tv Power Lunch CNBC January 25, 2021 2:00pm-3:01pm EST
welcome to "power lunch. i am jon fortt morgan brennan will join us for the house in a bit heavywaters are continuing to climb higher plus viral valuations. why gamestop is surging. why one analyst says this rally will come to a screeching halt xi jinping warning again growing tensions with the u.s.
how about president biden face one of the biggest challenges ahead. "power lunch" starts right now you heard it we have a big hour a wild day of trading to start the week mike santoli has more. mike >> morgan, a bit of erratic action this morning. we had a bit of a quick sell-off, but right now this is a long-term view, which is relatively elevated. we're above 20 times forward earnings that goes back to about 2000, 2001 one of the way the people rationalize these things one of them is bond yields are very low if you looked at p.e. ratios,
compared to treasury yields. goldman sachs says we're not even down to the overvalued levels we saw back in the '90s, so maybe this is okay. it doesn't necessarily mean that long-term returns will be all that great just because compared to bond yields, which is versus low, things will be fine the kinds of companies that are big in the s&p 500 are phenomenally dominant and profitable. so maybe these valuations are more sustainable >> yeah, mike, it is interesting. we've had a couple notes out, goldman comes to mind to where we're seeing frost in the market right now. when you talk about valuations, i realize we're going to talk about it later in the show, but
gamestop, really small name in the market, but now surging, express or fizz is another one getting attention today. >> there's a lot of -- stocks, when they're going up like that every day, it has nothing to do with the valuation fundamentals. i think the aggregate market is definitely surprised re generous ly the ones that don't really have any current earnings, that does show you that people are willing to take big bets on long shots, which i guess is key to the sentiment backdrop that we have. let's bring in liz ann saunders who says fears of a
broad are market bubble are overblown. lizanne, do we learn anything about the nature of this market from what we see happening with gamestop is it retail investors can do this does it tell us anything about tesla? about many of the ipo names that we have seen performed in ways that defy expectations >> i think it's pockets of speculative mania, herd mentality, and reinforced in what you see in various chat rooms, social media, leaderboards on many of these trading apps, and it feeds into the extent that it's call options being bought, the market makers have to hedge those so it does feed on itself. you can't segregate the retail
traders as having a sole or primary influence. no question we are seeing speculative mania. whether it means we have a broad systemic market bubble, that's where i would suggest what we are seeing is maybe more microbubbles or pockets of be able to as something akin to what we -- >> there is so many pockets if you're an investor, how do you strategize when the bond market isn't so available as it has been in the past >> well, first thing on valuations, i don't think that any of these stories propelling these types of stocks are because of a unique way of looking at traditional val valuation. i don't think that's been a factor in fact, i think it was mike santoli talking about investor being price incentive.
they're price focused, but not price in the sense of valuation, but to some degree even the price of the stock if you look year to date and break it up into the price of the stock and the lower price stocks have had significancely stronger performance than higher-priced stocks that happens to be kind of the latest trends. that's very different than lower valuations stocks. i also think you have to you careful looking at valuation as a market timing tonight. i don't think investors need to figure out the fads, but first of all, make sure you're diversified, particularly if it's a high momentum type of basket, but maybe rebalance, so stay in gear by more frequently trimming back areas where you've
gotten a big move up, add to areas that are still an important part of your diversified strategic portfolio, and staying that way without trying to the forecast with the next short-term trend. >> yeah, definitely some sage words of wisdom, liz ann we have seen something of a rotation back into the, dare i say, more defensive, megacap names, the fang type of names. do you expect that as a trend that's going to continue or whether reflation is still on the table? >> we may see bouts of that continue i think that's actually a function of some of the m macrofundamentals. it's a combination of a virus-related hit to the economy, weakness in recent sales and labor markets, payroll, claims, the uncertainty or concerns about the roll-out of the vaccine, some of the
concerns about the second str strange, of course the sausage-making in white house you add them together, and this rotation, unlike early november when we got the vaccine news, it was full charge into the reopening, what hasn't worked, brought cyclical leadership shifts, for now, anyway, i think those more fundamentally oriented investors are snuggling up back into pandemic defensive areas. we were talking about valuations earlier what is under-hyped right now? it could be a region, a market or an industry, anything you see in particular? >> we made a tactical shift,
actually at the expense of u.s. large caps we've been overweight for that for 3 1/2 years. we closed that out and went to an international bias. not just from a valuation perspective, but a belief in the long-term leadership changes that tend to come out of major cycles our messages are not necessarily load up to international, but those who have shunned it, that the u.s. is the only game in town, we think that shift may be under way. >> liz ann saunders, thank you. president biden has a stimulus package, but is that the right price? according to a new cnbc survey some of the country's top economists think he is asking for too much
steve liesman has more on the survey results steve? >> hey, morgan, thanks wall street thinking president biden is asking for too much in the rescue package, but respondents are more upbeat about the potential impact on the stock market, the economy and the fight against covid. the cnbc for you that 72% of the 32 respondents this is it's too big and that it will likely just get $1.2 trillion. 53% think biden will have a positive impact on the stock market that's up ten points, just a quarter believe it will be negative respondents pointing to an arrays of policies that could help the economy
that's a pretty wide held fuel 40% say president biden will do a better job than president trump on handling the economy. that's also up and 85%, up 20 points, think biden will do a better job than president trump at handling the coronavirus. morgan >> i want to go back to a topic you and i visited last week, the $15 an hour federal minimum wage what does the polling say about that >> what's likely, morgan, from our conversation i went right to making out these questions, put this in there. i can tell you that 53% of the respondents think $15 minute miss wait a-- those who say tha is too high, that 44% group think $9.50 is the right place
where the benefits would outweigh the costs. >> i'm also curious about the tip wages, too >> a pleasure. coming up. a wild day for gamestop, new high jumps as high as $159 a share, caught in a battle between reddit users and short sellers. what is going on with this company? we will dig in plus the vaccine roll-out picking up steams as hospitalizations fall from peak levels we'll go on the ground to florida, where they're cckraing down on vaccine tourism. much more "power lunch" is next.
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gamestop all over the place today. a battle has been playing out on social media what led to this viral valuation? the stock is one of the most heavily shorted stocks in the market, acted as a cash minute for bearish traders. r reddit stepped in now, they bought up the stock, encouraging other buys to block shorts from lending against their shares this is not about the fundamentals -- >> no.
>> it's about yet another crazy social event playing out on social media, and it's unclear -- if you're a trader who just believes in market dynamics, how do you know when one of these things will hit you. >> that's where we're going to start with our next guest. the only bull, down grading from outperform to underperform, price target remains a street high of $33 bringses the average price target to about $13 a share. joe feldman joins us now if is it still the short squeeze? >> i can't see what's driving it
at this point at the same time, this price left, i don't know how you can justify it where we are today. >> that's why -- we were trying to show that even with our bullish outlook on the fundamentals you're still at only a $33, $34 price target. >> to that pint we're at $78 a share right now, so 33 would be, what, more than a 50% drop you are still at a street high how do you get there >> yeah, well, look, we're using 2022, where things are more normalized the company has been doing a lot of things right. they're driving profitability. let's sigh they get back to a 3% operating margin in 2022, and
what does ebit dad look like , and that gets you to $33 that's really what we're doing i know i'm more bullish than a lot of the rest of the street, but i believe they can get there. once upon a time they did have a 7% operating margin. we should see better profit profitability. >> i just wonder, when the crowd ceases control of an asset like this, as an investor, you try to be smart, what are you supposed to do? i remember elon musk saying that stop was expensive a long time ago when it was in a whole different stratosphere how do you think about that? >> so we're trying to stay
disciplined. with the investors i have spoken to, you know, i think if you take a disciplined approach, you just move on, or at least pare back some of your position -- but you have to have benchmarks and price point where you want to buy it or sell it today bed bath & beyond was another one, moving a lot higher today because of a short squeeze. you know, talking to investors, some people said it's double in two weeks, i'm ready to pull off of that and i'll buy it back which it gets back to $30 or so, which hammond in one day so you mentioned bed bath & beyond in general, looking at your coverage universal and all these retail names, i guess, what do you recommend? what would you be putting an outperform or buy price target
on now and why >> we still like amazon, dollar tree, target, home depot and lowe's, tractor supply, names well positioned in the space, still fundamental benefits i think they're playing on the essential trade or the home trade, even some of the sporting goods, all look pretty attractive to us , and then maybe -- we're hoping things will get better in the second half. stole still ahead, we'll have more on the mark. the dow remains a bit under
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welcome back the u.s. has now reported 25 million cases, deaths app approaching the half a million mark, but the average cases are dropping across most of the u.s. florida works to battle the pandemic how is it handling vaccine distribution brian sullivan is live with more brian? 45,000 or so, getting vaccinated at the expense of using the vaccine -- florida is cracking that down, by issuing
driver's licenses, you have to bring a utility, be a seasonal resident, by here for 31-plus days some people say that actually hurts distribution to the poor and underserved who may not have that documentation that's sort of a debate that rages on still today. re, the vaccinations are hand by the states, but with the states, it is primary the ones that are controlling the -- how is florida doing they used about 51% of their doses, it's about a weekly shipment florida has done about 1.5 million of the first dose, and about 150,000 people have had both their doses
nurse, they would be considered fully vaccinated everybody is asking, how often will it take we asked that very question to the mayor of miami this morning. >> at the current rate, it probably will take about two months to vaccinate the vulnerable population. if we stay at that rate, it will take way too long to do the general population the general population is about ten times as large. >> reporter: the good news is once the at-risk population is done, all the control groups will be finished and you probably can go down to your local cvs walgreens.
the vaccination infrastructure exists every one of us uses it for the most part every year we're going to go in "closing bell", jon, we're going to talk more about the equitable distribution wealthier zip codes getting vaccinated at a much greater rate that lower-income ones. as a personal favor. i notice my mask keeps falling down for people like me with almost no nose, somebody need to invent a mask. >> you're also a tall guy, kind of a -- trying to figure out the right way to say this. >> reporter: a certain charm, je ne sais quoi >> a little more mask would probably help. the biden administration seems to be making hum flynn both on
vaccine distribution and on -- unclear whether that improves anything like florida, which of course is its own state, with its own practices and issues >> reporter: there's nobody around here's the thing, jon -- there's literally nobody around, except for that guy over there. there's a lot of confusion about this i've done a lot of work out there. distribution is done by the states the only thing the federal government really does is basically issue the allocation how much can each state get, then once the states get that allocation -- first they can -- of course they were all going to order all of it. the states then decide where those vaccinations will go to this zip code and that's one of the reasons
the roll-out has slower. that logistical challenge of getting the right around the doses to the right place at the right time and have the number of people to use it, that's been the keel challenge to this whole thing, jon, just doing that. the federal government could maybe do fema mobile sites that's something they're talking about, but right now this is a state-by-state operation florida is kind of in the middle new jersey is near the bottom. north dakota, alaska, west virginia, they're near the top they could all use more help national guard maybe, mobile sites, those could speed things up. >> imagine that, florida right in the middle, a position it's used to. brian, thank you it looks so warm down there. ahead on "power lunch," we'll continue to monitor markets. the dow the only index in the
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welcome back, everybody. here's your update president biden has signed an order -- or will sign it later today banning the entry of knotts non-u.s. citizens who have been in south africa recently, part of an effort to fight a new covid variant in that country the white house also says the current entry ban for brazil, uk, ireland and many europeans nations due to expire tomorrow, will be extended. they are preparing for a tough quarantine order they expect to be announced tomorrow. people coming into the uk would be required to spend days until security in a hotel with all meals brought to the room. here at home, cvs says it has finished the first round the
covid vaccinations in 8,000 nursing homes. it expects to complete the second round in four weeks among those getting their shots in england, jeff and jenny holland. they're newlyweds, and they are urging everyone to do what they did -- get vaccinated. congratulations to them. back to you, morgan. >> i love that newlyweds. the market is a mixed session for starts right now the dow is down about 90 points, well off the session lows it was down more than 430 points at the low the s&p is up fractionally, up about 0.1% the nasdaq is the outperformer after hitting the intraday high. just to give you a sense of the vola volatility, nasdaq has been up and down more than 1% in today's session. in terms of the weakest sectors
in the s&p, center is the weakest, down 2%, which will take us into our next hit, which is the oil market closing for the day. for that we go to rahel solomon. >> wti selling around 52.77, brent close to 65, so traders are noting abig of a tug of wa as they try too balance between stricter lockdown measures, barclays is raising its forecast, but noting that the covid situation in china could distribute to some pull does that backs in 9 near determine also supplies as they cut compliance close to 100% this month. jon, back to you. we are kicking off the biggest week of earnings meanwhile. more than 100 s&p companies and
13 dow components set to report. some of the largest tech companies are among them here with the key things to watch is tim higgins, tech reporters with the "wall street journal" and cnbc contributor tim, good to have you. tesla, do the fundamentals even matter to what they report on earnings do they matter to the down side? do they need certain things in order to remain you think at the levels that they are >> it's a growth story, a growth stock. if elon musk doesn't come out super excited, nabbed be problematic. the expectation is he's going to get to the best is yesterday again this year, maybe to try to get to 800,000 to a million deliveries, which would be a giant leap from last year where he basically hit the market of half a million units it's all about growth. the fundamentals don't necessarily always matter with
tesla. >> let me also ask about apple iphone is the big seller, big profits are there, but i'm especially curious about the mac, given that apple has begun selling these mac laptops with their own home-grown chip instead of intel the margins there could be pretty interesting. >> absolutely. that was one of the surprises of the final quarter of their fiscal year, the quarter that ended september was just how strong macs and ipads were from the work-from-home environment it was a lot of, you know, a lot of momentum going into the final months of the year with that new laptop so i think analysts and investors will be very excited to see that. there's expectations that it could be, if not another record quarter for the mac line, that pretty, among one of the better in the history, so that's definitely going to help the
company in the period -- especially at a time when you've got to remember the first part of the quarter, apple wasn't able to sellthe new iphone lik it typically is. so, you know, maybe not the same kind of volume you would expect in the all-important holiday quarter, but potentially made up by the fact they're going gangbuster with the mac line and the ipad. >> a key market for both of these companies, china, obviously in terms of production as well as sales with tesla, the same thing how should we think about it and what the commentary could potential look like? >> one of the things i'll be looking for is tesla, just in recent days they have begun what
i mix might be i think could be helpful. going back a few years, elon musk thinking the model y could be the best-seller it's in that part of the market where buyers are excited tesla hasn't had that kind of offering, so it could be a big production for them. if we turn to apple, they have struggled in recent years, and now the iphone 12 gives them that i'm going to be looking and i know investors and analysts will be looking some third-party data, whether it's customer surveys or sales data suggests that the higher-end iphone is doing better in places like china and the u.s., which is a good sign. >> tesla's market cap is over $800 billion, making it worth about half an amazon, nearly half a microsoft i wonder what sort of pressure
there is on tesla. you talked about them having to have a rosy vision of the future just how rosy does it have to be >> one of the challenges has long been execution. so on the one hand he's always had they rosy outlooks, and has been given new credibility in the past 18 months or so, because he's finalsly started hitting some of those targets, so i think investors will be looking for any kind of color on how the otruck is doing. the company's got factories going up in texas and berlin, really looking for some color on will they be successful. if not, that could be problematic. investors are betting on huge growth over the next few years all right. nobody bring me no bad news. tim higgins, thank you i want to bring in stephanie
link, a cnbc contributor, for more on this busy week of earnings so good to see you, 107 s&p companies this week across quite a number of industries and sectors, but i think he knows where i'm going to start it's a big week for the industrial names, which i know you have liked historically. what are you watching for? >> it's a great question there's so many data points that we're going to learn this weeks. it's 25% of the s&p companies that are reporting, to your point. the first them i'm looking at -- i know everybody is watching apple, tesla, facebook, lam research i do think the apple report is probably the most important. it's a 700 base point weighting in my benchmark. so i'm anxious to hear about the 80% of the products and services
they have refreshed over the last 12 months and what momentum that will take us in the next 12 months, the next couple years. back to your question on the industrials, we're going to hear from -- i wasn't skirting the question -- free port mcmoran i for sure important caterpillar same deal. is dow chemical getting pricing power? all of these companies are important, but you know my largest position is boeing that one will also be important and ge will tie into that, right? in terms of the aviation division both stocks have had a nice recovery off the lows into the beginning parts of this year it will be interesting to see the reactions. the other thing i'm looking at is really the consumer globally. american express and mastercard report this week we know the consumer spend has been kind of disappointing,
especially for american express. these are reopenings, so i want to hear what they want to say about the global consumer. those are the two segments this week that i -- >> i wonder how you see it, giving the fact that we are really getting under way with this earnings season one of the things we have seen, that the estimates were so much lower than the numbers that actually came in that's what happening when you have an enormous amount of liquidity and low interest rates, right? that's fuel for the risk-on trade, which means equities, right? so i think you have to look at it like some of the technology companies have done so well, because their growth end markets are so bold, right you look at a.i., you look at
cloud, a trillion dollars total addressable market by the end of the decade total addressable market, but 2025 precision farming, right up nourielie, is a $70 billion total addressable market i understand why technology has done so well, because the growth is there , so you definitely want to have some exposure, especially we as consumers, we understand these businesses it's like the peter lynch way of investing. at the flip see, that are not expensive are the cyclicals, the economically sensitive companies. i want to own them, mainly because i think the economy is in a recovery mode the atlanta fed, by the way, has a gdp number at 7.5% annualized i think that will surprise people i think you're going to have all the this liquidity that funnels into the system at low rates, even if they inch of higher,
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works to combine with its ubereats next up kimberly-clark climbing on stronger than experted earnings the consumer staples company continues to benefit from a pandemic-induced surge kimberly-clark is up about 4% right now. finally shares of carnival cruise lines as ship stay docked. carnival saying some dry dock plans will be delayed while previous trips have now been canceled as you can see, carnival is down by 4%. it's like funk music i'm trying to keep my concentration and not move around. >> we're like '70s cops under cover. >> i wouldn't have it any other way. stocks sitting near report highs, but it's not just u.s. stocks chinese stocks have also climbed higher, and fred kemp says china
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reporting a return to growth after the pandemic and president xi saying we should be competing quote, fairly an atlantic council ceo fred kemp argues china is going object the top challenge for joe biden and his administration in an opinion piece. he joinsis now fred, it is good to see you. so we just mentioned the keynote at the virtual world from davos this morning the biden administration like the trump administration before it, the obama administration before it, and the bush administration before it, really has a lot on its plate where china is concerned how would you expect this administration to now approach it >> the biden administration has made clear how it's going to approach it. that's with urgent patience. and first and foremost, president biden sees the way to
approach china is to strengthen the u.s. economy so this $1.9 trillion covid relief deal, and infrastructure build that's going to follow that you have to first of all heal your democracy, bringing author unity. build up your economy and critically reach out the allies. what xi jinping, president xi said to the world economic forum today, essentially, if you read between the lines is it may be biden's america but it is china's world. its 100th anniversary of our party and in the first 100 days of joe biden, ip going to focus on that and we have got the wind at our backs we have got the momentum, so the u.s. can do whatever it wants to do, but right now we are the indispensable economy even if in the past we were what secretary matalin albright called the indispensable nation >> how do you -- how does the u.s. do that, work with allies
guess to counter china, some of the key allies, thinking about europe, who sees china as a key trading partner? >> it is going to be important this stick was little noticed. but in 2020, china surpassed the united states as the proon's leading trading partner. it is the number one trading partner for many of our allies, germany, including south korea, japan, also uae and middle east, saudi arabia so it is going to take patients for the united states to put itself back in play again. i think one of the things that the biden administration will count on is xi jinping could end up overplaying his hand. he is concentrating more and more power in his own hands. and authoritarian governments tend to be brittle and the more he cracks down in hong kong, the more he cracks down on the uighur minority, the muslim minority in china, which the biden administration agreed
with the trump administration is a genocide that's what secretary of state tony blinken said in his testimony. that that's what they are counting on is we can strengthen ourselves, our economy, our alliances and in the meantime china may hurt itself by overconcentrating power. >> i want to get one more question in here before the pandemic china was already expanding its global influence with a lot of spending, infrastructure spending the u.s. is spending a lot at home and probably to the going to be in a position to spend a lot outside the u.s. is that a problem for trying to counter china's influence? >> i think the biggest problem, john, in countering china's influence is not being willing to do trade deals. and this democratic demonstration isn't going the lean into doing trade deals. and what has china done since joe biden was elected? first it did a deal with 14 other countries in asia, the rcep deal, then it did an investment agreement with the european union it is reaching out in trade at
dow being dragged down by am exand -- >> defense stocks have been hard hit even as commercial stocks like virgin galactic particular to soar. >> with that we look ahead this week to apple earnings amongst others that stock is lead the dow w. that, thanks for watching "power lunch. "closing bell" starts right now. >> john, morgan, thank you for that coming up on "closing bell" today with me, wilfred frost and sara eisen, all the latest market moves of course on friday we did have a record intraday close as well or the nasdaq. let's look at what's driving the act. values cyclicals driving, tech is high. apple up stimulus negotiations in washington continue though hopes for a full $1.8 trillion are slipping and speculative parts of the market continue to heat