on the issue of china, he says he doesn't see large first order impacts from china on the u.s. economy, and he says he's worried about market swings but ultimately they are, quote, not my central concern. and then on all the volatility, i thought this was an interesting quote, it's too early to know whether this episode amounts to a bona fide shock to the economy or just a nervous spasm in the market. lockhart, as you know, scott, is a centrist. he's somebody we follow very closely to kind of get a feel for which way the board is tilting. he still seemed very much on board with a rate hike this year but supported a pause in september, scott. >> so steve, you have got lacker with a dissent, lockhart saying go, bullard, who doesn't have a vote saying go. what's the likelihood of the overall fed being swayed by october. >> i think it's very much in place. you have to watch the data. you have to watch the comments that are made.

the question is sort of the yellen/dudley more dovish wing of the fomc as to whether or not they're adamantly opposed here, but the other guys, i think it was about letting the markets settle down and waiting to see if there was anything more serious that the markets were telling us from the recent volatility. but if things have passed and they seem to be quite a bit calmer than they were previously, then i think that group of people we were just talking about are quite comfortable hiking rates. >> steve, thanks so much. the markets were already moving lower throughout the last 45 minutes or so because of what's been going on in health care. they're going to react to this more in the minutes ahead. steve weiss, it brings up the question again, if the fed acts in the next month, stocks are going to blow that off? >> look, i don't know -- >> market can go up if the fed hikes rates? >> i believe that if we get everything else sort of more comfortable, the markets trade up. i just don't think the fed is the principal issue and i do think they've now -- nobody was

prepared for a hike before, very few were in terms of fed funds rates and so forth, treasury rates, futures. now i think the market is prepared and they will go in year. >> let's not forget that 13 of 17 fed members thought rates were going to go up this year. you listed the number of individuals that have already said they favor. you're going to hear more about that because, again, the vast majority of these guys still think rates are going up this year. to some degree this shouldn't be news. >> you got fed chair yellen speaking later this week. put it all into context where the market is today and where it could move and not only in the hours ahead but certainly in the days and weeks, and "power lunch" picks up that stoush right now. >> scott, thank you very much. welcome, everybody, to "power lunch." along with mandy drury, i'm tyler mathisen. watching the markets turn a little sour at this hour. the nasdaq and the s&p 500 both in the red. the dow clinging to about a 20-point gain. you know, those fed voting members all saying, so many of them saying by the year end,

they expect a rate hike, and that would mean either october, mandy, or december. >> we also begin this hour with the biotechs because they're getting slammed following comments by presidential candidate hillary clinton. the ibb nasdaq buyer tape index right now down by over 5%. in a tweet responding to a "new york times" article highlighting the soaring cost of specialty drugs, clinton says, quote, price gouging like this in the market is outrageous. she goes on to say she will lay out a plan to take it on tomorrow. so the biotech is dragging down the nasdaq this hour. bertha coombs is there and she's tracking the big movingers. hi, bertha. >> hi, mandy. this is not a new complaint we're hearing when it comes to biotech prices, but the move in biotechs has sent the nasdaq into negative territory. the big caps, small caps are down. it's actually the smaller cap by yes tech index at the nasdaq that's off the most. prices on specialty drugs have raised concerns among doctors and payers alike. in this case secretary clinton's

complaint is about a 60-year-old drug to treat parasitic infections where the price was increased from $13.50 a pill to $750 a tablet after it was acquired. hot drugs like hepatitis c treatments have led to outcries. new cholesterol drugs on the horizon have already galvanized payers to take action. clinton is going to outline a remedy tomorrow. investors are clearly worried the stakes are rising for perhaps regulatory action no matter who wins the election. mandy? >> okay. and a major exclusive in the next hour, bertha, because we have the ceo of one of the by yes techs highlighted for soaring drug prices. stocks overall giving up their big gains. let's look at the numbers. the dow is currently only up by 31 points. the s&p up by less than 1 point, and the nasdaq is currently

sitting to the downside. bob pisani joins us from the nyse floor. not just what's happening with biotechs but a plethora of fed speak to digest here for the market, largely hawkish as well. >> and i think that is impacting as well. let's take a look at the s&p 500. 3 to 2 advancing to declining stocks at the new york stock exchange but it was a lot bet irthan that earlier. the volume is on the moderate side after friday's titanic volume, second biggest volume day of the year. put up the s&p 500. we started turning south a bit right around the european close around 11:30 but i think 3457ndy has it right. all that talk from fed officials about maybe raising rates combined with hillary clinton's comments weakened the market a bit. if you look at the sectors, energy has held up pretty well as we had oil up about 3%. there's always a big mover. financials doing better after getting clocked a little bit last week. consumer staples strong, but there you see health care down noticeably, and while bertha highlighted the biotechs rightly so, it's not just that.

it's the big cap health care names. i mean big pharma names. bristol-myers, merck is a dow component, down 2%. that's what's weighing on the dow right now. pfizer as well, down 1.7%. so the dow jones industrial average is actually underperforming the s&p 500 because of the stronger -- somewhat stronger big pharma component in there. elsewhere if you take a look, we had strong -- whenever oil is up it tends to help the dow because you have chevron and exxon on the upside. they're fairly high-priced stocks. ibm turning around a little bit. tough week last week and the financials doing better. goldman is a very high priced stock. that's moving things and, tyler, ge and some of the global industrials that had a terrible time loost wake alast week also little bit catch up. >> thank you very much. fed lines we'll call them. steve, recap what we just heard. >> we had dennis lockhart, the atlanta fed president, basically making a case for rate hikes

defending the idea of a pause saying, you know what, we've made it on the labor test -- or the labor market improvement test for hiking rates and he's confident enough in the inflation numbers to go ahead and hike. he sees market-based measures of inflation are pretty stable. the economy is growing. he says performing solidly was the term he used, and plus he sees wage pressure a little bit more widespread than we heard any other fed president say. so all of this combines to say, you know what, he's ready to hike rates. he used that phrase, the idea of i'm confident that the much-used phrase, quote, unquote, later this year is still operative. >> there's not much of the year left s there? >> no. >> you have these comments from williams, the u.s. economy is on a solid footing, and then just now lockhart saying the u.s. economy is performing well. it begs the question why are we at an emergency level of interest rates, right? >> that's what jim bullard talked about this morning. he said it's hard to make the case for emergency levels of interest rates and made a strong

case for hiking rates saying don't tell me when we raise by a quarter point we're still not accommodati accommodative. there's an enormous amount of accommodation in the system even after the first quarter point hike, the fed will still be accommodative. >> michael farr was mentioning on fed day that don't mistake a change in the number for a change in policy particularly because it's still going to be very accommodating. >> the outlook is for the fed to be accommodating for as long as three years even when they get to the place, the final place, or the terminal rate, it's still going to be well below where they've even started other rate hikes at previous times. so the current outlook is 3.5%. our cnbc fed survey is even lower than that at 2.9% for where the terminal rate is. that's a debate between markets and the fed, but in either case it's very, very low, and so there's not really a concern that ultimately the will be tightening it. >> last week you were right on

the money. i asked what you they were going to do and you were right on the money. >> it was easy. i flipped a coin and took the other side. >> next fed meet something on october 28th. that's the night of cnbc's republican presidential candidate debate. the candidates will have a lot to talk about from the fed and a big day and night, october 28th, right here on cnbc. as we've been mentioning, the biotechs have been taking a hit. small of caps out of correction territory. so where are the opportunities in this market? the fed's decision to hold rates may have just made this sector a big bargain. which sector are we talking about, dom? >> perhaps a bargain. we're talking about the financials. one of those sectors that's extremely levered to what happens with fed interest rate policy. those financials have been a big focus for a lot of investors because they may represent an opportunity. remember, financials the second biggest sector in the s&p 500. if you take a look since those august 25th crisis lows, the recent market in turmoil lows that we had, equinix, iron

mountain at this, and s.l. green realty have been some of the financials, i say this loosely, financials that have outperformed the broader market. i stha because these are each real estate investment trusts. that's the reason why they're important because they're those interest rate plays. if you take a look at some of the ones that have been lagging behind, amg, franklin templeton, legg mason. they have been relative laggards. they're not bad. they just haven't participated as much. one other place we want to look at, some of the big investment bank broker dealer type. you look at morgan stanley in focus, right? you see here that some call it a death cross, maybe some momentum lagging behind here and then, of course, the reason why it's important, the last time that we did see this kind of a downward move was back in 2011 and it took a little while for the markets to bottom out. so that's why some traders are a little bit skeptical right now.

the last time we saw a cross like this, guys, it took a while for the markets to reach a bottom. that's why some traders are a little bit cautious about the current market action. back over to you. >> dom, thank you very much. let's get some market insight from an investing legend. jack bogle is the founder of the vanguard group. jack, a legend. you have become a legend in your own time. how do you like that? >> a legend in my own mind might be more like it, tyler. >> let's talk a little bit about interest rates and whether you think a slight rise in interest rates is, one, appropriate, two, any occasion to change your fundamental investing practices. >> no, i don't think it's going to be big enough. the stage is set for very cautious policy for a long time to come, whether it's up a quarter of a point or a half a point, who knows and who knows when. tyler, i thought -- for one, i thought that the fed's decision to put off any rate increase at the meeting last week, i uttered a quick bravo to the one of the

interviewers. >> because? >> because i think caution should be the watch word of the day. the fed should be watching out for an economy that, you know, i don't know if it's really vibrant. i don't think ts vibrant. it's adequately strong, but i'm not sure that's good enough. i mean, we know that wages are still under pressure. we know that the workforce, the size of the workforce, is not growing much, and we know there are plenty of challenges ahead for our economy as the whole world economy gets into this messy state it's in. so i think the fed is doing just the right thing under the old hippocratic oath, tyler, first do no harm. >> right. let's move on, i just did a radio piece an hour or so ago on dollar cost averaging, jack, and it seems to me that in a market like the current one, equity market is what i'm really talking about here, where there is volatility, that it makes a perfect argument for why dollar

cost averaging is the smart way to go for most investors. i'm not asking you to agree with me but maybe you do. what do you think? >> well, certainly for anybody with a retirement plan or trying to invest for their children's college education, those are some of the main needs of investors, but take the simple one, the retirement plan. there is no other way to do it. you want to start building early, as early as you possibly can because that slope gets steeper and steeper. the more money you have to put in per month the closer you get to retirement, you almost can't get up that hill later on. so start now, keep investing. when the prices go down, be happy. people don't seem to understand that when the markets are at highs, it's great for sellers and bad for buyers. when the markets go way down it's great for buyers and bad for sellers. these are the markets. this is the great casino out there, tyler, so just ignore all the noise.

>> ignore all the noise and keep your eyes off the headlines. good to see you. i want to ask you about goldman sachs making a play for mom and pop investors with a new line of low cost etfs and i believe reportedly some are even cheaper than some of those from vanguard. do you see this as competition for you? >> well, i never thought we'd be in competition with goldman sachs for anything, but you have to understand that etfs today are a very unusual kind of index fund. they're largely created for speculators rather than for long-term investors, and this year the numbers are something like this, that the trading in etfs for the year is going to be something like $1.4 trillion -- i'm sorry, $14 trillion and trading in the hundred largest stocks is going to be about $16 trillion, and yet etfs have this tiny, tiny asset base compared to the market.

so etfs are turning over at around 950% per year and common stocks, the old way of speculating, are turning around at about 120%. so if goldman sachs wants to get into the game of speculation, i salute them. and if they want to beat our prices at vanguard, i don't know how durable that will be, but their record as mutual fund managers has been been, if i may say so, rather distinctly poor. now they've moved to indexing and that's possibly a good thing, a good sign for the strength of the index. >> let me get your thoughts, you have taught me a lot over the years about the constituents of total return for equities. as you look at where stocks are priced today and the level of corporate profit growth, the differ dend payouts, what do you think over the next five years or so will be an average annual rate of return if i were to invest in a broad s&p 500 index

fu fund? >> it's pretty simple for me although i use ten years rather than five. the longer out you go within reason, the more predictable things are, but the dividend yield is 2%. i think we would be fortunate to have 6% earnings growth. that would be an 8% return, investment return. those are the components that make the return. but with pes up around 20, price earnings multiples up around 20, they could easily drop to 15 or 16, and that would slice two or three percentage points off that eight. now, that's not great obviously, and it comes before fund costs. you knew i was going to mention that. so in an actively managed fund you get five less, too, which is 3% which isn't good at all, but when you think of bonds being available, descend bonds, decent maturities at around 3%, that 5% would be a 2% equity premium and

i think that's all you can hope for. >> all right. jack bogle. on that note we leave it. appreciate your being with us. >> always good to be with you both. >> likewise. mandy. >> thank you. home sales plunging. what is causing that? we have the real read on the american housing market right now and as we were saying, goldman sachs is getting into that 3 trillion etf market launching the first in a series of low-cost funds. but the question is will it be able to compete with the likes of vanguard? we were just talking about that, blockrock, and state street. we'll try to find out. ckrock, a. we'll try to find out. ackrock, . we'll try to find out. care of my heart. that's why i take meta. meta is clinically proven to help lower cholesterol. try meta today.

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go pro taking a hit today. it's currently sitting at $32 and change because of competition from apple and sony. go pro stock is down 50% so far this year and down 8% just today. starwood way point which owns thousands of single-family rentals is buying rival colony american homes for $1.5 billion in stock. and lennar is moving higher -- actually moving lower right now, down by 1%. the number two home builder beating earnings estimate selling more homes at higher prices. the stock is up almost 20% this year. but right now it's moved to the downside. tyler? >> sticking with housing, new data out showing home sales dropping more than expected. what's behind this little dip?

diana olick joins us from washington. hi, di. >> hi, ty. it was actually bigger than usual dip. august sales dipped well below expectations and even below the normal monthly moves. total sales down 4.8% month to month led by much steeper drops in the south and west. those are the regions where home prices have jumped the most. the median sale price nationally was up 4.7% from a year ago but it was up 6% in the south and over 7% in the west. now, realtors point to very weak demand among first-time home buyers who have a harder time saving for down payments and meeting credit score requirements. fha is usually their loan of choice with a low down payment but the nation's big banks have all but gotten out of the business because they keep getting sued by fha. chase mortgage which is the nation's second largest mortgage lender is not even in the top 100 anymore of new fha originations. i sat down with its ceo this morning to talk about why. >> when we look at fha really it's the servicing that we're

concerned about. and so -- and when i talk about servicing, you have to remember in the last couple years, there's been about 13,000 pages of new regulation. so you were to stack that up, that's 5 1/2 feet high of new regulations that come in. all primarily focus on default servicing. >> do you even want fha loans anymore. >> fha requirements are down to a 520 fico and you only have to put 3.5% down. that's subprime lending and we're not not subprime lending business. >> chase says they will do fha loans but with higher fico scores and at higher cost to the borrower for that added risk. they are selling off much of the servicing portfolio while growing jumbo loan originations. not so much risk of litigation from the government. >> thank you very much. let's go to josh lip to be in san francisco with a news alert on apple. josh? >> yeah. mandy, some news from apple.

apple saying its releasing this software update for its watch. remember, last week apple had delayed this release because the company detected a software flaw, but now the software update rolling out. consumers can download it. features of the new operating system here, new watch faces, developers can write native apps. so more powerful, faster apps. apple, of course, doesn't break out units or shipments for the watch but idc remember says in q2 apple shipped 3.6 million watches. that put it right behind market leader fitbit. back to you. >> thank you very much, josh. apple has a lot on its plate. also having to deal with malicious software x code ghost but they say they're cleaning it up. tech is among the best performing s&p secretariors today, it's up by half a percent. and your ri milner will be joining us exclusively. who is he? he was one of the biggest investors of alibaba, facebook, and twitter. we'll talk to him about what is his next big bet in tech. that's coming up. nt,

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welcome back to "power lunch." shares of ralph lauren in the green today off their best levels of the day as the markets have turned at least a little bit to the momentum side negatively, but we still have more than a 1% gain here. this comes on the heels of a barron's article saying the stock represents a possible buying opportunity after a 40% drop so far this year. the newspaper also says it's likely due in part to currency challenges and investments in new technology which should

boost profits over time. they say the shares could hit about $135 over the course of the next year, so that's helping to give a boost, tyler, to ralph lauren. back over to you. >> let's get a check on the bond market on the back of those comments from the atlanta fed president william lockhart. rick santelli is tracking the action. hi, rick. >> high, tyler. looking at the dollar index i see the currencies, the yen, the mexican peso, canadian dollar, the swiss franc are lower against the greenback. look at the dollar index intraday. we have a half a cent higher than friday's high. let's look at the yield curve. 66.5 was the high on friday. we're currently trading 71, a handful higher. we're trading 150, 148 was the high on 5s on friday. 10s, a whisker below 220 was the high on friday. we're over that challenging 221 and 302 in 30s versus 301. it isn't a lot but we've come a long way off the low yields on

friday as we get close to that significant area, the 55-day moving average in 10s around 222. back to you. >> thank you very much. markets rallying just a bit at this hour. october usually a scary time for investors. there you see the nasdaq off a little bit, but the s&p has tilted back into positive territory and the industrials have picked up a little momentum in just the past 20 minutes or so. there's a lot of uncertainty over future fed rate hikes and that's been fueling whatever fears there may be about october phobia, but this may actually be a month to buy stocks. why you shouldn't fear october. that when we return.

hello. i'm sue herera-here is your cnbc news update. a 6.3 magnitude earthquake hill ch chile this morning. it follows last week's massive 8.3 magnitude quake.

the government is providing some financial relief to help people rebuild. 21 arrests were made in florida bringing an end to a two-year investigation into an extensive human trafficking and heroin operation. the florida attorney general and leaders of the police force revealed the details of their investigation this morning in orlando. 20 human trafficking victims were rescued, including one juvenile. florida typically ranks third in the nation for the most trafficking cases. researchers in germany found no evidence sex increases the risk of heart attacks even for heart disease patients who have already had an attack. but experts suggest heart patients consult their cardiologiey cardiologyologi cardiologyologi cardiologyologists before resuming sexual activity. and a store is selling pinatas in the imge imagine of

donald rump. t that's the cnbc news update at this hour. perhaps no surprise about that, right, mandy? >> it looks like they need to get new stock in. thank you very much. i have a feeling there's going to be a halloween costume as well. gold prices are closing to the downside. gold sitting at $1,133. silver, copper, palladium, and platinum are mixed right now. platinum is lower. ty, over to you. >> thanks very much. stocks, the s&p, and dow, moving a little higher. let's check in with bob pi sanaa at the nyse, bertha coombs is up at the nasdaq. >> the important things, take a look at the s&p, we were down fine up until about 11:30, we started drooping lower. hillary clinton's comments may have had some impact. look at the markets midday. a good start and we drooped down. energy has been doing great, health care has been fading. volume is on the moderate side.

if you look at some of the big pharma names, that's moving the dow. want to update you on pandora. halted twice this morning. a legal opinion might have gone in its favor apparently. they pay out royalty fees and people want more money. next year they're negotiating the rates and this ruling today may help them negotiate lower fees. do you know how much they pay? 0.0015 dollars per stream. a seventh of a cent per stream. >> that's astounding. >> they want more money. not they -- >> the artists. >> the artists want more money, yeah. >> bob, thank you very much. let's go to bertha at the nasdaq. nasdaq is in the red. is it biotechs, bertha, or what? >> it has been the biotechs. tumbling on the back of twitter comments of hillary clinton citing "new york times" article on prices being jacked up for 16

drugs. that's having the biggest downside impact. on the outside we have tesla. tesla sending out invitations to view the new model x starting a week from tomorrow. and then there's apple which is also higher today saying that it's had 50% adoption of ios 9 but if you're in new york or philly, your phone could be delayed, your new one, at the end of the week because of the pope's visit. >> thank you very much. let's have a chat with art hogan and craig columbus. gentlemen, thank you for joining us. craig, i know you're not a fan of the fed. how is their credibility standing in so far as instilling investor confidence. >> the big news is there's a shift going on in the market where we are now prioritizing growth over liquidity. when you get a bad assessment or a dovish assessment or bad data, it's no longer viewed as good. liquidity can put a floor under

risk. i think we're stuck in a trading range. >> what are we waiting for specifically, craig? >> well, we're going to have lots of data coming up here so payrolls, gdp, china export data, those are the heavyweights in the next couple weeks. >> who knows if it will be enough to have it resolved by the october fed meeting. art, are we more or less confused? last week was like a dove's home run. today and over the weekend it feels like the hawks are coming out to play. are we confused? >> i think we're less confused. the pinnacle of confusion came out in the q & a because you had broad market expectations that at the very worst the fed was 50/50 to make a move. if you listen to the conference call or listen to the q & a, it sounded like nobody was talking about raising rates in the last meeting. i know the feds fund rate only put a 20% chance for that happening. we were looking for september, one and done, and then to dound dovish after that. it confused a lot. over the weekend we had a trio

of speakers that really nuanced the message a lot better. we will hear more from fed speakers throughout the course of the day. the market's confusion -- >> so, art do, we do what jack bogle says and ignore the headlines and keep investing for the long-term? >> i think jack is absolutely correct. you ignore the headlines surrounding the fed. just know they're going to raise rates whether it happens this year or the first part of next year and then they'll take a good amount of time before they have to do it again. it should have nothing to do with your investment process right now. what you should be looking at is what are the companies you want to invest in and what multiple are you willing to pay for that. unfortunately, when the fed is the story, it's impossible to get that kind of focus for investors. i want you to say is the s&p going to earn $130 next year and what is that worth? >> you like smith & wesson and vista outdoor. thank you very much for joining

us today. >> thank you. >> you can go to powerlunch.cnbc.com to see some additional stock picks from art. that is powerlunch.cnbc.com. ty? >> thank you, mandy. as we've been reporting, the biotech index sinking after hillary clinton said she's going to go after the pharma industry after one drug used to fight a particular infectious disease, so a massive price hike from $13 a dose to $750. through twitter mrs. clinton said, quote, price gouging like this in the specialty drug market is outrageous. tomorrow i'll lay out a plan to take it on. steve case is the chairman and ceo of revolution. steve, welcome back. good to see you once again. you run a business incubator. you have invested in health care companies from time to time and before we go on to topics ranging from immigration to others, what is your take on this drug story and the fact that so many drugs are being priced at such high levels? >> i don't know the details on

this particular one, but i think in general the cost of developing and commercializing drugs has gone up dramatically. a lot of development is moving offshore. we're at risk of losing our lead in terms of innovation in the space. we need to look at a fresh look at what is the right regulatory process to keep people safe but expedite drugs. that's a great way to keep the cost down. more entrepreneurs are doing more innovative things and the dris rupters are putting pressure on the incumbents. >> i'm not a deep student of drug pricing but my sense is that you can often buy a similar drug or the exact same drug in countries outside the united states for a fraction of the what you pay here. that suggests we, the taxpayers and health care consumers in this country, are carrying maybe an undue burden of the cost of developing those drugs. >> again, i think it varies depending on the company and the particular drug.

i'm no expert in pharma or biotech, but i think ts veit is expensive. the question is how do you get that capital back and what markets do you go after. if we can figure out a way to lower the cost of development and expedite the process of getting these things from the labs into the marketplace, i think that will result in better products, better services for more people, better drugs at lower cost. >> in our 2:00 p.m. hour, we'll have one of the ceos, a drug company who was in the spotlight in "the new york times" article. we'll hear from him and he'll describe some of the things yaur talking about. let's transition to a cause i know is dear to you and that is immigration. in an editorial page or an op-ed piece you wrote for "the washington post" ten days ago, you take on donald trump pointedly, but you also broaden it out to say that you think we're just missing the ball here in our national policy on

immigration. how do you respond to today's news that by 2018 we'll begin to admit 100,000 immigrants a year so says secretary kerry. is that enough in your view? what do we need to do? >> i think we need to take a fresh look at our immigration policy in general. we haven't updated it in a couple decades. the world has changed a lot in that time frame and the real focus, the particular focus is to make sure we do what we can to win what's now a global battle for talent so we can remain the most innovative entrepreneurial nation. obviously immigration has many facets to it in terms of securing the borders and enforcing laws, things like that, but we need to make sure we win what's that global battle for talent. i hear stories of people who come to this country maybe to get a degree and want to stay and start companies here but are forced to leave because of visa issues and end up taking that idea, taking that company elsewhere. one in particular a what arton graduate wanted to stay. he was kicked out of the company and he went to india and started

snap deal. that's one discussion we need to have. >> we have to get to a news break here, steve, but a quick thought, why do you think in the face of the argument that you just made that donald trump has gained such traction on this issue with language that you describe as dangerously caustic? why do you think he's broken there? >> the issue of immigration is sensitive, emotional, and very complicated. i understand the sensitivities but i think his language has been too strong, a little too caustic. last week at the debate he softened it a little bit. i think the discussion needs to be on the details of his immigration plan not just the generalities of it. but immigration is a critical issue. it's worth remembering we are an immigrant nation. 250 years ago america was a startup. we we've grown our economy on the back of great ideas from a lot of great innovators, a lot of whom were immigrants.

we want to continue to be a magnet for those bright minds. >> steve, always good to hear from you. we appreciate your time today. steve case, co-founder of america online and revolution chairman and ceo. josh lipton now with that news alert on apple. josh? >> well, tyler, it's one of the most talked about rumors here in silicon valley. of course, apple's interest in pursuing this electric car now just getting some headlines from "the wall street journal." the journal is reporting that apple is accelerating efforts to build an electric car and setting a target ship date for 2019. the journal citing sources there. journal also saying leaders of the project code named titan have been given permission to triple the 600-person team. it's not clear whether apple has a manufacturing partner. 2019 target a pretty ambitious one. it's much talked about here in silicon valley.

this is according to analyst a trillion dollar market. apple has never shied afwra entering established markets where it thinks it can have a big impact and big innovative products that the world wants. read through the headlines. also reached out to apple and i'll get back to you with more. >> i'll pick it up from there. thank you very much. we'll see what tesla's stock is doing as well since obviously that would be competition for them, wouldn't it? there we go. tesla is doing absolutely nothing. just slightly going negative as we're speaking. sitting there at 260 bucks. okay. he was one of the biggest investors in alibaba, facebook, and twitter. what is next on yuri milner's radar? we'll be talking to him exclusively in two minutes' time. anything worth pursuing requires knowledge,

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welcome back to "power lunch." check out shares of danbury resources up 5% to 6% on the day just off their best levels so far. the oil and gas company announced its suspending its dividend payments starting with the fourth quarter this year in an effort to save some cash. this as it's entire oil business works to battle the effects of slumping crude prices. denbury expects the move will save $90 million. still down 60% for the year. >> we'll talk more about the energy sector later on with our sector guide. but he was one of the biggest investors in alibaba, facebook, and twitter, so what is next on yuri milner's radar. julia boorstin joins us live with mr. milner. >> thanks so much. and yuri milner, thank you for joining us. we were just sitting here listening to our josh lipton talk about how apple is accelerating its plans to build an electric car. what do you think as an investor

in the tech space? >> well, apple is an innovative company and electric car is really the next frontier, so i don't think anyone should be surprised that apple is doing this and even accelerating the project. i think also apple is a company that is so big that it can only look for big opportunities. obviously the car market is very significant and it's not unusual for a company like google to look at next big thing. >> so google, does that mean google, apple, everyone you think is going to get involved? >> i don't know. but i think it's a big market for any innovative company to ignore it. >> looking more at the internet space right now, do you think we're in a tech bubble, especially with private market valuations? >> well, it's an interesting question. i think that public markets have

definitely corrected recently and especially the large internet companies are fairly priced, i believe. like facebook, google, alibaba and so on. i think that the small caps can be more volatile in technology as we have seen in the last few months. but on the private side, you know, we usually observe that the private side is usually following the public side. you have not seen the full extent of that yet, but i think that there is always room for a very disruptive company to not be affected by any volatility because if you find an amazing opportunity driven by incredible founder, then this type of businesses will always be able to raise money. >> but with the nasdaq down 7% over the past two weeks, what does that do for ipos?

and does that mean that your investments will have a harder time exiting? does that put pressure on them to sell? >> well, probably what's going to happen is that the ipo will be delayed, and then the private markets in this case will play a more significant role in continuing funding those companies that cannot access public markets. >> you are a big investor in a number of chinese company. are you concerned about the chinese government pressuring tech firms to hand over a lot of user data? how big of a risk is that? >> well, that's not a new phenomena in china. you know, the chinese wall existed for many, many years, and their approach to data is well known and documented. it prevented some of the companies entering chinese markets from outside. as far as chinese companies themselves, they obviously are playing by the rules, and i think our investment strategy is

just based on those companies accepting those rules. >> very well. we have so much more to talk about you, we hope you'll come back very soon. youri milner, thank you for joining us. >> back over to you. >> vw's big emissions scandal. the company lying over environmental standards. what automakers can you really trust? we'll explore that on "power lunch." ♪ [ radio chatter ] ♪ [ male announcer ] andrew. rita. sandy. ♪ meet chris jackie joe. minor damage, or major disaster,

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the dow was up nearly 200 points at its high of the day. biotech slammed. hillary clinton tweeting she will take on price gouging in pharmaceuticals and dennis lockhart makes the case for a fed rate hike this year saying he is comfortable enough with inflation. "power lunch" is back in two. don't go away. we thought we'd be ready. but demand for our cocktail bitters was huge. i could feel our deadlines racing towards us. we didn't need a loan. we needed short-term funding. fast. our amex helped us fill the orders. just like that. you can't predict it, but you can be ready.

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it's active. that's the power of active management. on deck this monday, gm's ignition issue, toyota aets unintended acceleration and volkswagen's emission scandal. what automakers can you trust? plus, why one drug went from 14 bucks a pill to $750 literally overnight and the guy that runs the company taking a lot of heat. he is here. and watch out vanguard and blackrock, goldman sachs wants a piece of your business and they're coming. we'll talk to the man hoping goldman can grab a piece of the

pi pie. the recent market volatility creating some opportunities in some beaten down sectors. when i think beaten down, i think energy and i know you've been buying this sector or certain names in the sector for your clients. are you worried about what people are calling the financial day of reckoning when banks might have to re-evaluate some oil and gas properties because of plum netting prices? >> if you're a long-term investor and you're trying to look for value, you have to take advantage of the circumstances. if you go higher in quality and you buy the names that will survive and have the best balance sheets, i think you're going to be fine. at the end of the day this is a cycle. >> where do you find those higher quality names? there are obviously lots of subsectors within the energy -- you can call utilities energy. you can call drillers, you can call the multinationals -- >> the way we look at it is let's find the names that are going to be impacted when oil prices go back up.

it is always history. when oil prices go down, production slows, more usage comes back, prices go back up. we want to take advantage of that when it happens, and if you're a long-term investor and you're patient, i think you can get that ride back up. >> what about commodities? >> i think commodities over time are going to work. it's been four or five years since commodities have had any real meaningful return. we have to get through this turmoil here in china. we have to get to the other side of it, but at the end of the day cheap oil prices helps the sectors that eventually lead to commodity price increases. it's early and volatile is going to be around. >> consumer discretionary is also an interest of yours. that's a broad, broad area. what are we talking about here and why? >> i think the united states economy is doing fine. we're seeing wage growth acceleration continue, gdp grow. it looks okay to us. we want the early stage cyclicals. this market has moved back to the defensive sectors and yet the economy continues to grow. we think the rebound is on some of the early cyclical names and in the consumer discretionary

area i think we can pull that okay. >> thank you for joining us. >> a busy second hour ahead. >> brian, we're going to hand it over to you. do us proud. >> mandy and tyler, thank you very much. now 2:00 on wall street. noon in bozeman, montana. the dow up 70. oil up higher, up 3%. the big story right now is in biotech. the idb down more than 5%. really one guy sparking a tweet, one tweet, that sent biotechs tumbling. he's going to join us later on in the show. plus more on vw's big scandal and their potentially $18 billion problem. hi, everybody. i'm brian sullivan. melissa lee joining us momentarily from the nasdaq. we begin today with goldman sachs. that bank making a big move into the multitrillion dollar etf market. today launching the first in a series of so-called active beta funds. michael is global head of etf strategy for goldman and he

joins us now. $2.2 trillion pie but three firms control 80% of those. you are not one of them. you would like to be. how are you going to do it? >> sure. brian, first of all, thrilled to be here on the first day of our launch. so, yes, it's a very large market. the larger players control the lion's share of the market but you see a lot of growth outside of there. we at goldman sachs think our active beta etfs are part of the next generation. we're offering outperformance. we think etfs can do more than just track the markets. we want to offer an opportunity to outperform. >> what does active beta mean? >> active beta is our trademark name. it's our first entry into what's considered the smart beta space. we start with a market cap weighted universe of stocks. we look at common attributes or common factors proven to outperform over time. we tilt the index to get exposure to the stocks that have those attributes and combine a

well diversified index and offer that to clients in our etf. >> here is the thing, the etf market i think is probably bigger than the stock market in terms of the number of choices that the average investor has. there's so many etf options out there that maybe their head is spinning. what exactly do these products give our viewers, not the financial professionals, but the doctor in des moines, what does it give them that's not already out there? >> so we at goldman sachs thing the active beta etfs offer the average investor the opportunity to outperform the equivalent market cap weighted product at a very low cost. for example, our active beta large cap etf that started trading today is priced at nine basis points annualized. that's in line with the s.p.y., the largest etf in the world that tracks the s&p 500. >> if i'm hearing you right looking at your holdings, you're not mirroring the s&p 500 but you're taking a lot of the same

names, you're just putting them in a different weight that would provide according to your data, a better return than the overall market and offering that for the same price. >> that's correct. we're offering the ability -- the opportunity to outperform at the equivalent price. we've really taken price out of the equation. we want investors to really focus on the strategy. >> okay. so what's next? you're launching some today. what's the bigger strategy? what's the broader strategy for goldman sachs and really is it fair to say your first foray into a retail-type business? >> so this is our first launch today. we're looking at a broad diversified offering over time. we've currently filed for 11 different products so we're planning on rounding out the active beta suite of products with five additional launches and then we'll be focusing on liquid alternatives. it will give investors the opportunity to track returns in the hedge fund universe. >> the headline to the vanguards

and blackrocks is watch out, goldman sachs is coming. >> we are coming. >> good luck with the products. >> thank you. >> thanks, brian. check out shares of tesla falling on reports that apple is stepping up evident to build an electric car. at one point in the session tesla was up by as much as 2.7%. it's now down by almost a percent. let's bring in josh lipton with more. >> melissa, 2019, keep that date in mind because "the wall street journal" is now saying that apple is accelerating its efforts to build an electric car and setting a target ship date of that year. leaders of the project code named titan have been given permission to triple the 600-person team according to the paper and it's still uncolor whether apple has a manufacturing partner. there's been reports about tim cook's interest in the technology. apple's lawyers meeting with

california's dmv. the auto industry represents a $1 trillion market opportunity. in other apple news, there was a hack attack on the app store. the targets included messaging app we chat. apple provides developers with a set of -- hackers were able to modify this counterfeit version, plant malicious codes onto the apps, and once they were downloaded, these compromised apps could prompt fake alerts and exploit vulnerabilities. importantly, that he is no evidence right now that any user data was stolen. investors taking the news in stride. apple stock edging higher in today's trade. apple has removed the apps known to be created with that counterfeit software and it's working with developers to make sure they're using the proper

version of x code. >> josh lipton, thank you very much. still ahead, volkswagen shares hitting the skids following the big emissions scandal. it is the topic of today's cnbc vote. we are asking, would a possible $18 million fine be too harsh of a penalty for volkswagen? you can head to cnbc.com/vote to weigh in. also, the cost of one drug goes from $14 to $750 a pill overnight. you will speak with the man behind the massive price spike. later on, one analyst says that biotech stock could double. we'll let you know which stock. lots more do. "power lunch" rolls on right after this short break.

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welcome back to "power lunch." let's get you caught up on some of the stock headlines on the radar. pandora enjoying a nice pop after receiving what some are calling a favorable ruling from the copyright office. shares are up more than 5%. apple shares moving higher. you heard reports the company is stepping up efforts to build an electric car. apple saying more than 50% of you a apple devices are already running the du operating system ios 9. a handful of stocks hitting new 52-week lows in today's session. >> thank you. this is no doubt one of the most disturbing corporate story this is a long time. volkswagen admitting to placing secret software in nearly half a million of its diesel cars in america that would reduce emissions when hooked up to a

testing machine but then go back to spewing nearly 40 times the legal emission once the car wars on the road. it was a way to get past emissions rules. the company could face fiennes as much as $18 billion. that is the topic of today's cnbc vote. we are asking would a possible 18 billion fine be to harsh of a penalty for volkswagen. here now to talk about that is paul argenti. listen, i'm not going to necessarily just pick on vw, although this very egregious and they admitted to it. you had the gm ignition issue, the toyota unintended acceleration. years ago you had ford and rollover issues with tires. why does it seem like trust and the car companies is simply broken? >> yeah. i mean i think if you put it that way, it does look that way but these are very, very different incidents. we need to separate them out and look at them separately. so in this case no one has died

nor will anyone die, so i'm hoping your poll comes out that $18 billion is probably a little bit harsh. on the other hand what we know is that when trust is broken, that's not going to be a good thing in terms of how customers will view the company. so i think what's happening here is something very, very different from what we saw at gm and toyota and the first thing is probably a good idea just to separate these as different events. >> you know, it's interesting too because right now paul our poll is bouncing around. it's a live poll, about 70% of the people saying $18 billion not harsh enough. although that may also go to the idea now that, you know, monetary penalties seem to be the norm every day in the united states and we've kind of grown immune to it. you have to factor probably a little bit of that variance in there. but you've got this story here and i'll give volkswagen a little credit in saying, yeah, we did it. there's not some multiyear investigation and billions of dollars spent in lawyers. volkswagen raised their hand and said we got caught, we did it. does that matter at all from an

ethics perspective? >> it matters a lot. it matters a lot. and i think, you know, to respond to your first point, i mean, gm only paid $980 million and several hundred people died. so, you know, how people feel about it and what happens are two different things. but in this case i think they did exactly what i probably recommended here gm should do, which is admit your mistake up front. they didn't say they were guilty, they just said, yeah, something happened. they don't really know what ts and we're responsible for it which is the right thing to do and it was the ceo who made the comment. the way they're handling it so far is great, and my guess is they probably don't even know what happened. i have written a case about a similar emissions problem in a company in japan, and, you know, this is a problem that comes about for any number of reasons. it could be someone trying to make the numbers and, you know, no one in management knew anything about it. it could have been an honest mistake. there's any number of reasons why things like this happen. until we know whats that, i think we should reserve judgment about whether to trust them or not. there's any number of reasons why this could have happened.

>> paul, do you think that this will actually have an implication on volkswagen sales? gm had, as you know, all of those recalls and people didn't stop buying gm cars and this is a breach of trust between volkswagen and the u.s. government and perhaps the german government depending what their investigation finds and not necessarily volkswagen and the consumer. >> yeah. you know, melissa, i wish that i could say these things do have an effect on consumers, but, you know, i'm on audi driver. i think most people may knotts even know that they're owned byv w. in terms of sales, i think it will have an effect. i think there will be some people that will look at it and say i don't trust the company anymore but when you think about how many vehicles have been recalled in the last five or six years, the numbers are staggering. more cars recalled from gm than they made. i think people to -- the eyes glaze over after a while and they won't be able to keep track of who did what. the real crux of this is did

th they do something completely wrong and how many people knew about it? my guess is it doesn't go up to the ceo. once that's resolved, they can move beyond it. >> it was a good discussion. we appreciate it. thank you very much. our vote is locked in. we asked if a possible $18 billion fine, which is the max, would it be too harsh? 60% of you said it was not harsh enough. that's the most it can go. so 40% said it's too harsh, and i remind you bp was fined just under $14 for their incident. we have another vote on the other side of this break. we have talking about that 5,000%-plus surprise spike for one bill. should the government better control drug prices? a new vote. don't confuse this with the vw vote. head to cnbc.com/vote to weigh in. later on, we are digging in on the big battle to control the

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imagine for a moment popping a pill before bed that costs about $13.50. now imagine waking up the next morning to find that the price of the exact same pill jumped to $750 overnight. that is just what happened to one drug. meg terrell is joining us with that story and the man who is behind that price spike. martin shkreli joining us, the founder of turing pharmaceuticals. you said you increased the price to do the research and development. i got off the phone with a doctor who said they don't need a better version of the drug. what are you doing here? >> that's not true. there's a recent paper that suggests two patients died due

to autoimmune encephalitis. there are a lot of people who die every year and this field needs new ways to treat. the current drugs target the folate receptor. we're working hard on trying it find new ways. >> what a lot of companies do is raise venture capital funding when they see an important market for a drug rather than raising the price on the current patients who need it to survive and who have no other choice but to take it and pay the high price. why wouldn't you go that route? >> we raised over $90 million. we also feel this is the more appropriate price for daraprim. at this price it's still on the low end of what orphan drugs cost and we're certainly not the first company to raise drug prices. >> hillary clinton comes out today citing the story about you guys in "the new york times" causing quite a stir in the

biotech industry. do you not expect a 5,000% increase would result in that kind of attention? >> maybe, maybe not. it really depends on how focused people want to be on the industry. at the end of the day there have been much larger drug price increases by much bigger drug companies that actually you would argue large multibillion dollar companies with lots of cash don't need to do something like this. turing is a small company and we're not a profitage company. for us to exist and maintain a profit is reasonable. >> most biotech companies don't maintain a profit for decades until they get drugs onto the market. why are you guys different? >> i think of us as a pharmaceutical company, not a biotechnology company. i think that distinct is not exactly clear either way. but i think profits are a great thing to sustain your prompt existence. >> martin, you mentioned you're a small company and you're going to use the price increase, the difference, to do r & d. what kind of r & d staff do you have? what amount of money do you plan

on devoting to research and development? >> sure. so we have about 25 people in r & d and open positions for another 25. we do medicinal chemistry. i help the team out quite a bit so i'm really excited to develop new drugs. we're going to contribute the majority of our revenue to doing that. we're taking the revenue from daraprim and trying to come up with better, more effective version of it. >> and you awere a hedge fund manager before. you probably could have guessed this was going to cause a stir. we saw the index go down 5% on hillary tweet. are you in any way invested in biotech through a short either personally or through another fund? >> i have a small portfolio, but i don't really watch the stakt on a day-to-day basis. >> so does that mean -- do you have any position in biotech stocks? >> very, very small. >> are you short any of them? >> i am short a few but i am

also long a few biotech stocks. >> martin, i have to ask you, doctors have come out saying that you guys need to revise your pricing strategy because patients can't get access to these drugs. this hiv doc said they're trying to hoard it to provide it. do you feel badly about what's happening? >> no, we're increasing access to patients. we're dramatically increasing the access to daraprim, lowering co-pays, giving more drug away from free. half of the drug we give away is for $1 so i'm not sure what you're talking about. >> martin, when you bought the company, this was a $1 pill before core labs bought it, then $13. $13.50. now you bought it. now it goes to over $750. when you bought this company, did you buy it because you knew that you could raise the price? >> we definitely planned on raising the price. that's for sure. we paid a very, very large amount to buy an unprofitable medicine. we can't continue to lose money on the drug at that price. we took it to a price where we can make a comfortable profit but not any ridiculous profit --

>> but i assume you are a free markets gentleman, are you not? >> sure. >> okay. so why do you think the drug was priced at $13.50 before? somebody thought that was the right price for this drug. the market said $13.50 worked. >> if you look at drugs like si valdy, dash ra prim is less expensive. if you think about free markets and fair price, it's pretty clear that dir ra prim yas not priced appropriately. >> does daraprim cure toxow plas mow sis? >> it does. it's a short treatment administration which makes it even less expensive than most orphan drugs which you have to take for years. can you imagine taking a drug for $500,000 for the rest of your life. by comparison a cure treatment is about $50,000, about half the price of hep c cure regimens.

>> in response to all of this attention and doctors and patient groups saying they can't access this drug, are you going to change the price? >> no. >> okay. thank you for joining us. >> thank you. >> well, as we've been mentioning, the story got hillary clinton fired up. she tweeted price gouging like this in the specialty drug market is outrageous. tomorrow i'll lay out a plan to take it on. that tweet sent biotechs tumbling. you can see it fall off the cliff before 11:00 a.m. just when clinton sent that tweet. the ibb is now down almost 5%. want to know what you think. should the government control drug prices? head to cnbc.com/vote to weigh in. let's bring in michael yi. great to have you with us. obviously daraprim representing the concern that a lot of people have about high priced drugs in general, whether it be this one or whether it be hep c treatments or this new class of

cholesterol lowering treatments. do you think the headwinds have been raised when it comes do high priced drugs in the biotech sector? >> we've been talking about this for years and years. it goes all the way back to -- for a decade we've been talking about this. it continually comes up. you have to remember hillary has been talking about drug pricing for a long time. she's going to bring it up again during her run for the presidential campaign, and, you know, from an investor standpoint we view this as an creased noise to what i think she really could do. i'm sure we'll find out whether any of that is implementable given the republicans control congress and this is pretty far down the list for the priorities for congress. >> when gilead first got that letter from the congressman regarding the high price of its hep c treatment it created a headwind on gilead. it was a headwind that persisted for a long time. is it a possibility this time around or are investors so inured to this sort of noise

about grousing about high priced drugs they're going to look through this? >> i think that they're likely to look through this and i think that this is going to be dependent on how much actually gets implemented, whether a bill gets created. so real identifiize you're expe senator waxman said this a year ago we learned nothing actually happened. it goes back to the same situation and it's a reason for biotech investors to take profit given all of the noise that's been going on recently. >> i'm sorry, michael. just back it up for a second. you said this is another reason for investors to take profit? >> well, it's another reason for -- today for -- >> bu you't you're not saying bh investors take profit, are you? >> we're saying this is a buying opportunity. once again we've seen this in the past and going forward we're going to continue to see some of this, what we call noise given that this isn't really actually going to happen and nothing is likely to be implemented.

>> play hypothetical for a moment. let's say something forms, which companies would you think would be most at risk? would it be an amgen and regeneron with the pcsk-9 drugs? >> i think what's likely is that, and this has been proposed before, is whether medicare has the ability to negotiate price. medicare with part d drugs, cancer drugs, et cetera, medicare is obviously one of the biggest purchaser of cancer drugs. some of the cancer companies are more likely to be at risk theoretically, but i would suspect that all of these larger cap by yes tech and pharma companies could see some increased pressure. the orphan drugs and we just had on this segment about orphan drugs, these are small parts of the overall health care spend. so i think what's more likely is a discussion about medicare drug pricing and whether they can negotiate, and that really has to do with cancer companies. michael, great to speak with you. thank you for your time. let's lock in our vote here.

we asked you guys out there if the government should control drug pricing. take a look at the votes. 46% of you, the majority said never. free market capitalism i guess wins in this poll. 42% said always. and the small minority of you out there said to a degree. fascinating results, brian. i wouldn't have guessed that. >> well, it's free market audience i suppose. >> i guess so. let the market price it. up next a biotech stock that could double from here. we're headed to the nymex coming up.

i'm sue herera-here is your cnbc news update this hour. china's president arrives in the u.s. tomorrow for his first state visit. president xi will tour boeing factory on wednesday and join president obama at the white house on thursday. michelle caruso-cabrera will be following his visit on cnbc. there may be twice as much trash dumped into landfills as the government estimates. a yale university study found

262 million tons of waste was disposed of in 2012. that's an increase of 115% over what the government originally estimated. japan's elderly population has reached a new record 33.8 million people are aged 65 or older. that's nearly 27% of that country's population. japan's aging population has increased the risk of economic problems such as a shrinking workforce and rising costs of social security programs. and finally, in colorado they take their tree climbing very seriously. this weekend they crowned a new north american tree climbing champion. more than 40 professional arborists took part. certainly not for the feint of hea -- fabt of heart and not for me. >> i wish one of them was named sam because that would be yosemite sam and that would be fantastic. >> that would be good. >> he'd be the winner if he

could get up one of those. >> he absolutely would. >> thank you very much. >> see ya. let's go to jackie deangelis at the nymex for the closing trades on oil. >> hi, brian. kicking off the week on a bullish note here. $46.45 is where october wti settled. that will go off the board tomorrow. it was a near $2 pop on the day. opec making some comments to spur this rally and get traders more excited about crude. opec saying that it expects crude prices to rebound to $80 by 2020, so over the course of the next five years we should see fi$5 or $6 every year. the cartel also think this is 2016 we will see significant production declines because of the glut that's been created this year. if opec is right, oil prices could be headed higher. i do know we had a stronger dollar today but having said that traders still believe the dollar will remain weaker longer as a result of fed inaction. back to you. >> all right. jackie, thank you very much. it's time for "street talk."

the run down of stock recommendations you need to know. stock number one goldman sachs. upgraded to an outperform. the analyst had been on the sidelines for a couple years because of concerns around trading. they note the stock has underperformed most big banks and the bank index. he actually compared goldman sachs to a bumblebee because people say bumblebees should not be able to fly but they do. compares that with a weird metaphor to quogoldman's tradin business. the target 236 is share, 28% return. >> i thought that was some sort of muhammad ali reference. take a look at the fed's inaction. flat yield curve. really a primary concern of investors. stock number two, greenbriar companies, cutting it to a market perform. the analyst slashing eps estimates to below consensus. the reasons have been known for a while. lower oil prices and it shows in

the stock. the stock is down over 53% in the past 12 months. >> and the average target of the analysts that cover it is $61. >> i don't know what they're thinking. >> vanguard and merrill lynch are moving 15% of this country. next stock lululemon. morgan stanley upgrading to an overweight. says customers are returning to the brand. says their analysis suggests lu lu to return to 20% eps growth. with the stock down 30% over the past three years, a return to this kind of eps growth if they get it should support the stock's outperformance. it implies a 23% return. it's $68 a lu lu lieu shashare. >> stock is down 16% since the second quarter. there's a lot of catch-up here in the stock to do. fourth stock, cyber arc software. upgraded to a buy. the call comes after the ceo and the cfo presented at the

deutsche tech conversation last week. the stock had been down 36% in the three months prior to those speeches. the analyst says he's impressed with fundamentals such as 70% revenue growth. >> they're bullish. i looked up jm p securities, even more bullish, $72 security. a lot of analysts love this name. the final stock is therapeutics md. about a 100-year-old company based in florida. they specialize in treatments for women like prenatal vitamins and hormone preplareplacements. basically a double. i never heard of the company before now, but people are wildly bullish on the name. >> there's a conference at the end of the month, a menopause conversation in las vegas. they could be making comments

worth watching. >> with that we wrap up "street talk." time for "trading nation." andrew berkeley with oppenheimer, craig john with piper jaffray. we have over three months to go, but why do you think the markets have so wildly underperformed where most people thought they would be this year? >> really comes back to the most f fundamental of an lalysis, whic is earnings estimates. right now we're tracking about $120. so you really have to look no further than the energy and commodity areas to see the big shortfall. if you took energy and commodities out, earnings would be better but you have to include them if you're going to make a forecast. even the most bearish forecast, if you will, nobody really had a down forecast this year, but the most conservative really was not

on an earnings shortfall but most of kind of the slightly less bullish. we're looking for multiples to compress because the fed would be raising rates. so it's interesting. we didn't get the fed rate hike. we have got an little bit of multiple compression but it was on the earnings miss is where most strategists missed the mark. >> from a technical perspective or fundamental, you pick which one you want to look at, what are you seeing for the market? any signed of a rebound in the final three months? >> when i look at the overall sentiment towards the market at this point in time, put buying is still very, very expensive out there. we still have a lot of good downside support. we support at $1,905 and then support at 1820. i'll tell you right now the consensus on this market is that we're going to see a bigger drop and ultimately a retest of the lows we have seen just a few weeks ago. i suspect that at this point in time that could be the case, but the breadth of the market is so washed out at this point in time

i think we're setting ourselves up for a pretty strong finish into year end. still think we can get back to the highs we have seen last may and, again, still think there's some upside from here to year end because everybody is so negative and that is consensus. >> you like the negativity. you're taking the contrarian view then. >> absolutely. at this point in time we're completely taking the contrarian point of view because we have good support beneath us, valuation has been set and corrected right back to the median post 1946, and i think we're finally at a spot where we're going to find this market, get a strong push up. >> okay. craig and andrew, it was a good discussion, guys. thank you very much. a lot of strategists looking for some redemption. there's two additional segments at tradingnation.cnbc.com. >> coming up, a big interview with the ceo of dropbox. the company you go to when you need to store thousands of pictures from your vacation. take a look at how the markets are doing right now. we have the dow and the s&p 500

in the green. the nasdaq turning to the downside, down about one point right now. biotech blues, the ibb is down 5%. much more "power lunch" right after this break. technology empowers us to achieve more.

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some of the biggest names in technology getting together in san francisco today. julia boorstin is there joined by the ceo of dropbox, a company that was number six on the cnbc disrupter list. julia? >> thanks so much, melissa. drew houston, thank you so much for joining us. you just came off the stage. now, drew, you guys have been growing fast despite the fact that all the giants ever getting into your space, amazon, apple, google, every tech giant seems to be interested in this cloud space. how do you compete? >> well, it just means we're solving an important problem and we've had competition since the

beginning, but what people love about dropbox and why we lead in the space, it's simple, it's easy to use. you're free to use whatever tools you want. it's a powerful and scalable model. we crossed 400 million users on dropbox. so, yes, we have competition but if we didn't, we wouldn't be diagnose something that matters. >> there's a lot of talk about how cloud storage is something commoditized. >> i think maybe in the beginning what we were building was literally storage because we were like, hey, everyone pretty soon everybody is going to need a home on the cloud for their stuff. now the problem is i have 100 homes on the cloud for my stuff. my company's knowledge lives in 1,000 different places. how can i find what i'm looking for? how can i work with other people? our focus is on building this platform for collaboration where everyone in the world, any gr group, can be using any technology and things just work. our focus has been evolving over

the past two years from storage to collaboration. >> when you're pitching to get some big companies on board, which i know you're really focused on right now, is it hard to explain that? do people get it's not really about storage anymore? >> it's a little bit of a different conversation than the typical kind of b to b sale. usually when we have a bigger customer, they have thousands and thousands of people already using dropbox. people have voted with their feet. dropbox is the tool that makes them productive and the request he is how do we get the other 10,000 people in the company running. >> you have been growing fast. your valuation is $10 billion, but your private rival, it's valuation is $1.5 billion. how do you explain that? >> it's a big market. second, our model is really powerful. so we have a lot more of efficient and scalable sales model because people start using dropbox as individuals. they bring in the larger companies. we can grow a lot faster with a much smaller sales force.

>> is this an issue of a private market valuation bubble? is that what there is here? >> i don't think so. i think the markets that companies are going after, that startups are going after, is much bigger than it was even when we started. >> what are your plans to go public? >> we don't have any plans right now. we're enjoying the flexibility of building the team and working on our products. >> with the market the way ts do you feel pressure to sell rather than ipo? >> no, our investors new we're going after a huge problem and it's super early. >> we look forward to continue to talking to you more as you continue to grow the company. >> thank you very much. question, how do you know if you've become a victim of credit card fraud? answer, you have a credit card. all right. we say that a bit tongue in cheek, but the problem is getting near will that serious. we have more coming up, and the growing fight over go pro stock. stick around.

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market check. the dow back up triple digits but off session highs of 194, up 194. the nasdaq is coming back to the flat line. we should note the two dow

winners, ibm and microsoft. major changes are coming to credit cards and debit cards which will change who is responsible when you get hacked. you may have already got an new credit card with an embedded chip. mary thompson has that story for us. >> that embedded chip is virtually impossible to duplicate these cards should cut the number of counterfeit cards being used but only the retailer has a point of sale system that it can read that chip. if they do julie conroy sees these cards making a big dent in the 37% of fraud committed with fake cards while forcing criminals to turn their attention to other schemes. >> these are organized crime rings behind all of these attacks and they are not going to sit back and take a hit to their p & l, they will shift their tactics. >> conroy expects criminals to focus on online fraud. here criminals will use data stolen from the mag stripes in order to steal online.

as a result the eight group sees this card not present fraud end nothing 2018 to of $74 billion. the network operator visa says improvements to online retailer security should prevent some of this new activity. now the move to the chip embedded cards is being driven by an upcoming october 1st deadline, that's when retailers will be assuming the liability for a fraudulent transaction made with a chip embedded card not the issuer provide that had retailer has the technology to read those cards. back to you. >> let us brick in penny crossman, she covers the bank technology sector for american banker. i made a semi-halfhearted joke about how do you know if you've gotten hacked because everybody i know certainly has. my biggest surprise is not that actually fraud occurs it's that the credit card companies don't give to give a you know what. they're like we'll pay you back. are you going to go after them? it's not worth t how big of a

problem is this? >> well, i think there was about a $16 billion worth of card fraught in 2014. i believe card fraud who was at about 3% of total transaction size. so it's not an insignificant problem, but banks have been writing off this -- the cost of fraud for many years and they've kind of gotten used to it. it's not that anybody wants fraud to happen, but for card issuers their number one priority is that people be actually able to use their cards and use them easily and quickly and not have any friction, not have glitches, not have declines because cards are a hugely profitable business. >> okay. so call it 110 million adults or people with credit cards i'm making that number up but i get the point, 16 billion so 150, 200 bucks a person i guess i just did the math completely, could be imp completely wrong. yes, it's not td end. world but it's the left side not

nothing. why doesn't anybody seem to care? >> well, i think people do care and i think the problem has just been kind of beyond anybody's grasp so far. i mean, the amount of cards skimming that goes on is tremendous, you know, people just put card swimmers on atms and collect card information that way. there were a billion customer records stolen in 2014 through the target breach and other card data breaches. so there's a tremendous amount of data out there on the black market to be bought very cheaply. card data could be bought for about 60 cents for a regular standard visa card up to $25 for a very high end amex card. it's just been a very tempting target for hammers and it's been -- you know, frankly the technology that retailers have been using, the card swipe terminals, have not been very

secure, the retailers' databases have not been secure as we've seen from all these data breaches so it's been hard. banks do everything they can on their end but they only have so much control. >> i do wonder, every single one of my credit cards has been pinged in the last year, true story and i've gone back to using more quash when i can, unfortunately it's not that easy, maybe tomorrow we will have a live poll are people going back to cash. pen yeerks thank you very much. don't look now but october already right around the corner. should the guls and dpob lynn's of the market scare you away from stocks next month? october phobia, whatever that is, coming up. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities.

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you have the opportunity to say, "i've been part of the creation of over 27,000 units of housing," and to replicate this across the entire african continent. take a look at shares of gopro down a little over 8%. big barons the story calling it a one product wonder saying the stock could fall to 25 bucks a share. it is worth noting, too, take a look at amberella shares, that stock is down 6%. >> is certainly is a hot stock. august and september have been a scary month for stocks. will october be more frightening or less? >> take a look at this, guys. if you take a look at the s&p 500 over the past month it's just about flat, again, over that time frame here, just a little bit to the down side.

if you take a look at the year to day basis, we are just a stone's throw away from those record highs. yes, it's a big move. if you take a look at what jeffrey hersh said, he takes a look at his seasonality aspects. our friends over at cnbc pro asked him which sectors he's focused on most, he said technology is one of them. he likes the seasonality of those tech stocks down into october. he says perhaps it's a good time to buy. he is also looking at technology stocks given those comments and what not. ibb year to date up 12%. so if you take a look at some of these overall our friends over at cnbc pro also asked our data partners to take a look at the overall markets in october. over the past ten years the dow up 2/10 of 1%. the s&p 500 up -- just about flat here, positive 60% of the time, nasdaq up half a percent positive 60% of the time as well.

that's the last ten years. those points are skewed by one very bad, very bad october, of course, in 2008. solt numbers are skewed. if you take away and just look at the last five years the numbers here become a lot better, between 3 and 4% gains for the month. melissa, brian, it depends on what time frame you want to look at over the shorter term this tends to be a decent month for stocks. we will see if that plays out this time around, guys. back over to you. >> i think it's important to note also, dom, when it comes to the point about seasonality in the tech sector a name like gopro, 40% of its revenue come in the fourth quarter but obviously the suppliers their seasonality is in the third quarter just depends on where you are in the supply chain. >> absolutely. the other thing is remember over the broader scope of things if you look over the long, long-term people have made a lot of points about this idea that the fourth quarter seasonably is a strong time for stocks. it's hard to determine whether or not there is one true right or wrong answer. >> dom, thank you very much.

melissa, what's on the show tonight? >> take a look at shares of apple right now, brian, pretty much at session highs on that report that is developing an electric vehicle. how does this impact tesla? >> we will look forward to that. thank you. and thank you all for watching. "closing bell" starts right now. hi, everybody, welcome to the "closing bell" i'm kelly evans at the new york stock exchange. >> happy monday. it is for bulls -- by the way, i'm bill griffeth. biotech has been a big story today. that sector getting crushed on the back of a "new york times" story on drug price gouging, one company in particular was highlighted in that. then presidential candidate hillary clinton tweeted out saying that she has a plan to take on the drug price gouging that she sees out there. we have much more on this coming up in a little bit. you see the index is down over 4% right now. >> honing in on apple because a