tv Closing Bell CNBC February 2, 2018 3:00pm-5:00pm EST
until we get to 3.25 i think that's a ways off. ireally just don't see a scenario where the fed screws this up. i mean, you get a fed that basically, you know, hand-picked by this administration there's no way this administration, you know, with, you know, being the equity market is their benchmark is going to hand-pick somebody that's going to screw this up. i think we're in a position right now where you can take this and buy stocks on any weakness and continue to move. >> guys, thank you larry mcdonald and david, let's bring in kelly evans and wilfred frost who joins us for the "closing bell. we're off the session lows, guys, but it's going to be an interesting hour ahead. >> that was just in the last couple minutes, too, that we're almost down 600. thank you, guys, very much we want to get right to bob pisani who's on the floor for latest on this selloff, which has continued to pick up steam throughout the session today wilf, no sign of it letting up at all.
>> around 11:50, the gop released an fbi memo a lot of people are skeptical whether that would have any influence on the market. we moved down a few percentage points say it's a small impact. in the midday yields started picking up around their highs, and we've been cascading lower ever since then. let's put the vast majority of this clearly on yield concerns all 30 dow stocks have been moving to the downside, but we've seen some interesting moves of major stocks. for example, when was the last time you saw goldman sachs down $10? that's the biggest point decliner we're seeing right now. but even some other big market leaders are down, notably. boeing is behaving relatively well with the market down better than 2%. boeing is only down 1.7%
still, it's such a big stock, down six points. that's 45 points in the dow. then we have some earnings things coming out a little bit exxon was a bit of a disappointment on its earnings today. that's down 6% even then, even with the lower priced stock, that's about 40 points in the dow. chevron, depending how you look at it, a bit of a disappointment, lackluster commentary, that's down 6 points, another 40 points. we know about apple, that's also down about $6. that's also influencing the market so, where do we bottom here? i'll have a guest in the next hour talking about technicals. look at the 50-day moving average and the s&p 500. it's about 2176. that's 50 points from where we are now. if you're not sure where the bottom is, look at the techni l technicals and that's the numbers floating around. we'll talk about that in the 4:00. >> bob, just quickly, what are volumes like today is this a broad selloff or a thin selloff >> no, volume right now is we're heading towards 600 million. we'll do north of -- it's hard
to call it a close north of a billion shares on the floor. in a typical day we'll do 700 to 750 million. say this is is 25% to 35% above normal that's -- given the down dust side we're seeing today, i would expect at least that much right now. >> thank you, bob. for more on this dramatic selloff, let's bring in the man himself, someone who's seen it himself. art cashin from ubs financial services yesterday going into the close we had some weakness and you flagged the release of the house memo about the fbi as one possible concern citing everything from, you know, what does this mean for the fbi director staying to potential constitutional crisis. do you think now it has been released this is a major contributor to the selloff today? >> it is in the sense not so much that it produced selling but that it inhibited buyers you're going into a weekend in washington you'll have talk show, you may have resignations you don't know so, i think that's why you're
seeing in moderate volume what seems to be a short sell simprof. the market is thin the bidders have stepped away. basically look in the mirror and say, hey, why do i need this risk let me sit on my hands and stay another look on monday even if they're up somewhat, they won't be completely out of reach. so, to avoid political risk, the buyers are stepping back there's no question the selling really is coming from concerns about the fed pulling the trigger too fast and the weakness in some of this stars of the f.a.n.g. group, apple and alphabet all of that combined has got us here. >> the biggest point decline we've seen, brexit, obviously down more than 600 then. we've seen the biggest, 770 going back to the financial crisis much larger in percentage terms. but it's rare -- the higher we climb, perhaps we have to get
used to seeing - >> in percentage terms, this is still a big selloff. for the last ten days, we put it in perspective to the 3.5% gain -- sorry, the 5.5% gain that we saw for the month of january. this week alone is looking at 3.5 to 4% pullback for the dow we can't even offset to the strong start of the year art, in terms of the interest rate factor, in terms of what that has sparked in this equity market selloff, do we now have to wait until interest rates peak, even though money's coming out of bonds, it should suggest it could go into equities, do we have to wait until this rising trend of rates has fully peaked and plateaued off because people are waiting to see what happens? >> it's not specifically the yield level itself, at it looks like it when you make comparison it is the fear of the fed getting panicked suddenly responding. that's why this payroll data
this morning had a disproportionate effect with wages up, larger than we've seen them you have to remember what we've been through since the financial crisis they have pumped money into the system and it has gone nowhere we have really never had inflation. they've been pushing to get inflation up to 2% and now the fear is, gee, maybe these things are coming together maybe inflation will pop up. now, the fed will they suddenly say, oops, we were pushing to get inflation up to 2% it's maybe getting out of our control. we have to overreact that's a good deal of what the selling is this morning. it's not just because the yields moved higher it's that whole combination of things. >> we're down 630 right now. we'll keep it right here as we keep an eye on these markets and bring in our "closing bell" exchange guest, kevin nicholson from river front investment group and ricksan stelly from the cme in chicago rick, let's just quick lil begin with you on this rate move
as art mentioned, we started this morning with what seemed like good news on wages for the first time, 2.9% year-on-year growth, maybe helped by some bonuses people got at end of the year is that good news, part of what the wad news is playing out in the market, do you think >> you know, i have a feeling that if there was no labor recorded at all today, don't think it would have turned out much different, personally with respect tothe report, it' a good report but jobs are overinflated it doesn't mean it isn't good news it just means it's not as potent when you're measuring a work week that has fewer hours. it creates distortions i think that has been brought up by many in the trading and in lots of articles i don't think that's the catalyst the only flat line we had briefly was slowdown around
24,000 in the world i come from, commodity is 38% retracements are considered normal. what are we now, 3% from the all-time highs i'm not dismissing this but i just think no market is going to go up every day. we spent six months in programming here talking about how it was impossible. i do think rates are a catalyst, obviously. but then again the fed is teasing inflation around the globe, especially the bank of japan and the united states, to some extent. art's right, it's going to happen sooner or later the problem is when it gets traction, it's like fred flinstone feet, hits the ground running. the fed wants it they're going to get exactly what they wanted and as far as why we keep going down, thank you, art cashin, because this memo is getting very little attention in certain circles. maybe it doesn't warrant any nobody's going to step in here on a friday with all the uncertainty. >> perhaps we should call it fed
flynnstone that sums it up nicely. >> i like that excellent, wilf. >> kevin, is is it too late, given the markets have already sold off, given volatility has picked up, is it too late to protect your portfolio or are there actions you're taking that can protect clients from this downside we're seeing? >> no, it's definitely not too late i mean, if you think about it, at the end of last year, the s&p closed at around 26,073. so, you've had a pretty good run-up at the beginning of this year coming into this year, we said that this was going to be the year that was a tug of war between growth and monetary stimulus well, obviously, we're seeing that growth has picked up. you're seeing -- this has been an excellent earnings season thus far and we had knew this would probably happen as the fed came in to play what we have done here is we have basically created stops as the market ran up, we put a stop in place and we're going to stick to that stop you can always have multiple
stops in place if you don't want to reposition your portfolio at all once you look at the ten-year, when it broke through to 2.60, that's when a lot of equity markets started revaluing itself because investor who bought dividend-paying stocks in a low interest rate environment, they started to say, hey, now let's take a look. all of a sudden fixed income now has yields that are yielding as much as my equities. so, do i make a change that's where we've seen the selloff come from. no, it's not too late. >> and, again, we're down at session lows a moment ago we were down 642 points on the dow. keith bliss, we've had markets upset when rates were too low. maybe they're upset when rates are too high or maybe as rick suggested, this didn't have anything to do with rates at all. we've gone so far so quickly what do you think? >> i think so there was a trifecta of bad news as it relates to the dow specifically.
the dow was vastly overbought for three weeks straight if you look at something we look at all the time, the relative strength index, it was at the highest level it's been in 20 years. you had that then the ten-year yield smashing through 2.60 getting back to levels we've not seen in about four years the next stop on that, if we're going to have any kind of retraction in the selloff will be at 3% of course, two big dow components, chevron and exxonmobil and you can throw apple in there they're conspireing to bring that index down. i do think this thing should come to an end the vix vastly overbought. bonds vastly oversold. we should see some stemming of the bleeding, if you will. the otherpoint rick and arthur have made, it's friday friday is not typically good times to go long or step into the pool to go long, especially when we have more distortions coming out of washington, d.c., and political back-fighting. is it really is a buyer's strike you anticipate someone would
come in and take this bid that should be underneath the market. the dow is now oversold once again. this whip sawing back and forth. i fully expect things to fully stabilize once we clear out all the noise -- clear out all the we cans and the smart money will come in early next week and start buying this again. >> one thing that's up today is u.s. dollar. we've had six weeks in a row of the decline of the dollar. clearly today, a big move in the opposite direction what do you make of that and is this a turning point for the u.s. dollar? >> it's barely up on the week. it is by a little bit, but barely i think the dollar sickness can be remedied if we continue to see a very solid move in interest rates, possibly, but i think the dollar will remain more bearish than bullish. one thing i want to point out, all the guests have alluded to it, i don't want to diminish the
impact of rates, once we had a couple closes in our pocket above last year's high of 2.63, that's when the market started paying attention the the next stop in that regard would be december 31, 2013 the single close above 3% since 2011 at 3.03 if we go through 3.03, the way we went through 2.63, then i think we really may have an issue with equities but i think we're aways from that. >> keith and others mentioned, if there's a bit of a buyer's strike until there's clarity in washington, is it the weekend until we find out or is this going to hang over the markets until there's some kind of resolution >> i'm hoping you get some hint of what's going on you'll have all the talk shows on sunday. you know the memo is going to be a hot topic. if they don't expose what the vulnerabilities are or aren't, my guess is that the buyers who are postponing today will show
up on monday you come in and start nibbling, unless there's a big surprise over the weekend rick, i agree with you 100% on that level i happen to have it at 3.04, but i'll split the difference at 3.03. >> what's a basis point among friends. >> exactly, exactly. keith, just want to come back to you in terms of saying, if there are opportunities to pick up stocks at the moment, financials are down a full 2% in terms of the sector performance within the s&p. goldman sachs is down over 4%. they should be a beneficiary of rising rates is this a time to pick up names within a sector people like? >> certainly financials come to mind first if you think about a rising rate environment. as we've been saying now, if the ten-year starts to smash through 3% and the long end of the curve continues to go up while the short end of the curve stays down a little bit, that is extraordinarily beneficial to financials that would be the place to put your money wilf, the fact of the matter is today everything has been thrown out, en masse. that's not a single green ticker
symbol in the dow. very few in the s&p 500. i'm sure portfolio managers will be combing over their pick list, their hit list over the weekend and picking up some bargains you're right financials would be the place i would look, in the banks, the midlevel banks, the regional banks. those would probably be good areas to go into because of the rate picture also if you believe the growth story, which seems to be taking shape here in the u.s. and globally, that would be a good place to go. >> blue apron's up today, so continuing its contrarian streak just to put a pin in it, art, before we let you go and get back to work down here, on the questions about the president, do you think the market's selling off because they're concerned about his future or is that drawing too straight a line between the events of today and why we're selling off? >> no, again, i want to underscore, i don't think that memo and the political things are causing much selling they're inhibiting the buyers. so, they're creating this vacuum into which the selling is
occurring. i think that the primary cause of the selling -- or the fear that the fed may pull the try g trigger, the fear rates may get ahead of themselves. as i said, the sudden vulnerability of the f.a.n.g. stocks, alphabet and apple are there. now i have to get down out of here and find out what the market on closes look like because that will be critical on a day like that. >> arthur, one quick question, if i may earlier in the week when we had selling you were discussing it could be driven by the need for portfolio managers to rebalance at the end of the month. now that we're on the 2nd of february, that's not a factor anymore? >> no. it was a bit of a residual factor yesterday morning i think they should all be cleaned up now. >> thanks very much. >> guys, also, i mean, one of the things we've seen, though, is that you had investor sentiment get to extremes over the last couple of weeks i mean, you expect this to be a pullback, to see a pullback like this i think long term i think this
is just a short-term thing and the bull market will continue to run. >> it's down 560 points. we'll keep you there, if you will. >> yeah, stick with us arthur, we know have you to get back to the floor. thank you for joining us let's bring in bertha coombs who has a look at what's driving the nasdaq lower at this moment. >> the nasdaq today we had this yin and yang in terms of the point impact on this market. you've got amazon today at an all-time high. the intraday, well off the high it got this morning. got to nearly $1500 a share. that's 25 points of upside to the nasdaq 100 on the other side, wiping all of that out is apple, which is providing about 25 points to the downside apple we are watching in terms of where it closed it's right at the correction level, down about 10% from its january 18th high. that is dragging down the nasdaq this week, pulling it down, having its worst week since last
november that's a huge factor there apple, of course, disappointment on some of the numbers from its earnings despite the fact that it did beat and did have somewhat strong apple iphone x sales. apple is not the only stock in the nasdaq 100 and corrections we have a dozen stocks off more than 10% from their highs, including tesla, which had been one of the big momentum stocks of late. that's down 12% from the recent high a lot of chip stocks, kla which had big momentum, down 12% skyworks down 15%. and lam research which last hit an all-time high back in november, off more than 18%, so it's almost getting to bear territory. the interesting thing is when you look at the sectors themselves, they're only off about 5%, less than 10% from their recent all-time highs. so, we're seeing some of the big momentum names here getting sold
off perhaps as a little source of funds or just taking some of those profits off the table. we haven't seen a big pullback like this on the nasdaq. a better than 1%, nearly 2% pullback in an awful long time a lot of traders, as they have been saying, saying we are, perhaps, overdue for this kind of profit-taking, a bit of a pullback the nasdaq composite itself, not in correction here with the decline. it's only the first week in five that it is lower back to you. >> bertha, thank you we'll check back in with you the dow dow 550 points the vix, volatility gauge, above 17 we haven't seen that in over a year's time. rick, what do you think -- actually, keith, let me ask you since we were talking about those tech earnings. as art mentioned, the f.a.n.g. doesn't look so invulnerable what is the significance of the fact that names like apple are
struggling the way they are today? >> well, i think it's significant from the overall standpoint and health of the marketplace. when we look back on 2017, remember, we were having conversation over the summer and into the fall that it was the f.a.n.g. stocks that were really driving the nasdaq so, if people are going to start pulling out of those names regardless of what the reason is, certainly it's going to cast on the overall market. it is an area that we do need to watch and we're going to have fits and starts, i think, with a few of the names as bertha was just saying, apple's down while amazon is up one of the problems you have today here, kelly, when we talk about the market broadly is that because of the lack of volatility, you have a couple problems the algorithms were geared so tightly. we're seeing that at the close of business today. the other thing from a sentiment standpoint, and kevin can probably talk to this a little bit, is that we've not seen days like this very often in the last
year probably not throughout 2017 when you come into a friday and see accelerated selling or any kind of panic selling, you're going to see these moves it's just going to feed on itself there's lots of things that are conspireing to have us down for the day. technically speaking we don't see much damage, if at all, to the major indices. i'm highly confident that next week we'll see some bounceback here because we're getting oversold readings across the market. >> kevin, can i quickly ask you about the oil names because one asset class that is holding on largely to its january gains is oil prices they're only off half a percent today. brent, in fact s higher. given exxon and chevron are two names at the dow today, do you think that's a buying opportunity? what do you think about the energy sector more broadly >> when i think about oil, coming into this year we thought it was going to be range-bound between -- wti was going to be
range-bound between 45 and 65. we're at the top of that range right now. what we really think is going to happen is you'll have the shell drillers actually come into the market as prices stay up at these levels, as they're able to cover their marginal costs we actually think they have 7,000 or so drilled but uncompleted wells out there. we think they'll bring those online and that will push oil prices back down into the middle of our range given right now, you have about a $4 gap or more between brent and wti. as you noticed over the last -- since november, the u.s. has been pumping over 10 million barrels a day. i think the energy stocks if they traded off today because of poor earnings, they could see some further downside down the road because i do -- i don't think that oil prices will stay elevated like this >> a final question on interest rates. is today one of the first days
in a while that u.s. rates have led global yields higher, given international yields have been one of the driving factors in recent weeks >> you know, they've been pretty calibrated closely together. if you look at the spread, for example, between bunds and tens, for the last couple of months it's hovered between 205 they've moved it a great deal when you consider where they settled last year. they've added 30 basis points on i think in the grand scheme of things, you'll continue to see high correlations. where things start to get nervous, in my opinion, isn't so much if the u.s. rates keep moving up. if euro long rates start to outpace and that spread starts to change in that regard, i think mario draghi has problems. if mario draghi has problems, we all have problems. >> i agree with that, rick, indeed thank you all very much for joining us for that extended "closing bell" exchange. now, apple, as we've mentioned,
among the biggest drags on the dow today. entering correction territory from its highs as wall street digests last night's earnings report cnbc's josh lipton has more on the move, including last night's jbz. josh >> apple did enter correction territory, falling 10% from the intraday all-time high of $180 different moving parts in that earnings report. on the one hand, weaker than expected iphone units, 77.3 million in the holiday quarter remember, the street had wanted to see something closer to 80 million. that was ate disappointment. on the other hand, apple is showing strong pricing power, better than expected on that front. the average selling price jumping 15%, $796 driven by sales of new i phoniphones, incg the "x".
they noted the stock's dramatic rise the vert relative to expectations this iphone cycle is weak and total iphones sold, he says, are likely to be flat for the third straight year. morgan stanley remains bulled up on apple, telling her clients that services acceleration, which jumped 18% as well as capital return offset, which she calls a muted iphone unit outlook, saying apple could buy back more than 20% of shares back to you. >> holy cow. yet the shares down 3.5% josh, thank you. let's talk more about this, joining us gene munster. ian, what are your thoughts. we were down 642 apple is down 3.5% might buy back half of the flow. what's going on here >> i would sum it up as a story that went from great to good when stories have that kind of
move, you'll see a selloff, especially when it was recently trading at all-time highs. at the end of the day i look at three different things that stick out. you have a refresh -- or upgrade cycle that seems to be staying a little locker than expected. you had a nice sell-in and build of inventory in iphone xs but remains to be seen if they sell through. as far as margins are concerned, they'll be facing further pressures based on the cost of memory and cost of other components i think you've got a bunch of different things happening and you're about to lap peak year over year revenue growth it's a difficult environment it's not terrible but just not great anymore. >> gene, when we consider whether or not iphone sales are going to slow in pace, one factor, of course, everyone mentions is the high selling price, particularly of the iphone x another one that started to be raised is whether the apple ecosystem, which was such a huge advantage for so many years, is
losing its shine a little bit. the rice of other music streaming services, the way that google's developed is that something of a concern for you? more broadly, are you concerned about iphone sales going forward? >>. >> they came out with the paid subs in terms of apple services, 240 million, up 58% year over year despite these other competitive offerings out there like spotify, i think the apple services business is doing exceptionally well as far as the bigger topic about iphone demand, i think there needs to be a shift in the perspective or there will be a shift coming up. we're talking about some negatives earlier about great to good and two of those three were -- one i'm disagree with. we'll get to a point where iphones year on year are generally growing at mid single
digits if they can inch up the asps and raise services, i think investors will give this more of a sas type of multiple, which should be good for the stock. >> thank you apple is one of the weak performers, down 3.5%, weighing on the nasdaq, but a lot others weighing on the market dow down 552 points. at the high down 642 points. at these levels doesn't add up to quite as much but let's bring in ralph acampora. we talked about how high we had climbed. you said you were so bullish, you had to sit down. what do you think of this week >> that was a couple thousand points ago so i'm still sitting down actually, i understand why everybody's concerned. everybody take a deep breath and say, a 10% correction is in the
offing as i look at the market today, there are five out of ten sec stores holding up, consumer discretionary, health care, believe it or not, and technology if they were over the next week or so were to follow on the downside, then i would say maybe you have a 15% correction. but the real story, kelly, is the history of interest rates. unfortunately, you guys don't have my chart. no one talked about the long-term trend of interest rates. it was a 30-year cycle up, a 30-year cycle down when it started its first cycle up in late 1940s, early 1950s, it had a 16-year run in the stock markets. in other words, interest rates can go up and the stock market can go up. where that bull market ended in 1966, it ended when interest rates crossed 5% on a meaningful basis. so, everyone's so worried about
3% here. i'm not worried about the 3% my red line is 5%. yes, we'll have a correction, but that's part of a secular bull sorry it took so long. >> ralph, let's go back to what you just said at the top we could have a 10% to 15% broad correction if which sectors start to turn, how much further south? >> well, we started to see technology get hit hard. they haven't really gotten hit that hard. financials haven't been hit that hard consumer discretionary, industrials, health care is getting a little hit those five, if they start to buckle -- the thing you look at for technicians, just the 50-day moving average those five are still above it. if they were to break below the 50-day moving average, then i would say the correction could be a little deeper. >> by the way, ralph, we mentioned that the volatility gauges jumped a little, too. for anybody who is calling over the last several weeks saying, this has gotten overextended, we need some kind of pullback and
so forth, are we getting it all in one day or one week, what do you think? >> no, this is going to go on for a couple of weeks. >> why do you say that >> because there's a lot of unwinding to do. you know, it's -- you know, in this day and age, we could see because the dow was so high up, you can see 400, 500-point swings and percentagewise, it really isn't that much and we have to see more unwinding. i would hate to see it happen in a week that i don't want to see. >> ralph, just quickly nfl is down 4.6% as a sector on the s&p. is that broken meaningfully to the downside and could that proliferate? >> i'm looking at the etf right now, that xle is the symbol. just took out 50-day moving average. it's 200-day moving average is around 69. another 5% from here, yes. more weakness.
>> ralph, thank you very much for that market technician's perspective from ralph today's market chaos comes on the heels of a solid jobs report and the promise of rising interest rates on the eve of the new fed chair taking over. for how much these factors figured in to today's dramatic drop, we're joined by cnbc's steve liesman. >> markets were under pressure even before the jobs report. dow futures were down more than 200 points before 8:30 this morning. the job report came out at 8:30, causing a sharp spike in the ten-year yield it jumped through the 280 level, spiking the 283, right along with the report that 200,000 jobs were created in january that was stronger than the 177,000 consensus. unemployment rate unchanged at a low 4.1% the bigger story, wages surged 2.9% year over year. that was the best gain in eight years and it stoked feersz of wage driven inflation.
bond yields surged as it became clear to the market that the fed is likely to hike three more times. the fed considering a chance of a fourth rate hike the ten-year trading around 2.86, the highest level since 2013 dallas fed chair saying, i believe the fed should be removing accommodation gradually but deliberately i have not heard him use that word before. >> deliberately? we'll see if that has sent us back down more than 600 points steve, thank you actually, stick around, steve liesman. we were down at 642. we came back over the last couple minutes and now headed back down. down 618 on the dow. jeffrey cleveland is joining us now, and larry kudlow has made it he's cnbc senior contributor we want to get their take on everything that's happening here larry, first of all, there's been some speculation, as art said earlier, there's a buyer's strike because of the house releasing the fbi memo
maybe not clear how this is going to pan out he said he was going to wait to hear what they said on the sunday shows what they say about the president or head of the fbi. anything you would add into that >> i doubt if there's much linkage between this fisa memo and the market i'll just say that i think there's some bad things going on, unfortunately, with respect to the fbi and the justice department i think they relied on bad people who were, you know, hating donald trump and we'll get into all those details as it unfolds. >> so you don't think -- >> if anything as president trump's position is bolstered by this memo. at least that's my take. eye said it before, i'll keep saying it. this interest rate jump, particularly the long end, the tens have done to 2.85, they'll go to 3.0, may go to 3.50 because the economy is now moving at a much higher growth trajectory
as a consequence principally of the tax reform bill, which has been embraced by corporations faster than almost anybody thought possible, including me and that means interest rates have to adjust the fed made be a little stingier we'll see. but if you're operating the stock market model of capitalized corporate profits, which is my favorite model, you got to redo -- >> that's wonky. >> i'm sorry. >> but it's good. >> the discount rate, i prefer the bwa corporates, and you multiply that until your profits expectations the market has to adjust the adjustment will be a downward adjustment. it made take - >> if you if go back and look at the last cycle when the fed was raisings rates, so were stocks this isn't clear, is this a one-time adjustment to, wow, we're looking at 3% or is it really a resetting of how profit - >> see, i don't -- i don't think the issue is the fet i think the issue is the long-term rate because that's what the discount earnings models use
some people might disagree with this model but it's worked pretty darn well in the past i think the fet is there for three hikes, everybody knows that, maybe a fourth hike. it's the long-term rate because you're discounting profits down the road and this tax reform bill is probably going to give you more profits and more economic growth, et cetera, et cetera, et cetera. i don't think this is an inflation bulge. i don't see that evidence in the markets. live with it don't panic. every time the market corrects, in my humble opinion, it's a buying opportunity stocks are the place to be if the american economy is, to coin a phrase, open for business >> jeff, let's get a perspective from you, particularly in terms of the long-term rates how significant are the levels we push through and will that continue to rise >> you know, i think -- i'm not worried about wage growth causing inflation, but i do think the bond market is rethinking everything. you know, this weekend and
today, whether that's -- up until maybe the average hourly earnings this morning caused the bond market to wake up we also had eci earlier in the week that sort of is changing the narrative. i think the market thinks three fed rate hikes is possible, but if the economy is as good as larry says, we'll have continued growth into 2019 that probably means more rate hikes in 2019 as well. and does it make sense to have a ten-year treasury yield at 2.80 when you can get a two-year at 2.50 or 2.30 as interest rates edge higher. >> to add onto jeff's point, i think this is going to turn out to be a big bump up in real interest rates i don't see an inflation bump. you know my view i don't think more people working and prospering causes inflation. bad money causes inflation i don't see that right now it's really interest rate adjustments which means the market will adjust also.
very good, very positive it's want good for bonds you don't have to stay out of bonds where there is a bubble, has been a bubble, but great for stocks really, really great for stockses you kind of ride through this real interest rate -- look, it's real gdp think of it this way, real gdp, real interest rates. i know it hasn't happened yet but the real exchange rate is going to go up i think the dollar is a buy at these low levels i love the fact that gold is getting clobbered. that's exactly what it should do. >> you can throw bitcoin in there today. >> oh, my god. >> right whatever it is, it's going down. gold, i love the gold signal it tells me good growth and no inflation. that's why i buy the dollar. >> steve liesman - >> i like what larry was suggesting earlier which is this is a question about the long-term and discount earning for the long term. one of the big changes that happened over the past several
years was this notion that the fed diplomat need to go to 4% in this fed rate cycle but could go to 3%. if you're talking about a different growth regime, a higher growth regime, you'd be stalking about higher nominal interest rates perhaps that means the fed has more work to do next year -- a little more this year and a little more next year. i think that's key but i also think the idea that the -- you also have a major stimulus bill into a full employment economy is going to give some people pause about the extent of how much inflation is going to run here. >> see, i think that -- you know, with respect to my policy, steve, this is a supply side tax cut. it's not a demand side tax cut. >> not this year, larry. not this year. you're not going to have a major supply side effect this year no, no, let me finish. >> yes, you are. you're already seeing it. >> you're going to have a major keynesian similar lus through deficit spending this year at least the first six months. >> i don't agree. >> what are you going to do,
larry, you'll have major capital investment and boost productivity level in a single year >> yes. >> that takes years, larry. >> you're on the front end of this trend be -- >> starts off ke-- >> just use apple as a perfect example. they're going to put $350 billion into new investment. >> and not a dollar of that is going to boos productivity. >> jim cramer calls it a marshall plan for the united states. >> over time, sure. >> the economic capacity is already increasing and it's going to be a multi-year trend, no question about that >> i just want to come back quickly to the memo issue, which you -- which you kind of dismissed as not too important earlier, the memo that came out earlier. the whole russia investigation is as polarizing an issue between the two parties as there is at the moment we have a potential government shutdown next week does the memo not increase the likelihood we get another government shutdown, we approach the debt limit as well >> it shouldn't.
it really shouldn't. all these poison the well, which is already poisoned with heavy, heavy partisanship i get that i thought the president gave a very good state of the union the democrats still don't appear towant to play ball. immigration is a key issue not for the budget so much but for the culmity and coming together their compromise on immigration may be down the road the budget resolution isn't much of an issue. they'll get that done. it's real bad budgeting, don't get me wrong i'm a former green at omb. real bad budgeting no, this -- this stupid drama. at one point debt limit, if we screw up the debt limit, and i've had arguments years ago with eric cantor on it, that's bad. if there's any suggestion that our credit is being wounded, as it was a couple years ago temporarily, that's bad. that's really bad. >> and that's early march. larry, thank you for joining us.
steve liesman, thank you jeff cleveland, thank you. markets back down more than 600 points we got back to 575.80 during that discussion but back down to 624 lower for the dow. >> we have 20 minutes to go. famed invest erbil miller talking to "power lunch" on today's big drop here's what he had to say. >> i just think it's the ebb and flow of the market i think the fact that stocks -- because the market has been so stable the last year, sort of steadily higher, people's sensitivity to decline is probably greater so it feels worse than it is usually over the last 100 years we've had several 5% drops in the market within one year, typically. so, i think this is just trivial. >> let's bring in mike santoli, who has more on just how far we had gone and how far we've come back. >> for over a year it's been almost all flow and no ebb no build on a point rick san stelly made earlier.
what have we been talking about this market for six months, eight months how abnormally calm it was, ratcheting higher, ignoring headlines and incredibly well behaved and would have these magical rotations. coming into this year, a lot more energy to this advance. we accelerate to the upside. now we're puzzled over what happened to the last 1,000 points of dow upside the same thing happened when it was rising it went up 1,000 points on not a whole lot and to come down 1,000 points with yields being the proximate cause. look at the chart of the vix this goes back two years this is a tremendous downtrend you don't see historic low levels the vast majority of the time the vix traded below ten is last half of last year you see this spike here. it looks like the other ones this is late 2016, right around the election, right before the election what it really tells you is not so much there's fear and panic everywhere but that the market is adjusting to trading on a
wider scale and essentially has to maybe deal with the change in character, guys, exactly how it's going to behave. >> you know, it's almost like earthquakes that happen to the vix. you may be a little rumble and then a bigger one and maybe a bigger one it's hard to tell. i'm not asking you to -- >> it's very -- the technical nalts on the vix is a no-no as is percentage changes on the vix. think of it as temperature what you really are going to want to see if you're bullish and want to buy, is when this spikes and comes down rapidly, it means the fever broke for a while. the vix looks a little high relative to the magnitude of the decline in the stock market we've had, guys. that's something you want to keep in mind, too. it's not always exactly a predictable relationship what everybody said about friday, i'll add, there's an old wall street adage, markets don't bottom on fridays. it might take a little monday kind of plunge or flush of some
sort. >> mike, for people for protections through options over the course of the last week, have we seen those prices of options go up, given the vix has gone up? >> yes the vix essentially measures the price of protective options. that's what it tracks. it doesn't seem to me the volumes have been so tremendous. it's not as though you had people taking out a ton of insurance right here it's mostly because you only gave back about half of january's rise by this point nobody is cutting into muscle at this point in terms of your portfolio just yet, unless you bought at the top. >> dow transports down 6% from all-time high. than january 16th. dow down 6.2% january 26th, last week victor jones, from td america. we're down 640 what do you make of it >> you were talking about
volatility that's what our clients are looking at as well i think it's important to put in context. the s&p 500 average over the last month, we've been averaging half percent moves on a daily basis. the vix is really telling you right now to expect 1% moves you're exactly right we are popping here to about 17, but our clients are noticing that that's not exactly anything to necessarily get worried about. look at the futures curve. it's telling you in general the market is expecting this -- or reading this as a normal, ordinarily selloff here because you're not seeing a front month spike in the vix. >> and i take your point on that, but, you know, it's still not everyday -- we were just down 653 points here with about 13 minutes to go there's only eight times the dow has dropped more than 600 points it's rare. i understand in percentage points it's not what it was but to see it play out in the session where it's relentless selling picking up into the close, i'm not saying it's disorderly but seems more
significant than anything we've seen maybe going back to early 2016 market. why do you think that is >> i don't want to downplay the significance but it's important we look at this on a percentage basis. from our clients' perspective, we are seeing reducing exposure here today you've seen some decent earnings announcements get pushed aside, even though earnings growth around 12% coming into this week, even after pushing down to 10.2%. i think clients are remaining cautious here, reducing some exposure, cash levels increasing as well. >> even on a percentage basis, the s&p 500 is down 3.6% for a week that's a big weekly decline. it takes away the vast bulk of january's gains. >> it certainly does if you take a look at how we came into this week, we were up more than 6%, which is long term what you typically see from these equity indices i'm not saying we should downplay the selloff we're seeing here. i think it's important to just
keep it in context with the parabolic move we've seen to the upside i think a little pullback for those with cash on the sidelines will create entries -- >> vito that very point you're making, people -- i'm not saying everyone's day trading, but you've had all day to come in with a drop of 1%, 2%, 2.5%, you know, more -- i mean, we're seeing moves in the likes of goldman and exxon we haven't seen a long time. where are those buyers why aren't they stepping in saying, i've been waiting for an entry point and now i'm given one? >> what we've seen in the past, maybe a 1% down move and we've seen buying come in. this week has been an anomaly to all of 2017. i think investors particularly td ameritrade customers are being cautious next week we'll hear more fed commentary as we got this giant move in yields, now getting
people to think twice around an s&p 500 with valuations with dividend yield at 1.5%. >> victor, quickly, where do you feel like your clients' cash balances are in their portfolios relative to the last two or three years? >> we can't give specific on client cash balances but i can tell you what they're looking at from an options trading perspective. you look at the s&p 500, yes, we've had a quick down move. they're keeping their eye on the options market from now until march. probabilities are telling you the way the options market is pricing the s&p 500 right now, about a standard deviation move would put us around 2700 to 2715 as potential support area. >> victor, thank you for your time for going through this with us victor jones ten minutes to go. art cashin just walked by and mentioned we may go out on the lows today we're sitting back pretty much near those levels. there's $1.7 billion to sell again, we're seeing that show up in these markets with the dow
down 2.7%. nasdaq and russell nearly at those levels and we continue to sit down here, down 644. >> nearly 2% for all those indices. that's significant let's send it to courtney reagan for a look at energy stocks. >> energy stocks getting hit hard today they're leading the decline lower. the xle is down more than 4.5% that marks the worst day since august 2015. every stock in the sector is down for the day, let by declines in dow components, exxonmobil, chevron. when you look at the percentage, that's what's dragging down the dow. the xle is the worst performing s&p 500 sectorthis week. nearly down 7% led by double digit declines by chesapeake, range resources, eqt and apache. this as crude oil was only off half a percent in today's session. >> yesterday we were talking about how high we got on wti at
$66 a barrel today, a very different story. courtney reagan. let's bring in kevin o'leary with the dow down 640 points o'leary financial, "shark tank" investor, cnbc contributor are you buying this dip today? >> i've done a little nibbling and i'm going to wait the next few minutes to go into the mid to small cap areas there are some interesting deals. this is garden variety corrections. we've had a great run. if you go back to historical means of market returns, this year made only be 6% or 7% you've had the majority of it in the first few weeks. we're going to end on the lows today. it has nothing to do with political risk it has to do with the great increase and breach of the 2.8 on the long bond i look at it and say to myself
for the first time ever the fed's behind the curve what is that going to mean it could mean four rate hikes. big deal we get to 3.5 on the ten-year, you would still have a good reason to stay in equities i'm getting more and more convinced every day since the beginning of this year that the best place to be in equities is not the large cap names. they had good earnings they're selling off. the opportunity is in all the work that hasn't been done on america's midcap companies that are getting massive increases in cash flows, a one-time opportunity on deregulation and tax reform that's where i'm doing the majority of my work. that's where new money's going to work. and i think the russell 2000 is full of interesting stocks >> kevin, you mentioned yo think we'll continue selling off on monday. why are you deploying cash today, as you just said, in the next eight minutes we have left of the trading session >> i love when the toilet flushes on a friday. that's always a good time to nibble you can't ever be sure
i'm not a market timer i'm a long-term investor i sense that heaviness going into the close my guys have their finger on the trigger -- >> wie're seeing that we just hit 660 to the downside on the dow you mentioned that heaviness going into the close we have seven minutes to go to see if it's further than that level. the biggest point decline we've ever seen on the decline was 776, financial crisis. back then that was like 8% decline or something like that today it's 2.5%. still it's a big chunk 37. >> it's going to accelerate into the close. it feels heavy it's one of those days i love to listen to art when he talks about his experience in all the closes that accelerate in he's a great guy to have around on a day like today because he's seen it all. when he says it's heavy, it's heavy. and everybody i'm talking to right now since i came on the air, identify been on the phone all afternoon, everybody says it's heavy it's going to be a nasty, nasty close.
that's a healthy thing we need -- we needed one of these. we really did. it's time. >> kevin, quickly go back to what you said in terms of a longer term perspective, that rates going up means you still want to stay into equities it's just a slightly different market does that mean um be playing the interest rate sensitive sectors more than in the past, more skr discriminate >> i'm looking for companies that are increasing their return on as ssets and cash flows are increasing better than the index. the companies i'm fining that in are the small mid-cap companies. nobody is covering them. you can't even get research on some of these things at the end of the day, it's just because of the tax reform and deregulation now, on a day like today nobody wants to buy into a friday, which is why i'm going to nibble on my little package of names but they're not ones people are looking at and some have not corrected near what this market
has done - >> i can't even keep up with these declines look at this we're down 679 points on the dow. i don't think we've seen that big of drop since the financial crisis again, back then it was 7% today it's 2.5%. we're down 675 there that should -- we'll see now if that's the session low but we've continued to get new depths as we're talking. kevin, you're not inspiring a lot of faith in these markets. >> it feels heavy, it's feeling heavier. be one with the decline. be one with the volatility embrace the opportunity. i think it's going to be a really interesting heavy, heavy close. we might start to recover in the afternoon on monday. let's see what happens >> kevin, you are a brave man to say it enjoy the last four minutes of trading. we're down 680 points. kevin o'leary, thank you let's bring in bertha coombs and see what's driving the nasdaq. >> the nasdaq is not going to see a tom brady like drive to win this in the final minutes.
we're seeing a lot of red here a lot led by big cap names that dispointed on earnings google, microsoft, facebook, they all had mixed results the fact these stocks have been a bit priced to perfection, hitting all-time highs, that just wasn't enough so, that's what's really leading us lower apple as you mentioned also going into correction, a little noise on that quarter as well. that is putting pressure on the chip sector. a lot of apple suppliers are among the biggest losers today sirius logic hitting a new low amd also getting rocked. that's one of the chip plays that also play in with blockchain and cryptocurrencies as well. that also may be playing into the selloff there given we've had so much volatility on bitcoin. what's surviving today, i'm calling it the streaming everybody go home and watch tv trade today. you've got amazon, of course, at
an all-time high after blockbuster report, and charter higher today along with liberty. they're hitting new highs as well and netflix holding up as well i guess a lot of folks heading home, under the covers and just chilling after today's selloff back to you. >> where's the camera? just about two minutes to go until the close. three minutes. we're down 683 points as we're speaking right now 684 would be the third worst selloff for the dow ever this equates to 2.6% for the dow. the s&p is down more than 2% the nasdaq is down just shy of 2% if all three were down 2% and around that level, it really is a stark decline. let's have a quick look at the sectors. energy very much at the bottom, down 4.7% as we speak. look at those number of sectors all down 2% or more.
financials included in that as well, industrials nearly down. materials, telco, tech, all down sharply. financials is meant to benefit when volatility picks up, when rates pick up, but down 2.3% the dow, exxon, chevron down sharply despite reporting what was meant to be decent enough results this morning exxon and chevron down walmart was the only one in the green until two or three hurz ago. that's down 0.6% we have the dow names coming for you. goldman sachs, i mentioned the banks, they're meant to benefit from volatility and rising rates. down 4%. bob, join me now this is a pretty broad selloff with volumes up. >> so, we have three things going on here. number one, the interest rate concerns as we saw the two-year moving up over 2.8% early in the day market hit the lows around 10:00 and markets moved down again as rates started moving up over 2.8% that's number one. number two, there is some small
amounts of political risk. five or six points drop in the s&p 500 when we saw that memo released from the gop from the fbi. we also saw some other issues out there. i think he weearnings played a t you can't help but say look at apple, some other big namentz, exxon, chevron we even had clorox with disappointments. their revenues were on the light side we had big companies here that were not outright disappointing, at least as good as some people thought they were going to be. i think the earnings are the third part here for today. this is the first time we've seen some disappointment the earnings numbers have been going up. >> i was going to say 684 points the decline. 684 is enough to be the third worst close ever that's significant, yes, percentages are less than in the past. >> what matters is the percentages, of course
let's not poo-poo that 680 points is a lot. the big question is this the start of some broader correction that's going on? i would start looking at some technicals like the 50-day moving average for some kind of bottom 50 points below where we are now. >> there is the bell 670 or so. not quite the third worst close ever we're still down more than 2.5% for the dow. more than 2% for the s&p nearly 2% for the nasdaq a big selloff. ringing the bell at the new york stock exchange anheuser-busch bud light needed for many today. that's it for the first hour back to you at post nine welcome to the "closing bell." i'm kelly escvans rare we've said the dow dropped 680 points only a couple times in history a much smaller percentage
decline. 2.5% drop, takes it back to 25,510 the s&p 500 down 60 to 2761. nasdaq down 2% to 7240 the russell 2000 small caps down 2% to 1547 the volatility gauge, the vix over 17. the dollar a little stronger today, too the transports down 233 points we're going to have full coverage of what just has played out in the trading session today. let's start with ber stha coombs at the nasdaq, and rick san stelly, and bob will quack us through the action on the floor here in fact, bob, let's start with you. >> the important thing is there really was no room to hide this is not about reflation. let's take a look at the sec stores virtually everything dropped we had drop in energy because of concerns over exxon and chevron's numbers. retail was weak, semis, consumer staples were all weak, number
one. number two, earnings were a big issue for part of the day. chevron and exxonmobil was not that good. exxon was particularly disappointing. clorox, revenues on the light side apple's, not good enough that played into the stew overall. interest rates, we mentioned that all throughout this week. take a look at our chart of intraday trading in the s&p 500. 10:00 a.m. we saw ten-year yields move 2.85%. that's what the s&p hit their first lows then around 11:50 or so that gop memo from the fbi was released and we dropped another five or six points then in the middle of the day, bond yields started ticking up and the market started heading south. let's talk about yields, political risk and some earnings disappointment the s&p for this week, we're down 3.7, 3.8% still settling that out. it's certainly the worst weekly decline we have seen since january of 2016.
let's move on and talk about those -- the numbers here and the earnings situation there's your s&p 500 for the week, down almost 4% major sectors this week, as i mentioned, hard to find anything to hide from here. there's your earnings movers put up the major sectors for the week energy down 7% a lot happened today materials, semiconductors and consumer staples down 3.7. this is a very broad decline we saw overall. banks because of the rise in interest rates down but not much at all where is the bottom? this was a big source of debate. people look at 50 and 200-day moving averages. historic high 2872 we closed today at 2761. the 50-day moving average is 50 points below us. that would be about a 6% drop in the markets. that's a good starting point for looking for a bottom right now 200-day moving average, that is 12% from the historic highs.
just reference points for people trying to figure out where would this thing stop. back to you. >> we need them, thank you meantime bertha coombs is at the nasdaq >> if amazon had not has a big a mroe wi blowout quarter, we might have seen it down more. that was the amazon effect that's where the volume was today. if you look across sectors and things, you didn't see such a huge spike in volume today not that much above average. amazon, on the other hand, up 250% compared to itsnormal daily volume nearly hit a high of $1500 at the open this morning. on the other side, apple these were the two big earnings reports people were watching for yesterday. apple also seeing about 250% of average daily volume that kind of canceled out all of the benefit that the nasdaq 100 would have gotten from amazon today. apple today closing in negative
territory for the year so, that's going to be one that people are going to watch because apple can often create momentum apple's disappointment and the prospect of apple cutting back on so far of itsdz suppliers' orders, hitting chips. chips among the worst performers for the week some of the biggest losers in correction territory, almost near bear market territory some of the chip suppliers, chip equipment players, lam research, applied materials, and finally buy yore tech among the worst performers for the week and sectorwise as we saw health care come under pressure this week. back to you. >> thank you bertha coombs. let's talk about these interest rates now. moving higher in a big way, especially after the jobs report this morning rick san stelly has more from the cme. >> yes, fascinating week think we had a fed meeting and all the fed talk actually sense seems like 4 is baked in the cake next year look at one-week chart of twos,
that would be most sensitive, correct? it only closed up two basis points let's surf out to the long end, tens closed up 17. we now have tens minus twos at 69 it closed at 52 at the end of last year. why is this important? because when the fed had to deal with trying to stimulate the economy with monetary policy, it had little success along comes tax cuts and other issues, all of a sudden the fiscal side is going fast. the fed is going to have to try to keep up imbedded in there is nervousness. the curve steepness makes sense. there was a time when we didn't know how much of a premium or discounts was on ten-year notes. some said 100 basis points higher we'll find that out now. one week of dollar index, it barely closed up on the week back to you. >> let's get to our panel for reaction to the huge drop in the markets. cnbc senior markets commentator mark santoli, john blank is with
us, and art cashin has stayed as well, director of floor operations at ubs financial services we're down almost 700 points at the lows the pressure was relentless throughout the day what stands out to you about this >> just the fact it was payback to such a great start to the year that's fed on itself a little bit we basically spent so much months talking about how the market was impervious to headlines. that gave way. once you went down 34% for the first time in more than 400 trading sessions which happened midafternoon today, it's as if investors said, okay, i guess this game has changed because it's not playing by those rules anymore. we were talking about how this market is never more overbought, sentiment was never more optimistic perhaps for decades in is the reverse of that. it's the dip many people were saying they wanted this is what it looks like >> are you a buyer here, evan? >> no, not at all.
i said last week -- we talked about this one thing what is the one thing that could handicap the market? interest rates after five or six years -- >> if they're going up for the right reasons, is that - >> it's not an end of the world kind of moment at all. i think as long as the global economy stays in this growth phase, then everything should be fine but i do think you'll still see other shoes drop i think the story is not about the equity market. it's about the bond market it's about people going home this weekend, look at their mutual funds - >> in that case why don't you want to be a buyer of -- >> because i don't think we know how the process of narmization is going to play out we saw for the first time what normalization means. it means interest rates don't go down forever and means there's more volatility and they could pop the other way. what i'm looking for early next week is what is the reaction of fixed income and bond managers when they start to see a lot of people who have never lost money in the bond market for the last,
really, three decades -- >> it's not like they'll know today. people in the market will know immediately but others won't know for months. >> they won't but all of a sudden when your bond fund is down 5% year to date, i don't think there's a lot of people who have experienced that. there's been no place to hide at the super short end of the curve, which is really why i would say to a lot of people, don't rush back in take your time this will be playing out over months i would say if you're going to park your money, park it in a money market fund. ultrashort term. bond funds you get 2%. it's a lot more than from the banks because the banks will try to keep the profits in their pockets. >> year to date after this decline the s&p is up 3.3% you would have taken it if you said you're up 20% last year now 3% on groundhog's day. >> if you're a bond market investor, all of a sudden you're down 5%. that's a big difference. >> now having seen the way it played out, being down almost 700 on the bell, and the huge selling you mentioned, what more
would you add about what we've just witnessed >> i think the primary concern was that the fed might overreact and move a little too fast we can talk about the relative level of yields, et cetera, but, you know, after the tax cut, the economy appears to be kicking in and this morning we got some data on wages that looked pretty good and that led people to say, wait a minute, we have a new team at the fed. will they panic? they've been trying to push inflation up to 2% does it suddenly look like it's going to have a life of its own and will they overreact to that? in addition to that, you had weakness in a couple of the f.a.n.g.s, apple and alphabet weren't quite up to snuff. wait a minute, our super heroes aren't quite the super heroes we thought? lastly, the point about the political concern, the release of the memo and i think at that point everybody stepped back the buyers said, not me, i can
wait until monday to take another look i'm not going to step into a washington weekend and run a great risk so, that combination, very thin markets, a lack of buyers, disappointing super starp earnings and the idea that the fed may overreact and that's what we got. as mike and others have said, we were tremendously overbought and, you know, here we are -- last week we were saying, this market is too far ahead of itself, it needs a correction. voila, we're getting one now everybody's saying, oh, my god, what's going on >> last thing, what are you looking for on monday? >> i'll wait and see if there's some sign of political resolution or at least political calm because that will allow some people to come back in and start nibbling away on the buy side clearly, as evan said, it's on the whole rate related so you'll watch and see if there's any follow-up on that.
and get to see if alphabet and apple can put their houses back in order. >> thank you i think that bar will be a little more crowded this afternoon. art cashin joining us. john blank, you mentioned the earnings we could go back to duitch bank in europe posting a disappointment that set us up for weakness today how big contributor are the earnings to what's played out, do you think >> the one i would put on the table i didn't hear about is google i think you're seeing at google some real issues with their ability to compete as a company in a framework where apple has the search mobility and they're kind of taking their core business away and shifting into the youtube framework, trying to fund money on con teptd. there's massive content war going on out there and that's raising costs across the board for everybody. that's creeping cost center fact that you're seeing in a lot of these major companies. it's getting to be an arms race and i think some people are starting to realize it's going to take the valuation of these
stocks down. >> so, let's talk about a couple other parts of the market we haven't yet. there's the memo, of course. let me ask you about this for a second art said earlier, you know, the president allowed the release of the fbi memo and buyers didn't want to participate in the session after that it might not be a weekend thing that's resolved. this might go -- >> i think you have two separate two perspectives a lot of what i hear from people is what i call trading perspective. certainly in terms of trading, in terms of the dynamics of the market on a friday with the memo and all that, that could impact, you know, what traders are thinking about i think if you step back, i think the more important perspective is to go, okay, what does normalization look like of rates? in the best case scenario, maybe rates don't go much higher than 3% the ten-year this year you're in this goldilocks scenario - >> i know where you're going
with this. let me ask you this. i asked larry kudlow the same thing last hour. let's say the rates go higher, 3.5%, wherever they go, we've seen this movie play out before the last cycle rates moved higher, the economy was improving, symptom prices moved -- >> but it's different now because you've had globally -- you've had negative interest rates. you've had a world that was very, very weird and you don't -- you is have a world when rates go up from 3%, the long rates, to 5%. >> what do you think those bond funds -- >> it's not just bond zundz they see those losses, what are they going to do? they're not going, we're going to get into stocks. >> no, but i think the market -- the capital markets in general have to be stress-tested at each new threshold higher interest rates. not because it's a disaster. not baz it's going to restrain growth in a tremendous way but because it's unfamiliar. you know, when you have stocks at this valuation level, a lot's got to go right, right and you have to make sure nothing breaks.
>> and what i would say is what has happened the last few years, given how strong the equity market's been and how strong the bond market has been is we've been accustomed to having these discussions. do you buy on the dip? here you have like a 3% thing. it's 700 points is a lot but it's not - >> it's not what it used to be. >> it's not what it used to be i got a couple calls from people, are you buying on this it's like people who have missed out are afraid of missing out again. but i think the psychology of this dynamic is going to change dramatically as rates go higher. >> john, we'll let you go. but what are you going to be watching into next week? >> the thing i'm watching right now is the difference between the two-year, which is on this incredibly smooth rise in rate versus the ten-year, which is spiking up at ohioer speed of change if you have something on the high end, i think it's the ten-year that's concerning everybody, but the bottom line is, i think the deficit finance of the tax cut is driving all these markets higher across the
term spectrum. that makes me much more bearish going forward and much more believing in that this sweeping move has got a lot more to go because the rates got higher to go >> let me understand you you think the rates are going higher because of the deficit? >> yes, a $650 billion year deficit to a -- 10.7 - >> yeah. >> so you have $400 billion. you have to find buyers for that have you to pay them higher to do it. you'll continue issuing treasuries more and more and more the rates keep going up. that's the cause it's not -- the economy, it's not inflation, it's not the fed. it's the deficit finance that puts you in a totally different game and that makes you much more bearish going forward. >> that's a good one for us to debate thanks for joining us. john blank let's bring in brian bellski and nancy tingler joining us from heartland financial. thank you for joining us brian, what do you think about
the point john just made, is the larger deficit to blame here >> spoken like probably a true bear market guy or bond guy. welcome to lovely minnesota, by the way. we had a 2% close on the selloff. we need to have some perspective. the market has been on a tear. everybody is looking for a correction here it comes. it doesn't even qualify as a correction now, people are going to creek out over the weekend there will be a big bear on the covers of barrons. earnings sister strong earnings drive stocks. not memos, not fears of deficits, not all this bearish talk so, take a deep breath markets needed to take a pause this is very positive and in longer term the bull market is very much alive. >> anyone who can be that
positive standing in 5 degree weather, we know you've got conviction ed, what would you say in response to that >> well, i fundamentally agree we are overweight stocks in our portfolio. we still think the bear market is not here yet and the bull market has a while to run. there's one data point we got this week that i think is worth thinking about and that is the slight drop in productivity. there's always some special factors in economic data you had a big number the prior quarter. i don't want to panic here, but the fact that productivity was -- if we're going to get 3% growth, if we're going to get this stimulated economy that grows faster, you need to have the productive capacity of the economy grow also if you're going to avoid inflation, you need productivity to rise. that number was a little disturbing you combine that with the 2.9% wage growth, it's certainly not a crazy idea to think inflation might start to accelerate and the move up in the ten-year is based on that fear of future inflation. >> what do you think it's going
to, ed >> i think the ten-year will go over 3%. how much higher over that, it's hard to say. i wouldn't conclude we'll get much more higher inflation but it's enough of a worry, especially as everyone point out, a tremendous run. >> we're showing on the right the time lapse of what happened with the dow today nancy, a few days ago you were on when we had the first -- this is kind of like groundhog day. we had a 400-point you said you wanted more of a corrections. here you go. what are you thinking today? >> thanks for having me. i'm in the bellski camp today. i think this is healthy. i asked for a controlled brush fire it's a little more than that but we had -- i had written a piece at the end of the year that said when everybody is thinking alike, watch your back. it was to announce to our clients that we were moving them out of bonds and stocks to the
tune of 5% in each asset category and moving them into noncorrelated assets for my year-end commentary i wrote from waikiki, i wrote about the correction that it wasn't late, just on hawaiian time and we needed to see that still and needed to see an improvement in productivity. those are our two biggest issues we wanted to see happen so this market could take the next leg up we're not panicked we had already trimmed, pulled back on the big winners, or the super heroes and we're looking for the opportunity to step back in because earnings are good -- go ahead. >> let me get mr. market fund back in here. >> by the way, it's not like -- i'm not predicting - >> the same kind of long-term attitude - >> yes and no. you basically -- if you think like, you know -- if you think a 3% correction or whatever it is the s&p was down a little over 2% -- >> but for the week let's call
it 3% to 4%. >> if you think that's a great buying opportunity, then all the power to you, you know and, you know -- >> you think there's more of a correction to come i know what you're saying. we have to wait and see what exactly it's going to look like under normalization, of course. >> of course. >> if you picture a world -- try and picture a world in which of instead of the ten-year being at 2.75 or 2.8, it's at 3 in a world is that a world where profits are still growing healthily and everybody is happy to pay 35 times earnings for boeing if that's that world, great and things will continue what i'm saying right now -- >> is it a rick to that world? this is a really -- this is kind of the umbrella question right now is, when people are talking about the selloff in technology and, is it because there is a rerating going on there or no? >> i don't think it happens on a day-to-day basis i think we should keep that in mind we're kind of pointing to the
action in bond yields as the main culprit here. actually the action today in bond yields was gentle yes, maybe it hit a new level on the ten-year the two-year was down. it's not a big deal. today the dam broke for stocks the -- >> my point is - >> what's that >> in bonds -- at 3.25, let's call it, what's the real rate above inflation? i mean, this is still not a compelling level for bonds for people to sell out of stocks and move into bonds for the yield. i don't see is that. >> i don't think of it as a funds flow question. i think of it as if the ten-year is at 3.25, investment grade bond yields, corporate bond yields are 4.25, 4.5 that any different for corporate balance sheets than it is right now? that turn of the screw actually matters. let's be honest. it's just the market dynamics. when the market was going up every single day in january, $100 billion literally flowed
into stock funds that month, the market which is captivated with itself and now giving some back and caught up in its own pullback - >> you mentioned -- spreads may go in. this week we had examples, tesla in the asset back securities now in order to raise another half a billion in capital you've seen this play out, too just because the ten-year yield is going up, they may end up being able to borrow more cheaply. this cycle could continue to play out in some weird ways, right? >> that's absolutely true. tesla is not actually a microcosm of the market. we were at crisis levels with respect to interest rates for several quarters if not several years. it afforded an opportunity for corporate america to buy back their debt, clean up their balance sleet and debt to equity levels are at cycle lows so price to cash flow levels continue to be very strong i think what's happening is we're spending so much time talking about interest rates and not doing any analyses
we've shown that when interest rates go higher, the market does very well. we're just talking about macro stuff all the time the bull market is very much alive. we're getting pulled too much in minutia. >> you'll talk about how this is a stock picker's market as opposed to the fact that the s&p has outperformed active managers for the last decade in a row i know that's where this is going to go. >> no, no, did not outperform last year. last yut - >> okay, great >> okay. >> it's not a stick picker's - >> let me ask you a question would you admit, though, that we for the last nineor ten years have been in uncharted territory in terms of negative carries and global bond yields i can understand your point of historically speaking it's not been a problem, but we haven't had a history of where we had trillions of dollars with negative carry or negative
interest-bearing bonds globally, have we? >> the number one thing we've been telling clients is, there's absolutely nothing academic to do with this current market environment. that doesn't mean it's different this time and it's rarely different this time. and i think it's very dangerous when people say it's different this time. the problem is this, we've had a total lack of confidence this bull market's been almost 20 years in the making the dollar goes to zero and no one was buying stocks any more and then the credit crisis and the perfect storm. we forgot hout how to invest again. i'm not saying there aren't issues i'm not saying we can't go lower. probably can go lower. the longer term secular bull market is very much alive. this is positive 2% pullback, we're acting like it's 2008. this makes me more bullish when we hear this type of rhetoric. i think it's fantastic. >> we're going to let you go because i know you're freezing you stirred everybody up here. brian, ed, nancy, thank you for
joining us to talk about this market. let's talk about some of the banking names. goldman was one of the worst performers in the dow today. financials down across the board. you have jpm, goldman, b of a, morgan stanley, there was trouble today. wilf covers the banking industry he's back. talk more about that what this move means. >> we'll bring in dick, you think banks should benefit but they were caught up in the selloff. what's your take >> i think the reason is because when interest rates go up, you have to remember that the banking interest owns $3.5 trillion worth of bonds. the asset values of the banks are coming down when the long rate goes up and the long rate, as you said over and over today, has gone up substantially in the last month. the second thing is you have to remember the cost of money is going up for the banks
what is happening and what we've seen over the past couple of quarters is that the banks are not increasing the interest rates they're charging on loans. they are increasing the interest rates they're paying on sdmofts. not a lot. a very small amount. but if you don't increase the yield on the loans and you increase the cost of the money that you're taking in, your margins start to get squeezed. interest margins have not been expanding for the industry for some banks -- wells fargo net interest margin is actually down, you know, year over year so, the net effect is, this interest rate thing is far more complex in terms of its impact on the banks than people generally think. >> what about the volatility pick up, dick, because clearly that's something we would expect to play into the likes of morgan stanley and gold man sanction, but goldman, third worst performing stock on the dow today. >> with then volatility picked p
about a year and a half ago, we expected trading results to be much better and they were not. the banks were all saying, well, volatility is different this time around. it is different this time around because the volatility is not associated with things that the traders are doing. it's more associated -- or it has been i don't know exactly what's happening today but it has been in the past more associated with funds falling in and out of etfs the net effect is the volatility isn't necessarily going to mean better results for the banks you know, as -- i sent a piece to you in which i took a look at the period from 1954 to 1981, which was a 27-year period in which interest rates were reset and moved up on a consistent basis. in that period bank earnings went up virtually every year it didn't matter if interest rates are going up and down or if the curve was steep or inverted earnings just kept going up. if the economy is strong and if
they're selling more loans and the loans aren't going bad, the earnings are going to be better and their stocks will improve. >> to round things off, will you be advising clients over the weekend to use the selloff we've seen in bank stocks today to pick up on your favored name, which is what? >> well, you know, my favorite name is bank of america. no, i'm not going to tell anybody to buy into this market until it settles once the market settles, then i think there's an opportunity to step in because i think that, you know, over the next few years, higher interest rates are not bank stocks will go higher. >> thanks for joining us. >> dick bove, appreciate it. let's bring in meg with the health care sector. >> health care across the board fared a little better than the rest of the market today often you see biotech stocks swinging a lot more than the rest of the market did it didn't end up that way.
when you saw pharma name, you saw astrazeneca up and bristol-myers. people telling me that could be some of the reason why the sector is holding up a little bit, people looking for earnings catalyst news in terms of clinical data from bristol-myers. probably the biggest catalyst from all of pharma we're waiting for from bristol-myers in addition to that in terms of biotech, there's a big m&a story going on and nasdaq biotech only closing down 1.6% today. normally you see it have a bigger swing than the rest of the markets. amgen, biogen, celgene and gilead amgen having a lot of impact
from taxes announcing a new $10 billion buyback. a lot wondering if amgen will be a big buyer. i'm hearing this is a defensive play earlier in the week, you already saw health care stocks sell off on the amazon/berkshire hathaway/jpmorgan consortium news >> that's a great point. thanks for staying meg talking about some of those health care movers what does jump out to you about what's different in this decline -- there was a cycle when biotech would have led us up or down and it's not that way today. >> or one group beneficiary of the turmoil and today that's not that day today 90% of the decline was in declining stocks these lopsided washout days, net basis longer term, they're probably good news if you're looking for signs. and health care is one of those groups that often would have been, fine, we'll get a bid, we'll buy the big pharma
because -- >> i was thinking of you with the energy did you see exxon -- >> clobbered. >> for a while it was the worst performer in the s&p 500. >> it was weird. year to date, energy up until this week was one of the strongest performing sectors, if not the strongest performing sector it literally gave back everything it had and then some in one week. maybe there's something to do with the dollar. i'm not a real expert when it comes to these things. my general view is not that i'm super bullish on energy, i think the global economy is in decent shape. i think you will continue to see growth in the energy sector. i think oil prices have been firmed up here in the 60s. i'm not predicting they're going to $80 or anything like that i'm saying on a pure valuation basis -- >> that's why you were looking in the first place. >> on a pure valuation basis, you know, when i originally went into the energy sector it was early 2016 and they've done well. probably up 30%, 30% to 40% in that time.
it's not as good as amazon, some of these other - >> you were never buying amazon. >> i'm terrified of amazon it's a thing of beauty, actually were shares close to $1500 today? probably pretty close. valuation has gone out the window with that >> it's a well-run company. >> they just did a billion in profits for the first time. >> first time they did profits one of the things that's interest is as rates go higher, the cost of capital to all companies should go higher so the growth stocks should they're et they're ret lick be the hardest hit. we didn't see that today you may see that in the future. >> they'oretically you're right. there's the dow, down 665 points on the bell. we were down 696 minutes before 4:00 p.m
bob has more. >> we want to remind everybody what is going on here. there are three issues number one, most importantly, is the rise in interest rates number two, there's a little bit of political risk going on and finally -- let me show you the stew yields are far and away the most important thing all week we had yields moving up to 2.85 around 10:00 a.m. eastern time that's when the market hit new lows we didn't recover from that. around noontime we had political risk, the gop released the fbi memo and we dropped another seven or eight points. then bond yields again started moving towards their highs in the middle of the day. well, we were just straight down essentially from there take a look at the s&p 500 for the week we're down 4%. worst weekly decline since january of 2016. there's the decline for the week here's what's important, i think. earnings today was a little more important than it was before because there were some
disappointments. exxon office a disappointment. chevron was muddled but people weren't satisfied. clorox looked good but issues on higher commodity prices, manufacturing prices that impacted them. apple was a clear disappointment that's a huge influence. that earning see it was very important as well today. for the sectors for the week, there really wasn't many places to hide at all that reflation trade we keep talking about, materials and energies, semiconductors even consumer staples were down. that's what i mean, it wasn't just a reflation trade selloff it was a broad selloff there's the banks, higher rates slightly to the downside they're looking for bottoms. look at the technicals historic high end of january, 2872 2761 was the close today our 50-day moving average, about 40 points below that if we hit that, that would be about a 6% decline from the historic high of 2872. if we hit the 200-day moving average at 2532, that would be
12%. those are convenient numbers, 6% declines, 12% declines a lot of people have been saying, gee, i would love the market to drop 6% so we can buy more they may get that opportunity fairly soon. back to you. >> see if they meant it. over at the nasdaq, bertha coombs has more on what happened there. >> you're seeing the nasdaq closing with one of its worst weeks in percentage terms we've seen in well over a year the interesting thing was a selloff on tech. it wasn't a scary kind of decline. a lot coming from names that disappointed this week most recently apple. apple going into correction territory. some of those other names, the f.a.n.g. names like google and facebook all the disappointing they are down less than 6 -- 5% or so from their recent all-time highs. they've been big momentum
movers even netflix which closed up today. that's down about 6.5% from its all-time high. it is within pullback, a type of pullback you would see after having moved so quickly. the interesting thing today is amazon while the others had fairly noisy quarters, there was something to pick at and be disappointed with. if you ask alexa how did it do, amazon came within two dollars of hitting $1500 a share today when you look at that stock year to date with that move, at it closed off of the highs today, still up better than 25% year to date amazon right now is what's really holding up this market here today and prevented the nasdaq from having a 100-point decline. back to you. >> that's a heavy load today thank you. bertha coombs. joining us by phone is long-time bull and wharton financial
school professor jeremy s echei. >> we haven't had a correction in a long time when you have a lot of momentum players, that's what you get at the end. we all know in the short run trying to predict when the movements are going to be where they are but i think overall, the market is not going to be up as much in 2018 as we saw in '17. >> professor, what are you thinking today, especially having seen this decline i'm just curious, what do you make of, you know, being down at one point almost 700 points on the dow simply from -- i would like you to -- what are you reflecting on as you watch all of this play out today >> of course, 700 points is not what it used to be i mean, we're down 2.5% on the dow. which is a big decline but, you know, it doesn't really reach the big leagues in terms of percentage i think what happened today was an interest rate effect. i think, you know, when that -- when i saw at 8:30 that wage
year over year hitting a nine-year high, i said, wow, we're probably going to get four interest rate hikes. we're going to see the ten-year probably go to 3 and pass three. that's competition then you have all these momentum players. ones that stick with the market no matter how high and they just jump off whenever their triggers are reached, whenever their limits are reached and i think that something like this is not at all puzzling. i'm not at all surprised >> okay. is it that places like f.a.n.g. in the market are more vulnerable than others we were talking a moment ago about what is the cost of funds now for some of these companies and what do those multiples look like in the scenario you're describing >> so, the long bond at 2.84 is still amazingly cheap, even if it goes to 3.25, which was actually last year i thought it would reach at the end of this
year but it does mean -- i mean, we overdid it at the end of last year and beginning of this year. i think we double-counted the effect of the corporate tax cut, which is very, very positive, but you were going up far more than what actually earnings were going to rise as a result of the tax cut itself so, all you need is a few disappointments or the realization interest rates are going to rise. we talked about apple. particularly exxon, that was not expected and then people say, okay, i'm going to take my profits and stops are triggered and you get this sort of decline will this turn into a correction, 10%? it could i did predict last december we were going to have it this year some time. it's really hard to know whether this is actually going to be that time or not >> professor, hi, mike again thanks for calling in. you know, it's interesting you talk about how you can get that 10% correction.
when you talk about it, when anyone talks about it, it sounds like something that's routine. we haven't -- we're still up year to date last year we were up year to date literally every single day of the year. we've had a couple of times when we have had two years in a row where you never traded negative year to date but i wonder what it says about the mind set because those who got comfortable because the economic news seemed good, does it destabilize that effect right there, the retail investor thinking it's safe again >> you have to realize all stocks have risks. i think since trump was elected, i think the dow is up over 40% it gave up 2.5% today of that huge rise. so, wow, we are still way, way up there and it's -- and every day is not going to be an up day. i'm actually glad people realize, hey, there is risk in the stock market there's no absolute guarantee of easy money there
invest soundly and for the long run and don't get overly blinded by these short run fluctuations. >> and, professor, anything you'd add about where you think the interest rate is going on the ten-year we talked about over 3%. is it the level? is it the speed you're most focused on or what the fed does? >> well, the fed is going to follow up. we got 200,000, we got a strong payroll and the unemployment rate did not tick down this time but with 200,000 it will tick down to 4, 3.9, 3.8. each time it absorbs that, it's more wage pressure, that's more cost pressure and that means the fed has to step on the pedal at that particular point. i think that's what just happened everyone is saying, where is that wage increase where has it gone? all of of a sudden people say, oh, it might be here and i think that complacency, the loss of feeling, hey, it's not going to come for a long
time got shaken today and you saw it in the market >> jeremy siegel, thanks for joining us. >> thanks for having us. let's get to big headlines today. if you missed it, the market actions in our rapid recap >> dow futures down by 215 points those are well off the lows of the session. we've seen down more than 265 points today. >> january, fon farm payrolls increased by 200,000 jobs. the unemployment rate is 4.1%. >> question got a selloff on our hands this morning dow below 26k. >> we now have the four-page memo that was released, so-called nunes memo, written by staffers on the intelligence committee. >> memo was sent to congress, it was declassified congress will do whatever they're going to do. but i think it's a disgrace what's happening in our country. and when you look at that and you see that and so many other things, what's going on, a lot
of people should be ashamed of themselves. >> the dow below 26,000. down 400 points now. on track for its worst week in two years. >> the dow was down by more than 500 points at this hour. >> we're down 602 points now we were down just about 607. the dow dropping 606 on the bell takes it back to 25,510. >> what a session. one of the worst performing sectors today was technology not all tech stocks fared the same joining us to talk a little how to trade those three as, amazon, apple, alphabet, are the "fast money" traders, steve grasso and guy adami. great to see you guys because it's been such a crazy day steve, what do you make of these tech earnings and how much are they to finger for the market react broadly today? >> so, i don't think they were to finger for the market reaction the market reaction was to yields the market reaction was to technicals you and i have discussed this.
the market was extended above the 50, 100, 200 it wants to correct back more to the norm that's what we did a little today. more on the downside but on a friday, no one is stepping in. apple, everyone was worried about the demand for the iphone x but you saw asp's average selling price rise about $100. >> are you a buyer of that one, steve, apple >> i own it. yes, i'm holding it. i own it holding it and owning it is the same as being a buyer. amazon, you can't say valuation, no one cares aws is a force to reckon with. it's the name in the cloud space. amazon, still a buyer there. i don't own that currently i've been in and out of that one. >> what about alphabet >> alphabet is sort of taking a page out of amazon's notebook. they're in the investment stage. i think they're at the forefront, artificial intelligence, machine learning and at a reasonable valuation. you don't get that knock, you don't get that headwind, but i
still think longer term all three of those names are buys. >> guy, what do you say? >> hi, kel, hi, mike i know he's next to you. i'm waving at him. it's interesting up with of the big catalysts for apple this year is could they repatriate that money they had overseas they did we saw the headline. president trump talked about it. look what the stock has done since then, quite frankly. markets don't end of old age they end on crescendo of good news you have to admit, that was as good of news we've seen from apple in quite some sometime stock hasn't traded well since on top of that, you had a decent earnings release yesterday there's no doubt in that at all. the price action wasn't good good run up, stock opened lower today. not a good price action off more good news. that's telling you something. >> you sidestep this one you think for apple -- >> would i sidestep it if you take a look technically at apple, 170 was the level it bounced off all three november,
december, back to october. we're obviously through that now. i would wait for a close of 170 than try to play the stock market amazon, steve said it -- >> quickly >> look what the margins did that's the key all the numbers you want, but their operating margins much 3.5% the street was looking for 2.2%. says once again when amazon wants to turn the spigot, they can do it. er to get valuation. in terms of google or alpha bhet, valuation is cheap you saw it downgrade today people are saying amazon is skating in their lanes we'll see out of the three of them the most interesting one, the one with the biggest moat is probably google. >> thank you i know getting through a lot and a lot more coming up. >> we talk fast. we don't mess around. >> we all appreciate it. be sure to catch more "fast money" beginning at 5:00 p.m. eastern time about 13 minutes' time despite the downturn today, it's shaping up to be a strong earnings season. by the end of today, half of the
s&p has reported quarterly results. they're up the earnings are more than 14% from a year ago. bob pisani is back with more. >> if you look here, they've been going up steadily not just for the fourth quarter but going up even for the first quarter. we haven't seen these kind of numbers hold up. almost 14% 13.6% as we head halfway through. the most important thing is the revenues remember the arguments, they're not there. we can't do it it's all cost cutting. we're 8% almost. that's the best number since 2011. >> 8% year on year revenue growth that's far outpacing nominal gdp. that's impressive. >> i did note you're hearing a lot less this quarter of currency adjusted revenue and earnings from companies because the dollar is down 10%. >> it's not to their advantage to bring that up. >> that's not the whole story with the revenue growth, but part of it. >> it's hard to imagine the dollar continuing to get so much weaker maybe that comes - >> the dollar has been stabilizing. looks like it wants to go up i think also important is the size of the beats is much higher
than normal. almost 6%. usually they beat by about 3%. 80% are beating. usually 60% beat that's a very statistically significant number now, the question is, does it continue i'm watching the first quarter the numbers keep going up. i suspect today is probably the top. for earnings adjusted growth on the upside. >> is that cutting into retail earnings >> you have to stop. every week we go up a percentage point. we won't be up 25% for the quarter. it will stop i suspect this might be the top. >> you're talking about the strength on the top line i get it maybe it was the energy sector - >> last year it was way down i'd be curious what the numbers are ex the energy sector. >> material, reflation trade will have a good quarter industrials, if you kick out ge, i know that's an issue, but if you kick out ge from
industrials, it will be up 15% materials will be up 15% these are great numbers. that's that reflation trade. we look at what's going to happen in two, three and four and so far the numbers keep going up they're 10%. double digit growth for the second, 147, we are getting 152 or 153 that's five, six, seven percent. but we are seeing global economic expansion more significant than the overall
numbers. what is going to derail the gravy train is the question. you could get a spike in oil and we go the other way. that could be a big issue and inthe interest rates are a major problem. we haven't been anticipating a move >> we were anticipating it but it doesn't happen. >> no. but, all of a sudden in three weeks, they thought it was going to happen four or five months down the road. a ski slope up. >> i urge the companies to tell us what the impact of that is going to be, the ones who have to report. can you make sense that would be a great thing for them to talk about. >> at 2.8 i am not terribly worried but when you move this fast everyone's thinking is thrown off the guys who are saying no, you are all wrong, it's four, not three rate hikes, now they have the intellectual upper hand. and that's a problem for had market. >> i will say betting against treasuries, against higher
yields, it was kind of a crowded trade. it's not as if people didn't think there was a chance yields could go higher. you could say if you get negative surprises on macro data we hit a ceiling on yield. >> even this morning was the start of a surprise for gdp. atlanta came in at 5.4. >> consumer sentiment was an undershoot >> -- >> what you want to do is watch will we are getting rotation or a generic selloff. money moving into tips a nice move into financial stocks on the weekly flow numbers, i think i don't think you are going the see any kind of generic across the board selloff. i think the market will try to rotate >> one wild card here, which is kind of interesting is given president trump trumpeting the stock market all the time and him being, you know, putting a new fed chairman in and being comfortable with where the fed is, it probably won't take a lot
in terms of interest rate increases or for ruptures in the stock market before he says something. >> that's a great point. >> it's going to be very curious. >> do you think it's going to make him go dovish >> if you think about donald trump, he tied himself to the stock market. >> but powell is relatively untested i think that's a good point. we don't know what his sensitivity level is he's watching this and he's saying okay when do i need to show leadership and start pushing everybody to act that's a good point. >> it's not that simple of saying maybe let's tilt the fed more dovish because the market right now is equally susceptible to the fed is going to go too fast or get behind the curve. >> if you fall behind the curve you are going to see inflation expectations it would have a worse effect than if real rates were going up. >> donald trump hasn't shown that he really cares about we'll call it the middle of the road he has tied himself to the stock
market for better or worse it's going to be interesting. >> i think he's flexible enough to untie himself if it doesn't -- >> really? >> yeah, uh-huh. >> or if things don't work for me, look what happened to the stock market. >> is he jawboning to keep rates lower? would you argue with this president? i wouldn't >> i'm going along the logic here, following your logic. >> i don't know what he's going to do. i would say as a guy who loved junk bonds, he loves the leverage he loves the leverage. >> he did a lot with those casinos. >> raising the debt level and the -- >> unless you were a junk bond holder it didn't do a lot for you. >> interest rates have been surging this year. housing stocks just had a tough go of it ten year-year-old it's up 18%. it is a hard to talk about yields going up x percent. anyway it's up the homebuilder he is etf has
dropped. diana olick is with us to tell us if people are getting nerv s nervous. >> builders are getting nervous. higher mortgage rates will affect their buyers. down significantly since rates started rising this year prices are higher than ever for borrowers. the rate moved since the last year makes new homes even more expensive. if a borrower took out a $200,000 mortgage in the middle of september when the average rate was around 3.875% on the 30-year fixed. they would have had a monthly payment of $940. that's not including tacks and insurance. that same loan today, the monthly payment want $101373 a month may not sound like a lot to some people but this is the best case is mayorio. depending object your credit
worthiness it could be a bigger difference some borrowers on the margins ma no longer qualify for that loan because lenders today must make sure the borrower has the ability to repay a loan based on income and other extenses. if the payment is higher some borrowers may not meet that standard so yes, kelly people are nervous. especially as we approach the spring buying season >> what do you think is going to be the effect on the housing >> the stocks are telling you that's one area of the community that it bites clearly. >> >> is that is that true >> it is try it's true that it's going to change affordability picture and all the rest it doesn't mean the cycle over look at the auto stocks. ford is -- i mean a chart of ford it's gone back to its lows. >> wow. >> it's been ugly. i'm not saying it is all rates. >> the zero percent financing
has been out of control the last couple of years. but back to the cycle point. mortgage rates mopping -- moving up -- they need market share it is a bull market. >> that ended very, very badly for a lot of people last time. >> very badly. >> it's interesting. i do think the, moage rates is a big deal i told you i paid off -- in fact it went through this week i paid off my jumbo mortgage because the rates wend up 2, 2.5%. >> do you have to buy a house. >> how can it not impact ou? of course it impacts you >> slides a handful of buyers off the list. >> it has to that is where the cost of money hits the -- >> diana >> remember who the buyers are today. the biggest demand right now is coming from millennials. they took a long time to get into the housing market.
they waited nell they were a little bit older but they have student loan debt. they have been paying exceedingly high rents, having trouble saving for the down payment. when you talk about who it's going to effect. it's the new buyers, the new demand, the lower level, the entry part of the market that's where prices are increasing the most and that's where these buyers have very little wiggle room in their budget when you talk about $100 more a month or something like that, these are the folks it's going to hit and that's where the demand is coming from. >> i think you are right i can see the inpo i can see the point. diana, thank you for joining us. as mentioned those home building stocks had one of their worst weeks in a couple of years. how about some of the other sectors? we'll check on those today on this big 2.5% drop for the major averages this is sort of a reversal that we are used to seeing. utilities were actually the outperformer today, down .7% consumer discretionary had help from amazon, down 1%
materials down 2.5%. tech down 3% energy down 4%. >> it had a lot to do with what the recent leaders were. i really think it's one of these sharp gut check moves. it wasn't perfectly calibrated to rate to the data. >> would you echo that >> i agree like i said, energy went on this -- it was a water month and two days for the energy sector i mean the energy sector did a full reverse and the oil price has been strong so it's not because of the oil price. >> you are wearing the tie again. >> how much time -- we don't have a lot of time left. >> plenty. >> plenty of time to talk withb the patriots. >> plenty of time to talk about if the patriots win it's going to be much worse >> the original thing was an original afl team or an original nl team. don't make it more complicated. >> i'm photoing a lot of use out
of the tie two weeks in a row i'm going to have to retire the tire after this, unless any make to the super bowl mex year. >> i'm a' not putting any more stock in the super bowl indicator than any other prediction or metric or anything else. >> tie gets retired with tom brady? >> it cab around another five years. >> guys thank you so much today. wild session what a way to close out the week that does it for "closing bell." "fast money" begins right now. ♪ >> "fast money" starts right now. a stunning selloff on wall street the worst day since brexit in june of 2016 at one point the dow shed 100 points it closed down 666 points. a demonic end to a tough week. of course, on a percentage basis it was only 2.5% still it's the worst week for stocks since january 2016. the culprit, look no