tv Fast Money Halftime Report CNBC January 14, 2019 12:00pm-1:00pm EST
it's continuing to expand and moving aggressively into areas of business. other companies have gone bankrupt to try to pioneer >> not the only company to announce lay offs. there's been a few let's get over to the judge and the half i'm scott wapner the wear of the repetest is mike wilson about to be right again? it's 12:00 noon. this -- here what morgan stanley ee stanley's mike wilson is saying today. what citi's numbers are saying about the rest of the big banks. the big call on western digital that has the stock taking what it all means for the rest of the chips be p t
the halftime report starts right now. welcome. good to have you with us on this monday stocks are lower earnings beginning the government shut down continuing there's lots to discuss. we want to begin with this call from mike wilson he says be waware of the retest 2600 to 2650 is your sell cale signal >> he's giving us a nice range he was talking about rolling bottoming. he points out the specific sectors he's isolated on in is a
guy whose been right we like to follow that kind of a lead it makes a lot of sense. will we see earnings grow the way everybody maybe either is anticipating or hopefully maybe expecting. are we able to exkud on that that will be interesting >> you may get no earnings growth you may get an earnings recession which will drive this retest >> yeah. the market is priced in expectations for mid single digits >> we haven't priced in negative earnin earnings >> you're correct on that. i thought mike's note was right. i think today is an interesting day.
we've had this pattern in january where you could buy the down open and by the end of the day you were rewarded for that let's see what happens today it doesn't look like it's coming back with the strength it has. >> what about this call? are we going back to get a retest of the december lows. we have come a long way from the december lows. mike wilson says this bounce is not over you go 2600 to 2650 it's a run for the hills because you're going back. >> i think what he was trying to say it's going to be ggo back a we'll go back from there the way i'm looki ining at it is take advantage of opportunities now. i agree. if they go down to retest the low, they will be lower. they are much lower than they were three months ago. >> you don't think it's too early here to by the cyclicals
>> no. i'm going in with position if it's new money, buying the really high companies that i want in these areas like the industrials, cyclicals and financials i have a position as we go forward when i get a little more clarity into the future. >> we wait do you wait for a pull back? do you even agree with mike wilson it's not the gospel. it's not in stone. >> he's a guy that's been right. >> doesn't make him god. >> he's been right is the bottom in i said we could retest mike wilson has called this much better than i have i said the smart money would tell you we're going to retest just like we're going to hit resistance to joe's great point on the up side of 2630, 2650 it's likely we'll do either of those things
it's also the possibility exist that we would have more reactions like we had today. are people willing to put capital at risk for a better return. >> he even talks about could the earning recession that drives the retest cause an economic recession. it's not like he's -- i'm not an economist. i don't know if that will happen but that could happen. you're going to get those questions if you get back to a retest you'll get those questions >> mike's premise is the earnings expectations in terms of growth is not mid single
digits it's closer to flat. if flat is the case then we're going to have market that is trading near 2600 that's not going to be trading at 2600. i think the next couple of days you have to be very judicious and very patient about listening to what you're getting in terms of earnings and the guidance you really want to get into the technology which i believe would be next week i think you've got here probably five to ten really important trading days ahead of you to see if the mid single digit expectations is reality or not >> it's tough to figure out what's priced in and what isn't. we go down to the new york stock exchange that's the trillion dollar question or however you want to characterize it. what is priced in and what isn't? >> i think it's safe to sigh that some measure of slow down even from the published 2019 earnings forecast might be priced in right now on paper,
academic way if you have that low to mid single digit earnings growth and it was not in the context of we're going into deep recession risk then you can probably absorb that. what i'm curious about is how the market digest that process that's what we'll have to wait and see. you had this call for a retest obviously the historical pattern when you had that kind of a steep decline, it tells you there's a high probability of retracing down to those levels why do you get a retest? people say, okay, the worst wasn't priced in at the low. we might have a worst situation on our hands it doesn't just happen because it's a video game and we have to go back to that level. all that stuff filters into the earnings trajectory. we are seeing credit spreads in
there by no means are we over pric priced stock market that's banking. they'll be coming out of wood work you haven't seen nothing yet >> for good reason why is that? i don't think anything that we have seen in the last three weeks or three months has liberated us from this idea that it's later in the cycle. we have to be cognizant of late cycle di n cycle dynamics the bond market pricing than a rate cut than a rate hike, let's talk to ourselves about what the economic circumstances and news flow would have to be.
i think efb has to credit the way the market behaved in the past three weeks we can't say, we're still at a make or break point on the charts but it hasn't given you a lot to worry about in terms of the rhythm of the market >> citi hasn't given you gang busters out of gate. mike, thank you. financials leading the s&p today. cho those shares are rallies the bank beat fourth quarter earnings missed estimates due to weakness and fixed income trading it's good to see you >> hi.
>> you brought that. do i need to do that to get you to talk? hold it up the issue with bank -- >> the scene started >> take one. the point is that spoiler alert, the bogeyman is not coming for the banks. the trade business grew double digits >> fixed income business was back >> let me finish here for a second the big macro issues -- >> i'm about to yet cut. these big concern, the bogeyman is coming, it's not happening.
the revenues grew faster or expenses declined more the revenues and expenses over the past year was positive that's the good news the bad news is they missed their efficiency target by 10 basis points we put them on notice last time. did they perform good enough for you or no? >> yes citigroup reported its first year with double digit returns and those returns are going up by 100 to 200 points
there's big news friday which was not covered enough value act has an agreement with citigroup. they get confidential information and return value act supports citigroup management. you know how long this agreement lasts. until december of this year. who's on alert forget about me. you have a billion dollar investment it's good enough for the stock to go much higher but it's not good enough to their peers and they're moving in that direction. >> can you get to $82 with what that are doing now >> absolutely. we think the stock can double. if you have more aggressive action, we think it can double faster >> you got to first word out, go >> citi is a case because it's a real value stock all the others are also value.
chp is the next companies you think will do much better because of what you heard? jp morgan. bank of america? >> we don't think the bogeyman is coming for any of the largest banks. put a blind fold on and buy the largest banks like citigroup, bank of america, jpmorgan, morgan stanley and some others out there. they are coming back you'll see that credit quality is fine. the bond market says things are fine this time it's taking a false
start. credit quality is good the bank stocks are fine the weakness is a weak top line. fixed income trading was awful at citigroup >> we lowered our numbers. >> you serve a $235 price target you need to change that? >> no. the stocks below ten for book value there. there are issues >> major issues. >> we went on your show and said we need the new ceo to come out and talk he's talking on the wednesday call they are having the ceo on the earnings call. we'll ask him all sorts of questions or one twor two that e ghet there how is he changing the course of the firm but below tangible book value, whether it's goldman or citigroup seems like a no brainer for us >> the kind of economic environment we appear to be in
it's not like things are projected to be gang busters over the next couple of years. you're looking at me like why are you bringing that up that's a real issue, isn't it? loan growth hasn't been great. >> here we go with the macro concerns you know what you need >> i didn't say the bogeyman >> maybe this is a film. you should have reality bite >> i brought you a night light in case you're afraid of the dark >> thank you investors in these stocks have reason to be up at night >> i think this is a bogeyman sell off banks are doing just fine. >> michael sounded confident stock was down 24 last year. i think citi will be fine. what does it tell me that consumer credit losses were $1.74 billion.
the highest level since 2014 and they put the least amount of reserves at 79 million since 2016 what does that tell me about the consumer banking environment >> the number one concern that we hear about the bank stocks is it's late cycle. who wants to own a bank late cycle because of concerns of consumer credit. that's why we go back and look at the bond market with our bond market experts you look at credit card, auto loan securitization. unemployment is low. this is a good environment >> why do you give short trift to the regional banks.
they all have market performance. >> firms like sun trust are a relative out performer the largest banks are benefitting in scale like never before it's all about doing more with loss we pyramiding. >> what makes you like bnt, which we like. you look at the other regionals and you take this kwone separately
the largist banks benefit. the rest of the banks you have some extra earnings. we think it will improve more than the average bank. we also like their insurance business they should benefit fine through the recession. >> normally in the last cycle it was all these banks will eat up the following. you should own the regional and the small banks. nobody talks about that. is that something that's not going to happen or you see it but we don't put it in the valuation. >> it's where it was between the 1990s and where it's been over the last decade. the banks are likely to merge.
it's matter of when, not if. >> one of the things that mike has been spot on about calling these moves but also the -- i think a lot of us, i mean i got cold feet. they have been right i said after this rebound, i don't know if they can live up to it. were these earnings that outstanding to justify the very significant bounce they've had if so, can a bank like jpmorgan, which had a similar 10% up side pop off just the lows of 2.5 weeks. can they do that as well >> the bar is much lower these are the earnings for the last part of the year. they will have weak top line
growth but you benefit from the 3cs of cost, credit and capital return that's enough to get double digit eps growth.cludeing the t benefit. we think you'll have record industry earnings also you don't want banks having too much growth. go back to 2005, 2006 when ther was a lot of growth. that didn't end so well. this is an excellent environment for banks. >> the timing when you look at where this particular stock was and they talked about how much buy backs they made during the quarter, that could have been really great timing in terms of what we saw.
how does this read through to the morgan stanley's of the world. we expect that to be pretty strong >> anyone who surprised by weak trading by, by weaked fixed income trading, we'll force them to watch the show. thoeb shou nobody should be surprised by recapital markets. that's a negative read through we already lowered our numbers for that the real question is, they said things have picked up a little bit so far in january. risk appetite come back a little bit. little prices have come back there's not a lot of read throughs >> good to see you the movie credits are rolling. we'll see you soon >> thanks. here is what else is coming up >> next up, the call on ge
that's getting a lot of attention this morning the call on western digital that has chip investors running for the hills and etf edge the focus turns to retail. before the break, our partners on earnings fared. up 80% of the time fjs ha financials have had a tough time for more go to cnbc.com/kensho oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪
we're working to make things simple, easy and awesome. we want to answer your questions. all you've got to do is submit those questions to cnbc.com/halftime. we're here for you welcome back e shares have rallied to start 2019 william blare thinks that moment will continue. they say the end of apocalypse scenarios at hand. what do you think of this call no ownership of how this was viewed >> i was an owner for a very long time. >> you were looking at single digits
has the tide turned? >> i think it might be a little early to make that call. i understand why this particular gentleman wants to make this call it could be him saying -- >> long time bull too. maybe he's reading into this too well he's talking about all these various sales and how the problem sometimes is when you're trying to sell these businesses when everybody knows you're trying to sell them, who has the upper hand i think that is something that had to be understood as well is this the bottom he saw that range of 6 to 9. >> you're not even sure whether the bottom has been put in >> price target was still 6. it's interesting to see. you can understand why the bulls are coming out >> this morning kramer said he thinks it continues. there's a fundamental story
here >> i have two things that i think are hard to own. one is given the relative valuation. there's plenty of other opportunities that you can own other than bying a really distressed you get the pull backs and the credit markets start cracking. ge is so dependent on the credit markets. not just for their businesses but to sell some of the stuff they have. >> you wouldn't touch this thing no matter what >> no. >> then when you're worried about the market pulling back and the credit risks showing up more acutely than some other places >> i think the opportunity cost of my dollar elsewhere is much better than it is with ge. if we're at the top of the market and the market is trading at 18 times earnings and there's
value, maybe i start looking more seriously at 15 times and this trading at 12 times, there's a lot of stocks that are cheaper than ge. >> lawrence has a great reputation you have to give him credit for what he did today, going in and hiring steve winiker lawrence is a fighter. the problem here is the pension liabilities. you've had 7 to 8 years of significant equity gains but we have pension liabilities in excess of 5 trillion dollars that's one of the biggest problems for ge. i'm not sure how they will fix that >> december 19th they trade at nearly a quarter of a billion shares that's a wash out. when we traded down 27, through 7. we traded down to 6. slammed all the way down into a six handle the turn over was about a billion shares on those three days pretty close to it
if they set that as the level and now we're here at 780, 790 where we are now and they say this is a good area, i can't blame them for putting some risk capital in >> what about this other call? we're calling it our honorable mention call of the day. you see this stock today take a look at the chart it's ugly. that stock is down 6%. that's not even as bad as it was earlier. you got to downgrade they're looking at one more reset coming for some of these stocks you've had a nice come back but maybe it will be short lived what do you think? >> when china came back with what they put out over the weekend about growth there and lack thereof, that hurt anybody
the tech space from western dig, apple, micron tech, a lot of those had been given upgrades the softness today not surprised. >> they go, they say their top picks for 19 they looked to add positions in a final reset. what they call between february and may. maybe is it too early to buy any of these >> i might be early especially if mike wilson is right in terms of do we got another test towards those lows there's probably still left some great opportunities. everybody seem to love it at 285
or where ever it was it was ridiculous and noun towards 130 everybody went absent if you're looking for somebody that will have beta and now you can look at a pe level that's reasonable, i think nvidia is one of those names to watch. >> i own it. a lot of these go down with the market the market will see that grow. they have great trajectories in a.i. and gaming. it's got reasonable, multiple for the growth rate to begin >> let's get over to sue herera. here's what's happening. a federal judge blocking new birth control coverage rules from the trump administration.
the new policy set to start today would have allowed more employers to opt out of providing contraceptives to women at no cost citing religious or moral obligations mike pompeo arriving as par of his middle east tour. he seeks to reassure arab leaders about president trump's decision to withdraw u.s. troops from syria he cancelled planned to wrap up the trip in kuwait tomorrow due to a death in his family a suspect has been shot as police end a hostage situation at a ups facility in new jersey. the suspect fired shots in the facility before taking to females hostage. the female victims are okay. penn state researchers studying data from more than 8 million cancer patients found they were likely to die by
suicide compared to wompeople without the disease. options traders are betting on one big consumer stock. they think it's set to go higher john and pete have that, next. first the s&p sector check s&p is down 11.5 a bit of a choppy session. the only session in the green, t financials we're back at this [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out.
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shares of starbucks up double digits. we're starting there, right. >> we love following a trader who has been right whoever this was, they made a nice bet just a little bit ago on these calls when they were $2 today they were selling them at $4 100% return on that one. very nice. they didn't just step away they bought more they bought another 10,000 calls to the upside at this name at the february 60 strike they wanted to pull some money off the table and stick with it. you see the 10,000 that traded today. next to nothing for the last few days leading into it i'll probably be in these calls.
right around 30 days got another one real quick for you. take a look at what's going on in this one. in micron we spoke a momenting a about things in china moving negative this stock is down they came in and put down a pretty big bet in this one take a look at this. january 36 calls this is january 22nd expiration. they also bought about 10,000 of them i like that. followed this. probably be in these a week to ten days >> we were talking about financials keycorp is not a name that comes up that often. somebody put in a pretty big bet they think the stock will be higher it was trading around 16 bhwhen they started about 10,000 of what we were
seeing here. it was 12,000 when i shot it to the guys now it's approaching 16. it's probably about 15,000 10,000 of that was bought in one single print they were trading for about 25 or 30 cents. stock was trading around 16. these aren't that far. the stock does not have to move significantly from here. these options have great chance to double, triple or quadruple i like the risk rewards. it's low premium but gives a great risk reward to the upside. unless they start moving really fast, i'll hold those two expiration >> good stuff. up next, a viewer wants to know what the traders think of visa right now they'll give krou tyou the answr after this break
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level. it's just around that. when ever it goes underneath there, underneath the 140, i think it's out standing by >> got one for you from jim. thanks for the question. lockheed >> this will make pippa happy. she says i'm lukewarm. i think you go out and buy lockheed at 275. it's a cash flow story 7 billion is what the street is estimating i say it will be higher than that >> local question. thanks so much for you unh. earnings tomorrow. >> great company one of the best out there. if this breaks for something
nonfundamental, you buy it >> coming up, etf edge is up next today's focus is a look into retail we'll talk about it next kelly evans talks about what's coming up on the exchange >> hi, everybody china ea china's economy slowing big signs of slowing another apple supplier warning. it's the latest sign of apple's smartphone slowdown but how much worse could it get we'll explore that a rolook at how farmers are being impacted the halftime report is back after this the future of technology investing
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seem like pure play retails but they are very different. this is what we want to highlight. take the xrt it's all the retail stocks in the s&p from big to small. almost 100 of them it's pretty much equally weighted there's the rth. this is the top 25 retail companies with a huge waiting towards the likes of apple, home dep depot, walmart, lowe's and costco together it accounts for more than half of the holdings. we have always talked about equal weight to retailers what kind of etf do you want to own. >> if you look at what has gone on in rth, it's been online boom amazon being 20% of the holdings it's tremendous. with the retail etf it's more equal weight didn't have much of a prove. it continues to dwindle. that doesn't mean that equal weighting or smart beta strategies aren't bad.
i think a lot of investors are looking under the hood to do exactly what you're bringing up now. market cap waiting doesn't always work in your advantage the way it does here >> this is all great in an up market rth out performed. amazon is 20% and still out performed everybody else when you hit a down market and get rid of a big beta name like amaz amazon, that will draw more. can we say is it better to own a market cap weighted index or better to own a generic index. >> what you're pointing out is you live and die by the swords if those five stocks make up 50% of the holdings, you live and die by that performance. it did well in the up side in the last five years. because it was online oriented it got slammed in the recent decline. >> is there any other way to play this? there's some other etfs that go
long they will short the big box retailers. >> there's one that i like proshares. the ticker symbol is clix. >> great >> it's online on the long side. short on the big box >> all right good to talk to you. be sure to tune in to our live stream today today we're looking at bank earns plus the technology that's baetsi in beating the market back to you. good stuff thank you. let's talk retail. best way to play it now. interesti interesting segment. factor in whether now is a good time which scared the you know what out of everybody. >> it had an over reaction to other parts of the market because target had given out
that great number. best in 15 years from q4 holiday sales looked so strong that stock got punished and it's back to where it was you can find different areas did you see the see different ones lululemon, i love that name. i think it's a better buy now than it was in terms of versus the nike right now i think it comes down to the home home depot, lowe's, tgix, i think those are great names with plenty of up side. >> i think it's hard to gate get into retail given the levels of where we are and what we're expecting with earnings season there's a downdraft of overhang of the consumer. i think they get cheaper and as they do -- >> consumer has been good, though what's the overhang? >> you have the government shutdown and uncertainty with earnings and the tariff issue. those three things are not adding to consumer confidence which you need to drive the retail sector. i like companies like lowe's and
welcome back to the halftime report we want to call your attention to the stock of the pay, pacific gas and electric down by 47% trading below the moving day average for about a week it drags the s&p 500 utilities gang to be the worst performing sector and the only negative one in the early part of 2019. >> that lot of it having to do with the ugly chart. sad story. dom with the latest. there's pg&e down. no break okay final trades >> we saved the extra. >> i do what they tell me. let's keep it going. final trades >> we've had the high beta names, the technology names lift us toward 26 00. i think you've got an opportunity here to kind of take
some of the risk out of those names, roll it into some of the financial names. i agree with a lot of whattive heard. i think -- >> you think now is the time to buy financials >> i look at it in terms of potential downside risk. i think if the market rolls over, you have more downside risk in some of these high flowing momentum names than you're going to have in the financial names in which i think it's already priced in kkr, american express, jpmorgan are the names i own. a name i don't own i've owned it in the past, i think it's a defensive type of play it's pulled back to 107. that's pepsi pete, i think you like coca-cola. >> i own both. >> they pulled back nicely had a nice run toward the end of the ear. they proved their worth in an environment of risk off. i think you're getting them at evaluation value that's appealing. >> jpmorgan is a big holding of ours we've owned it for a while
i think after hearing from citi, i think it's a bellwether stock. it will be interesting to hear what they have to say. if they have a good call, it could provide a good runway. >> earnings tomorrow chicago-based groupon. grpon. took it down below $3 a share. it's been moving back up, taking a little bit each week right now it's making a fairly big move today it's $0.20 on a $3 stock they're buying the four calls, the four strike calls aggressively that's my final trade today. i like the up side >> that's based on the activity you're seeing? >> yes, sir. >> we talk about the financials a lot on this show we talked about it today and i had that halftime question on visa. i own visa i like it. i think it's a great name out there. if i had a final trade in that space, i think i'd look at something like a papal
i've been in it. we've had multiple days of unusual activity over the last c couple weeks they're buying again today i'll probably add as soon as we get off the show i think there are a lot of different names in thatspace when you look at a square and papal and visa they're not all identical. that space is great, and joe talked about pepsi a second ago. i've been in that thing. it's been five years i love it. i love -- and i know they're different than coke. we put them together a lot they're different companies>> you have food side >> it makes it different in terms of a lot of things >> absolutely. >> pete mentioned papal. i sold it the other day. i wonder if we finally see a lift and confidence in the big banks if you're going to see an allocation shift out of the fentwit names. they've been hiding out in the visa, mastercard, papal. >> fen tech?
>> yes. >> spending too much time on twitter. >> visa and mastercard are technology stocks. not financial. >> let's get another viewer question in. caterpillar. bill wants to know the thoughts on cat we talked about industrials at the top. how about caterpillar? >> a couple bucks lower. the stock was 127ish now it's 131 the bets are still in place. people are holding onto them >> it trades too cheap this is a great example of a name that got pounded. i own the stock. i'm selling calling and i own the stock. i've been selling calls against it every couple -- about every two months i sell calls against it it got too cheap i think it's still too cheap can i hold on to the stock with a little bit of downside taken away because of the premium for the options. >> and we had one on dunkin' you like it? >> yes >> not a lot of time to talk
about it >> i like it >> you like dunkin' or starbucks better >> starbucks >> starbucks >> dunkin' >> dunkin' >> that does it for us you can see the dow cut losses by a lot it's done 70 points. thank you for watching "the exchange" begins now. welcome. here's what's making news as we kick off the back half of the trading day. it's day 24 hnow in the shutdow. we'll tell you what has investors nervous now. china's slowdown cracks and weighing heavily on the markets and the rate hikes may be over. janet yellen saying that this morning. we'll get you the full story we begin paring losses >> as you can see the dow jones industrial is only down by about