stocks without earnings, the types of fast-growth biotechs that we're leading. if volatility is going to continue for the rest of the fall, then those are arguably a better place to be looking for bargains than at some of the growthier stuff that used to be the world's fair at the end of the year. >> show of hands -- that was important. right? >> way to go. nice. >> guys, see you tomorrow. thanks for watching. "power" begins right now. >> announcer: "power lunch" and the second half of the trading day start now. after a bearish day yesterday, the bulls trying to make a comeback. s&p, nasdaq and small cap russell 2000 all higher. but today we dig in on the biggest of the big caps, the names likely in your retirement plan. companies like disney, ge, ibm and caterpillar. and more and more wall street analysts are sending out notes saying buy on weakness. does the street really think the bottom is in? tyler's out. i'm in. mandy's inside the action down at the new york stock exchange. >> i'm in here on the floor of

the exchange. stocks currently moving back up towards highs of the day. bob, okay, it is a rally but how low is the conviction at this stage? >> this is a rally but not with a lot of conviction. we need a little more buying enthusiasm. we're not getting it right now. but still 200 points, nothing to sneeze at. we had a nice move up prior to the open because productivity numbers were better. we are now approaching the highs for the day. little bit of a midday rally. let's look at the markets in the middle of the day. right now 3:2 advancing to declining stocks. heading towards 2:1 very shortly. moving in that direction. volume's been moderate. not saying this is heavy. this is the lightest volume since we've had this volatility. speaking of volatility, vix is below 30. just a few points moved there. dow leaders, fairly broad advance here. home depot is one of the few dow

components up this quarter. these are nice advances. just not seeing much volume. it is not a normal volume day for most of these stocks right now. these big multi-nationals are really hit badly on the recent declines we saw on concerns about china. hon honeywell, ge, 3m all up. honeywell a great story on the front page of the "wall street journal." very nice, explains their strategy. still modest volume. all the oil stocks, shale names in particular. oil moved down on a build in inventories. word the iran deal may have enough votes to sustain a veto that would be negative for crude. most of the shale names like marathon, eqt, all on the downside. >> 10 out of the last 11 sessions have been triple-digit moves in the dow. like triple is the new double. >> but a narrower range than we've seen recently today. let's get to the nasdaq now further uptown where bertha

koo coombs is following the big movers there. >> we're not seeing triple-digit moves on the nasdaq. seeing a fairly broad bounceback and the tech sector etf just edging shy of correction territory at the highs today. we're going to watch that very carefully. apple though still down 18% from its april high, having a strong point impact to the up side today, nice bounce back. amazon announcing expansion of its dash button. investors in netflix might want one of those. that's a notable exception today, down again. netflix seeing more competition in streaming, this time from hulu who is announcing a new commercial fremontly subscription package. netflix falling again hard. take a look at the airlines today with that pullback that we've seen in oil recently, they've held up fairly well. jetblue and skywest in fact are both down less than 10% from the

recent high put being them higher than correction territory. ryanair in fact is only 3% below its recent high. back to you. >> all right, bertha. thank you very much. now to the american housing market and the number of people applying for a mortgage or a refinance is soaring. diana olick is live in georgia with more on a big number no matter how you slice it, diana. >> reporter: it was big, brian. no question. we knew this was coming. lenders early last week told me their phones were ringing off the hook. here's what happened. as the stock market plunged last week investors headed to treasuries pushing the yield down and interest rates followed those yields. even though rates were barely down two days and barely down an eighth of a percentage point on the 30-year fixes, it was in you have to push applications up 3% for the week.

interesting though, also was the big jump in applications to refinance adjustable rate lobes. a.r.m.s. bringing about their share to the highest in almost a year. a.r.m.s. are very popular among jumbo borrowers on highsier houses because they get a lot more bang for the buck so they're a lot more rate sensitive. and sorry to say, rates are back up today. oil prices are continuing to slide. let's look at what wti, crude and brent are up to right now. $44.94 is wti, down by 1%. brent currently sitting at $49.21. jackie deangelis is at the nymex. >> we're rebounding a little bit. we were down during the session almost 4% at one point. two major factors today. we have the report from the department of energy citing we had an inventory build last week. traders weren't expecting that. then we got the news that president obama has the support he needs to move forward with the iran a deal. having said that, if iranian oil

comes back on the market, it floods the market even more than it is right now. those are things that we certainly discussed before. that said, the technical levels right now are pushing this trade around as well. the next level of support to the downside -- $42.79. we're well off that level at this point. i will say the last thing that you have to consider is what is happening in the equity market. the losses start e ed to pare w we saw the dow rebound during the session. many factors to watch right now when it comes to crude oil. right now i'm going to drop some wisdom on you, folks. things are engines use oil and possibly even gasoline. therefore, look at the transportations in this recent market plunge. the group kind of ironically getting slammed. you think their input costs would be less. but they're down % in the past one month, 15% down for the year. some on the street say the sell-off is opening up an opportunity to buy a new select names poised for growth despite perhaps a weakening global economy. morgan brennan taking a closer look at some of the transports. >> it is a good day today for

the transports. still, they are down the most out of any major index so far this year. but take a look at oil as well. crude prices are half their year-ago levels. if you couple the two together, the lower stock valuations, lower fuel costs, analysts say there are actually some buying opportunities in this market. take trucking stocks. they get a big boost sfrom cheaper diesel. old dominion freight line has shed 11% over the past month but analysts think the company will expand margins and gain more market share. another stock, many on the street claim as a top pick -- fedex. citi just added the parcel carrier to its recommended list. deutsche bank says it is buying on the current pullback. the stock is down by 13% in a month thanks to the profit improvement plan in place and its express operations. also strong pricing gains and growth in ground operations. analysts see a 31% price pop in fedex shares from the current

level. lastly, expeditors international of washington. this is a logistics provider. that's managed to buck the downward trend. it it is up 4.5% over the past month and one reason for that is holding its first-ever investor day today. ahead of that, the stock was upgraded to a buy on refocused growth opportunities. investors are tuning in right now as we speak for any positive guidance from the company. so far, management has said it's considering "limited acquisitions" to boost growth. that's a big shift for a company that's actually never really done. we're seeing that stock move higher 2%, almost 3% on that news. >> thank you for that, morgan. crossing the atlantic, europe's migrant crisis having a big impact on transportation there. eurostar trains turning back to london and paris after people blocked the tracks leading into the tunnel that cuts across the english channel.

cnbc's will friend fox is live in london. will fred, what are you hearing? >> five euro star trains were delayed heavily overnight after migrants blocked the tunnels underneath the english channel. those trains have now been returned to their departure stations. one passenger had this to say. >> some migrants had climbed on to the roof of one of the trains and so they had to shut off all the power because the power lines were above the trains. that plunged some of the trains into darkness. the air conditioning was off. people were sweating. and they couldn't be let out. >> my apologies on the name front. this is not the first issue for the crossing between france and the uk. freight trains have already been affected as have ferly crossings. this thought to be the first time passenger trains have been

affected. it is not just the france/uk crossing affected in this latest eu crisis. these pictures are from outside budapest's main station in hungary where the train link was shut off from austria and up into germany. this is the second day that migrants have been prevented from boarding the trains that they have booked. this crisis is ongoing. angela merkel, the german chancellor, urging eu leaders to find a common policy that's thus far been illusive. it means there is no immediate end in sight to this crisis which has become a major political and humanitarian issue for europe this summer. >> thank you very much, wilfred frost from london. the s&p 500 is now out of

correction. however, coming up, a very bullish money manager still thinks the s&p will end the year at -- get this -- 2 t 1 -- 2,100. that's about a 10% rally from here. and, big cap stocks that are looking like a good opportunity in the sell-off. . we have the names right here for you on cnbc, first in business worldwide. nt's ever photographed mean ms. colegrove. but your dell 2-in-1 laptop gives you the spunk for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great.

the drought is affecting at pg&e we've definitely put a focus on helping our agricultural customers

through the drought. when they do an energy efficiency project and save that money they feel it right in their pocket book. it's exciting to help a customer with an energy efficiency project because not only are they saving energy but they are saving water. we have a lot of projects at pg&e that can help them with that and that's extremely important while we're in a drought. it's a win for the customer and it's a win for california. together, we're building a better california.

wall street dialling in a bit on at&t. that stock upgraded to buy from neutral at citi group. citi saying that the recent pullback is an attractive entry point. imagine that. firm also citing potential up side from at&t's recent buyout of directv. meantime, navistar shares taking a hit. the truck and enginemaker reporting its 12th quarterly loss in a row. results suffering from restructuring and warrantee costs. amgen saying its experimental osteoporosis drug was more effective than the eli lilly treatment that's already on the market. that stock up $1.27. we wait for the fed's beige book that will cross at 2:00 eastern time. the dow is up right now about 204 points. pretty good day for the bulls, though after yesterday, probably not the headlines that it would normally garner. >> you are absolutely right on that one, brian. we have the stock exchange, jeff carbone. good to see you again.

we are currently sitting at 1,3935 on the s&p. are you rethinking that at all? >> certainly not. headwinds of china, we don't know where that will land or what policy will come out. >> you don't think the worst news is already out on china? >> china's really going to be are they slowing below 7%? are they 3% or 4%? but in the u.s., revision of gdp at 3.7%. consumer sentiment maybe -- or consumer confidence higher. investor sentiment may be low. could be some good opportunities to get in. we are seeing that dip. it's been four years since we had a correction. we've got a correction. you look at the volatility that's out there. the investment's become pretty complacent. even during the greece issue in europe. vix spikes up to 50.

we've got volatility go into correction, i think we are seeing a correction. wouldn't say it is going to be a v-shape direction yet, but i think we'll see when the economic data and earnings coming out soon, job numbers continuing to improve, i think we'll see a good finish. >> we got a bunch of economic data today. factory orders, productivity, labor costs, you name it, we've got it. it feels like the economy's doing just fine. do you think the fed really badly wants to raise rates? >> absolutely. all. janet yellen and the fed wants to do is raise rates, get us out of this 0%, .25% interest rate market we're in. the big thing why they'd want to do it, they don't have a ammunition to quell inflation. but with inflation not being in their target number, the data is growing, but we're not overheated. why would the fed want to raise rates and slow down and overheated had economy?

we're certainly not in that position. >> until we get to the 2,100 at the end of the year, will we have another leg down? >> we had such a quick correction. if we go back up too quickly or maybe test the highs. if we test the highs too soon, i think we could see a correction in later september, early october. i do think we'll see the market finish up around 2,100 on the s&p at the year end. >> thanks. brian, over to you. the dow up 200 points. tech and telecom your best performers. energies and utilities your best sectors. our dominic chu has what he claims -- we'll be the judge of this, dom. >> you guys will be the judge of this. what happens when you look at the s&p 500, try to find stocks that have held up relatively well that pay great dividends and trade at a discount to the market? the answers are stocks that may surprise you. all that and more coming up next

on "power lunch." keep it right here.

it's from daddy. sfx: dad's voice i love you baby girl. duracell quantum lasts longer in 99% of devices so you can always be there. ♪ while many out there are, no doubt, running for the hills, others see this recent market swoon as perhaps a big-time buying opportunity. you're supposed to buy low, and then sell higher later. that's what we're going to bring you here on "power lunch." dominic chu here with us with some interesting plays for investors, not perhaps your usual overdone, over talked-about well-known names. >> they're not going to be facebook, amazon, netflix,

google or apple. these are not recommendations but they're just objective screens that we put in. if you're looking for certain things in the market, these are the stocks that are going to provide them for you. s&p 500, 500 issues there. which ones are within 10% still of their recent 52-week high? it's about 100 of them. put that up there. it's not that bad. 99 stocks are still within that 10% range from their recent highs. 99 green balloons. >> or red ones. >> let's take those 99. 18 pe or below, meaning trades around the market multiple or less. that becomes 17. now which ones pay you more than the current 10-year treasury note in terms of yield. all of a sudden that becomes 6. 6 out of 100 meet those criteria. here are those stocks. they are names we don't often talk about but a couple of them have some interesting themes. first of all, cincinnati financial. insurance. it's an insurance company. 3% yield on that guy.

it meets those criteria. darden restaurants. it's now pretty much just the olive garden, longhorn, they got rid of red lobster. that's 3% as well. lockheed martin and raytheon both have 2% yields. they've both held up okay during the turmoil. not great but still relatively well. >> the middle east is still hot, we're still going to sell planes and boats. >> right. then two other insurance companies. progressive and xl group. insurance, re-insurance. generally the insurance business. those guys both have 2% yields-plus as well. so these sticks stocks, as of yesterday's close, are the only ones in the s&p 500. that, again, pay a dividend yield higher than the current treasury. also trade at a discount to the overall market valuation, and, again -- and -- have held up at least reasonably well given the current market turmoil.

>> i don't need to tell you this but this is where i'm going to say what we've said about a million times on this fine program. which is that the yields are good -- this is great work, as always -- but yields don't have to stay. yields can go away. these names are a little different than the oil patch, but just here today, gone tomorrow for a lot of companies. >> sure. fair enough. >> especially if you're in an oil company or something where the industry or free cash flow is doing that. >> right. generally speaking, these guys have not fallen by as much. and with darden, you actually have a gain year to date. these guys have held up on a momentum basis better that be the overall market. >> the other thing i would say is that 18 as a market multiple is a little high historically. >> it is. >> you say under the market average multiple. that's great. but 18 might be a little rich for some. >> fair enough. but then we want to cut off on these things just to kind of get you an idea for how some stock pickers are looking at this.

they want some criteria, some factors, seeing which stocks all meet in the middle. that simple screen, those are the stocks that come up. >> maybe an idea generator, dom chu. thank you, good work, as always. >> dom is always an idea generator. talking about the overall market, the dow is currently only slightly below the session highs, gaining by 211 points right now. the nasdaq is up by 69 at session highs at 4,705. let's get over to the bond market where rick santelli is tracking that action at the cme. hey there, ricky. >> hi, mandy. of course we know that the beige book is coming out shortly. maybe this beige book will garner more attention than other beige books because of the implications. traders already saying, listen, if they don't want to raise rates maybe they'll lean towards a dovish beige book and the districts will report growth a little less than average. i can't answer that but a lot of eyes will be glued to cnbc.

intraday 2, virtually unchanged. the 30-year, you see the pattern is different and the yields are higher. the curve steepening a bit today. the 10-year bund overseas, same pattern. they've let us up, everybody's kind of idling. they have their meeting tomorrow. we have beige book and our fed next week. the dollar index is strengthening a little bit but the last three months, somewhat middle of the range. the dollar there moving higher. gold is moving lower just as it is getting ready to close. let's get more on gold prices from jackie deangelis at the nymex. >> gold is losing a little bit of ground today as we are seeing stocks recover just a little bit. the safe haven trade really hasn't been on here even in this market turmoil and volatility that we've been seeing. what's keeping gold supporting over $1,100 is the fed. gold traders do not believe that the fed is going to raise rates in september. that has been good for gold so far. that said, that makes the jobs report very important on friday because traders will be looking at any sign to see if there is

going to be a change in what the fed may do. at this point gold prices just under $1,135. the dow and nasdaq are currently sitting right at session highs. but is this just a retest or are we headed lower? much. plus, the recent swings in the market have many worried about a popular investment in their 401(k) plan. does your retirement fund have a risky position? we'll analyze that as well. hello. i am technology that is changing investing forever.

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hello, everyone. i'm sue herera. here is your cnbc news update for this hour. thousands of migrants remain stranded outside budapest's main train station as hungary prevents them from leaving for germany. the migrants protesting wonder if they'll ever be able to board the trains. vladimir tuten arriving in beijing to mark the 70th aen vaersry of the end of world war ii. he is set to meet with chinese

president xi jinping. north korea says its recent expression of regret over a mine explosion that injured two south korean soldiers was not an apology. the statement muddies the prospects for better ties between the two koreas. xbox 1 promoter has agreed to settle ftc charges that it engaged in deceptive advertising by paying influencers to post youtube videos endorsing the system. the influencers never revealed they were being paid. promoter is prohibited from similar decentive conduct in the future. you're up to date. that's the cnbc news update at this hour. the markets right now are sitting at session highs. the dow is currently up by 222 points seconds ago it was up by ccxxvii. bob pisani, how much of this move back up is due to the fact that crude also turned positive and so it's energy stocks leading the charge? >> energy was the laggard here because pof the decline in crud

and build on inventories. we may get the deal with iran through. . dow jones industrial average, we are now surpassing highs earlier in the morning. 2:1 advancing to declining stocks. we're taking out those morning highs. techs, industrials, consumer discretionary, staples all up around 2%. the xle, the etf for energy, negative all morning. we've had a nice pop in the last 30 minutes or so bringing some of the energy stocks in to positive territory. where are we right now? i want to point out that the dow moved 2,000 points in the last seven or eight trading sessions from roughly 17,400 to 15,400. we've retraced almost half of that. we're 900 points above where we were at the low point last mopped. that was roughly around 15,400. as you can see here, mandy, i think we're just right in the middle of it. we're not retesting the lows. it looked like we were yesterday. right now we're in the middle.

i think that's all you can say. >> what do we need to see before we definitively get a bottom? >> two things are important short term. the august jobs report. if we get outliers, if we get 170,000 jobs, consensus is 220,000. that's going to eliminate the fed from doing any rate hikes. we'll get some finality on that. 280,000 may dramatically increase the chance. outliers are what we'll look for. next we'll get china economic data, retail sales and that economic data will indicate how stable that chip is. if you're looking for two data points, that's going to be it. >> we have discussed this -- that maybe china should just throw in the towel and lower their 7% target. >> nobody believes that number. >> i don't even think they believe it. they should just say, we got it wrong and just lower it and be more realistic about what they can achieve. >> what is the realistic number? 4%? 5%? that would be an big move for them to move down that much.

>> and reassign other asset classes as well, wouldn't it, particularly commodities. thanks, bob. the nasdaq currently up 1.5% at 4,706. some winners in the nasdaq 100 -- american airlines. c.h. robinson. biogen, viacom and apple. on that china discussion, you remember that bet jamie dimon lunch that china's gdp would fall below 7.5%? i think jamie dimon owes me a meal. >> a good meal! not like a mcdonald's all-day breakfast kind of meal. you ask jamie dimon to take you somewhere really nice! >> it ain't happening. >> hello, jamie. ron insana has a new piece out called "this is only a retest." >> for those of us who remember the civil defense warnings.

in corrections you typically retest the lows. we're going through the process of determining whether or not last monday's thousand points of fright was the actual bottom or whether or not we have to dip a little bit further. >> what would you think? >> it looks like there's more work to be done and i suspect that we're not going to go straight up from here. all of the markets having a good day. you look for positive technical divergences. advance/decline line has improved. after a disastrous day yesterday, sometimes that marks a certain amount of capitulation. we are getting closer to the end but we're not quite there. >> we had 499 of the s&p 500. my map tells me that's almost all the percent down yesterday. >> that's pretty close. >> i don't know if i've ever seen. you would not define that necessarily as a capitulation? had. >> i think we're close, yeah. i think you had 90% declines

over -- 9:11, whatever the number was, where again it looked sort of like capitulation. i'm not sure we are entirely out of the woods. >> there is two ways to look at what's going on around the world. we'll do this thing in the 2:00 about hidden global risks. from are markets that scare me a lot more than china right now. but you look around the world and say, okay, things are slowing down, sell everything, sell the kids, sell the car, i'm never coming back -- "apocalypse now" something to that effect. because everything is going to go down. or with be because the rest of the world stinks, the cleanest dirty shirt in a bag of laundry, once again the united states, will benefit. >> i think even more positive than that. i've been talking about fortress america, that if the rest of the world looks bad, we look that much better. we have economic stability and are becoming increasingly self-relia self-reliant, manufacturing renaissance, technological innovation, all of that. i think china is a big problem

for china. they are hae nnot growing 3%. that's where i think china is. other markets have essentially crashed around the world. >> australia. aussie dollar. sorry, mandy. something's stuck in my throat! >> we had not had a recession in australia since 1991, i will have you know! >> not since they discovered iron ore has australia had a problem. >> i like a weak aussie dollar. below 70? it's a bargain. >> i think jamie owes you lunch. >> i think the growth is between flat and 3%. ron and brian, stick around. joining us now, jeff, you are ron insana's new best friend because you agree with him and saying this is just a market retest. >> yeah.

i absolutely agree with that. i think it happened too soon. retest and gene can correct me on this. retest usually take two to three weeks, not two to three days. if you look at some of the market internals like the invaluable lowery's supply and demand line, the sellers had a higher high than it was last week. i think we are in a bottoming process but i don't think it is complete. >> gene, agree or disagree zp. >> i agree entirely with jeff and with ron. i think that we are in a correction. i think there is probably a bit more to go but we've seen the worst of it. after the october 15th decline last year which was bull driven, the market psychology changed and investors began to adopt a willingness to take on more risk for more reward. year to date we have seen that play out where growth is far outstripping value in terms of performance. the russell 3000 growth is beat

being russell 3000 value. you're going to have these more abru abrupt, ugly kind of intermediate moves to correct the market condition, and i think that's just what this is. there is no real change in leadership as i see it. for those some concerned about the transports versus industrials, i think transports are making a significant bottom here. >> thanks very the very kind comments in your note. gene and i have been, as you and i have, talking about this stuff for decades. bottoms are processes. people forget that. they're not point in time experiences. as we have discussed over the last couple of weeks, you nibble at stocks you like that have gone on sale but you still have to wait this out. if this were going to be something worse than a correction, if we don't hold the lows and all of a sudden the market comes unglued, then all of a sudden you have to start talking about -- >> i'm nearing 20 years. jeff and i have been talking for more than a decade. mandy an gene's been doing this

for a long time. even as an observer, not an investor, jeff, aren't you more nervous if you see four years without a correction than if you see a 10% or 15% drop maybe once every couple years? i think the latter, where we are now, provides me with a little more comfort not as a journalist but just as a guy that has a 401(k) plan. going up every day makes me nervous. >> yeah. we put out a note a few weeks ago that the internal correction that's been going on for a long time of the 4,000 largest stocks on the new york stock exchange. there's something like 40% of them were wn 20% or more from their three-year highs. 21% of them were down 40% or mo from their three-year highs. so there has been a lot of internal correction going on and this is what happens at the end of a correction. the generals that have been holding the averages up finally surrender and you get the capitulation move like we got last monday. >> it is a valuation correction. look, we've come down 15 times earnings from 18 times. that does open up some opportunities when rates are still at zero. assuming the fed keeps them

there for a little while longer, this market can repair itself relatively quickly. >> if we all agree it is maybe a healthy thing to have a pullback like this and hopefully then have another leg upwards, if i can pin you both down, jeff and gene, on some numbers here. again, you originally thought 20,000 for year-end for dow. are you maybe revising that? >> perhaps. i think we're going to see north of 20,000 before the end of this bull market cycle but this market is so oversold now that once we do hit a bottom and once people are more confident that we are hitting the bottom, any kind of positive catalyst here could go a long way in breaking through the previous space in the dow at 18,300. you could have a very strong year-end rally. i'm not willing to give that up just yet, but i just want to demonstrate i think the risk to reward is really good. >> jeff, you had 2,250 for your

s&p year-end target. >> yeah, i did. i haven't revised that yet but it's been suspended until we see the action over the next few weeks. i would like to add that a weak ago monday at the low, the s&p was five standard deviations below its 50-day moving average. it was more oversold than it was on october 19th of 1987 in the crash. >> gene, jeff, ron, thank you very much for a roundtable there. >> the one thing about volatility -- unless you lived through '87 and covered it, you do not know what volatility is. they could not measure the vix on october, 1987. it went completely off the charts. >> always get the last word in there. >> it is an old habit. >> thank you very much. go to powerlunch.cnbc.com to see how jeff is playing the energy sector in particular. >> it certainly has been a bit of a roller coaster ride in the markets over the past week.

if you are just coming out from under a rock, we've been up and down a couple points every day. but where do you find value amid all the volatility? and as we head out, petrolbras down nearly 3%. ge and ford are up. we're back in two months. (trader vo) i search.

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hasbro upgraded by piper jaffray from underweight to neutral. it benefits from the upcoming introduction of new "star wars" themed toys. up by 2.7%. morgan stanley upgrading general mills to equal weight from underweight citing a more aggressive managing of costs. the stock is up by nearly 2%. cbs announcing its cbs sports unite will allow expanded streaming of in nfl games on portable devices. the stock marginally lower.

the major indexes are all higher today but not yet making up for yesterday's big loss. if you're looking for opportunity, you should always be because stocks are a long-term value proposition. where would you put your money? mark travis says take a look at mid and small-cap stocks. ostensibly, mark, i'll read your mind or your guess notes, that small and mid-cap stocks tend to be more domestic centered, talking about klein and brazil and these other problems. are you looking homeward, angel? >> brian, we'll look anywhere for a disconnect between price and value. we found things really across the globe. these hiccups with high volatility are really opportunities for people if they look at it that way. it doesn't appear they do. if it is apocalypse now and you're selling your kids -- >> i didn't know if anybody was going to get that line. >> i was going to offer you two of my kids and their tuition bills, if you'll take them for me. but all kidding aside, yes, we

find in the smaller-cap space some are domestically centered. the smallest one is american science and engineering. it has back scatter technology that helps detect bombs and people and cargo and contraband. i think it would be a nice tuck-in acquisition for a larger defense company. you get paid to wait with a 5% dividend and you have a balance sheet that is void of any liability. it is a small-cap business so i would suggest using a limit order. but shares in the kind of in i had upper $30s, probably worth in the low $50s. >> the name i want to focus on is also one that we used to talk about jeffries, the investment bank, all the time. we don't anymore because they are now lukadia national. a sort of mini berkshire hathaway in finance. you like them. but with all this market volatility, why are you willing to bet in a finance company? >> i think the ceo took over

from mr. steinberg and cummings who ran the leu cadia for a number of years and built it to the point that they acquired jeffries, i think is very opportunistic. he's bought a foreign currency trader at a discount in the last year. fx concepts i believe is the name of the company. if you do a book value analysis with all the holdings in the leucadia holding company, shares today are below $21 and we think they're worth closer to $30. >> patterson energy, quickly pttn. what if oil stays low, mark? you still going to oil this company? >> i think the beauty of a commodity business is the oversupply corrects itself with, in this case, rigs being cut back. but they have 1,500 horsepower land rigs that are very vital for horizontal drilling and they're usually built under a three-year contract. so they don't build them until they've got a contract to use them. i think if you do an asset liquidation on patterson-uti at

$15 or less, you probably end up with a share price that's closer to $22, maybe even $24. i wouldn't own a lot of this as a portfolio weighting. but i do think it is a material discount to a private market value at this point. >> mark travis, it was a real pleasure. thank you, buddy. we got those names written down. >> thank you, brian. a 20% rally in the s&p 500 from now to the end of the year. one bullish strategist says absolutely. we're going to make him defend that call. plus, a look at s&p stand-out stocks. you're watching cnbc, first in business worldwide. when a moment spontaneously turns romantic, why pause to take a pill? and why stop what you're doing to find a bathroom? cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms

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the dow, nasdaq and s&p 500 sitting around session highs. h&r block leading the s&p. apple, microsoft and home depot are lead egg the dow. so which sectors are leading today? consumer discretionary? health care? consumer staples? utilities are lagging. how are investors playing today's rally with etfs?

pbj up more than 2% and iyz up 1.5%. if you missed any of the big stories in the past hour, relax! breathe easy. visit our site, powerlunch.cnbc.com. right, brian? >> you certainly can, but not while driving. look at the price of a barrel of crude oil. briefly turning positive. we were down a couple of bucks earlier in the session at least a couple of percent. we're down 1 cent now. it was up 4 cents per barrel. if you blinked you missed it. $44.40, nothing to write home about. we'll catch you down to the close in about 38 minutes. recent swings in the market are starting to take a toll on retirement savers. maybe even their hearts. especially if you're one of those target-dated funds that are so popular now. cnbc's sharon epperson joins us now with more on these. >> if you have a 401(k), chances are you are vested in target date fund. nearly 83% of employers now offer a target date fund and it is the defafault option in many plans. these popular funds have had a

mixed record during the market's recent wild swings. much of the target date's performance is determined by the so-called glide path. that's the formula a target date fund uses to determine its mix of assets over time. all target date funds get more conservative over time shifting out of stocks and buying more bonds as they approach the target date. if your target date is still years away, even if the fund's performance has taken a hit in recent days there is tinl to make up those losses. but look at two target date funds designed for investors who retire this year. fund families with larger allocations in fixed income investments like the wells fargo advantage dow jones target date 2015 fund, fared better than those more focused on stocks recently like the freedom -- fidelity freedom 2015 fund. over the past five years though the fidelity freedom fund and other target date funds with larger stock allocations have outperformed their peers overall during the bull market. target date funds are certainly not perfect but many financial advisors generally agree that these funds can be a good tool

for retirement savers who have neither the expertise nor the inclination to actively manage their own retirement account. >> sharon epperson, thank you. the market's higher with only a few minutes to go before we get the latest fed report. that's right. the beige book summary of fed conditions due out in just minutes. remember, this is the last time we are going to hear from the fed on the health of the economy before the big september 17th meeting. will it give us any clues to whether we'll get our first rate hike in nine years? just over five minutes to the beige book. don't you go anywhere. you're watching cnbc. ever photd mean ms. colegrove. but your dell 2-in-1 laptop gives you the spunk for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great.

we are minutes away from the fed's beige book. stocks are rallying today hitting near-session highs. what can we expect from the report? joining us, chief u.s. economist at meser hull securities, guys, steve, beige by name but certainly not by nature especially in the lead-up to the september 17th fomc meeting. likely a very important one. what are you expecting to hear today and how influential will it be? >> well, the reality is i think we kind of know what the grassroots portion of the economy's doing. we've kind of been stuck.

we've been stuck at the same 2%, 2.5% growth trajectory for the past five years. we continue to be stuck with that during the first and second quarters on the year on average. the economy's continued to move along at the same pace it's been moving over the past five years. >> steve, if we've stuck in that zone, right, even with 0% rates, what's going to happen to the economy when we start to get higher rates? >> that is one of my big concerns. my concern is especially emphasized through the automobile industry which, if you noticed yesterday, had okay -- made very good sales, don't get me wrong, but really not moving up from where they had been with the incredible discounting they've been giving to move cars off the lot. if you start to see interest rates go up at the front end of the curve you could have some significant to the underlying fundamentals of the economy. you can wind up in an economy that comes in even slower. >> you are expecting no rate hikes this year. no rate hikes this year. carl, you are looking for september to be the move. what do you think will push us over the line? >> i still think that there is a

very good chance we'll get a tightening this month. the reason is that we've entered the second and third quarter with a lot of momentum. the second quarter gdp report showed an uplift in consumer spending on the back of good employment news and energy price di dividend. you are also seeing investment spending come around. while we've focused the last few weeks on the international uncertainty, let's remember that the united states is a bit more of a closed economy than others are. we only rely on exports for about 13% of our gdp and since domestic demand's been so strong, looking forward, there's still a pretty good chance that we could grow at an acceptable pace. >> carl, would you be willing to cancel your rate hike call if the friday jobs number comes in very weak? >> the fed will tell you they certainly won't base their decision on one number. it will filter all the way through they're forecasting. but since this does seem to be a decision that's on razor's edge, if we get an exceptionally disappointing or an

exceptionally uplifting number, it may sway those who are on the fence about how to fact on september 17th. >> okay, guys. hold tight here. we are awaiting breaking news on this beige book. a lot of discussion about guessing about what the fed may do but the beige book certainly is maybe the big estelle ahead of that. hampton pearson. >> reporter: from july to mid-august, economic activity continued expanding across most regions of the country. respondents in most district expect growth to continue at its recent pace. districts reporting on manufacturing mostly positive. in 10 of the 12 districts, matter of fact. retail contacts, sales revenues continue to expand. most district reporting increased auto sales, transportation activity improving as well. banking sector tallying increases in both business and consumer loans, reports on commercial and residential real estate, mostly positive. home sales and leasing widely

improved. one slowdown, if you will -- the energy sector nationwide was reported flat or down in all districts. modest to moderate growth in labor demand. however, tightening labor markets are pushing up wages slightly in selected industries. turning now to the consumer. spending, frankly is a mixed bag. richmond sales up sharply but areas like philadelphia, chicago, kansas city and san francisco, only moderate increases. new york, consumer spending was actually reported as sluggish. minneapolis, it was characterized as flat. there's even a dollar impact, if you will, in dallas. sales near the mexican border are down due to the strong dollar. ditto for new york and minneapolis being impacted as far as slower sales in areas near the canadian border. back to more emphasis on wages and what seems to be happening there. while the fed describes it as stable overall, they do say the labor market is tightening with

increased wage pressures in several districts. as a matter of fact, they say in st. louis, three-fifths of the firms reporting have actually raised wages in the last three months. new york, they say there is increased pressure on starting salaries on the wage front. cleveland, wage pressures intensifying. construction retail, transportation sectors. and of course, in san francisco heavy wage pressures for i.t. workers. >> hampton pearson with a pretty much unequivocally solid beige book that's reported from the 12 different fed regions around america. let us know get instant analyst from steve leisman. you heard hampton. i'm sure you've got a copy of the beige book in front of you. i was kind of strolling through. here's the reality -- that is positive. labor tightening. expansion. auto sales. home sales. is this pretty much putting the fed on the table for september 17th? how could they not after this kind of regional report? >> so if i could make a quick personal note as the guy who

normally reports the beige book and what a solid job hampton did. i think you're right to pick out the things that hampton emphasized when he talks about wages being something that will move the federal reserve. a little caution -- the beige book is not the report that will make or break the federal reserve's decision in september. but as a piece of the evidence that the fed will use, first of all, it is a very contemporary report. it comes from -- it's also very wide. it comes from all over the country. so the fed saying that there's this issue of wages is something that will stand up and they'll take a look at. plus, this idea that there's moderate growth around the country in most places with maybe some concern about the consumer which seems to be a little bit contradictory of what we're seeing in car sales. but overall it is a solid report. what you would do, brian, i think from the fed standpoint, you put a check next to it and say, of the things that i'm looking for that would make me raise rates, beige book -- check. yeah, that helps. >> stanley fischer to you said that if you wait for perfection, you will wait forever. >> right.

>> okay. i understand there is a lot of problems out there in the world. there always has been and there always will be. are you in the camp -- listen. nobody cares what i think. just as brian sullivan personal citizen of new jersey, i think the fed is going to raise rates september 17th. what does steve leisman, non-cnbc employee but avid trout fisher marne thin eerman think? >> i think if the unemployment rate were to fall and i think if there's an overall or abiding sense that what's happening globally is not going to severely impact the united states growth case, then i would think they might hike in september. by the way, i think they'll hike is a signal they won't be doing a whole lot after that. >> i'll check the box leisman in the hike. but if we're waiting on inflation, it is like waiting for -- >> something else, too -- >> deflation and the stuff they measure,ing to

have the kind of inflation they're looking for until we have a super cycle in front of us. >> one other thing, too. when the federal reserve looks at other things going on in the economy, of which the beige book is telling us, three seven growth in the second quarter. not that strong. 2%, 2.5% in the third quarter. unemployment rate, 5.3%. job growth over 200,000. solid car sales. hard to make a case for zero. hard to make a case for tightening. zero does not feel like to some key members of the federal reserve, i believe, to be the right rate. >> steve leisman, thank you very much. and by the way, we can't let you go without noting this. this is a big deal. a must-see interview lined up with steve tomorrow. the reason he is in washington, d.c. is not the beige book. because he is sitting down exclusively with treasury secretary jacob lew. it will start at 6:00 eastern time and will run throughout the

day. back to our economic panel still with us. steve and carl. steve, i know you're not in this september camp. does this change your mind at all? or did i overstate it? make it sound better than it was? >> i think you've overstated it. i think you've done a lot of overstating on a number of things in this aspect. u.s. economy basically has been running at this growth rate and continues to run at that growth rate. all the indicators have to say the economy is getting better. the reality is even though the economy is slowly getting better inflation numbers are not. we are near the fed's target ban. the fed looks at risk versus reward. what's the reward of raising rates too early? amid no reward whatsoever? what's the risk of raising rates too early? a major slowdown in the automobile industry which hits an economy at a time we have a large inventory, then we import deflationary pressures which you youry self-indicated in your own comments right into the united

states. >> was i overstating that? >> not that particular case. it's not 25 basis points is what will happen to the forward rate structu structure. the forward rate structure will go from a market that's below the fed's dots to a market that's above the fed dots and it will have a direct impact on the automobile manufacturers and their sales. that's been the main driving engine of this economy and you are a he taking a risk at damaging that. for 25 basis points to get off zero? number one, they can't just go 25 basis points because under their disclosure, they didn't raise rates last time through, given the growth numbers and inflation numbers that they had. nothing has changed now. so now they have to raise the growth numbers, raise the inflation numbers and come up with even stronger dots to raise -- >> bill gross said he thinks they're -- lot of people are in the one and done camp, steven. i hear what you're saying -- >> there is no one and done camp. >> there is a camp.

there's other people's camps out there. >> there's no one and done. >> it's not just your -- >> there's no one and done reality. >> for you. but there is that reality. >> the fed can't do that. >> listen. forget all that. >> how are they going to define it? say we'll raise rates 25 basis points and now do nothing for an extended period of time again? everything is data dependent. if they raise rates they think the economy and inflation is going to get stronger. they have to follow up with additional rate hikes going forward. they can't just do one and done. it is not going to happen. >> i understand your premise on the auto industry but steven, you cannot not admit there is a positive to higher rates. what about all the save erps out the there getting a little extra money because they've got nothing on their savings. no? >> the savers are the ones that have the money. most of this economy is suffering from a lack of income, a lack of saving and a fairly high level of debt. all you'll do is raise the interest rates on them and damage employment for the people who are at the lower level. you do more damage to the

economy than you're going to do having a higher saver getting 25 basis points more or even 100 basis points more. that's a fallacy argument. most of the savers are actually retirees. it won't damage them whatsoever. they've already been getting more income than they've needed over the years through the cost of living and social security while younger people's purchasing power has gone down. all you will do is damage that by what you want to do in terms of raising rates. >> apparently we should keep interest rates zero forever. if you're going to say i'm overstating everything -- >> i didn't say zero forever. you got to keep interest rates unchanged until you start to get a clear path for the economy to grow above the economy's potential and we nowhere near the economy's potential. >> you're the economist. you know more than i do. but four years ago on this hour, this program, we started talking about the economy. people said we're idiots then. everything's gotten better.

>> carl, is a 25 basis point rate hike going to damage everything steven's saying it is going to? >> first, i think everybody has been so focused on the data of launch that we've really lost track of what's most important especially for longer term investors is the trajectory. i do think that the fed can craft a case which will probably come through in janet yellen's post-meeting press conference that they're going to be extraordinarily careful about the sequence of interest rate increases that may prevail from the first move. they do not want people's impressions that this is going to be another 2,0004 with 17 consecutive hikes. i think they'll give a nod to the unstated state of international conditions and the mandate of central and other banks ep su banks and their level of security. the fed bases its decisions not on where things are today but where they may go. we really don't have a handle on how all of this asian mess is

going to come back and affect u.s. gdp growth. unfortunately, the beige book, while encouraging, i thought, is pre -- predates a lot of the turmoil we've seen coming out of asia. janet can probably stand in front of the cameras and say we're going to really have to study this and do some listening, crunch it through our models and create a scenario where it may not be until very early next year, march or even middle of the year before they start thinking about that second move. one other thing. the first time that they raise interest rates from zero they're going to be using their new operating range, a feature that we've not seen in interest rate tightenings in the past. calibrating the lower end and top end and the fed funds trading in the middle is probably going to take some getting used to. another reason why they could make a case for stretching out. the distance between the first and second move and not alarming the -- >> i want to give the last word to steve. steve, my dad always said don't go to bed angry. can we agree the financial markets are already anticipating a rate hike at some point.

aren't we already seeing a little bit of that dislocation that you were referring to as a sort of precedent? anticipation? >> first of all, i'm not angry. i'm disappointing at the level of analysis that you were projecting, number one. number two, with rarpd egard to the markets are anticipating, they're anticipating very little, even less than the fed said. the adjustment is going to move rates substantially forward, it will have damage to the economy and you are all sit here four years from now after they do it and say why did they do it? trichet made a mistake in 2011 and the fed did it in '99. >> get in the back of a long line of people -- i admire your feistiness. it's good! i dig it. thank you very much, guys, a good debate. melissa, i'm going to go put on powder because i'm sweating. >> fiery. you you should be sweating. right now we are sitting at

session highs. we are not only holding on to the gains for the session but we are pushing just within the past couple of minutes or so to our int intraday session highs. dow up 1.5%. the s&p 500 a session high, 1.3%. nasdaq 1.6%. it is really technology leading this rally. moechlts ago we did see apple pushing higher by baltimore than 3%. let's get more on today's action with bob pisani at the new york stock exchange. >> the beige book isn't normally a big market movers. we are at the highs for the day. it didn't move the markets a lot. i am a little bit surprised, i think the tone was unabashedly positive here. labor market tightening. pin creased wage pressures. economic activity continuing to expand. two seem to support at least the concept for a potential rate hike in september, seems to me. though the s&p 500, sitting at the highs for the day. we had a nice rally after the european markets closed today and the volume is on theed mo rat side. yields are up today and treasury

yields are up but most of the interest rate sensitive sectors are either side of positive or negative if you look at reits, for example, or if you look at the bank index, not a lot of movement in the middle of the day. modestly to the up side. the bank index bouncing off the bottom briefly being negative here. the key thing that friday august jobs report, g it is an outlier, below 170,000, for example, i think you'll see a lot of people say it is over for a september rate hike. if it is a big move on the up side, 280,000 or so, i think you'll hear people say it is much, much more likely. we might get a little more finality on this sooner than people think. >> i think traders are also looking forward to the china's going to be on a national holiday 37 that holiday. >> they get huge numbers of economic data next week. all the retail sales, ppi, cpi. we'll know if that ship is righting or not righting within the next week or so. bob pisani, thank you at the

nyse. in the bond market we were tracking this closely. yesterday we didn't see the action correlate with the stock market in that we saw the stock market selling off, we didn't see much action at all in the bond market. today we are seeing the tlt lower by .5%. a couple reasons here that people are pointing to, first off. that china's potentially been selling treasuries and also those risk parody funds out there. risk parody, basically a lot of assets in the market are allocated to these funds. essentially when market volatility goes a little haywire, there's some forced selling and wepeople were sayin that's the reason for the lid on the treasury market. look at some of the most weedily held stocks. google higher by 2%. apple 3%. microsoft up almost 3%. jpmorgan leading the banking sector by 1.4% gain at this hour. "power lunch" is back in two. no student's ever photographed mean ms. colegrove.

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at 2,311. effectively, john is calling for about a 20% leg up over the next four months. john, welcome to "power lunch." >> hi, melissa. >> really? 20% in the next four months? you think that's going to happen? >> let's put it this way. when we put in that target, it was in november of last year and we were looking for about a 12% up side. at this point based on where the market has gone, the fact that we've already rallied from down 12% from the may peak, now we're down about 9% and change as of this afternoon. even with a wash-out as we move forward, maybe some sideways movement, some give and take within the market, we do think we're building a platform into september from which we'll have a good chance to see a significant rally based on fundamentals. >> right. a significant rally but you aren't answering the question, john, with all due respect. you're sticking by your target by year-end which is a 20% move

higher from now until the year end? >> i think, yes. i think based on the way this market is known to rally, whether it was from last year's october 15th low through the end of the year, we've got two more months involved here. at least a month for it. >> what is going to take us higher? there are not too many people who are optimistic that energy is going to be a leader in this market. financials, when we've seen the market pick up a little bit, they haven't really provided leadership. with today underperforming the broader markets. what's going to take us there, especially in a time when you see market volatility and people are looking to reduce risks, they might not be as apt to go into the some of the go-go names that have brought us to our market highs, the ones with the higher valuations, names like netflix, amazon, et cetera. >> melissa, we're very close still to that august 11th date, the devaluation date. we think people are still dig t digesting it, people are still coming back from vacations. we think they've been working on their numbers while they've been on vacation. we think they're just letting

the market move to a level from which we can see some consolidation. and then see a rally from this. but it really is about fundamentals. consider the fact that the gdp number for the second quarter went from -- went to 3.7% from around 2.3%. if we remember in the first quarter, which now, as i recall, is positive modestly so. barely a fraction. but still, people were looking for negative growth at one point in the second quarter. so good opportunity here if you believe that earnings can be driven by gdp. we think looking forward, the market may very well move higher in the fall. >> your top sector, john, quickly. >> top sector remains consumer discretionary. the only defensive sector that we like, which is health care. but we're also positive on industrials, materials, technology and financials. >> okay. john, thank you. from oppenheimer asset management sticking to that 20%

from here to the year. up next, a few stocks that have withtostood all the market volatility recently. crude up 20 cents a barrel to $45.70. the oil pits, the oil close when we return. 's ever photographed mean ms. colegrove. but your dell 2-in-1 laptop gives you the spunk for an unsanctioned selfie. that's that new gear feeling. all laptops on sale, save $230 on this dell 2-in-1. office depot officemax. gear up for school. gear up for great.

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welcome back. investing legend bill gross out with his latest monthly outlook today. perhaps it is the first time he's ever used the word "frankenstein." telling his clients today to pile into cash -- or what he calls the near-cash of one or two corporate bonds. the bond legend also says the fed may have missed its window to raise rates earlier this year. gross also blamed the recently super sized market moves on the broader problems with the global economy and says 0% rate policies have created some "frankenstein" financial conditions. the roller coaster ride for this market the past few sessions, pretty incredible. right? not all volatility though is created equally. dominic chu is back and found some stocks that have held up better than others. >> you look at this roller

coaster ride for stocks overall. we can say that it's been very volatile for a lot of investors. we decided to put our screening abilities to the test again. this time looking at these 500 stocks. between how they traded on august 17th before this market melee started and where they traded as of yesterday's close. 500 stocks in the universe. we said we only wanted ones that posted positive returns between august 17th, the close, through the close of business yesterday. that 500 became 17 stocks overall that have at least survived, posted flat to higher returns over that time span. now look at these 17 stocks. these five are the only ones that we've seen here that have shown not only those gains in that period but also gains year to date. these five stocks hospira, cameron, smucker's, agl

resources and signet jewelers are higher. that leaves just two stocks, smucker's and signet jewelers, the only two s&p 500 stocks that posted positive returns since the financial melees began and still have positive year to date returns. only 1 of these 2 stocks carries a dividend yield that's above the current 10-year treasury yield, and that, my friend, is smucker's. up about 4% again since that 8/17 close. >> obviously they're known for jellies and jams, right, but they're a huge coffee company. >> america's biggest coffee roaster. >> dunkin' donuts, folgers,

they're all part of that brand. >> you and i both worked way too much today, dom. great stuff, buddy. oil volatility. it is down a bit today, but of course sharply up recently. the ovx, an index which tracks crude oil volatility, is up a whopping 48% month to date. with the oil close in a couple of minutes, wti is up 63 cents to $46.04. let us bring in the senior vp at raymond james, and the managing director at lomura. what do you make of this volatility and more importantly where are we going with oil prices? >> right. good afternoon. we're real big believers that you have to sort through positioning versus fundamentals. recent volatility is really about positioning. you see 2 1/2 to 4 standard

deviation type moves in oil which you really haven't seen since you showed the ovx or talked about is since '08, '01 and '98. you get everyone short the market, then an event occurs like the eia comes out with lower production in north america which people are watching very closely. or a 300-plus facility of crude goes offline in canada and you get the kind of volatility we are talking about. >> the eia changed its production. >> u.s. production is rolling over monthly data can be choppy. but certain ly balkin is rollin over. we had chatter from opec, "opec"

magazine saying maybe we should talk to some non-opec producers about instilling some discipline. it doesn't mean any change in policy. but given how oversold the commodity was, that was in you have to cause the biggest three-day spike in oil since the run-up to the persian gulf war in 1990. >> sit down. jackie d. is at the nymex for the oil close. >> we're closing really just off of session highs here. remarkable pop in oil prices after we were down 4% at one point during the session. we've got about an 85-cent spike here as we get that settling number. two major factors pushed us lower this morning. it was a build in inventories from the department of energy and also the news that president obama secured the support that he needs to be able to move forward with the iran deal. but then you have a situation where we had a turnaround and was it equities pushing oil? was oil pushing equities? it is hard to say. people have varying opinions on it but you can really look at a chart and see they both started

to move together. again this volatility that you mentioned really just continues when it comes to the oil trade. there is a lot of confusion in it. it is a difficult trade right now. back to you. >> all right, jackie. thank you very much. lloyd and pavel may have some insight. we've highlighted how the dow and oil have almost been perfectly correlated in the last two to three months' time. who's leading who here? i know you're not equity strategists necessarily but i'm sure you have an opinion on it. >> right. well, i mean i think what's happening in the oil market fundamentally is people were concerned about supply so the opec production, saudi looking to price out some of the higher cost producers, iran coming back into the market, and then that's flipped a little bit to concerns about klein. i think that the concerns about china are probably impacting a lot of the market as well so you're seeing these things move a little bit together. >> yeah, pavel. you've been leading this call.

months ago on this program you knowed that some of these stocks are going to be in big trouble. a lot of people keep saying buy the bottom, buy bottom, whatever that is. are you fundamentally now more bullish on oil equity stocks than you had beenen? >> right now the average oil stock is discounting $55 to $60 oil. obviously that's much higher than the stock price. it's even higher than the 12 or 24-month curve. but look, in the long run certainly 12 to 18 months out, we think oil will be in the -- probably in the high $50s, if not $60s, because the current level of prices simply does not support sustainable investment across the spectrum of the industry. if the current austerity continues for another year, let's say, then we're going to get a really brutal supply response and production's really going to be falling off a cliff. of course, that's not a sustainable picture in the long run.

prices will have to recover. >> at the same time, pavel, that path over the next 12 to 18 months to fit your $60 a barrel oil, does that support you having your top picks being newfield, pioneer natural, c concho and suncorp. that path to higher oil prices in 12 to 18 months could be $40, $45 and the average won't be $50. so in that environment are these top picks still top picks? >> the short answer is people should be focusing on companies that have balance sheet stability and dividend stability to weather the storm over that time frame. so you're right, it is going to be volatile. generally larger cap, more liquid names. some of the ones you mentioned i would also add occi and marathon to that list. they should come out on the other end of this commodities --

>> they'll be in business but they might not do your portfolio any favors. >> well, if oil gets to $60 over -- by, let's say the end of '16, then they absolutely should be doing their portfolio favors because right now we're in the low $40s. that's a 40% move. that's a lot of up side. >> pavel, lloyd, we'll leave it there but i just have a sneaking suspicion this is not the last time we talk oil or oil stocks. thank you both very much. have a great day. it's noted the transport are at session highs. but the group's been down 7% in just the last month and 15% for the year. so it an opportunity opening up here? the names you may want to take a look at. look at apple, it is now positive for the year. we are sitting close to session highs on apple. certainly that's helping the s&p, as well as the nasdaq, hold on close to their session highs. stay tuned, more "power lunch" right after this break. >> announcer: the cnbc real-time

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hello, everyone. i'm sue herera. here is your cnbc news update at this hour. a baltimore judge has refused to dismiss charges against six officers charged in the death of a black man. freddie grey died from a spinal cord injury during his arrest back in april which led to four days of rioting and protests in the city's streets. attorney general loretta lynch condemning the latest violence against police officers in illinois and texas. she addressed a housing conference in washington saying violence "against all of us, regardless of what uniform we wear," must end. vietnam celebrating the 70th anniversary of its independence from france with a military parade in hanoi. about 30,000 officers and people marched in front of the mausoleum of revolutionary xharm ho chi minh. lego has reclaimed the crown

as the biggest toymaker from mattel. sales increases to $2.1 billion to the first half of the year compared to a 5% drop by mattel to $1.9 billion. lego crediting the success because of its "star wars" product line with the new movie coming out in december. >> "star wars" is going to save the world, sue. >> absolutely. >> a lot of companies out there benefiting. >> may the force be with them. >> thanks, sue. transports at session highs but down 15% for the year. so is this a buying opportunity? jack atkins, great to have you with us. i would think especially for the land base transport stocks this would be a sweet spot. the economy is slowly improving, fuel prices remain low. what is going on here where we're seeing a down year for this group? has it just been that investors have priced all that into the stocks prior? >> well, it is great to be with you, melissa. i think you're absolutely right.

we've had an opportunity to meet with a number of transport companies over the course of the last couple weeks. trends within the general freight economy remain stable versus the second quarter. capacity is a little bit looser certainly on a year over year basis. i think that creates opportunities especially for the non-asset based names to really benefit from that as they arbitrage lower buy rates. >> meaning they don't actually own the truck. they are sort of the go-between, they arrange the truck where it needs to get and -- >> that's right. the largest person on the service based side is c.h. robinson. >> i want to talk about kirby. it is a tank barge operator. i would think it doesn't necessarily matter of the cost of what they're transporting is. yet this has traded horribly. it is down 43% over the past 12 months. it is trading than crude oil itself. what is happening here, why is kirby not benefiting?

>> well, you're absolutely right. this is being viewed has an oil stock, though it is not. we have graupgraded this a mont and a half ago. these guys predominantly move petro chemicals. only of% of their assets move crude. about 9% for the overall industry. you've seen a big move down in the stock here. i think that's really reflected in the current valuation and we think this stock could see earnings growth next year even without much of an economic tailwind. you have the huge petrochemical investment that will be a major benefit for kirby in the gulf coast over the next few years. the stock market is the most volatile it has been since late 2011. that's right. volatility is about a four-year high. how should this impact your investment strategy if you're a long-term investor or maybe a short-term trading. our tradings nation team, albert

brenner, todd gordon. albert, i'll begin with you. most of our viewers are probably not day traders. they're probably buy and hold investors. some doctor in iowa who's got a 401(k). how does volatility we are seeing now impact them, or should it at all? >> hi, brian. that's of course a great question. the volatility is more a condition or, if you will, sort of a temperature of the market right at a current point in time. i would say it is more indicative of underlying uncertainties, if you will, that investors have. we don't think that the causes for those uncertainties right now should warrant an investor changing their longer-term asset allocation. we have been overweight in equities for 3 1/2 years, and although we think that deserves close attention right now, we continue to be overweight equities right now. >> so, really, if you're longer-term investor out there looking at these giant market

swings, how do you -- aside from maybe yoga, how do you stay calm in you have to -- because we just got some data that mutual fund people were selling. how do you say don't sell! hold! relax! wait! >> well, one of the things that we try to do is we try to prepare investors, our clients, for conditions that are likely going to occur. since the start of the year, we have been advising our xlinclie that in fact the stock market was going to be a roller coaster this year. i have to say, we have been closed to see that our client base has pretty much stayed the course right now. that's what we would suggest. it is one of the most important roles that an investment manager or investment advisor can serve for a client, that is to hold their hands through volatile periods like right now. >> todd gordon, from a trader's perspective, how do they take advantage of the volatility? >> i have a completely different side here. we love volatility. just to put it in context before i speak to that, if you loo being at the sell-off that we've seen so far, we dropped, max,

what? 13% from the peak to trough in the s&p with a vix reading of 50. you compare that to the 2011 market that you mentioned, that was a 20%-plus drop with the same volatility reading. we've seen just this volatile market is a market that's traveled half as much as we did in a percent change from the last peak. what's that mean? this is a wild market. whether you are a long-term buy and hold investor, or if you are a little bit more nimble, a more volatile trading condition takes more action. you're basically going to see two, three, four times the amount of travel range in one trading day than you normally would. if you do anything but just buy and hold and pray that we move back to the highs, in fact are positioning yourself, either decrease your trading size, look at your chart outside of a weekly or daily, get down to the intraday. if you're positioning, realize you're going to see three, four times more travel range than you normally would so position accordingly if you're trading these markets. >> albert, todd, thank you.

for more "trading nation" head to tradingnation.cnbc.com. "power lunch" back in two months. >> announcer: and now, the latest from trade regionnati tradingnation.cnbc.com and a word from our sponsors. want bladder leak underwear that moves like you do?

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financials, and energy, two tales of the market right now. financials might not be the very best performer. energy, though, is the second worst. still up today on an otherwise up day for pretty much everything. global investment management joining us now. patrick, i mean, up 400 one day, down 400 the next day. perhaps the machines and the alall algorithms. trying to have enough money to retire for the most part. how do they do that now? >> i think step one might be not to look at the daily performance. i think one of the worst inventions in the history of the industry, or worst innovations was the daily performance reporting. because it really gets people to focus on something that doesn't matter the day-to-day.

takes away the focus from the long-term. i think the question is, are you in for the long-term? do you own businesses? are you trading stocks? if you're trading stocks, that's a loser's bet, usually. the great investors out there that have made billions of dollars and have been very successful, they've owned businesses. the buffets the templetons. people like that, they've been there for this long-term. and bought them at the right price. you look for the right price or ignore what's going on. >> i agree with you and the data agrees with you, and the stock market is the greatest wealth creator in the history of the world. i'll take the other side and say, all right there also good times to sell? i understand stocks are probably higher ten years from now. there's also a time value of money. if you think stocks will go down for a couple of years in a row, there are good times to sell. you do sell stocks out of your fund, as well. >> yes, we do. and absolutely. we were just actually talking about investment meeting we had a couple of hours ago here.

we're value investors, looking at prices. and one of the things we were debating, is the market overvalued? do we see any bubbles? a lot of times, if you're looking, if everybody's euphoric. if everybody's thinking the good times will continue on forever, that's usually a good time to sell. you may not get the top exactly right. i look around right now, and i don't see euphoria. i don't see unbridled optimism. >> what have you sold? we always ask, would you buy? what have you sold lately? >> yeah, i think some of the staples out there right now. i think some of the stocks are overvalued. they have poor growth prospects. i think a lot of the utilities still look expensive. we've been selling some things that -- and this is a little bit too late for some of these when we sold them a couple of months back. we threw them and in and said, the world has changed, the facts have changed, we need to change our opinion. so there's things like that. a lot of things we've been

sellisell ing tend to be more steady in nature. >> admitting not every stock is worth your clients' money. we appreciate it, patrick, have a great day. all right. right now, the nasdaq 100 etf ticker qqq probably in your portfolio up by more than 1%, almost 2%, in fact, but down more than 8% over the past month. is now the time to jump in on big cap tech stocks. we'll get recommendations when "power lunch" continues. stay tuned. ve attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom. legal help is here. ♪a one, a two, a three percent cnext.ack♪ there's gotta be a better way to find the right card. creditcards.com lets you compare hundreds of cards to find the one that's right for you. just search, compare, and apply at creditcards.com. to breathe with copd?ow hard it can be it can feel like this.

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alright, let's take a look. the one on the right just used 1% less fuel than the one on the left. now, to an airline, a 1% difference could save enough fuel to power hundreds of flights around the world. hey, look at that. pyramids. so you see, two things that are exactly the same have never been more different. ge software. get connected. get insights. get optimized. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.

right now in today's session. what are your best tech bets right now. joining is the president and cio of cassell arc, the senior equity analyst. great to have you with us. you're in the momentum names. higher valuations, but certainly better performers so far this year. you got the steady eddies the intels. >> these three are down. intel down 21%, ibm down 10% this year. when is the environment going to change where this sort of homework you do. valuation analysis is going to catch up with how the stock performs. >> well, i'm going to say, no the that far in the future. i think intel in particular was down because of the lack of pc purchases. and there were great reasons for that. microsoft's new operating system is one of them. but that's one of the drivers. >> okay.

jerry, i'm curious in this market environment where people are looking to maybe limit their risk exposure, they're looking to sort of the atm stocks, the stocks that have done pretty decently this year, a high valuation stocks. stocks that whip around a lot. palo alto networks is one of those stocks, i would think. >> still year-to-date with the recent pullback, are you concerned that the market environment is not favorable for that kind of stock? >> the question is your entry points for great growth names like these three aren't very few and far between. and if you do ignore this and don't accept the fact that the stock's already pulled in, you may be missing the best buying opportunity in the next three or four years. so the fact that they've pulled in is actually exactly when you want to look at these kind of names. and nxpi and palo alto are too unique. they have too many solutions for the next leg of this economic

activity. and i don't think you want to stand around and wait for the bottom. >> how concerned are you about china? all three picks have exposure to china. and we've heard it in the past that asia has been a trouble spot for them. >> asia will continue to be a trouble spot for them. they're a global organization. >> i think it's already been baked into the price, and that's one of the reasons why i'm looking at ibm right now and talking about it today. >> and jerry, same question to you, except with nxpi. it has a big end market user, and that would be the auto industry in china. and also, supplies a lot of the enb chips for the credit cards also in china. they're a dominant player in that industry. they've got a couple of different exposures. how concerned are you that this market environment overall, it's going to indict stocks with china exposure? >> again, it already has. and since we're not buying the stock at its recent high, so we've had a number price correction to accommodate a fair amount of chinese disappointment.

on the other side, we heard what u.s. auto sales are doing. the u.s. alone could capture the biggest share of their growth. so i really don't think it's a big issue right now. >> sure. kim, jerry, thanks so much. brian, i'll see you tonight at 5:00 on "fast." netflix down today. >> have a good day. we'll look forward to it. thank you. "closing bell" starts right now. >> welcome to the "closing bell," i'm kelly evans at the new york stock exchange. >> good afternoon. >> a big rally today, but it's fading here a little bit as we enter the final hour of trade. all the averages still up more than 1%. the dow up nearly 200 points. but at the highs of the session, it was closer to 228. and remember, the dow has still not recovered from the 470-point drop yesterday. we'll see whether the gains can hold. also ahead on the show, transports moving higher, as well, with american airlines. one of the standouts in the sector