaining that the bank was there expressly to provide financial support for trade with north korea and the list goes on and on china watchers say the reason they don't do more, because what china fears more than a nuclearized korea is a unified peninsula and allies with the u.s. right on their border so given the choice, they tolerate north korea one of those china watchers is fred kemp. president trump heads to europe for the g20 summit and meeting with president vladimir putin. he joins us from poland because he is there for the big meeting. good to have you here on the phone, sir. >> great to be with you. >> so, china has said in the past that if north korea were to
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do something even more, like a nuclear weapon, like an intercontinental ballistic missile, they might do more than what they have already so is that what we're waiting for is for china to step up and respond to this? >> well, look. i'll get to what's going on in poland tomorrow next two days but it really links up with what you're talking about because people here are asking which donald trump is going to show up this week. is it going to be the one that we listens to the mainstream advisers or, is it the one who's the insurgent and disrupter? on the question of china, he is really managed his china relationship much better than one would have thought during the campaign and it's much now the real test. can he cash in on the relationship that he's built with president xi xinping and coax china into an active
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response to korea? because the military people telling him, you don't really have a good alternative here you hit north korea and hundreds of thousands of south korean dead in seoul, south korea you don't really have a good military option so your option is putting pressure on the chinese to actually put more pressure on the north koreans. >> fred? >> watching this week whether he can pull that off. >> fred, does anything change with the strategy given that this missile can theoretically reach the united states via alaska they have had the capability to effectively throw nuclear bombs on 40 million people, tokyo, and 10 million people, seoul, south korea. does our strategy change merely because of the distance this missile can travel >> i don't think that's just yet because they have shown they can travel further and they can barely reach alaska if they're lucky. but they haven't shown they can mount a warhead on it and that it's going to work effectively
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so i think one has time there. what it does is put more pressure on trump to put more pressure on china. there's a need to show some movement in that direction but i actually think you're going to see some of the pressure on him from that go away in the next couple of days and have a lot more emphasis on three things here. number one, the speech here tomorrow in poland and the white house calling the most important point policy speech of the presidency number two, bilateral meeting with russia's vladimir putin and then the g20 meeting and you are seeing a lot of international tests for president trump where our allies and friends are still questioning do we have an overall strategy for our global approach. >> i thought it was interesting, fred, that over the past weekend president xi in moscow meeting with mr. putin and i would like your thoughts on what you suspect they were talking about,
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and how that complicates the calculus but i would like you to dive deeper on where you began which is the idea that president trump managed the relations well with china so far and i guess my questions would be, what does he have to show for that? number one and number two, how do you filter into that assessment his tweet from this morning that was sort of dismissive towards what the chinese had done with respect to north korea i almost said north carolina with respect to north korea. >> no. it was dismissive. at the same time, you know, he didn't lash out in the way he has in the past in his campaign. he said perhaps china will put a heavy move on north korea and end this nonsense once and for all. you know, that's not -- he's been very careful not to go ad
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hominum against president xi xinping. he talked about that tariffs on china at the moment of his presidency he talked about branding them as a currency manipulator he was convinced to get more out of them over time building a relationship, not humiliating the chinese leader in the year for the bid party congress in the fall so he hasn't got quite what he wants yet. you're starting to see more of a confrontation of china, with weapons being provided to taiwan and other moves. so i think this will be a test of the relationship. >> all right. >> you also have a test -- you also have a test here which is he had a very bad first trip to europe where he questioned the whole collective defense of nato so people here are going to be waiting to see which president comes here is it going to be the president that calls europe on climate and
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trade issues and wants a confrontation or will he come here as the president to lead the alliance in terms of nato defense and in terms of more traditional role >> all right fred, thank you very much. it's a consequential week. we appreciate your time. fred kempe with the atlantic council. is markets seem as they have for so many months shrugging off fears of north korea and what point should investors be worried? can anything, anything derail this rally bruce biddles for baird and david speca with guide stone capital management david, let me begin by asking you if you think this is the week gee owe politics start to matter. >> i don't think it's this week, tyler. the main reason is because of global central bank policy for the past several years, has
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created a situation where there's no penalty for being wrong in the stock market. we saw that after brexit, after the trump/comey issue. investors have no fear of being wrong and risks gee politics or terrorism or slow growth or lack of policy approval, none causing angst for investors because they don't fear being wrong with the liquidity. >> go ahead. >> david, i was going to say the liquidity is supposedly going away, isn't it isn't that the big risk. >> absolutely it is. that's what's going to start to create volatility. seeing the fed tapering, ecb is started to talk about tapering, the bank of england. the fed's raising rates. >> but what is the risk that the market just falls or is the risk we have never undone such a massive policy experiment like this one so the probables could be systemic and frightening or just simply no more big increases in the stock market? >> the uncertainty, michelle,
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surrounding never having gone through this is going to creat volatility qe and that policy approval or all the central bank monetary policy lifted risk assets. did nothing for economic growth and has to impact on the way out. no way around it we don't have a strong enough economy at this point to offset the negative impact of declining liquidity. >> bruce, jump in here you know, we began with a sort of what in the world could derail what's been a rising market for certainly the first six months of this year? what in the world could do it? >> well, it certainty doesn't appear north korea will have an influence. if there's a lot of anxiety in the markets, it tip think shows up first in the gold market and then also the treasury market and both of those areas have been in decline the past two weeks. so tells me there's not a lot of concern about the korean situation. as far as the markets going forward in the second half of
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the year, certainly there's some head winds we are entering a seasonally weak period in august and september. we haven't had a 5% correction in almost 250 trading days the last time that happened was 20 years ago so, you're fighting the odds we might see a correction in the third quarter but i don't think it's going to be one of significance the fed, of course, has done a great job here in our opinion in preparing the markets for normalization. and i think the fed is going to continue to go at a very slow pace and unless inflation really picks up in europe, i think the tapering there by the central bank will also be a measured pace so i don't think there's a major risk there at this time either >> all right, gentlemen. thank you. we appreciate your analysis there. bruce, david, see you again soon. all right. the big question for your money is, at what point do earnings stop mattering enough to send
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the stock market down on the stuff we just talked about bob pisani is live at the new york stock exchange with more. that has to be the question everybody's asking at what point do the solid fundamentals stop mattering because of we have north korea firing missiles? >> not yet i think optimism on global growth and global earn sgs the primary driver of the market now and probably will be into the near future. let's show you we have had a very good start to the second quarter earnings oracle, nike, darden, great numbers. 5%, 23 companies in the s&p have reported but the earnings are up 12% and out of the earnings recession. out of it for three, going on four quarters now. the revenues have been really strong here so you can't just say cost cutting, buy backs. revenue really picked up from these companies. 90% exceeded their targets that's way above estimates we'll wait for them but so far in the second quarter we're 2%
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lower than the start of the quarter in terms of earnings estimates. normally analysts are optimistic and lower in the quarter to 4% lower. they're not doing that much less cutting of estimates and that's a sign the companies are comfortable with the current numbers. third quarter, 43% are seeing an increase in estimates by analysts there doesn't seem to be a lot of anxiety about the numbers and not aggressively cutting the estimates. global growth numbers going up citi is talking about 3.1% global growth in 2017. 3.3% in 2018 and their strategists talked about healthy eps growth in 2017 the first synchronized upturn since 2010 in all of the major markets in terms of earnings per share so, brian, that's why i'm moderately optimistic on earnings season. the numbers for the third
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quarter looking pretty good right now. >> these are scary serious situations happening in the peninsula and not as if america says, you know what? let's not buy that house or that car, let's not go on vacation firing missiles in north korea that's not happening and so earnings should be solid is what you're saying. >> most important determinant of stock prices is future earnings estimates out 12 months. single most important factor and those numbers are improving. >> bob pisani, as always, see you soon, thank you. >> okay. on deck, one sector of the market having a total breakdown here. plus, we have talked a lot about the so-called death of the mall but is it really as bad as some think we actually found some bright spots. of course, always working to help you make money and grow your investments coming up, favorite picks of a top analyst all ahead. (baby crying)
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at least 47,000 vehicles and that's correct they delivered 47,100 but looking at the first quarter, this is what concerns the folks at goldman sachs 22,100 vehicles delivered is 12,000 model x, 10,000 model s, 10,000 model x and goldman sachs looked at the numbers saying, you know what? this is roughly in line with the last four quarters as a result, goldman sachs today cutting the price target for tesla down to $180 a share this is one of the main reasons why the stock is under pressure all day long it also expects lower margins for tesla in the second half take a look at what's going on in the second half for tesla and the model 3 gets attention first deliveries, july 28th. later this month and production ramping upstarting with a few this month and then up to 20,000 as a production rate for the month of december. tesla's annual deliveries this is what so many people focus on. last year, they delivered just
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over 76,000 vehicles for the first half of this year, delivered 47,000 have yet to give full-year delivery guidance because they don't know exactly what they expect to deliver in terms of the model 3. but then, remember, in 2018, they say that they will be building a half million vehicles and so when you look at 76,000, up to a half million, a lot of folks are saying, okay, how quickly can they ramp that up? obviously the model 3 is a big part of that as i mentioned, first deliveries are later this month. >> all right, phil sticking with electric vehicles, now volvo announcing that it - >> right. >> -- planning to go all electric over two years. i assume that means just their automobile business, not their truck business which is separately owned >> right two separate companies. >> do i have it right, number one? and isn't that a huge risk >> well, remember, we are talking about auto company owned by a chinese automaker and
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talking about that, remember what their focused on. two biggest markets, western europe which is their largest market and northern europe in particular with huge demand for electric vehicles and china, the largest market for electric vehicles and easily outpacing the growth, the rest of the world is seeing right now. so from their perspective, making sure all models have an electric motor starting in 2018 makes senl a limited portfolio. >> would they have a backup gas motor? >> hybrid. >> no, no. >> it's not all electric >> not fake news but there's an added element to say we are all electric or hybrid because hybrid can mean a lot of things. >> no models strictly internal combustion engines starting in 2019 right now you can say, well, i want a gas-powered ones and then they said fazing out diesel. yes. >> tesla doesn't have any gas
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motor in it. >> correct, correct. >> the volt doesn't, for example. am i correct on that the chevy volt. >> the volt -- yeah. the gas extended - >> as well >> yeah. the gas extended range, correct. >> after a certain amount of time the gas engine kicks in so you don't have range anxiety. >> right. >> envy? >> i have that at the driving range. >> you are right the headline all electric -- >> suggested to me becoming tesla. >> exactly. >> all electric or a hybrid and that's a big deal. it's a big deal. >> phil, thank you very much >> you bet. when a company misses sales targets, it is usually a bad thing. when's not usual for a company to miss sales targets by a couple of percent and have its stock fall 20% that's what's happening with o'reilly auto. back to the 1993 ipo it is dragging down the entire auto parts sector. joining us on the phone is
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analyst at oppenheimer brian, what happened >> well, i think you led it correctly is that early this morning o'reilly preannounced negatively the second quarter results and indicated that comp store sales in q2 track at 1.7%. the market had been looking for something 3% to 4% >> what happened >> does that -- yeah why? why aren't they selling more parts? >> well, it's no one really knows. >> somebody needs to know! i hope the management knows. >> i think even the company -- i have spoken recently with o'reilly management and spent sometime with managers of auto zone and i think it is not clear out there. we have done a lot of work in the space. i think basically it's a confluence of factors. the warm winters economic strains for lower income consumers a lack of vehicles in that sweet spot seven to nine years so it's a factors seem to be coming together right now and weighing
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upon sales growth within the sector. >> explains all go down and not o'reilly losing share to a company in the business because they're being more competitive on pricing but a general decline in sales for the entire sector >> that's fair and we basically have seen o'reilly the most recent data point to point to sales weakness we have seen weakness out of auto zone and some service guys. >> some stocks are getting hammered advanced auto parts 12%. genuine parts 4.5% s. there a short-term trade to be had in any of these or a bigger sign of things to come something akin to what we are worried about with amazon and retail >> well, look. great question and the way i think about it right now, are the moves overdone absolutely you know from a valuation per suspective, the healthy companies at valuations we have not seen in long time.
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but the problem with that is in this market where there's a big concern on retail and anything physical retail i don't -- i think me and other people don't foresee an all clear type signal. >> how much of this is unamazon-ible? i get wit a commodity item but you need to go in and may need to talk to somebody, specific to the car, big, heavy. not effective as a ship -- do they have a moat of sort >> i think they do for things you said there, i mean - >> not buying a car battery on amazon i hope. >> okay. a battery is a perfect example for shipping would be almost impossible also a lot of times, seeing buying a battery because there are other battery died and need it almost immediately. and o'reilly and others take it away for you so yeah. i think, look, there's a significant moat around this auto parts business that defends them against amazon but when's happening is in terms of
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sentiment within retail stocks is no one wants to discount the power of amazon anymore. even the categories like auto parts we have seen them in home improvement. >> do you see a world in which -- o'reilly, advance, auto zone, genuine, four of them there. are they going to merge, some of them >> you know, it's a good question because i don't foresee that happening near term but at some point, you know, again, if these -- if the sales weakness, if it's clearer that's more structural than cyclical, usually we see big players merge. i don't foresee that happening in the nearer term, though. >> okay. thank you. >> thank you. all right. illinois finally getting a budget and it's being called a suicide pact why? we explain straight ahead. plus, one of the world's greatest mysteries solved. new photo of amelia earhart surfaced att ves xt
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hi, everybody. i'm sue herera secretary of state rex tillerson will make a first official visit to ukraine following the g20 summit he is expected to meet with the country's president and reaffirm the united states commitment to ukraine's sovereignty. more than a dozen horses killed when the barn in a southwest chicago suburb caught fire earlier this morning. two people were injured trying to rescue the animals. 30 horses were believed to be inside when that blaze began. new york city firefighters have rescued four people stuck in an elevator 200 feet below the ground at a utility plant. they're being treated for nonlife threatening injuries. one of the world's greatest mysteries may have been solved experts say a newly discovered photo in the national archives may show that amelia earhart
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survived a crash landing 80 years ago in the marshal islanding. there's a high probability that earhart and noonan are the caucasians in that photo and i know you goois will be talking more about that in a little bit that's the news update this hour brian, back to you. >> that is just a fantastic story. >> the best story of the day. >> it really is. yeah a great story. let's hope it is her and the mystery deepens. thank you. >> you got it. all right. time now for the daily bond report with rick santelli. hit the numbers and then chat about illinois you finally got a budget and one called a quote suicide pact in an op-ed. >> oh, how am i supposed to follow that? but we will. look at an intraday of tens, down two basis points from 235 but yields are hugging up. let's make the following charts all june 1st, shall we 20-year, we zoomed up after last monday at the 13 on the 26 dollar index, this is an
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interesting chart. you notice right side? it's ticking up a little bit i don't think we're guns hot on dollar index but the next is guns start we did reach up to 114.5 it's turned down a bit pay attention to that 114 area on a closing basis now let's get to illinois, sully. what do you think? >> well, i mean, listen. the one positive is that you got the budget done. okay they got it done however, it's a 32% individual income tax hike, it is a nearly 2% jump in the corporate income tax and above michigan state competing for jobs you are there. you are there. what are people saying about that they raised taxes in 2011 and didn't help. we're still here. >> no. and whether it's temporary or permanent became a sticking point. listen people live here roll their eyes. because, yes it is something to get the first budgets since 2015 i understand that. in the end, a $5 billion tax
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hike for 36 billion in spending when the governor's aptly pointed out for three decades, illinois spends more than it makes. this is a poster child for the notion that santa claus is welcome on the 24th of december but to welcome him every november by voting in politicians that promise to spend more than they take in never ends well. they couldn't get a quorum okay supposed to vote today i think i heard 59 of 118 showed up now why they didn't show up i'm not sure either playing with fireworks or they couldn't get enough votes or maybe they just didn't want to show their face in public but no matter how it turns out, this is certainly not the end of illinois/chicago's financial woes >> yeah. reminds me of the greece of the united states, rick. new mortgage rules this month and there's a catch. we'll tell you what the catch is next plus, the growing list of retailers in distress and new report predicting the doom of u.s. malls we have a guest saying, not so
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fast that's straight ahead.
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welcome back, everybody. take a look at some of today's movers, energy stocks under pressure as the oil rally stalls hesse, chesapeake, range resources, transocean, biggest losers there 5% or so or more chip makers led by amd, nvidia and blue apron falling hard, trading below last week's ipo price. new mortgage rules going
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into effect this month to make it easier to get a mortgage. however, they, of course, come with a catch diana is live in washington with more diana? >> it's clearly a response to the cry that credit today is just too tight but here we go again with the risk. two major changes in underwriting go into effect this month. first, the credit rating agencies are dropping tax leans and civil judgments from consumers profiles if they're not fully documented. that's because one in five consumers have mistakes on their credit reports so of about 220 million americans with a credit profile, about 7% have these credit hits. and without them, their credit scores could go up as much as 20 points according to a study. second, fannie mae and freddie mac are increasing the debt to income limit from 45% of your pretax income spent on debt to 50%. and that's due to today's high level of student loan debt >> in this case, we're not changing the other underwriting
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criteria and we believe that the additional increment of risk for making that change is very small. and given how pristine credit has been post crisis we don't feel like that that's an unreasonable risk to take. >> some argue it may loosen in some spots but tighten in other others lots more online back to you guys. >> all right thank you very much. you know this. it's been a good year for the stock market but did you know it's a better year for investors and home builders? a group of those stocks up 28% this year. kb home big out west up nearly 50% year to date because we know you can never lose money taking a profit, is it time to take some money and run away megan mcgrath and joins us now we always talk about when's it time to buy and never talk about when's it time to sell should we sell some names? >> well, that depends.
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i think investors should have housing exposure the fundamentals are still great. new home sales are growing, employment is growing. interest rates aren't that high and haven't had that much of an impact on sales. if you have an overweight exposure to housing, maybe pull back and we would say an equal weight to housing like home builders and building products stocks is a right place to be. >> huge runs so far this year. what do you expect why, you know, defend why somebody should keep money there. >> i think we are still going to see home sales growth. we do a proprietary survey and things improved april to may and came through the spring really strongly and earnings reports in a couple of weeks and probably hold on to them into earnings especially maybe those that underperformed a little bit so we think things are strong through the second quarter and as long as higher interest rates don't impact the level of growth, this's what you need to
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look at. it's the pace of growth. can it accelerate ordecelerate as long as we don't see a big deceleration in home sales, we should see the stocks continue to move. >> which names are the sweet spot >> yeah. well our favorite names are toll brothers and cal atlantic. in line performers so fall and toll is luxury and hearing about the millennial buyer coming in to the market and hearing about a wealthier buyer. there's a difference of first-time buyer and lower entry level buyer and we still think there's a lot of room for buyer buying for the first time in the 30s to come in and buy a mid level to high level luxury home. >> cal atlantic, a regional play >> yeah. well, we think they have a great exposure in all the top hot housing markets in the u.s the company has slowed growth a little bit to concentrate on gross margin and the market never likes very much. they want to see high volume growth so they have to get that
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volume growth growing again and there's a lot of room for multiple expansion. >> is it interest rate sensitive? we'll talk more about the fed. do the stocks go down? >> not always. so again, it's the pace of new home sales so we have done a lot of work on interest rates because obviously there's been a lot of attention paid to the fed. h historically speaking, you have to be very mindful at a 50 to 75 basis point year over year move in interest rates and seen home sales start to decelerate a lot. we're not exactly sure what will happen but that's when we start to see them carefully. >> thank you. >> sure. my pleasure. well, it is no secret retail is struggling, the sector shed 6,000 jobs in may and a recent report predicts 25% of u.s. shopping malls will close in the next five years. many blame amazon and the growth in online shopping, all sounds alarming but a senior economist at
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wellsfargo says mall armageddon may be overblown good to have you with us. >> thank you. >> what are you seeing that others aren't? >> if you look in the details of the store closings, most of them occurring in tertiary markets and it's not surprising because when you look at the trend in the 2003 through 2007 period, there was an increase in retail construction and largely a lot of that population growth into the tertiary markets was as a result of housing and the trend to get in the sub usuals and to get out in that outer suburbs. so retailers followed population growth and seeing most of the closings. >> when you say a tertiary market, you mean what exactly? and so if i translate what you just said, builders overbuilt in markets that ultimately didn't
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grow as fast as they thought they would, or that experienced job loss and population decline where they expected it to agree. >> yeah. absolutely so when i talk about tertiary markets, it's the difference between a major market which would be your boston, your new york a secondary market would be your austin, your charlotte a tertiary market would be somewhere out in the suburbs that's a much smaller environment and population growth is much slower. we have seen the reversal of not only the construction boom, but we have seen the reversal of population growth from those areas back into the central business district. >> which companies are most exposed in the markets that you are talking about? >> so, i'm not a company analyst. i'm a macro economist and from a macro standpoint, when you look at those particular companies, that have been focused on middle
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income, like your k mart, like your jcpenney, where many of those consumers relate to the expansion, that is where we're also seeing a lot of the fallout occur. >> so the big market, big glam malls, the south coast plazas in southern california, short hills, tyson corners in northern virginia, they're going to be all right and the owners where the problems are going to be is in those secondary and third tier markets where the economic conditions aren't so good >> that's right. macro economics is playing a big role in this particular recovery, more affluent households had the advantage of financial asset appreciation through the stock market, andless through home prices and so those particular malls in those areas, those so-called class "a" property spaces for
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malls, those particular malls are doing much better. >> okay. thank you very much. >> thank you >> we appreciate it. last week he went on a rant to reporters about his trial today, the judge telling him, stop doing that! the lastte in the martin shkreli case next. don't you mean dad kind of ruined our hawaii fund? i thud go to the thothpital. there goes the airfair. i don't think health insurance will cover all... of that. buth my fathe! without that cash from - aflac! - we might have to choose between hawaii or your face. hawaii! what? haha...hawaii! you might have less coverage than you think. visit aflac.com and keep your lifestyle healthy. aflac!
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welcome back another day, another twist in the trial of martin shkreli. a judge ordering him stop talking. meg tirrell is live in brooklyn outside the courthouse meg? >> reporter: hey, michelle over the long holiday week, the trial wasn't in session and we did get news monday evening. the prosecutors asking for a gag order on the defendant martin shkreli as well as all counsel in this case this morning, the judge here ruled on that order essentially not agreeing to the entire gag order but getting the defense attorney for mr. shkreli to agree to not make comments about
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the trial in or around the courthouse and follows friday shkreli wandered into a room full of reporters in a recess from the trial and talked about the case and then afterwards as he spoke with reporters including me outside the courthouse the judge telling shkreli's attorney, quote, all your client has to do is stop talking in the courthouse and around the perimeter of the courthouse and he responded there will be no more commenting by mr. shkreli this morning we got news from the prosecutor saying that several plea offers had been on the table leading up to the start of the trial those mr. shkreli refused to consider according to the defense attorney, responding, quote, i would never plead guilty to something i did not do we are going to trial. now, as part of his request on monday night, the prosecutors also asked for him to stop commenting on the trial in social media citing a handle on twitter blm bro that it said it appeared shkreli tweeting under about the case even though he had been banned from twitter earlier this year that account as of this morning, guys, has been suspended we'll bring you anything else
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from the courthouse here michelle, back to you. >> martin shkreli may not speak at the courthouse but go online, set up a camera and invite people to watch. could he do those kind of things or near the courthouse where hee where he has to stop talking >> reporter: the order was specifically in and around the courthouse the judge specifically was concerned that jurors could be wandering around the courthouse, just coming out here in the park for lunch and could hear something that mr. shkreli was saying the prosecutors also asked for semi-sequestration for the jury the judge didn't agree to that >> how much longer is this case likely to go we're in, what, week two of six predicted?
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>> reporter: that's correct. the sore reason it took so long to pick a jury is because so many people had heard of his work so they are especially concerned there could be any corruption of the jury that it took so long to put together >> what is the mood there? he's had a comedic element in a way to it because of his personality. is any of that reflected in the courtroom at all or is it business as usual >> reporter: today has been pretty straightforward they're really getting into the nitty-gritty details in terms of investors in the hedge fund, so it's been the antics outside the courtroom, including on friday when he wandered into a room of reporters that have been generating the headlines is the trial has been moving along. >> meg, thank you.
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the fourth big wall street calls you need to hear about today, your daily dose of "street talk" is next. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade
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for years, centurylink has been promising fast internet to small businesses. but for many businesses, it's out of reach.
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why promise something you can't deliver? comcast business is different. ♪ ♪ we deliver super-fast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. we do business where you do business. ♪ ♪ as you see, four of the 11 sectors are led higher by technology, health care, financials and industrials on the other side of the coin, telecom is down, so is real estate and energy. biotech is on the move let's get to seemo mody for a market flash. >> biotech stocks are extending last month's gains with an etf ticker ibb, up more than 1%.
quote
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it's the heavyweights like celgene, biogen and rejenneren all up about 1% or mo on the day. the etf gained about 10% last month for the best month since july of last year, this of course will be a sector to watch as we head into the second half of the trading year. michelle, we're seeing more biotech ipos finally after a big drought from that sector >> yeah, watershed moment for them time for "street talk. first stock is buffalo wild wings. stevens downgrading the stock, citing the uncertainty about future leadership. analyst says buffalo wild wings is one of our favorite casual dining names, however they lowered the pry target from 145 to 195, so a far less bigger move than what they're expecting. >> it's been a tough year for buffalo wild wings investors, stock's down 20%, even with the
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so-called activist inside there. stock number two, pandora. morgan stanley restarting coverage with an overweight rating they say the recent investment by sirrie/xm removes what they call an overhang despite what the analyst calls an unclear impact on the strategy giving the three board seats that sirius will get. the analyst does think, though, that the core radio side will support his $12 price target, which is 35% up side third stock is oracle. key bank upgrading to overweight analyst says a stock has been an underperformer for two years, but the cloud business, big boost for the stock, even more so going forward the first price target is now $61, a 24% up side from here we waited for years for oracle to cash in on the cloud, and
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book, you see the reaction. >> amazing that nobody saw it coming oracle [ laughter ] finally stock number 4, the small-cap list on chemours, upgraded to a buy by citi bank shares are down for a couple reasons. they say there is excellent regulation for flier ochemicals, that's their word, in the future basically changing the kind of coolant in an air conditioner because of the environmental regulation. >> regulation growth. >> should benefit their switching off the hide roar flier ocarbons and the titanium them a paint ingredient is improving. oracle all right. gotcha >> i see it. folks, defense stocks surging as tensions with north korea heat
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up what affectly are our options when it comes to defense we'll take a closer look ahead, but first the minutes from the latest meeting, investors looking for clues on when the fed will start unwinding the balance sheet. will they get them in these minutes. not in minutes, but in the 0 seconds.
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breaking news to start 9 hour let's find out what the fed thinking about the american economy. before we do that, let's check out how the markets, see if there's any reaction to this
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probably the best glimpse into what all the fed members are thinking the most important metric, down a couple ticks, so fed minutes, hampton pearson, d.c. now. >> the mid june fed meeting show, quote lots of discussion and dern about surprisingly low recent inflation ratings, most participants expect it to remain target near term, get closer to the target as labor markets tighten. it's transitory overall is the long view, but some participants think progress towards inflation might be slowed. several participants expressing concerns about undershooting unemployment a substantial miss, requiring more rapid rate hikes,
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but there is general support for the policy goods forward of gradual rate hikes, but again inflation remains the biggest x factor going forward on that decision on announcing plan to reduce the size of the balance sheet, basically two camps, as far as the discussion there. several people preferred announcing the start of the process in a couple months, others said it would be better to wait until later in the year. also looking ahead at government and fiscal policy, fed participants are noting the fun certainty regarding the enactment, timing and nature of changes in fiscal and government policies, and concerns both to the up side and down side about what those changes might all mean back to. >> hasp ton, thanks very much. jim mcdonald, chief investment strategist with northern trust asset management, which now that is a trillion of money under management jim car ron, on portfolio manager, global fixed income
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welcome to both of you glad you're hear let me start with you. what did you hear in hampton's quick summary ofs on -- excuse me -- jim mcdonald i got lots of jims i could go to the gym here jim mcdonald, what did you hear in the report that stood out to you. >> so, tyler, i was reassured to hear the assessment of the inflation picture. i would not have wanted to hearing them solely dismiss the recent numbers as soft with complete confidence we would see a rebound. inflation has been stubbornly low for a very long period of time, and the fed risks bosch more than they need to i think the market is ready for them to start to reduce the balance sheet. whether it's september or december, i think the market's -- >> do you think that september will be the time where they go into more detail on the balance sheet?
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they certainly nibble at it in the most recent statement, maybe not so much in these minutes, but certainly started to talk about it >> yeah, i do think so you know, i think in september they'll probably announce something perhaps brie reduction would start in october, at least that's our base case, and possibly even hike rates one more time in december. i think it's about time, they're equities have been going higher, rates have stayed low. they're running into some problems here, which is correlation risk you have financial assets, bond prices are going up, equity prices are going up. if this continues because of excess accommodation, this could create a bigger problem down the road when you get negative correlation, bond prices, and equity prices going down there are risks of excesses, and
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i think the fed is doing that. >> track us back to sort of mom and pop. most people don't trade bonds, but they probably have a mortgage how relevant is the federal reserve to things outside the financial sphere, stuff that our parents might be concerned about retiring, buying a home, et cetera >> if interest rates go up too much too fast it could hurt some of their financial savings, whether it's a pension fund or savings accounts, or investing that they may have, so, you know, i do think that it has a reasonable impact. i think it's going to be 340destly felt initially, but long term ultimately the fed will be the dictator of where rates go we clearly need good data to back it up if that doesn't happen, i think rates stay low. >> jim mcdonald, you suggested you were quite happy for them to acknowledge that inflation had been weak. what i did not hear them say, though, that that would really change anything. they think it's tertiary or
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temporary, and that eventually they're going to stick to their pace of tightening did i hear incorrectly does it change the interest rate hike picture in your mind, mr. mcdonald >> michelle, i think it does i think they're laying out the risk case that it may not be wholly transitory, so the fact that they put those caveats in while expressing comfort that things will go back to normalcy does give me confidence that they think there's a chance we're in a different environment. with the unemployment rate as low as it is, and really a lack of sustained wage inflation. there's enough evidence to say that things are a bit different this time around i think primarily tied to the impact of technology >> i don't even know if this is a question what i hear the two of you say, though, inflation weak on the one hand, that's a reason for them not to hike, but mr. car ron, you're talking about asset bubbles. that's what they're trying to weigh at this point, right
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there's all this stuff happening, normally a sign of, wow, something is going on here, yet their primary thing they are supposed to focus on isn't budging. in fact it's falling, right? that's the issue >> yeah. this is creating the dilemma, right? for the fed? they've been increasing interest rates, i don't think they're tightening, still plenty of accommodation, so what's happening is you're getting a correlation of financial assets. there's lots of cash on the sidelines. people are very worried, nervous. money keeping pushing asset prices higher. the causality of whether credit spreads are cupping in, even equity price is doing pretty well the causality may be because interest rates are low and we're in a benignly positive economic environment, but this could create a correlation the other way where both asset prices go do you and that could have more financial tightening that could be the result and that could be what they're worried about. >> my sort of freshman
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economics, sort of tells me if you want higher inflation, you don't raise interest rates odes this morning "wall street journal" was written if you have a list of preconditions to a recession, a tightening central banks and pervasive sense of calm in other words, it would look a lot like the present jim mcdonald >> well, also the condition would have to be much tighter financial conditions that lead to a real slowdown in business activity i think we are very far away from that. so we really don't see a lot of excess in the real economy if you think about sectors fully healed and rebounded and actually may be maturing, you get the auto sector, but not a lot more the other point i would add about what the fed wants to do, i think they see the lodge end you have the curve -- and that would lead to a reduced worry we're at risk of going into recession, so that would 4r5ed
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them i think to favor -- starting to shrink the balance sheet sooner and putting rate hikes more on the back burner. thank you, gentlemen bob pisani is on the floor of the nyse, any reaction? >> we're up a couple points. let's take a look at that, the tone of this i haven't read the -- it seems to be a slightly lower chance of a rate hike. they did use the word transitory, but obviously debating how much inflation might have slowed. i would note, though, since this meeting, some of them have been pretty good, like the isn manufacturing number we got today was well above expectations the new order number for that component was better than expected, above 60, the highest reading since march, so to the extent we've been getting stronger data or we will get stronger data, that will make the fed's position that the
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inflation numbers are transitory much more likely, but obviously debating whether that's happening, a couple points in the s&p. spot index is essentially flatlined just fractionally to the up side. so call this maybe a slightly less chance of a rate hike i think most people i was down here still were talking about balance sheet reduction in the third quarter, and still a decent chance of a rate hike in the fourth quarter guys, back to you. >> thank very much, bob. before we get to rick, i want to highlight one thing. back to this whole question, what are they targeting here the minutes are very long-winded. when you start to dig down, there is a line that suggests they may be targeting either the stock market or the bond market, increased risk tolerance among investors that might be contributing to elevated asset prices more broadly, and a lot have expressed concerns about low equity premiums leading up
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to a buildup of risk so normally they're supposed to focus on inflation, but this raises the question of whether or not they're focused on the markets. >> maybe we should raise the question of how accurate the fed has been when they talk about asset bubbles. remember the biotech comments a couple years ago, irrational exuberance i do wonder why, first off, i wonder why they're making those comments they're not making that job. >> their job is to target inflation and the employment rate. >> that's really is. >> that's it, right, rick? you must enjoy this discussion >> you know, i do enjoy the discussion, and i find it fascinating, but also it doesn't accomplish anything. if i decide i'm going to hold my breath until i grow 6 inches, i could hold my breath forever it's not going to happen we can debate whether the policy will actually accomplish the type of inflation they want. look at japan, maybe they should
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just try to target growth. if you have 2% ground and 1-plus percent of inflation, i seriously doubt you can get to 3% without having 2-plus inflation, i think michelle hit on the key, you know, what they're saying and what they're discussing versus what they're going to do, okay? it seems they're on the path of rising rates the key issue on the table is balance sheet and it's huge, because it puts mario draghi and abe in a very tight box with regard to overseas in terms of my markets, we now have the high yields of the day on pretty much everything on the curve, but only a couple basis point reversal much closer to the high, first move a dip in rates, they came back and moved it up high yields and close to the top of the range in the dollar, so you can't read much into the minutes at this point. got it othanks, rick.
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on. here's what's coming up on "power lunch" -- is the united states prepared for the threat building from north korea? plus is fake news causing oil to fall we're going to speak with an analyst trying to debunk some of the current myths he says. and microsoft reportedly utout to chave job cs. we're headed to a break, right after this ke you do sometimes, ? well, when you have copd, it can be hard to breathe. it can be hard to get air out, which can make it hard to get air in. so i talked to my doctor. she said... symbicort could help you breathe better, starting within 5 minutes. symbicort doesn't replace a rescue inhaler for sudden symptoms. symbicort helps provide significant improvement of your lung function. symbicort is for copd, including chronic bronchitis and emphysema. it should not be taken more than twice a day. symbicort contains formoterol.
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the pentagon saying today the missile was a new type of missile from north korea. >> the north korea intercontinental ballistic missile blew for 37 minutes, making the country's longest launch before landing off the coast of japan after skeptics about -- this means the north is moving closer to the target of alaska and other parts of the u.s., like hawaii the pentagon is responding by saying, quote -- this act demonstrates thatnoicnoic poses a threat to the united states and our allies, and we remain prepared to defend ourselves and our allies and to use the full range of capabilities at our disposal the biggest, the brown-based midcourse defense, a $40 billion
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system that can shoot down those long-range missiles in space it's the only such system that can defend the entire u.s. from an icbm attack raytheon, aerojet, northrop drummed are key suppliers. gmd has come under fire for a spotty success rate, but in may it did destroy a mock icbm you can see it there lawmakers want to boost the number of interceptors we have a neu bipartisan bill that would at more than two dozen to ft. greeley the other is california, vandenberg that number is already growing demand for all of these systems is growing, both here and says among other allying.
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all the stocks are trading higher day, all of more than 1 percent on the heels of this latest test. more are morgan, stick around, howard rubebell is with us it's hard to talk about what stocks to buy whether you say who is best prepared, what would they be? raytheon first and foremost. they have the best ground-based system, and integrated solution as well. other important participants are orbital atk, provides the boost system for the gmd and aerodebt rocket dine who provides the missile, standard missile and for the t.h.a.d. program >> do so we that i that the u.s.
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will much more of the products or is that spending already cut in stone should we be adding to the positions if you own these stocks because of the north korea right now today? >> we're not done yesterday with all the things that can happen the japanese have considered another program which would help deferred their territory if in fact we go forward with some form of defense of hawaii, that's a multibillion dollar program. the answer is, it's undecided how large the opportunity is for these contractors. >> and north korea isn't the only threat, right >> well said i mean, we see it in the middle east, the raytheon patriot system has been remarkably successful against threats against saudi arabia and there are other examples of that as well >> and what about spending when
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it comes to europe, morgan one of the things that president trump and candidate trump complained about so much was members of nato rarely spent as much as they were supposed to. you can criticize the 79, you ultimately we've heard from the europeans actually he's right and we'll spend more money will we see -- >> i'm sure howard can speak to this more eloquently, but certainly we saw last week nato saying all of our allies will spent 4.3% more this year on defense spending, some of the regional defense programs have been in the spotlight, as was just mentioned in south korea, you have t.h.a.d. being po deployed there but certainly. >> howard, it seems like the whoa world is spending more on defense, every part of the world. >> not a question about it some of it is to solve problems, some of it to protect borders. that's what government is really there for, is protect impeople
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frp threats stem to itself >> howard, you have a wide universe of stocks you follow. i don't mean this flippantly is there anyone in the defense area you just don't like, because you have a nice buy on most and a hold on all the rest. >> it's hard to have holds when the -- we have great tailwinds for many of the companies in the industry, and i think the performance for the group, as you well are aware, has exceeded the market for the last several years. >> two points i would just make on this, diagnose back to the international spending story the first is a fact of major contractors have said that an increasing amount of their international -- their sales are going to come from international. they're just looking at incredible growth projections from occupy allies across the world, as they spend more. the second point i would make is we're coming out of a down cycle in defense spending, we're
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gearing up and seeing more spending, not only here in the u.s., globally my understanding is these cycles tend to be 20 years or so. >> these are not shoes that we're talking about. this is probably the greatest technology that we exported 20 years ahead of what many people even think that we've got. how much of this stuff is just not exportable there's certainly countries you're not going to sell certain things to. >> well, in certain cases you're right, but we still have a capability just to -- just to help the homeland alone, whether it's in hawaii, or in the east coast at some point on, or just to continue to improve the technology both in terms of radar and tracking, that still warrant more spending than what we have done today >> okay. >> all right on. bill and morgan, we'll see you again, i'm sure. i hope so.
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>> i hope so, too. >> it's like when you fly. i flew yesterday, the pilot says we're coming in for a final descent, i tell mea pilot friend, can you say landing? not final descent. i know it has a technical meaning, but final descent >> as we show this video, make a short week for most of us, but the president has a busy week. he lands in poland tonight for a state visit. on thursday he flies to the g-20 leaders summit in germany, all of that leading to a bilateral sit-down joining us is cnbc contributor larry kudlow you're an economist, what do you want to tell me about foreign policy >> well, first of all, my hats off to heaarry rubel, we used to call it peace through strength can we continue to call it that. i was around when reagan started
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the missile defense system, derot torriely referred to as "star wars." it turns outs he was way, way ahead of his time. the question is the united states has to be willing to fund tremendous investment in missile defense. we have the triad, right land, air and sea. all of that stuff is getting better and better, but we need to make sure it is financed properly we probably have much more work to do. i'm sure not an expert, but that's so vital to this. uk negotiate with th ththe noi point they're going to say directly to the north koreans, you keep doing this, we're going to knock them down, we're going to take you out, no matter what, we are going to take you out, we have the capacity and the
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technology to do it. get ready. there's no more free lunches here, i.e. no more free flights. no more. >> what you are implying there, china be damned. >> well, like, china will know about it, but at some point the units is not a sleeping giant, not a sleeping tiger we have to take matters into our own hands. we have the strength to do it, we have the investment to do it, we have these great american companies that howard was describing we cannot just sit around and say, oh, my goodness, oh, my goodness, and by the way, howard mentioned the middle east. it's the same in iran, same in iran they are developing nuclear weapons, eithers on sooner or later. we need to -- reagan said i'm not going to contain communism i'm going to overturn commune i. i don't think the united states has any luck at all -- i don't
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want to sound too hawkish. this is in the nation's defense, in europe's defense and in asia pacific's defense. let's get real we need to be tough. >> so are you ready suggesting, larry, i'm trying to spin forward here, that the united states' first move, if north korea continues to shoot missiles off, that we would shoot those missiles down, or are you suggesting an attack on the launch sites or other military targets in north korea which would start certainly a regional war >> tyler, that is a degree of expertise that's above my pay grade, okay? >> it's the general point on i want to make the g-20 meeting turns out to be one held of a blockbuster of a meeting. the first thing the united states has to do, mr. trump will do this i'm sure, is have a pretty serious sit-down with china vis-a-vis north korea, and that has to be followed with
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putin and russia, vis-a-vis north korea and economic sanctions. that spills over into trade. >> yet today, larry, he tweeted -- so much for china helping us with north korea. he was merely exasperated there. >> i'm going to leave the diplomacy to the president and his team. >> or the lack of it. >> my view, i think trump has done rather well with china so far, and he else has very cleverly, and i think despite his critics, he's linked issues such as trade and currency with the chinese/north korean/russia problem. trade is a big subject here, and we don't have a case to protect steel on national security or anything else right now, okay? but there are linkages here. if you want a world of free trade, they could be talking
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about currency, coordination and cooperation. so these currency wars can be taken off the table. i don't see that, i'm not reading that, it's driving me crazy. they need to put currency in, and then by the way -- >> and clearly an issue he's aware of, because he talked about it on the campaign trail >> just to finish, to close the loop, to congress, to all our great friends in congress who want to make america great and strong and have the economy grow, no august resist until we get the tax cut package. no vacay you're going to work 25 days more in august and the remainder of july, and that there is the plateful when you think about it, but we could do this very well and come out ahead. i'm an optimist. >> strength. >> we're going to put him in a time-out, larry. >> all right thanks a lot or go on vacation forever. that's another way.
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oil down 3% ending a brief run higher, is fake news hurting oil prices one analyst says yes
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hi, everybody, here is your cnbc news update a lagland explosion contained methyl chloride into the air parts of that base were
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evacuated. luckily, no injuries. they may look more a like zombies, but these people are protesters voicing their opposition to this week's g-20 summit hundreds of people painted themselves as clay pictures and slow le walked the streets of ham burg before that meeting, xi jinping made a stop at the berlin zoo to present two giant pandas to chancellor angela merkel, the plan will be on loan at the zoo for 15 years. china is trying to strengthen its trade relationship with germany. they're so cute. this was one big catch, a florida up and down on bond steel on beach caught a lot more instead he reeled in a hammerhead shark, believed to be about eight field in length, but they did let him go. i made sure. i watched the video to the very end. you're up to date. that's one of those videos
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that could have ended in an entirely different fashion, an i used mauled by a hammerhead shark. it turned out okay. >> i guess hi nailed it sue, thanks. >> you're welcome, brian there we do, shark tank. the dow industrial average popping just a touch on the back of the fed minutes again, folks, lighter volume, small move the need dak, the bigger gainer, however, big moveses in some of the autopark stocks u you said say o-o-oriley, and autozone and advanced auto parts are falling in simp think. jackie >> crude losing about 4% today, session low testing 45, actually
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4 45.05 on part of it was seasonal holiday weekend, nice weather, driving. the other part was the recount decline we saw last why. only two rigs came out, so the question of course now is, now what so some profit-taking today, and also that repositioning i a reported last week, it happened today. two exports increased in june, two months in a row, and reports that the russians are not on board for a long-term production connect -- the supportive trends have been encouraging, but they have to continue, all eyes on the inventory numbers. delayed because of the holiday. >> thanks, jackie. a rough year for crude raymond james out with a note today saying, quote, fake news might be the cause of oil's
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recent bear cycle. good to have you here, pavel your report is on some of the headlines have been misleading our outright wrong expla explain. >> a tendency by way too many investors to focus exclusively on what's happening in the united states, so case in point, the nevin tore data, people follow that religiously every wednesday, but u.s. inventories are only one fifth of the world total. on those are looking better than may and june if they are expecting that to represent a complete story of how a glob nevin -- same thing goes for u.s. supply you know, a lot of talk about
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u.s. supply recovery, that's true, but there are lots of countries outside of opec, where production is still shrinks, china, mexico columbia, argentina. if people inclusively focus on the one country that's grow iin what do you think is the correct price of oil that matters? >> look, we have a $65 forecast as an average for 2017 we think in the long run, something less than that, but here's the reality oil in the 40s, or even in the low 50s, is simply not enough to sustain a level of investment for the industry, which can enable meaningful supply growth.
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so this year, for example, even outside of the opecs production cuts, if you just look at non-opec, supplies is barely up. next year we have a trough for oil projects startups. thing about oilsands in canada, and deepwater africa and brazil, so on. it takes a lot of startups to cancel out the declines that we're seeing. >> let me make sure i heard you correctly, pavel did i hear you correctly and say that you think that the average price for 2017 will be $65 a barrel >> for 2018. for 2018 >> for 2018. obviously right now oil's in the 40s, we're not expecting oil to average 65 this year, we think that oil should be in that range exiting the year, and in fact exiting 2017 is a key timeline to watch that's when companies are
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setting their 2018 capital budgets. if oil is at current level by the time those budgets are being set, we're going to have budgets coming down from this year's levels, that means the rig count will be coming down. not just in the u.s., but across the board, that's a recipe for supply, not just to leave off nest year, but probably to fall, and remember global oil demands growing, at least 1% a year, so supply needs to grow at least 1% a year to create a balanced market as it stands, this is also one of those headlines that misses the picture, the market is not over-supplied, but undersupplied. >> okay. we'll see if you're right. pavel, thanks so much. up next we are going to open the second-half playbook discretionary stocks have already had a good run up, are even more gains ahead? plus it's been a slow start
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to summer for hollywood. atother disappointing weekend the office "power lunch" will be right back
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another disappointing
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weekend at the box office. can anything save summer for hollywood? >> this weekend certainly failed to turn around it brought the summer season down 9% from last year that's such a reversal of gains from the beginning of the year that the box office year to date is now down 1% depick at me 3 grossed $99 million in the first five days, but the $72 million it brought in just over the weekend is about $10 million lower than the opening for "despicable me 2." "baby driver" outperformed, while will ferrell and amy poehler's comedy fell flat now all hopes ride on marvel's "spider man homecoming" this weekend fox's war for the planet of the apes, and "dunkirk" the weekend after that
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morgan stanley slashed its target on regal, and mkm just issued a note, warning that given tough comparisons for july and august, the third-quarter box office will likely fall around 6%. guys, back over to you allia, thank you very much the consumer discretionary stocks have continued to perform will the sector accelerate its gains in let's bring in paul christopher from wells fargo's investment institute mr. christopher welcome. good to have you with us. >> they let me out of the institute. >> i am consistently need reminding what we are talking about when we talk about quiter discretionary stocks, what are they without recommending any, what are some names in the group? >> think about airlines, think about luxury goods, think about
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anything that consumers will buy when they have some money. >> and so you think consumers have money, and the think this group is going to feel that tailwind in the second half of the year >> we continue to like consumer discretionary stocks, but really more than a look we think there's be consolidation into the end of the year we liking consumer discretionary because of the growth prospects we see, not just this year, but through next year. >> that means, then, focus on discretionary stocks, as opposed to the ones not considered discretionary, the stuff you, quote/unquote, have to buy, exactly. >> so forget the toilet paper, paper tolls and all that stuff go with the prada shoes or whatever, right? >> right what other spoke sectors do you like over the longer haul? we're oriented towards growth,
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so we like industrials, which by the way, could benefit if we get some tax reform and infrastructure program we also like not necessarily from a cyclical standpoint, but health care, and we like the financials, which we think would benefit from a rising sloping yield curve. >> you are all in, when i look at those sectors, i think that's a portfolio for an improving economy. do you get nervous, though, when we see for example some commodity price that is have fallen, with the yield curve threatening tore flat. some people worry that it invertebrae, any of those concerns weigh on you or no? >> we spend a lot of time looking at the cycle, where we are in the cycle, what the down side risks might be, but we've seen a bunch of times when the economy has ebbed and flowed a bit. because the growth rate is so
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slow, people worry those will -- but that's quite normal. we think that's what we're going through right now, but going ahead the next 12 to 18 months, we seed more tide coming in ar further growth that's why we're, as you say, all in on the cyclicals. is the biggest risk maybe we're not falling at all, ever you know that maybe the lack of a pullback is itself a risk? no complacency? irrational exuberance, dare i say? >> sure, sure, there's a possibly we're looking at irrussianal exuberance we think that you're going to have some correction -- not a correction, i mean a pullback, some pullback in equity prices, as investors guess closer to the end of the year and bethin to think about how the economy will function with perhaps three or four more rate hikes between now and the end of 2018. we are concerned about the fed you might have the ecb, throwing
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in in some taper talk as well. should temper some of that expectation of liquidity and with you an end to the straight-up movement you're talking about, tyler we think a pullback is likely. frankly we would till be buying the growth stocks there. >> paul christopher, thank you. >> back to the institute. all right. great. microsoft could soon announce thousands of job cuts, what the strategy is if indeed that does happen plus after months of wait it for it to happen, the ten-year yield did -- that is next. thank you so much. thank you! so we're a go? yes! we got a yes! what does that mean for purchasing? purchase. let's do this. got it. book the flights! hai! si! si! ya! ya! ya!
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what does that mean for us? we can get stuff. what's it mean for shipping? ship the goods. you're a go! you got the green light. that means go! oh, yeah. start saying yes to your company's best ideas. we're gonna hit our launch date! (scream) thank you! goodbye! let us help with money and know-how, so you can get business done. american express open. flexshares etfs are built around the way investors think. done. with objectives like building capital for the future, managing portfolio risk and liquidity and generating income. that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.
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make as soon as this week. it comes as ceo trying to remake the company around the cloud the stock up 35% over the past year, and is adding to its gains today. josh lipton has the story for us from san francisco josh
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>> well, tyler, we don't know yet how many people suggests thousands as you mentioned microsoft, remember, employs 122,000 people in by bloomberg, the company's saying it will now divide commercial sales into two segments, one focussed on the biggest customers, one on small and medium clients sales force will target six industries, including retail, health, and manufacturing. and focus on selling software in four specific categories, including apps and ai. so why the change? so far the company's staying mum but telling cnbc microsoft is implementing changes to better serve our customers and partners but onereason could be to better align that sales force with that commercial cloud business, which is now on a more than $15 billion run rate. but there'll be plenty of competition as that sales force looks to land those cloud contracts, for example, when it comes to infrastructure as a service, a critical partof tha cloud strategy, they are amazon
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dominates more than 40% of that market no word yet on the timing of this announcement, it's fiscal year did close last friday, we could expect the news soon, guys back to you. >> thanks, josh. all right. now to trading nation. let's trade the ten year bond market, what we're going to trade the whole thing. washington crossing advisors, craig johnson, craig, i'm not the chartest, but i looked at a chart before the segment i looked back and realized that two years ago, the ten year, was 122.34%, not quite to the day, you get my point we fell to 1.5%, why haven't we seen a more sustained move in the year and will we >> i brought in this five year chart. you will see rates move higher from here. you can see the dow trade reversal happen after the trump victory. you pull back. this was just a normal pullback to retest. now, i think we're moving
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higher, we're up 233, 234 here, i suspect when you start moving up toward 260 and higher, i think you're going to see the reinflammation trade kick back in i think now is a time where we will see rates finally push up toward 3% and i feel stronger about our year end call of three and a quarter at this point. >> okay. cha chad, would you agree you're more of a stock guy, whatever else you're going to use to value stocks. >> right, so i only take the reverse of that trade. we think that inflation expectations will be stubbornly low over the course of the next 18 months. i wouldn't be surprised to see last week's sell off or interest rates on the ten year went to 230, reverse itself. all eyes should be focussed on central banks, and what they're signaling and what they're doing. when it comes to the federal reserve, as they start to tighten, we believe that
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financial conditions will start to tighten as well and volatility will increase you have to keep a careful eye on what the ecb says and does. of course, they signal that they want to be less accommodative, of course, interest rates that are negative within the european central bank have been an anchor to long-term rates, but we believe that that will continue to be an anchor. so we think that the yield curve is actually going to go lower when it comes to rates. >> both sides of the coin there, craig and chad, i hope you're wrong, no offense, only because i might think about rebuying one day. check please is next don't move and now the latest from trading nation.cnbc.com. and a word from our sponsor. at fidelity, trades are now just $4.95.
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hi been a hard time for notable high-tech falling below the ipo price or hovering near it. for example, snapchat, snap, debuted at '17 for 15 and is now around 15 bucks. enterprise cloud company debuted at $7, it's now at $7.30 and while it is not a tech ipo, maybe they consider it, blue apron, below it's ipo price, point is, we're not picking on these companies, market hasn't had an appetite or maybe the bankers are bringing companies public too early >> or too late >> or too late >> sometimes you wait too long -- >> snapchat, no growth left. >> we wonder about uber, best days behind them >> by the way, did i show you this notification, $50 credit on
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lyft i've never used it >> is that right >> but you signed up for it. >> it's on my phone. i was at the airport yet -- >> i'm thankful to the private equity experts subsidizing my cheap rides. >> this is what they do. i'm going to use that credit now, you win, well, i win, it's a free ride. >> so, we talked a lot this morning as markets were opening with the situation with north korea having an intercontinental ballistic missile, would we see the markets fall and we don't one way that it's been described by several traders is they think about leverage right? in all forms and fashion the leverage for north korea is having nuclear weapons it would be done if you assume it's a rational
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actor and in the sense he wants to retain his job and stay in power -- >> that's right. he is a survivor, survivor is job one for him. >> if he were to do something really bad, he would not be around on said earth much longer >> exactly some it's not ultimately in his interest to do so. >> larger weapons. >> and that's why the market looks like this all the time ultimately, they don't think he's going to do anything. >> not minimizing, but north korea has a nuclear bomb for more than a decade the market has sort of written us off for a while now >> this test is a thematic and symbolic change it seems to me just both in practical terms and also in symbolic terms and that's why we have such a focusen to another area that is affected by geopolitics is oil and yet, oil is down, gas prices -- what are they, 211 in new jersey now >> $1.92, lowest in the country by state. >> just amazing over the long holiday weekend. going against what has usually
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been the case, which is that gas price goes up in the summer. >> and mine quickly is amelia earhart. i hope they confirm it's a picture. it's a sad end, but at least closed the mystery this is an incredible, incredible story i'm sure "closing bell" will have more on the story thanks for watching power lunch. closing bell starts right now. hello everybody, welcome to the "closing bell," happy july 4th, we're back to work here >> i was asking a friend, is this boxing day in the uk? >> that's date after christmas >> i no e, but i'm just wondering how they commemorate this holiday >> well, they were calling this the original brexit. >> that's it i did see that i like that. i'm bill griffith, tesla posting it's worst day in the markets since february after disappointing delivery numbers

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