think retail is where you're supposed to be this week. >> i would keep my eye on the energy space on natural gas. i think natural gas is near the bottom. >> all right. good stuff. guys thanks. thanks to all of you for watching as well. we'll follow the markets as well. "power lunch" begins right now. scott, thank you very much. along with mandy drury, i'm tylermatson. have you heard there is an apple event? the tech giant expected to release its new music streaming service. it will be a game changer. like its music download business was a decade or so ago. >> ty we're also expecting ios 9 updates for iphones ipads and the watch. what about apple pay? the stock right now is under pressure. down about 1% but that may change in the course of the next two hours because we've got a lot of information coming out. the stock is already up about

15% so far this year and up 40% in the past one year. our jon fortt is live at the big event in san francisco. jon? >> reporter: well it hasn't started yet but we expect that to happen any moment mandy. right now they've been pumping uptown funk in there as people get ready. the lights just went down. really we're probably just seconds away from tim cook walking out on the stage and saying something to the effect of, "i'm so glad you're here we've got a lot of great stuff to share with you." what typically happens here is they show a video, possibly from an apple store, possibly in china, making the point of just how big the global audience is for ios and for the mac. they want to show momentum in units here. they want to show that they own the premium end of the market. they want to communicate to this audience in particular that if you want to make money in software apple's platforms are the place to do it. that's what we expect. of course we expect music and also those operating system

updates to take center stage. >> jon fortt, we'll get back to you shortly. we've got a lot off jon coming up, but let's bring in another voice, kara swisher who is also at the apple event. a lot of things that we are expecting have been well telegraphed to the markets. what do you think could be the surprise? >> well we just broke a story about a new flip board like app that they're going to redo newsstand which hasn't been a real success with publishers because they feel like they're buried. we just wrote a story talking about this new app they're going to build that will allow publishers to sell -- for consumers to sample content of publishers. they're getting on that particular bandwagon which is a new thing that. hasn't been reported before. otherwise, i think it is a lot of the music streaming service, updates. it is not terrifically newsy here. never have so many periscoped

about so little. >> could that potentially move the needle apple stock today? >> no. it is interesting they're getting into the publishing space this way and correcting the newsstand problem with publishers. they're working with a bunch of publishers that we reported on. it is will be interesting, facebook is getting into it with instant articles google is going to make a move here. it is an interesting time for content publishers. that will be the most interesting thing. besides the music streaming service brwhere they're trying to sell a paid product and see if they can get to spotify levels. we'll see. >> stay with us. we're going to bring in two analysts with strong ratings on the stock. ivan feinset of tigress. and dan ives of fbr capital markets. kara is sticking around for us.

ivan, you like the stock. why do you see it moving up substantially from its current levels $127? >> based on their dominant position in the phone computer and will be the wearable with the watch. i think the watch is going to become the center of the connected universe. >> how about you, dan? do you think the watch is a real profit driver here? a lot of people are skeptical that it can really move the needle, that it's not -- let me put it this way -- a mass enough product. >> we view this to some extent right now as really it is an iphone 6 in china story at this time for apple. in terms of the watch and in terms of wearables, i really view that as the next leg of growth. i ultimately believe 8% to 10% of revenue two years out. apple pay i think could be some of the breadcrumbs here in terms that they could lay in terms of the reward programs and some of these other areas.

this is really apple going not just from hard wrar but transition is to software. software is the epicenter of the next leg of the apple growth story. >> there were so many nay sayers and critics in the early stages of the apple watch. how much of an integral part of apple's growth story do you think the watch will be going forward? kara? >> yeah. >> i don't know whether you heard the question. i was asking you to follow up on what the guys were saying about the apple watch and it being so much part of the ecosystem. what do you think? >> yeah sorry. i think the apple watch -- we'll see about the apple watch. there's been a lot of stories and a lot of consumers talking about that they don't like it. i had an interesting interview with aaron levy from box, someone who was wearing it. he thought it should have been sold as an iphone accessory which is kind of interesting. i think the question is is this version something that regular people are going to use. i think possibly not. i think it is still -- they've got to make it so developers who are here -- this is a developers conference, let's remember. it is not a stock moving

conference. they've got to make it so developers want to develop for it and create great apps. right now that's still a big open question. i think they will. i think there's no question but i don't think it is sort of this big booming thing right now at this event at least. it will be interesting. it's all stuff that's tbd, as far as i am concerned. >> ivan, let's talk a bit about where you see the stock moving, how soon and what if any, flies there might be in the ointment here. where is the vulnerability if apple has a vulnerability? react to that. as we look now -- i guess tim cook has taken the stage out in san francisco. don't know if we can take a shot of that. but any rate he's on the stage. do you see any vulnerability in the recipe here? >> the only possible vulnerability in competition and substitution. if other phonemakers, other wearable makers take share from apple. apple's position in the stock, it is not just the watch not just the phone, not judgment i

pay, iitunes, but it is the watch, i pay, all together. >> kara tell me i'm being unfair here. but with respect to apple going sort of all-in on music streaming, i think this is one of the few times that i would say apple is playing catch-up. when you look at the ipad when you look at the ipod the iphone, the original itunes store, they were way out front. now they're playing catch-up. >> yeah. they tried it with ping. if you remember ping that was here a while back and some other services. but the question is do they have enough features to make people want to sign up for this. if that was the case everybody would be using itunes radio and the itunes -- that's not just taking off either. so the question is is this surface so good given that there are so many good competing services, not just spotify but pandora, jay-z's efforts and all kinds of things. the question is why are they so late to this.

same thing around the content. i think it is interesting they haven't weighed in with a great content consumption. it is a really bad experience to consume content in newsstand. i'll see if they debut something that's more attractive. >> we'll get back to you in a few minutes. thanks for stishging ingsticking around. apple has changed the face of music with music downloads. will it be able to do the same thing with that new subscription service? julia boorstin is looking at what it means for the competition, talking about the spotifies and pandoras of the world. >> absolutely. apple is expected to charge $10 a month for its beats streaming service as it chases the growing music subscription market which is poised to surpass digital downloads which are actually on the decline. apple's new service is direct competition for spotify the leader in the space with 60 million users, 15 million of whom pay. as apple plays catch-up it has to take advantage of a massive

scale. it has credit card information for 800 million people around the world with itunes accounts. sony's music ceo says today's announcement will be a tipping point for subscription services predicting it will have a halo effect on rivals. now there are only about 41 million paying subscribers to music services plus more than 100 million active users of freemium music subscription services. pandora shares are already trading down about 2.5% today ahead of today's announcement. itunes radio is expected to introduce live online radio stations created by deejays and popular artists which is a direct attack on pandora's more algorithmically created play list. we'll be back as we learn more about apple's new offerings. >> pandora shares down 2.8% as we speak. thanks a lot, julia. more of apple throughout the next two hours but let's hit some other headlines out there.

a monsanto deal could be worth $45 million. if sears reporting a loss it offered fewer discounts. shares are up 20% this year though sears is down 2% today. general mills launching its yoplait yogurt brand in china with three new yogurt lines. general mills shares unchanged. to the american housing market we go. renewed doubts about the strength of the recovery there. banks have lowered interest rates, government has forgiven debt but loans are still going bad. why? what's going on? diana olick knows. >> reporter: hi ty. look, no question we're in a far better place than we were at the height of the foreclosure crisis but some troubling new numbers show just how far we still have to go. of the nearly 1 million borrowers who are 90 or more days past due on their monthly payments but not yet in foreclosure, 62% have already been through some form of home

retention program, like a modification. that according to a new report. they are, it seems, beyond help. so when you dig a little deeper into the issue though analysts say part of the trouble is that today's modifications are not as aggressive as they once were. for instance the government program. in 2010 the typical monthly payment reduction for a troubled borrower was about $530 a month. that has now dropped down to just $450 less a month. banks are also getting more aggressive in pushing delinquent loans through the process rather than offering more modifications, because now they can sell the homes more easily at a better price. so retention actions, some with principle reductions are down over 42% in the last two years. of those being done 72% of those loans have been right in that place before. again we are in a much better place. delinquent loans in the foreclosure process though are still two and three times the

normal levels respectively. >> diana, thank you very much. apple, of course -- the big stock story this hour. ceo o tim cook speaking right now on stage in california. the tech giant holding its worldwide developers conference. "power lunch" all over it. we got the headlines as they hit. a new music service expected to be launched. one nobel laureate in economics will weigh in on the impact of the apple economic. as we head out, the number one song on itunes right now, taylor swift, "bad blood." ♪

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we're just beginning to get the first headlines out of the apple developers conference in san francisco. our man on the scene is jon fortt. hi jon. >> reporter: hi, tyler. first headlines out of this mostly having to do with the mac os. the upcoming version, appears to be called el capitan which of course is a california landmark which are all the code names of mac os up to this point. the last version was yosemite. the head of the software development at apple just said 55% of active mac users are on yosemite right now. that is a very fast adoption rate. not clear exactly how they define active mac users, but nonetheless, a very important

milestone for them. also they've made clear they are going to talk about watch os that being the underlying software for the apple watch today. we're going to get news on mac os. ios and watch os guys. >> kara swisher, jump in here with your quick reaction. >> sure. i mean it's an upgrade of a thing. el capitan is actually a rock formation in yosemite that people like to climb here. so again, it is an upgrade. he'll have a few new features but it is not a fully new system. a lot of people of course do upgrade as they improve these things but it is not a soup-to-nuts kind of thing. it is just fixing things that were wrong with yosemite adding to things and it is a part of yosemite but still again, it is a developers conference so it is going to be much smaller announcements here than people -- everything apple does is big, but -- >> every year they come out with a new version. they like to iterate on that versus the old days when you would have a shrink-wrapped piece of software it might only come out once every couple of

years. they want to iterateablely improve. >> they are making things you can pin into safari. not a new thing, just improvements. another thing where the cursor blows up if you do certain things. again, kind of cool but i don't think it is going to set the world on fire with this particular update. again, el capitan is in yosemite. and i've never climbeded it. >> that makes three of us. we'll be back with you. from his unique vantage point at stanford the nobel prize winning economist alvin roth has a front row seat for all the changes that take place in silicon valley and his new book "who gets what and why" is all about how these markets work. since we are talking this hour so much about apple, i'm curious, of the students you encounter at stanford and in your work in that area is apple still a hot place for those

students to go to work or do they want to go someplace that feels fresher or different? >> i think a lot of students would like to start their careers at apple or google or facebook. but many of them speak about how after getting a few years experience, they might like to start off their own and get involved in a start-up. >> so maybe they cut their teeth with the big guys then move out and be a little bit more entrepreneurial. what do you think apple is worth to the u.s. economy? all the spending on apple products. we often hear about young ones these days perhaps saving up their allowance or saving up whatever they are getting from a part-time job and they aren't necessarily spending on what they used to spend on like shoes or clothes or that sort of thing. maybe they are spending it on technology gadgets like apple products. >> it is not just american youngsters but apple is a giant exporter. they're becoming a big part of the american economy. not just apple. silicon valley in the united states in general are big manufacturers of digital

products. so there had been some thoughts some time ago that maybe manufacturing was leaving the u.s. but of course internet manufacturing is a very big deal. >> is apple, in your view professor roth a net adder of jobs in the united states or as a disrupter of many technologies and an enhancer of productivity maybe a net subtracter of jobs. >> i'm not expert on that but by and large, new technology grows the economy and that's good for employment. it's good for -- it makes the pie larger. but not for everyone. so while it is very good to have the economy growing with be we haven't been as good as we might be about taking care of people whose jobs are eliminated by new technologies and not only are we a big exporter we're a big importer. we should do a better job of making those transitions easier. >> ty used the word disrupter.

it seems a very apt world for apple. what other parts of the world economy do you think apple has disrupted and will continue to disrupt? >> well, apple certainly has changed the way we talk on the telephone and what else we do with our telephones. they are a big part of the computer industry and the internet generally has very much changed how we buy things. so music, which apple is a big part of they've changed the way musicians earn their living. not just the way we buy songs but the way musicians are paid much the way the internet has changed the way books are sold. there used to be lots of used book stores. now you can get any book you want on the internet. >> it might disrupt search as well. only considering a switch to yahoo! or bing from google it might even come up with its own apple search. i'm not asking you to speculate but that's certainly another area apple could shake things up and be very bad for google. >> search has certainly changed

the advertising industry and apple is a giant platform. so i'm sure that they have intentions in that space. >> let's talk a little bit about trade. you mentioned how big an exporter apple is and indeed many american companies are very large exporters. there is a major trade pact that's working its way through congress now, and there is some controversial provisions in it. do you have a point of view on it and whether it would be a good thing globally and for the u.s. economy? >> trade pacts are hard to negotiate, so one of the things that's before congress now is whether they'll give the president fast track authority so that congress will be able to say yes or no rather than chipping in with ideas about how to modify whatever treaty emerges. and trade is one of those things like technology, new technology that tends to grow the economy. so by and large increased trade is good. it makes the world wealthier but it doesn't make everyone

wealthier. if you can export to more people, that's good for you. if you can buy things from far places, that's good for you. but far places are making the things used to make cheaper than you now make them that's not good for you. so we need to do a better job of smoothing these ripples. we want everyone to share in the growth of the economy. >> noble laureate alvin roth thank you very much. congratulations on the new book "who gets what and why" about how the way markets work in the brand-new economy. thanks again. how hot is apple? check out the stock this year. it is up a whopping 16% making it the top stock in the dow 30. apple today is not doing terribly well but nonetheless it's done very well and outperformed so far this year. 23 analysts tracked have a buy or overweight rating on apple. 13 have a sell rating. and -- excuse me. 13 have a hold rating on the stock and just two have a sell rating. we'll speak with one major shareholder about why he is

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welcome back to "power lunch," everybody. apple's big event is under way. the stock right now is down by 1 1%, $127.25. with us, channing smith, portfolio manager. in the past six months channing has trimmed back his apple holdings from 5% to 3%. channing, why did you do that? >> look we still have a very

large weighting in apple. it is one of our top positions. we were over 5% and we just thought it was prudent to pull that back but we're very positive on apple. today we echo a lot of the reporting that comes out. we don't expect this to be a big mover of the stock today. what's going on today is strengthening the ecosystem. what's been driving the stock over the last nine months the new iphones and the apple watch. those are the key products. today is more let's strengthen the ecosystem and support those sales going forward. >> what do you think is the biggest risk to. ale and its stock? >> i think competition. if you look at samsung, if you look at google they're right on the trail of them. apple pay. not unique very much anymore. we think that you have to have that service. we think that if you look at the radio, we think that will be somewhat of a competitive advantage but it is really a competition. there is not a lot of differentiation when it comes to smartphones anymore. >> you don't think the apple watch is going to be a game changer? >> we really don't. if you look pat a lot of

estimates, a lot of animal cysts have 10% penetration rates. we just don't see that. we are excited today to see that you're going to see native apps available on i watch-watch but we don't see that being a game changer. we expect 1 out of 20 to use that functionality. we don't see it as penetrating and being a big revenue driver. >> the stock is sitting just above $127. about 5% or so from its all-time high of $134 and change on april 28. where do you think the stock should be? >> we think $140 to $150. the iphone is tracking very well. iphone is about 66% of the revenue. we think those estimates are going up. we've read that china's penetrating very well. if you think about the refresh cycle, we're only 20%, 25% penetrated there so we expect a big refresh cycle to happen not only over the next six months but over the next 18 months. we think this drives apple much

more going forward. everything else is good to support the ecosystem but the big driver is the iphone and we spent big things over the next 18 months. >> but still $140 and $150 is lower to where our other guests had their price targets. channing smith from capital advisors, thanks for joining us. a check on the bond market now. we will bring you numbers today. i'm going to do it not santelli here. let's take a look. you can see that the yield on the 10-year is at 2.38. just a smidge below 2. 4.4. that's a major move in the past few months. that, folks, is your bond report for the day. mandy. the i-economy. we'll head live back to apple's developers conference in san francisco for the very latest headlines coming out of that. apple stocks sitting just above

$127. it's dropped just a few cents. it was sitting around $127.41 the a the top of the hour when the conference started. we'll keep an eye on where it heads as headlines come out. e financial noise financial noise financial noise financial noise

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hello, everyone. i'm sue herera. here is your request cnbc news update. the president said all leaders are in agreement against man tang sanctions against russia because of president putin's continued cease-fire violations in ukraine. >> he's got to make a decision does he continue to wek his country wreck his country's economy and continue russia's isolation in pursuit of a wrong-headed desire to recreate the glories of the soviet empire. >> the u.s. envoy for the global coalition against isis general john allen, visited bosnia today. he met with the muslim member of the bosnian presidency as he

continues his balkan tour of kosovo montenegro bosnia and croatia. hundreds of taxi drivers who work for uber protesting in the nation's capital saying the crackdown on the business is affecting their livelihood. the taxi country was banned after an uber driving was charged with raping a female passenger. people in australia forced to run for their lives after a man was knocking down a house with a bulldozer and crashed into four cars. a 48-year-old man was arrested. that's your cnbc news update this hour. back to you, ty. sue, thank you. back over now to jon fortt and kara swisher with the latest from the apple worldwide developer's conference. jon. >> thanks tyler. kara we've had quite a few interesting headlines over the past few minutes. they talked about metal which is a piece of software that allows developers to get more out of

their software. that was on ios. it's coming to -- >> they can destroy cars 70% faster. i'm sorry. a lot of these updates are minor. >> adobe is adopting it for the creative suite. >> yeah. sure. >> that's one of those apps big-time developers use. if they're adopting this it could be good for apple. they said this latest version of the mac os is going to be broadly available in the fall. if you want the public beta you can get it next month. of course developers will get it today. on ios they said there is an 83% upgrade rate to the latest version. so still a lot of people who have the latest iphones and ipads are upgrading to the latest version of the software -- which is important to developers. >> a lot of this stuff, one of them in the mailbox which i switched to from apple mail to microsoft because apple mail was so underfeatured, has had it forever. i just think they're bringing in -- they're very nice but

minor updates. walt said that from inside. he's inside blogging. they're nice and needed and important, but i wouldn't say earth shaking, certainly not for its stock. it is just improving on the product that they've got. >> not for investors, but for developers, the people apple wants to pay attention today, say work on our platform. these tweaks and these numbers, 87% adoption rate on ios is important. siri apparently 40% more accurate than it was before. the word error rate at 5%. i don't know how you feel about that. >> i don't know. >> 1 out of every 20 words it went wrong? >> it works pretty well. they all work. google's doing amazing things in this area. again, i'm glad it's better. >> more headlines as we have them. >> looking forward to them. let's get reaction from two strategists who own apple. hugh johnson, chairman of hugh johnson advisors.

art hoe gone chief market strategist. hugh, you've raised your price target on apple, this time to $172. what are you seeing? >> not seeing much except just really good numbers. continuously good numbers not only on sales. we're talking on revenues of 22% for this fiscal year. we bring those numbers down to very conservative numbers. 5% for next year. 4% for the next year. when we talk about margins we're using 34%. i think that's in the cards for 2015. we're bringing those numbers down. and even using those numbers, in our judgment the price at $128 is very undervalued. $172 is really not a far stretch in my judgment. given these numbers -- and i think these assumptions, these numbers that we're using are extraordinarily conservative. let's not forget the distinct possibility. you know about their cash position. you know about their free cash flow. this is going to give them a real opportunity, in my judgment in the future to do

some stock buy-backs, raise dividends. really right now, quite frankly, all the numbers are falling into place and they really look very good. i think it is very cheap, i think it is very undervalued and i think people should take a hard look at it even at this price. >> are you taking a hard look at it as well art? do you agree or disagree with hugh? >> i've never disagreed with hugh and i'm not going to start today. one thing is that there is a credible opportunity for us to look at apple as a value stock here. when you think about the fact it's traded below the multiple of the s&p 500 when you back out cash and give it a fair market multiple backing out cash gets it to his $172 target price. i would argue it probably deserves a growth company multiple, something north of that. clearly that's one of the things. the other thing is that they continue to drive demand. you think about a company like apple, they are looking at inventings things we didn't even know we needed two months ago, then we can't live without once they introduce them. >> that's so true.

>> that's not happening today. today is an iterative process, incremental improvements and we probably don't have that oh there's one more thing moment today. but that's all right. this company has a lot of runway ahead of it and i think hugh is absolutely right. >> to broaden the conversation away from apple for a second even though you think, hugh apple stock is undervalued you think the overall market is overvalued. don't you? >> yeah. we were about 3% overvalued before we started this correction last week. right now i think we're just a little bit overvalued. quite frankly, what i'd like to see is a further decline in stock prices to levels that make a lot more sense where i can have a lot more courage to step in and just start to buy stocks. you've really got in this kind of a market environment to be really good on your entry points. i think that's, quite frankly, 6% roughly 5% to 6% below current levels on the s&p. and then i take a hard look at companies like apple. i think apple might give a little ground in that kind of environment. a lot of everything else will

give ground but it will get to levels that make more sense. again, this is all within the context of an ongoing bull market. you just got to buy right, get the entry points right. >> in this context then art, what is the best trade of this week or maybe even this month or year for you? >> i think the financials are clearly that. the kre, the regional bank -- >> i'm just going to bust in for two seconds. we've got to get back ton jon fortt who's live at the developers conference. any more headlines, jon? >> reporter: yes mandy. something that we really need to mention. apple has announced proactive assistant. what this is it is similar to google now which we've seen from them. it is something that anticipates what you're going to need. it is able to tell the context when you're asking a question using something like siri. so you can be in an app and say remind me about this when i get home. they can see what "this" is your phone can see, the operating system can see because it knows what app you're in and it knows when you're home because of the gps and can thus

pop up a reminder. you can also say something like an example they give "show me the photos from utah from last summer." it is going to be able to understand that. part of what powers this is natural language search the software being able to understand your intent search through the contents of the phone, even search through the cloud, search through apps to figure out how to give you what you want. that's increasingly important as we think about apple coming into competition with google which not only has this in again, services like android's google now but search is a very important piece of google's monetization and ecosystem. and apple is a very important customer for google. with search, this is more of apple doing more of that technology in house and should have implications for google in the months ahead. >> google's stock price -- in just a second. let me just talk about apple stock. we started off this show at 1:00 p.m. eastern when the developers conference started. we were sitting around $127.40.

we're about 30 cents lower than that right now. we've dropped a little lower but not a huge amount. google right now is off by over 1%. at $543. it's been following the last few minutes as john you came out with those headlines. we'll keep an eye on what google shares do as well as apple, of course. let's get back now to our market guests. i'm sorry to have broken in to your train of thought there. you were telling us how you like the banks, particularly the regional banks. >> yes, that's right, mandy. you were being my proactive azips tant there making sure we are getting all the news we needed. which is great and interesting. but when you look at regional banks right now, they're coming into their sweet spot. we're creating jobs 240,000 jobs a month for the last six months. bank lending. demands for loans is is increasing, these are for banks that have been able to operate in an environment of nest

interest margin. i think the financials in general are taking over leadership here and will continue to do so the balance of this year. i think the best way to play that is in the regionals whether the bank of the ozarks iberia bank. look at the kre which has finally broken out of a two-year channel and continues to make 52-week highs. >> thank you very much. hugh, art, for joining us today. you can also go to powerlunch dot c powerlunch.cnbc.com. let's go out to jane wells with breaking news from california. >> very different sort of tech. we're standing by if you watch nasa tv right now, the next important step in technology of going to mars. a test vehicle will be launched by balloon to save money instead of rockets. that test vehicle which will look kind of like a flying saucer is going to be used eventually as sort of a prototype for a neulander for

mars something that could land heavier or larger payloads. and it would use what's called atmospheric drag to do it. the low-density supersonic decelerator. any moment it is going to take off. we have a still photo of what it looks like. you can see, once it gets to 180,000 feet altitude little inflators on the side will inflate which will make it look even more like a flying saucer. then there will be a massive 100-foot wide parachute that comes down. now a year ago when they first did the test imminent release, they're saying. a year ago when they did the test -- the inflatable decelerators worked. the parachute ripped though as it was coming back down to earth at speeds of mach-4. they have really worked on that parachute parachute. and here it goes.

>> the test vehicle's on that tower there which will be pulled off by the balloon. the balloon will carry it to 120,000 feet. again, this is to save money. at that point, rockets will fire to take it to 180,000 feet. and the ldsd will then hurtle back to earth at speeds of four times the speed of sound. the inflatable sides will come out. the parachute at one point will come out and it will hope this time that it doesn't rip. and it will take about 40 minutes for that thing to fall back to earth if all goes well at a slow enough speed that they hope they can use this information then for mars. again, the martian atmosphere is onlily 1% the density of our. you have to be right on to use the right sort of technology to

use the drag over a very thin atmosphere as opposed to the airbags which they have used on the martian rovers that they've taken to the red planet so far. finally be guys this is about a $200 million project so far. and the largest publicly traded name involved with the orbital atk which has been involved in making the forestructure around the rocket engine. it is lift-off. not a rocket but a balloon. and this will be happening now probably for about three hours. so tune in later to see if everything goes well on the landing. >> all right jane, thank you. back to jon fortt at the apple developers conference. jon? >> tyler we've got news on apple pay. let me bring it to >> jennifer bailey saying that square is going to have a new reader. square has the plug-in to your phone that accepts credit cards. that will be carried in apple stores. apple giving the update that 1

million retail locations now accept apple pay. also saying it is coming to the uk next month at a number of big retailers there. quite a bit of news on apple pay. the momentum there. we'll have more "power lunch" coming up after the break. er group, they work all the time. sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks options, futures... even advanced orders. and it offers more charts than a lot of the other competitors do in desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivative pricing model, honey? for all the confidence you need. td ameritrade. you got this.

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all with dedicated responsive support. with centurylink as your trusted technology partner you're free to focus on growing your business. centurylink. your link to what's next. welcome xwrakback to "power lunch." more news from san francisco from apple's worldwide developer conference. more news on apple pay. loyalty cards are now coming to apple pay. the company announced including brands like kohl's walgreens, dunkin' donuts and jcpenney. also the massbook where app where you can keep things like airline tickets, movie tickets, other information. they're changing the name of it to wallet which is interesting. google used to call its product google wallet. they just changed the name. apple is taking it. this perhaps more direct more specific, google no longer ha is

wallet, apple no you calling passbook wallet. >> thank you, jon. american pharoah the first horse to win the triple crown in 37 years! a big accomplishment, but is it in you have to save the sport of kings? robert frank here with that story. >> great victory for him. american pharoah made a fortune for his owner around the trainer but can he save horse racing? racing hasn't had a triple crown winner in 37 years. experts hope american pharoah's victory could bring new fans new sponsors and owners to the sport. that's one reason ahmed dayzayat wants him to keep racing. he's also helping the wagering business. the new york racing association saying $135 million was wagered on the pel month onbelmont on saturday. that's the second-highest in new york racing history.

17 million bet on the track and 117 million bet off the trashg. a lot of that electronically and through mobile apps. nationwide the number of races and horses is in a decline. the foal crop that's the number of young thoroughbreds being born has fallen for over a decade so tracks are struggling to get horses. attendance also down because people are betting online and over mobile phones. it is going to be hard for one horse, even one as great as american pharoah, to turn all of that around. >> i couldn't help but notice that in theent ranl entourage there, a lot of people were wearing those monster beverage hats and necklaces. this there is a back story. >> along with the many sponsors along with the ride. they paid a lot of money. they didn't know if it was a one-day wonder or a six-month dream ride. they also had the monster girls there. famous. but a lot of people wearing monster hats. wheels up the private jet company, also on the pant leg of

victor espinnosa. that horse looked like it was smiling when it finished. that was one happy horse. >> one happy horse. but let's get out to the apple developers conference. >> people have been waiting for this one for a long time. apple executives have moved on in this ios discussion to talking about maps. they say that transit directions are coming to. ale maps. you'll recall this is a feature that google maps have had for quite a while. apple wasup set with google for not developing that within the app that they had on ios further. so apple has taken it upon themselves to work on this. any now have it. apple also saying that it's getting 5 billion user requests per week inside of its maps app

and saying that's 3.5 times higher than any other mapping provider is providing. i guess that's 3.5 times higher than google is getting. also within transit you're going to be able to get multi-modal routing. we'll have more on "power lunch" after this break. . seven out of ten power outages in the us are caused by weather. but utilities can now predict where the power will go out, within a few city blocks. working with ibm they're combining micro weather forecasts with detailed data from local sensors.

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want to show you two charts to show you how much apple stock has outperformed the broader market. you are looking at a dow jones industrial has just gone negative for the year to date. year to date for apple though is up 15%, 16%. a clear up performance there. apple stock is on track to be the greatest gainer on the dow so far this year. be right back.

welcome back to "power lunch." more news out of san francisco and apple's worldwide developer conference. company has just announced a new app in ios called news. think of this as replacing news didn't stand which newsstand which was an app that didn't do so well. news is going to be a lot like clipboard from all appearances. you can pick specific publications or from over 1 million topics. what apple hasn't shown yet is exactly how the advertising model might work. publishers are wary of this sort of thing but it is a very attractive looking experience and something that facebook and google are also trying to pull information in to on their platforms as well.

tyler and mandy, back to you. >> that would be a big improvement there because i think their news app actually buries a lot of the news content that you get as opposed to flip board which does make it very accessible and like reading a magazine. >> we started the show about one hour ago. that's exactly when the conference started at well. we started at $127.41. where are we guys? $127.41 a little bit of gyration in between, but essentially we're back to exactly where we were at the start of the conference. we'll see if anything really moves the needle over the next hour of "power lunch." >> that does it for the first hour. over to brian. >> listen guys i think renaming apps right now and new operating system updates not exactly moving that apple needle. i think the markets wants something bigger. hello, everybody. it is nearly 2:00 on wall street, 11:00 in cupertino, california. you are watching the second hour

of "power lunch." melissa at the nasdaq down across the board. the dow down negative for the year but have no fear the nasdaq still up 6% year to date. by the way, oil is also lower once again. we're going to get more on all that other stuff coming up but without a doubt, as you may have surmised the day's top story is apple. the massive developers conference under way right now in san francisco. music, watches, software apparently all the rage so far. jon fortt is raging with the machine and he joins us now. tell us about el capitan. >> reporter: well brian, incremental improvements here but they're important improvements. if you're an investor watching today be with don't expect some big piece of hardware a blockbuster surprise announcement. rather, you want to look down into the details here and look how apple is performing versus competitors. in el capitan, they are talking about speed improvements that will allowle software developers present here to write closer to the hardware getting better

performance, hopefully better battery life out of the devices as well. they also talked about improvements to ios that's the mobile operating system. just finished talking about news -- a replacement for newsstand that's going to come to ios that's very flip board like. also talk about apple pay and how square is going to come out with a new portal in stores that will accept apple pay. that's also moving to the uk. they're bringing game developers up on stage on how they are optimizing the experience about writing apps for the platform. we have yet to hear about music. we expect to hear that coming later. also they said they'll talk about the watch os. we haven't heard about that yet so a lot still to come. >> is it fair to say investors are underwhelmed by what they've heard? >> the stock was down i think more than 1% at one point. now it is about break-even to where it was at least. it is still down a bit from when

things -- when the day started but it's come back a bit from when the keynote started. there are a number of different ways you could look at this. bottom line -- you can't expect a big move out of a developer conference because a lot hf people don't take the time to understand how these software announcements are going to affect hardware in the coming months. but if you do your homework you can start to form your own thesis based on what apple is announcing here comparing against what google announced and what facebook announced earliyer. those are three of the important platform players already out with big news. microsoft is coming out with windows 10 later. you got to pay attention to the software if you want to see where the hardware is going or where those revenues will come from later in the year. >> jon, i have a feeling we have not seen the last of you today, my friend. edmond coward is an apple investor, he is bullish on the stock and he joins us now. ed, be anything you have seen or read that will make you buy more

apple stock today? >> no brian. i don't think there's anything coming out of this conference today that's going to impale an investment decision on our part. i think the earlier commentary that you all had from your reporters is right on point. what we're looking for are -- what i'm looking for are things that are going to give apple a repeatable source of revenue. things perhaps we're going to see coming out of the music business. something ultimately out of the television business. apple pay is another one. it is going to be realtive for a company this size to move their earnings just on the basis of hardware or new device. what we want to see if we're going to turn this into -- from a good stock to a really good stock, a great skok stock, is some multiple expansion and

usually that's going to come along with repeatable revenue opportunities. >> hold just one second. breaking news. ed we'll come right back to you. jon fortt has more breaking news. >> reporter: brian multi-tasking has finally come to ios 9 to the ipad. our viewers will note samsung has had this on android for quite a while where you can run two different apps side to side on the screen. that is important for trying to mark out the ipad as more of a productivity device not simly a immediate simply a media viewing device. sales on ipad have flattened out, teen started to drop. you double tap the home button and you can bring up a list of apps that you can move into multi-task. you have to be careful this experience doesn't get too complicated. we'll have to get our hands on it to see how it works but apple catching up to other apps

samsung and -- >> jon, i've had every ipad since they first came out. i've had every iphone, mp3 player, whatever. nobody's not buying the ipad because they've got lack of multi-tasking. the ipad has struggled along -- >> i'm not sure that's true. >> you think our viewers are going to say, oh they got multi-tasking so now i'm going to buy it. or people realizing tablets are super silliest. >> most people have not had every ipad. they've had an ipad they've had around for two or three years. they haven't seen a reason to upgrade. if you can run two apps side by side and if that's an experience you want to have that actually adds value to you, you're going to need some horsepower to do that which might mean you with a'nt to upgrade your old ipad from the ipad 2 or ipad 3 that you've had that chugs along playing movies and you just haven't seen a reason to upgrade.

maybe people haven't upgraded because they haven't had horsepower -- >> or because their phone is the same size as their previous tablet -- >> brian, i think the issue is to stem the decline in ipad sales. ipad is not going to be the drive it once was -- or i guess never really was. the point is that maybe you can get that person to actually upgrade instead of completely abandoning the ipad in favor -- >> nobody's saying we're abandoning it. can we have an honest discussion not as journalists but as users of the product that tablets may not be -- >> what you're seeing brian and melissa, is a pc upgrade cycle. that's actually been pretty good. not just for microsoft and for windows. but really for apple. you take a look at what apple says about their pc growth versus the rest of the market. aside from a couple of rough quarters that they had a year-and-a-half ago, mac growth has been pretty strong. people want to be productive. ipad sales at the same time flattened off and dipped. so the idea might be we need both of our platforms on the pc

and on the ipad to be productivity workhorses. that's what might get this to grow especially with this relationship with ibm. if they're going to sell these things into the enterprise we need as many possibilities as they can for the enterprise worker to be nimble and get work done on those ipads, guys. >> hey, jon, we'll come back to you in a minute. our guest has been very patient. ed kowcowert. ed the stock is down right now 1%. clearly there's nobody like yourself and the other institutional investors that have said multi-tasking on the ipad let me buy the stock. you sound like you need something big, big, big for you to press buy. >> yeah. i think so brian. right now the story is all about the iphone. we still think that there's good momentum with iphone 6. we believe that only about 20%

or 25% of the people who are walking around with iphones in their pockets, 4s or 5s, have upgraded yet to the iphone 6. that's still out in front of us. of course iphone profits are way over half of the total income for apple. ipads are an interesting kind of sideline there, but it's never going to move the needle i don't think. it's going to be short-term. it's all going to be about the iphone adoption. and longer term as i said earlier, it is going to be about multiple expansion, and as if this company can acquire a consistent repeatable revenue stream, not have to rely on people have to togo out and buy a new gadget every two or four years. >> powerful business model for some companies here. quickly on the valuation from 2013 to exexpected revenue at the end of this year both google and apple should grow around 22%. google trading at 16 1/2 times

forwards earnings. apple about 13 1/2 times forward earnings. is apple undervalued or is google overvalued? >> well i think i would put my bet on apple being undervalued, especially, brian, if you strip out the cash on that balance sheet. nearly one-quarter of apple's market cap or earnings -- or market cap is represented by cash. if you strip that out, realizing that cash isn't anything right now, then the ex-cash multiple on the stock is probably more than 11 times. so we think right now we got a very inexpensive stock with good earnings momentum going forward. lots of cash is going to be returned to shareholders over the next couple years. but longer term as i said it is going to be that repeatable revenue stream that is going to turn this from an 11 times earnings stock, let's say, to a 15 times earnings.

you look at a company like visa or master charge selling in the low 20s multiples, maybe if you want to really think about what apple could really do some day, if apple pay really begins to take off, then we could get begin to think about some real multiple expansion. that's how a good stock turns into a great stock. >> ed is cowert, be thank you very much. guys, good to see you. dan, start off with you. apple is firmly still in an iphone company when you take a look at where the revenue stream is and where revenues are going to come from at least in the near future. what they have to do today in order to move the needle is either firm up that ecosystem and future base of iphone users and/or unveil a new, entirely new stream of revenue. have we heard anything today that falls into either of those

two categories? >> yeah. i think we'll see in the next 15 minutes when they announce the streaming music, that's important because it really focuses on the software layer. ultimately now really apple is seeing where the puck's going, it is streaming music today. we believe along with apple pay, this is building out the next ecosystem when we think outside of iphone 6. it comes down to the next three, four quarters. it is iphone 6 in china. that's the growth story, that's what drives the stock and we think ultimately up side the next few quarters. as we look out, it is the software layer, these next gen areas. when you look at streaming music and some of the developers we talk to, some of the improvements made on ios i really believe they're laying the groundwork for what could be a massive 2016. that's really the 2.0 for tim cook in terms of that software layer combined with china wrapping a ribbon around it. >> ivan do you think that

streaming music service is going to be a slam dunk? spotify has 60 million users. only 15 million actually pay. pandora has 79 million users. a majority of the users on pandora don't pay a dime. why do we think that this is going to be a great thing for apple? >> first of all, they have a larger installed base in both those companies. apple has one of the largest install base of customers than any company in the world. so they -- >> do you mean the 800 million credit card numbers on file? >> i mean the people who have iphones, who buy content from itunes is the largest installed base of customers anywhere. so i think if they were to adopt a pay-one price all the music you could consume, i think that would not only be a competition to spotify and to pandora, but even to xm satellite radio in cars. because there is a link to put your -- attach your iphone to your car and stream music from

your phone into your car. >> dan, should we look at the streaming music service as a software layer or as a revenue stream? do you think in your model of apple that this will actually be a stream of revenue that will move the needle? >> financially speaking it's not even bread at the restaurant in terms of what it does to the model. this is really about them starting to put that fence around the backyard building out that next layer on the software side. today it is streaming music. ultimately we believe streaming tv where is all flows into apple pay and ultimately wearables and pro tension potentially augment reality. they know it the next three, four quarters they have high-octane jet fuel with iphone of in china. when we look out in 2016 at that next layer, that's why they're the gold standard of technology. they continue to be two steps ahead of any of their competitors. this is really what they're doing. they're laying out that next vision, next generation for apple. which ultimately i believe

starts in the next 15 minutes when they announce the music. >> we're actually getting headlines about apple pay. ivan i'm curious, you've got a price target on apple $165 to $175. how much of a driver is apple pay in this? reuters had an interesting story on friday saying that essentially pay was -- 85% responded they would not be accepting pay this year in the united states. >> it is not that that's the one driver. it is everything contributes to the overall drivers. i think that is the key thing. you'll be able to use apple pay on your watch. not to pull out your phone or your wallet. i think that -- that functionality will drive watch sales. the fact that the watch connects to the phone, you need the phone to make. watch work will continue to drive stickiness and expansion in watch and phone sales. >> thank you so much ivan and

dan. as we have been mentioning apple is in fact lower but the rest of the tech sector. the nasdaq was down as much as 1% on the session. the semiconductor index one of the softest parked in the nasdaq so far. some of the individual components much deeper losses than the overall stock which is down by just about 2%. micron is down almost 3%. nxpi down by 3.5%. let's get off apple and stocks for a second and talk about oil. another favorite topic of "power lunch." oil may be down today, but natural gas on the move higher. right now natural gas up more than 3%. given the low price, a 3% move is about a dime. but there is still lots at play here. nat gas rebounding after a bag sell-off last week, plus rallying on expectations of higher demand as we head deeper into the summer. velocity shares three times long that gas etn.

ugaz is soaring right now, up 10.7%. the other big story that we are watching today, the dow. it is now turned negative for the year again. happening now, the business roundtable giving its latest update on how ceos around the country are feeling about the economy. let's get down to steve leisman. steve, what is their collective outlook? >> brian, thanks very much. the business roundtable reporting this hour that ceos have downgraded their outlook for the second half of 2015 and done so sharply. their index plunged by 9.5 points to 81.3 to the lowest level since the second quarter of 2013 any lettered their outlook by .3 point. their outlook for employment declining by nine points. all of these big moves and contexts in those indices. quarterly ly quarterly, it doesn't reflect

attitudes about last week's strings of better economic data that include the stronger than expected jobs report. in response to that data economists parted ways with the ceos. they became more optimistic than they had been. morgan stanley among them. our cnbc rapid update done by moody's tracking negative half a point for the first quarter which is better than it was at 2.7%. also better than it was for the second quarter. macro economic advisors writing over the weekend last week's data capped by a robust employment report for may increased our confidence that gdp growth will be firm in the second half. also, the uptick in employment in the retail and leisure sectors at least suggests core retail sales might recover more than originally assumed. goldman sachs writes better growth and wage data have modestly increased our forecast for september lift-off. the troubling outlook for the

ceos. if they act on their down views it could create worst outcomes than they forecast. the good news is the ceo surveys oftentimes looks more to reactive data than determining it. it matters what ceos do and not 100% clear it matters what they think. >> those are all excellent points there because they do the hiring. steve, we got to get to jon fortt. more breaking news from apple. jon. >> reporter: brian, some new information on ios 9. it will be available broadly in the fall as previous ios companies are it in. a bit of a departure -- all devices supported by ios 8 will also be supported by ios 9. in the past that has not been the case. a number of other small announcements. the language apple uses for developers, swept 2, that's going to be open source. that's had a big reception in there. more "power lunch" after this break.

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i know you might be surprised, but let's talk more about apple. but, no not the stuff that we've been talking about much of the day, phones watches, music. let's talk about search. right now, google arguably the undisputed search king. that's why it caught our eye when a research report came out recently saying that apple may have something in the works for search and it could be big. joining us now, the man who wrote that report james, we

appreciate you coming on. it caught my eye when you came out with the report last week because we don't think of apple with search. in fact i believe google is the default search providing in the safari browser. why do you think there may be sort of a hidden search opportunity for apple right now? >> sure. basically, the way we see it is apple has been constantly improving their search experience and what they're doing is -- with the things that they're doing i think will help potentially shift the balance of search kwir ryqueries away from google and over to apple. i view it in three buckets. the first is siri. what apple's been doing to the updates to ios 9 is deeper irnt gration of siri into core and third party apps. this is a material step forward. i think the apple watch could actually serve as a tailwind. they announced over 1 billion requests per week already on siri. i think as the number of queries improve -- >> just quickly tell us where search might fall into apple's

money. would have help revenue? earnings? or just mostly a smack to google. >> the with a i we positionay we position the report is from a google standpoint. if you get that google search behavior on to apple. what is the monetization hit as few as fewer queries besides the incremental benefit to apple. is it about really what are the use cases going to be who will capture the most use cases. with the falling share of android to ios and with the potentially losing of the google search deal with apple to yahoo! we think there are risks to the google search story. >> so james, you covered google so i want to get what the google impa kt is going to be. in 2014 almost $12 billion for google came from mobile search revenue.

75% came from ios. half of that came from the deal with apple making google the default search engine. if that goes away because that i calculated is -- was 7% of 2014 revenues. if that goes away do they actually lose 7% or do they lose more because there is a knock-on effect as you are saying in terms of capturing the attention and search leads to other things? >> look. the revenue hit is going to be in the single digit range, both gross and net. the bottom line is where is the longer term implication. because the quality of search is based off of the magnitude and aggregate number of kwer rizqueries you can collect. if you lose the potential deal with apple, you'll lose data collection capabilities with most affluent of consumers, and if you lose android to potential competition looking to displace

android in operating systems the fewer data collection capabilities that you have the fewer clutch points, the more as a disadvantage you are longer terms in getting the right eyes in front of the right users and getting that optimal search experience for users. >> though i believe you can change it. duck duck go is a personal favorite of mine. thanks, james. up next all the latest breaking news out of that apple worldwide developers conference. plus an under the radar small cap stouk that citigroup thinks could nearly double that name ahead. and we are just minutes away from the energy market cloersing for closing for the day. financial noise financial noise financial noise

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booking.com booking.yeah! aol's tim armstrong is headlining "squawk box" in the 8:00 a.m. eastern hour tomorrow. you won't want to miss that. jon fortt is covering apple out in san francisco. jon. >> reporter: well, melissa, couple of big milestones for you. out of the worldwide developer conference, tim cook announcing 100 billion app downloads on the app store. they have crossed that mark. also $30 billion paid out to developers. 98% of fortune 500 companies have an ios app. apple making the case for apps

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i'm sue herera. here's your cnbc news update at this hour. authorities in boston releasing a video of terror suspect usaama rahim being fatally shot by police officers last week. the video shown at a news conference came from a restaurant across the street and it appears to show law enforcement officers backing off after initially confrundting him. prayers were held in nepal's capital to mark the 45th day since a massive earthquake killed thousands of people across that country. reynolds american cleared the final hurdle for its $27 billion purchase of its smaller rival as a federal judge approved its request to sell several cigarette brands. the companies expect to close the deal june 12th. former first lady barbara bush celebrating her 90th birthday, seen here with her granddaughter, jenna bush hager. bush family members will hold a gala tonight in her honor in kennebunkport, maine.

we wish her all the best. that's the cnbc news update this hour. and now back to you, brian. >> nat gas up about 4.5% right now. jackie deangeles, but oil, weak once again. >> yeah. a lot of volatility today. we saw energy prices moving to the downside with the exception of nat gas. oil did close over $58 a barrel despite the fact that we had a weaker dollar. it was about a dollar slide to the downside but it followed along in the wake of the products losing some ground as well. nat gas is really interesting because it closed around $270. when it was under $260 $258-ish, traders were saying it is a good buy. we had an unusually cool week last week so they're getting into this trade. 4 of the last 5 trading days nat gas has tested this 2.72 range. >> back to jon fortt and

cupertino, california with more headlines. >> reporter: here in san francisco for apple's worldwide developer conference. got some news on the apple watch. now you will be able to set up photo albums as fars faceces for the watch. you can choose to have photos from around the world shifted in to appear on your watch every time you look at it. they've also added a new alarm clock feature which while it is charging you set it on your nightstand, it faces you and shows you the time and can act as an alarm clock as well. app developers will be able to make their own what they're called complications, if you're familiar with watches, little icons on the screen that you can put there besides the time. that will give you quick access to applications. they've also added face time audio to the watch. you can already do regular phone calls but this will allow you to do apple's version of voiceover ip. it is not the video calling, it is the audio calling over apple's network. you can now reply to e-mail using the watch. before you could only look at it. so a number of features.

they're going through that are added to the apple watch. >> jon fortt, more headlines out of apple, thank you tle very much much. now time for "trading nation." what better stock to look at than apple. andrew, we've heard a lot of headlines out of the developers conference today from apple but fundamentally what is your take on that stock? >> hey brian. we like it. we've had it on what we call our triple play list for a long time. our fundamental analyst likes it from his perspective. has outperform rated on it. our earnings is more of a quantitative model. technically we think this stock looks very healthy, too. wouldn't say there is any really big news at the conference today but a lot more incremental positives. it is more about getting this ecosystem working together, the watch, the wallet the phone. i think that will continue to grow their user base and keep earnings growing. the stock is still relatively attractive valued.

it is trading ha thee inging at a disappoint to the market. >> i noted it had a forward pe. three points less than that of google despite revenue growth rates that were almost the same. given the growth of apple, why do you believe that many in the market seem to perpetually ascribe some discounted valuation in it? >> i think it is just the disbelief that they're going to continue to go through these beat and raise quarters in terms of earning but they've done it. they've just proved naysayers wrong in terms of that. i think there is a lack of belief that they can continue our pattern but our analyst thinks that's going to continue well into 2016. should trade at least a market multiple in our opinion. >> todd your firm is trading analyst.com. what i'd like you to do is analyze the trade technically on apple. worth a buy? hold? sell? >> it is a buy. i'm long. i have the october 125 call long term holding. it is a strong chart. to put it in perspective, we are in a range right now so i have

some longer dated call options just in line with this. you look back at the last consolidation we've seen meaningful consolidation that lasted 97 days. so far with this massive run-up to that earnings announcement we just saw, we're about 7 it days2 days. we have a range to go before the range is due. while this range is exhausting ourself, we should maintain about the 120 to 122 support level in the up trend to keep this up trend alive. i like it i'm long and i'll stay that way. >> fundamentally and technically they like like, like apple. todd andrew thank you. head to our website, tradingnation.cnbc.com. we do two segments every single day. much more coming up from -- apple. plus is american pharoah's win actually bad news for stocks? i know that sounds a little weird but there is some interesting history here. we're going to show you when "power lunch" rounds the turn. before the break, apple's

tim cook talking about the app store. >> the app store has passed 100 billion apps downloaded. the rate of growth and the momentum is absolutely staggering. the industry has never seen anything like this before. the app store has forever changed software and software distribution. and now your "trading nation" stats of the day and a word from our sponsor.

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and that when technology meets expertise... everything is possible. for as long as the world keeps on searching for healthier... we're here to make healthier happen. optum. healthier is here. and the shares coming off the low of the day. they are still down. in fact one of the worst performers in the dow today. the dow down 34 points. with that move it turned negative for the year. let's talk more about apple. ivan feinseth and dan ives. dan, when i look at your price target on apple, a very bullish $185 a share, just doing the

simple math gets us to an apple market cap of more than $1 trillion. i need to put my pinky to my mouth when i say that dr. evil style. do you believe this is really a possibility this will be a trillion dollar company? >> i truly believe that when you take a step back we're still in the third, fourth inning of this apple growth story playing out, and you talk about coming about trading at 11 times ex cash. when you look at some of these categories like apple pay wearables, the software layer which we really view as the sort of gold jewels here going forward. i do believe the next three, four quarters you'll see some strong beat and raises on the iphone 6 china story. i do believe a year from now we do see a trillion dollar market cap for aarple combined both near term growth as well as long

growth categories that we're starting to lay out at the developers conference. >> ivan you are a huge fan of the apple watch. in terms of what they will do today to make it easier for developers to develop apps for the watch, how important is that going to be especially when it comes to the -- i hate to say christmas, we're still in june we have to look forward to the christmas season and think maybe apple watch could be the "it" gift this time around. but how important is the apps? >> the apps drive the functionalitying a the ing aing a ing aing a ing aing a functionality, you like the fact that it does certain things and you want to be able to do that. apps are very important. apps are what drove the popularity of the smartphone, of the iphone and apps are what drives the need for computers. overall apps are the most important thing. >> dan, do you think that this christmas or holiday season could be the season of the apple watch? >> yeah, i really do think that

we're going to start to see the point of growth on apple watch. start seeing it come to retail stores. the app community is huge around apple watch which is the big focus today. ultimately i think it really paves the way for wearables, this next growth category with apple watch, we believe 8% to 10% of revenue two years out. then combined with apple pay, with streaming music, with potentially streaming tv later this year, those are really key ingredients that we believe is the next leg of the apple growth story. >> ivan i'm curious, what do you want to hear about apple pay today? >> apple pay is not a big component in my view. it is an important thing but increased acceptance and increased -- ease of use and people to use it. >> ivan have you used it? apple pay? >> no. i have not, no. >> dan, have you used it? >> i have used it. and now with my apple watch, and apple pay, it's -- to me that's

really the one-two punch here. that's really how cook and company are really looking at this. it is about going from 10% of retail to ultimately over 50% in two years in terms of apple way. the watch is the key growth driver to opening up this key growth avenue foreapple. >> as a consumer i did use it. i don't really use it much. i didn't find convenience factor there necessarily. it was easier to just pull out the card. i'm sure that will change. guys sit down. back out to jon fortt in california. >> reporter: brian, yes. first i all i want to note tim more cook just said one more thing. that old steve jobs line. i believe we're about to hear details on apple music. some more on the apple watch that just came out. they announced that the developer release of watch os 2 is going to be available today and it will be available for everybody who's already got the watch for free in the fall.

developers are now going to be access the mic, play audio from speakers on the watch, play short videos even. they did a demo with vine. also they'll be able to access the tactic engine and say you want to get infee on your golf swing, you swing, and itthat. a number of things will be built into the watch including home kit, being able to control the temperature perhaps in your home. also the temperature in your car. because you'll be able to have carmaker apps on the phone. now we are getting into music, into apple music. i'll continue to much with a the headlines on that and bring them to you when i have them guys. >> jon, i'm sure you will. back now to our guests. it is interesting, ivan jon mentioned right at the end the car. to me when you look at the consumer possibilities, what's left out there for apple to take -- they already have tv. that little black box. we already know that exists. the car opportunity. car play in some certain models of volvos is coming out. ivan, is that an area you see

apple needs to get into further? >> infotainment in the you a stow industry and a key growth area and also a key driver ofnse differentiating factors. the stock is higher from when the conference actually started. right now at $128.08. when the conference started, it was at $127.36. the intraday high was -- we have breaking news right now. to jon fortt in san francisco. melissa, as i mentioned, they were getting into apple has announced apple music, calling it the next chapter in music. they said it in the context of the history of music showing a video that had a number of different recording devices and people of course enjoying those. they are putting themselves in the position of very high bar they are setting of setting out the new direction for music

based on the service we're going to hear more about in the coming minutes. i'll bring you that when i have it. >> breaking news here apple announcing its streaming music service. more details when we come right back. ♪ ♪ ♪ at chase, we celebrate small businesses every day through programs like mission main street grants. last years' grant recipients are achieving amazing things. carving a name for myself and creating local jobs. creating more programs for these little bookworms. bringing a taste of louisiana to the world. at chase, we're proud to support our grant recipients and small businesses like yours. so you can take the next big step.

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we talked about music. apple making a big announcement regarding their second effort of streaming music. let's bring in john fortt. we forget apple has been in the streaming business for a while now. itunes radio has not exactly moved the needle. it's not been a big hit when you look at user numbers of pandora and spotify and others. why might this time be different? >> i'm not sure. they are trying again. this is the sort of thing that apple has difficulty with. they do a great job with hardware. they do a great job with operating systems. the stuff in the middle can be hit or miss sometimes. apple music. the algorithm wasn't that great figuring out what the next great song to play was going to be. tim cook said that was a big

reason he wanted to pick up dr. dre' beats service. he said it would be heavily curated. jimmy is on stage talking about we'll bring streaming music and streaming video together in a service that allows art and technology to co-exist. they haven't explained how they are going to do it but it's something they had trouble with. >> ivan, they are coming back out with apple music. they bought lala about five years ago for a couple of million dollars. a cloud-based music company. i made a mistake uploading all my music to it then it got shut down. is this something you care about as an investor? >> yes. it's another component lala was more of a music storage product an streaming product. apple is not the first in what they do but they do become the best. over time i think they will have a good product.

>> when i was asking whether you thought this streaming service could be successful, you said yes because apple has a huge installed base. yet that installed base didn't help with i radio or itunes. why do you think as an investor it is going to work and will be a big thing for apple? >> it doesn't guarantee success. when you have 450 million iphone 5 and 6 out there plus other legacy iphones. when you have that kind of installed base apple has the biggest and most loyal customer base of any company ever that are willing to try apple prod products. >> i'm one of them. i'm sure melissa is and john is. i'm the king of apple products. yeah spotify pandora, radio. just because apple has something

doesn't mean it's going to be a hit. there are things they are not that good at. >> what they are good at is the plug-and-play and everything working together. the ease of use and simplicity and the fact apple customers are willing to give the benefit of the doubt to apple products. >> we'll wrap it up there. thank you very much. john, i guarantee you, we haven't seen the last of john fortt. up next, big battle in the streaming wars. maybe we'll get street talk in. let us know what streaming music you use.

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configure e-mail every month? or how about processing nearly $5 billion in electronic toll payments a year? in fact, today's xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. with xerox, you're ready for real business. >> let's get to the last name. the under the radar name was going to be that company, new media investment group, newm. a new york city based small newspaper company. important to note the stock has been crushed down 13% over the past week. citigroup says that drop may have been caused by their own

note last week which some investors did not understand their point on same-store sales and overreacted. still people have a negative group on media group. that is citigroup's call. $37 target there let's get down to julia boarston with more on apple and the music wars. >> that's right. apple music being discussed on stage. they are calling it a revolutionary music service. the key thing here is what they are calling a 24/7 worldwide radio station. saying this is going to be curated by humans. a number of times saying they need the human touch, not just algorithms dictating what you listen to and how you listen to music. talking about how not only will you have access to unlimited streaming through the service. you'll have a service called connect.

this is a direct attack on spotify. it's xoetation for pandora. >> people can follow me on spotify. siriusxm, this is a crowded field. >> but the advantage apple has, it has 800 million people's credit cards. >> thank you. melissa, will you talk about apple on "fast money?" >> maybe a little bit. we'll be talking about tes lachlt it's up 3% ahead of the shareholder meeting tomorrow.

that's tonight on "fast." >> a little tesla action and maybe a smidge of apple. >> maybe a little bit. >> thank you. >> thanks for watching. get your "power lunch" to go. "closing bell" starts right now. hi and welcome to the "closing bell." i'm kelly evans. >> i'm simon hobbs in for bill griffith. dow, s&p and nasdaq all in the red, substantially cutting earlier losses with the nasdaq the hardest hit. the move lower in apple not helping. again, the stock is coming back right now. we'll take you live to the worldwide developer's conference coming up. transports weighing on the nasdaq and broader market. airlines again, the hardest hit. look at these declines.