up or down. >> even if they move on the shortened, the long end doesn't move. >> good valuations. i think it's good insurance play for a portfolio. >> all right, guys, it was fun today. thanks so much. >> that does it for us here on the halftime report. "power lunch" begins right now. >> ladies and gentlemen, thank you very much, welcome, everybody, to "power lunch" i'm tyler mathieson, a bombshell locking the world, fontacy sports allegations of insider trading. so is this going to lead to regulation of this booming business. oil is soaring there, up by 4%. it's actually been pretty stable over the past two months. so is the worst over? well, maybe not. the other looming threat for the oil company. >> and after flattening out for much of the summer, home prices surging again, seeing big gains. what's fueling that one? >> good question. but first to the scandal,

hitting the booming world of daily fantasy sports. allegations of insider trading. walk us through it all, domenic chu. >> millions and millions of dollars at stake. that's why it's getting so much attention. many of us play fantasy sports, dfs on the daily sites. let's take you through exactly what the stage is right now. first of all, draftkings and fanduel, it's pretty much a duopoly. they control the daily fantasy sports world. that's why they're so much in focus right now. what is daily fantasy sports? it's about a week-to-week commitment. you don't go through a full season. you play against people on a week-to-week basis or enter these contests. what happens is you act as a team general manager. what you are looking to do is finds players. each of those players, however, has a dollar value assigned to assign them to your team. so you have a salary cap and salarys to work within. your objective is to create the best fantasy team given the

money you have been allocated. now that means, much like the stockmarket, you are looking for value plays. perhaps stocks or players in this case. but the market may not be paying as much attention to, that's the reason why it's important. you got to stay within that salary cap. the more players you can get that can get you the most points for the lowest dollar possible gets you that efficiency. that's what you are competing against, here is the issue where the controversy lies. there is data at risk right now. there is a lot of it. so who has access to player usage data? you know this, because players have a certain dollar value associated with them. whether or not a lot of people are trying to draft that person, if you know stats, few know where the heat map is, where the action is, that may give you an unfair advantage. it's also, is it considered "inside information"? is it really information that can eventually tell you or prevent or at least influence the outcome of your matchup. maybe get you more money. that's the key as well.

transparency. how can they solve this? should they just let everybody see this information all the time? a lot of people are saying, this is a transparentscy issue. then, of course, should employees, that work for a draftkings or a fanduel or anybody else be pro hint from playing in these types of fantasy sports? it's a big deal. lots of controversy, of course, it's even more complicated because there are so many people in this booming business. remember that nbc universal and comcast are investors in fanduel, so again, this story getting all kind of attention, tyler, back over to you. >> domenic, thank you for walking us through how it works. let's now turn to the question of whether what happened in this case, or what is alleged to have happened is illegal or not. it is an unregulated industry, eamon javers in washington having a look. let's start with this question, what is alleged to have happened? who was the perpetrator? what did he or she do? how did he or she use that

information to ostensibly gain an edge? >> what's alleged here, timer, is an employee of draftkings accidentally released information early that was not supposed to be released until the games actually began. in theory, that could give somebody advantage over other players inside the system as dom was just laying out. if you know where the betting is on each players, you might get a sense of where supply and demand is in this market they have created. there is the question raised by the "new york times" article about employees of these firms, draftkings and fanduel, who are playing on the other fantasy sites. now, the question is, do they have "inside information" based on their employment inside these companies about where that action is? that's the allegation that is at the heart of this. it is fantasy sports. here in walk, it's participanty much subject to fantasy regulation, tyler. there really is no indication of who would be in charge of regulating this. i talked to the top lobbyist for

the fantasy trade association on the phone. they're a new entity. they have only spent about $40,000 in lobbying this year. >> that makes the fantasy sports association a relative pikeer in lobbying terms here in washington. but could there be congressional hearings on this? that's an interesting question. i was standing here, i got an e-mail from the house energy and commerce committee. an aide there. i asked them about whether or not we could see it on capitol hill. reports raise the safety and integrity for these new platforms for fan engagement. we have a responsibility to protect consumers and ensure that those participating are not being taken advantage of. our staff is looking into these issues and we will keep you informed as our work continues. tyler, it doesn't sound like a no there, although, mandy, i will say in the past, republicans have suggested that no hearings are imminent. however, with all the interest, all the fans, all the media, can you expect that the members on capitol hill would want to get in on that action. >> absolutely.

watch this space. thank you very much for the latest information on that. eamon javers live in washington. we have three-year notes up for auction. rick santelli is in chicago. what's it like, ricky? >> reporter: the man was exactly average. we gave eight season charlie in terms of gradeing demands at 1:00 eastern for the auction. let's go through the internals. it's three-year notes, $24 billion t. first of $58 billion in supply, tens and 30s to follow. yield at auction .895. that was flipping on the issue market it was doing most of the trading. the only light aspect to this auction the bid to cover 3.14, light since august. very small variance on these short maturity auctions. so that wasn't so far out of line. 40-some points, seven on indirects, close to ten auction average a. little stronger on directs at 11.1 versus 10%, 10 auction average.

pretty average all along. now, how will it play out as we continue to move through with equities turning a bit questionable after a very strong day yesterday? we'll have to waited and see, tyler, back to you. >> all right, rick, thank you very much. let's get back to that scandal that today has hit fantasy sports. so will these allegations of quote insider trading lead to regulation? let's bring in a sports gambling attorney and also chris grove, a partner at narris advisers and the co-founder of legal sports report.com. daniel, let me begin with you. in eamon's report, he used the word carefully t. word was accidental release of data. do you see it that way and from where you sit, would the release of this data to a broad public, we don't know that this individual profited from it, do we? but would it have totally skewed or corrupted the game? >> well, to begin with, we don't

know what's accidental, how widespread this is, whether it is an isolated incident. if this one instance was isolated or accidental, or we could go back to weeks two, weeks one and to the 2014 nfl season. the problem for the larger issue is the play, the play by insiders on rival sites, using or having access to this type of information. i think both companies have acknowledged that their employees and their executives are playing daily fantasy sports on the other site. so this is much more widespread than just one accidental or inadvertent release of information. we can take these companies at their word, you know, before we can enact meaningful reforms, we need real meaningful answers. >> in other words, if i know where the money is going, chris, on one site, i can go over and perhaps potentially profitably use that information to increase my chances on another site.

is that what we're talking about here? >> we're talking about that, but we're also talking about the potential for you to release the information that you have access to as an employee, to players outside of the site who could then use it to profit on contests on the site. so there are several levels of concern here. and it isn't just limited to cross site play by employees. it's about the flow of this very sensitive data within the company and then on the outside of these companies. >> i want to get to the regulatory question. i want to cover a little more ground first, chris, if say, by the way, i played one for the first time last weekend, just to figure out how it worked. i was curious. if, say, there are 400,000 entries, and i had access to information that told me that 250,000 of those entries had chosen tom brady as the quarterback, i could use that information, somehow, to increase my chances to win?

>> exactly. this is a peer-to-peer betting market. so in any market of that nature, if you have access to perfect information about your competition or even close to perfect information, that's going to a massive advantage. >> don't i effectively know that, daniel, by virtue of the fact that the price to draft a tom brady is high and that would suggest that somebody knows that most of the money is going to go to brady as opposed to pick your other quarterback. >> well, it's not so much the price that's assigned to tom brady. the inefficiency or the concern is knowing how many of your competitors are selecting him to be the quarterback. and this is all about value drafting. it's like the stockmarket. you want to populate your team with not only, you know, core franchise high level players. when you spot efficiencies and grab a player like an a.j. 14

from the cincinnati bengals, who is owned by a low population of contestants. >> that can give you an edge over your opponents. it's not the price of the player, it's what your competitors are doing relative to that. >> my problem this past week i did draft off the cincinnati bengals. that's why i developed about 290,000. do you, daniel, see this as, a, insider trading in the sort of dejuray definition of the term and, b, do you think that greater regulation is inevitable here? >> yeah, clearly, we are headed towards regulation. that was happening anyway t. sniper scope that the fantasy sports industry has been operating under with regulators' concerns, the attorney general from massachusetts and calls for hearings of congress, this was taking place over the last couple weeks. even before this scandal broke. so this news, if it's not the tipping point, it takes a near certainty of regulation into the

100% mark. we will have congressional hear. this industry will not be able to self regulate. it's proven it can't self regulate. we will have government reg lakes like in all forms of gambling, such as the lottery, horse racing, casino betting in nevada. this has been the only form of gambling to fly under the radar. make no mistake about it. it is gambling. it will be regulated. is it insider trading? maybe not in the legal sense, insiders are gaining or have access to information that could presumably give them an unfair advantage over the consuming public and too many insiders are playing fantasy sports to take at face value any statement that nobody is utilizing "inside information" to win. >> gentleman, we have to leave it there. i'm sorry to interrupt, daniel. i appreciate you being with us. always good to see you, krichls thank you for your per specttives. to oil this hour, surging about 4%.

mean tooinl the major averages are struggling for gains, the nasdaq, in fact, is getting slammed by biotech's plunge in particular. let's get more on this with bertha coombs. >> it's more like if there weren't bad news, there would be no news at all. today, really the points of pain is the larger arc of biotech index. it's off more so than the nasdaq index which has more small caps in it. pricing in biopharma industry is again in the spotlight. there is big fundamental news as well that is moving things lower, exact sciences hitting a 52-week low after getting a disappointing fda rating on the colorectal screening tests. they want to make sure that these targeted drugs will work on patients. so the testing is very critical. then you are also getting a warning today from dna sequencing tool firm illumina. it says it has weak instrument sales, asia, another issue here.

the transpacific partnership agreement has a limit on biopharma exclusivity. five years, half of what u.s. biopharma industry wanted. >> that is weighing on these drug makers. mandy. >> big time, indeed. thank you very much, bertha coombs. as we mentioned, oil is rallying, the prices steady despite the market volatility. the worse may not be over. the other looming threat for oil companies coming your way. plus the new establishment. well, he's been compared to steve jobs and runs one of the world's top tech venture funds. he is the man behind air's bnb and drop box. we will get his next big idea. are you watching cnbc, first in business worldwide. mornings. wonderful, crazy mornings.

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[phone ringing] but a little less crazy. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. welcome back to "power lunch" morgan brennan with breaking news. amtrak says the vast majority of its network would be inoperable unless the deadline for implementing safety technology called positive train control, ptc, that that federally mandated deadline of december 31st is extended. in other words, amtrak is now growing a list of great railroads, commuter railroads, and panes railroads, asking to extends the deadline for a very high-tech $13 billion and counting regulation that needs to be in place by the end of this year, according to current rules. many of these railroads do not

have it in place they are warning that they will have to shut down service coming into the ends of the year, if congress and other federal regulators do not extend that dead line. so amtrak joining a growing list. warning that if this ptc deadline is not extended, that service on most of amtrak's network will come to a halt at the end of this year. back over to you. >> thank you very much for the breaking news, morgan brennan. chrysler shares are higher today despite receiving a notification from the auto workers union the right to strike says it is continuing to work with the union to reach an agreement on a new labor contract. elsewhere, microsoft unveiling a host of new devices, including a phone and wearable fitness tracker and general mills recalling almost 2 million box office cheerios because the cereal maker says wheat may have been added to the labels as gluten free. >> check out oil over the past twos. s have been holding steady. despite the marketability.

don't get too comfortable. more bad news may be headed for oil companies, that and more next when "power lunch" continues on cnbc. good.

welcome back, everybody, to "power lunch" oil is rallying today nicely up about 4%. you can take a look at prices over the past two months, they've been quite stable, leading people to ask if the

worst may be over for oil and any oil companies. but maybe not. morgan brennan is here to explain. >> hey, mandy, that's right. one way the oil companies weathered the collapse in the past year is by hedging. they have been locking in on the commodities prices in the futures market. with u.s. crude down nearly 50% lower than a year ago and sliding back into the 40s in june, those hedging protects have been a saving grace for merge companies, pioneer natural resources says it expects to realize $70 per barrel in the hedging program and 65 to $66 a barrel next year and that's good news for pioneer, but not every oil and gas company is as well protected. so according to a few report from ihs, just 11 part of total north american production is hedged into 2016. compare that to the second half of 2016, 28% is currently hedged. ihs says small and mid-sized

eeps have increased their 2016 positions the most with average hedge prices of $69 per barrel. but some smaller companies like exco resource and com stock resources are at risk of serious liquidity like hedging, san sandridge energy and companies have added the most oil for 2016. how can resource, bill barrett and whiting petroleum? here's the reason all of this matters, if companies stay low, those who around hedged can see it plunge further. we can see access dry up. >> it's a big issue, a big risk. thank you for laying it out for us. tyler. >> all right, folks, tech leaders gathered together in san francisco this week for "vanity fair's" new establish. conference. andrew ross sorkin is there moderating throughout. he joins us now, hi there.

>> hey, we are here in san francisco at the vanity fair conference. i am here with the commentator, we will be hanging out with elon musk, talking about all theengs entrepreneurship and what's going on, of course the big question on the east coast, but i think everywhere are we living in the proverbial bubble right now? >> you know, maybe. there are a lot of people who sort of try to speculate where in the cycle we are, what will happen next month, next year. we at y commenter try to think of next year, if you think where the world will be in 20 years, everything here looks like noise. >> do you do anything differently today than you did say three years ago? >> no, we try to get every single investment right. we don't try to get the macro trends right. is this company have the potential to be huge? we invest early, up or down cycles, we have the same terms

all the way through. >> what does that 19? the reason i ask, we have valuations in the public market come down, in the private market not so much. people hold on their books whatever price they put on there. >> so y combineator. we do $20,000 for 7% flat through. all the time no matter what the cycle is. >> 250 companies. when you look at those companies, obviously, this is one of those things you hope for a couple grand slam home runs. how accurate do you think you are going in? meaning are there one ossen the edge and they turn out to be the high flyers or is it the opposite way? >> it does happen sometimes that we, there is one we are on the edge about, they turn out to be great. but more often the ones that were on the edge turn out not to

be good. now there is a lot we are really confident about that turn out not to be good also. all you can say at the sage we look at it, is this company could be great if everything goes right for the next ten years. >> we work twitter, airbnb to drop box, but there are still worries. are there companies that you have if your portfolio now that you think are going to be able to ride this out and is there going to be this whole series of downrounds and what do you do about that? >> we get worried when companies don't have profitability within grasp. if a company can get to profitability if they choose on the cash they have in the bank, we don't worry about them. if they're dependent on outside capital, then the market versus a big effect on them. so one. that i think is good about the y combineator family, if you look at our being-plus companies, there are only a handful dependent on raising more capital. >> we have to go, final question, would you invest in a

ceo or entrepreneur running two companies? i ask because mr. dorsey is working two companies. >> it works for steve jobs, it works for elon, it's clearly possible. i'd be a little skeptical. i think at our stage we want really focused. >> thanks, we look forward to seeing you a little later. tyler, we will send it to you. >> thank you very much, andrew. on "closing bell" don't miss his interview with alec berg and mike judge, hbo's silicon valley, executive producers. tune in. the bond action on the back of that three-year note auction at the top of the show, rick santelli holding down the for the at the cme. hi, rick. >> reporter: hi, tyler. whether it's bills, two-year notes the maturitys are in good demand, no exception, look at the two days of threes, pretty much lateral activity. although, still virtually at the top of yesterday's range, flattening out today.

here's the important, i look at april 1st chart three year, these are the lowest yields, if you look at a two day of 10s, losing momentum t. 30 yield bond yields, dollar index having a close day. this is zero strength. mandy, back to you. >> thank you very much, rick santelli the dow is up for a sixth time. the major averages rebound from the august lows, how you can trade it. three oundz the radar starts, leading that comeback. are you watching "power lunch" on cnbc, first in business worldwide.

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>> hi, everyone, i'm sue herrera. here's your cnbc news update this hour. facebook losing a big case in europe. it and other big tech companies may be forced to radically change with the way they deal with user data. after the top court ruled they can't simply hand it over to u.s. author. it companied the case of an austrian citizen who claimed his data wasn't being adequately

protected. the death toll from the flooding in south carolina reaching 16. more than 800 people have been evacuated from their homes and are living in shelters. officials are still assessing the damage and getting roads and bridges repaired. the fda is targeting ethnic minority youths in an ad that discourages smoking. it uses hip-hop to reach young adults. the ads feature hip-hop artists and will run nationally for two years beginning next week. and a michigan woman winning the $310 million powerball lottery. she is picking up her check this morning. she opted for the $197 million lump sum which came to $140 million after taxes and, yes, she quit her factory job. no surprise there i guess. that's the cnbc news update this hour. back to you, mandy. >> good for her. >> thanks very much, sue. let's take a look at gold prices closing right now. we are seeing a pretty good last

few days for gold after that 2.2% jump we saw on friday. we are adding to gains up $9 bucks at 1147. let's take a look at what's happening on the other metals, silver, copper, pauladium and platinum move higher. >> the market the dow is modestly higher. the s&p a little lower. ditto the nasdaq off about .8 of 1%. let's check back with mary thompson with the nyse. >> tyler, as you pointed out on mixed markets, with see weakness in biotech and health care. that's basically the tale today t. s&p 500 index yesterday posted the fifth straight session, it's pulling back having hit key resistance levels. among the sectors we are watching, as i mentioned health care under pressure and biotech consumer discretionary as well. energy and materials are moving higher. they have been strong ever since the opening bell. dupont, of course, higher on the

news ceo anne sherman alan coleman will be retiring october 16th. there you see the rest of them, the energy sector very strong. in that today's session, to the downside, though the health care sector both insurers and drug companies coming under pressure as you can see by bristol-myers. then united continental. we are seeing strength in energy. oil is up off session highs. still extending the gains we saw yesterday, tyler, back to you. >> mary, thank you very much. let's go uptown and check with bertha coombs where the biotechs are getting better there that's dragging the biotechs. although the biotech versus come off their lows of the sex, continuing concerns about pricing pressure, continuing concerns as well about whether or not we're going to see increased regulation as a result of that. chip stocks also a bit lower today, come walk to the wall with me. take a look, pmc sierra is bucking that trends. a $200 billion deal to be

acquired by sky works. sky works is a chip maker that also is there with apple, provides some of the components for apple phones and a lot of phones. and speaking of apple, apple today bucking the trends has actually turned positive as the market has gone lower, moving higher. microsoft getting a little boost with the introduction of a number of those new devices, including the band that you can talk to, tyler. >> thank you very much, the dow meantime up for the fifth time in six sessions right now. the the s&p fighting for a sixth straight day of gain. which sectors have been leading recently? domenic chu explains fantasy sports, sectors. take it away, baby. >> jack of all trades, master of none. but let's talk about because a lot of the same sectors mary thompson and bertha coombs spoke about are some of the ones leading us higher ever since the market's in turmoil. we'll call that the august 25th low. when we saw the volatility t. s&p year-to-date is down about

4%. it's still down, if you narrow into just since that august 25th area here, can you see here we're up by about 4.5%. we'll reiterate the same names. since those august 25th low, energy stocks, oil and gas up 14%. technology shares up 9% and consumer directionary up 8. these three sectors important because they are decent in size and waiting. but also very economically sensitive. so maybe it's short covering, maybe it's fundamental buying, still they're leading the way. health care of course the big lagert here has been a leader, now showing weakness thanks, to biotech stocks, specifically. take a look at some of these stock that have been moving higher. since the turmoil lows t. names are sometimes we don't touk about. we talk about nike in a blockbuster earnings reports, under armour are up 50%, lbrands, owners of victoria

secret and bath and body works. sandisc, we will keep an eye on biotechnology and transportation stocks, battlegrounds, at least that some investors are watching here. we'll she what happens, back over to you. >> blatlegrounds is a good way to put it. so what will drive the market higher or lower depending on where you think it will go. joining us now, an investment strategist and a portfolio manager and advisers, asset managethment john, back in june, i believe you lad a forecast for the s&p that over the course of this year would gain about 5 to 9%. so far this year, we're down nearly 4%. are you still sticking with that june forecast or have you brought those forecasts down? >> well, mathematically it will be hard to get to that top end of the range. we still think we can have a positive fourth quarter, at least ends flat for the year and likely get into a low single digits for the year, you have a

couple catalysts, the upcoming earnings season, generally fourth quarters are positive for stocks, you get a resolution on 2 feds, they pushed out and get bounce in china. those couple catalysts could get you to flat up a couple% for the year. still could get to that 5% level. >> seasonally, you are right. we have that back, a little wind beneath our winds if you like for the 4th quarter. it's not the average year, considering what is happening with the fed. jean, you have brought down your targets this year as a result? >> yes. so we have a pretty wide range in the dow between 17,619,000. the reason for that is we were watching and waitsing, going from being predicting the trends to really watching the trend and so recently when the dow quite convincingly bottomed at 16,000, that was the first important step in terms of beginning to then start to identify what the upper levels could be.

which is a lot of buying potential in this market. so the earnings season could play a pretty good role and that's why we have this very wide range for the upside to a year end that could see the dow at record highs before the ends of the year. >> record highs before the end of the year. goodness me, jean, okay. do you think energy, the bottom is in there? we have been debating this considering the relative stability over the past couple of months? do you think we've seen the worse in the. >> absolutely. i think that's a very important point. august 24th, they got that big slam in the market. three days later, august 27th, they got a classic technical reversal. a 10% reversal on wti, up 38. it continued for the next two trading sessions, way above average, contract by them. you got to move from 38 to almost 50. your classic 50% retracement down to 44, 45, based out, now it's starting to break out again, the energy stocks have also been following suit, bottoming, starting to really come around.

so that's important for the market. i think it alt reflects investors perceptions that the worst as far as the china slowdown and other related factors are in a rear view mirror for the markets. >> it certainly is important for the markets. we have been watching that correlation over the past year or so. john, what about the biotechs, as dom put eight moment ago, it's a battleground do you think it is something very specific or something potentially is nexttive for the broader market? >> i think it's sector specific. >> that specific industry group tends to gets overvalued at times and then any spark of bad news sets off a sell-off. that's what happened this last time. but if you look out over the next year, five years, ten years, that he can heck sector biotech, the demographics behind that, good all american know-how that drives that biotech sector. i think that's a plus. >> is it a buy? >> i think across the health care sector, there are a great number of bargains today that

didn't exist two and three months ago, so, yes, i think given a long-time rise in short they're a buy, there are certain names there you probably want to avoid. but the sector, itself, probably you want the dollar cost in here rather than bail out. >> you may do a little homework as well on that one. thank you very much, jean and john. can you go to powerlunch.cnbc.com to see what they are expecting for the coming season. shares of pepsi trading higher. one analyst's bullish call. why he is setting a $102 per price share on that stock. that's next. as we head out. here's how the sectors are doing right now. energy the biggest pin e winner at this hour, health care, the biggest loser. you are wrauching "power lunch" on cnbc, first in business worldwide. .

you wouldn't order szechuan without checking the spice level. it really opens the passages. waiter. water. so why would you invest without checking brokercheck?

check your broker with brokercheck. hi watson. annabelle, your birthday is tomorrow. i'm turning seven. what did you ask for? a princess. and a pony. you like things that begin with p. i like pink frosting too. will you have a cake? yeah. i was too sick to have one last year. the data your doctor shared shows you are healthy. are you a doctor? no. i help doctors identify cancer treatments. i want to be a doctor someday. i can help with that too. watson, i like you. welcome back to "power lunch," everybody, i'm tyler

mathieson. the offer is valued at 3.3 billion. sun edson is cutting the work force as a part of the restructuring. stocks sliding about 5%. how about 2.77%. sony splitting off the sensor business into a separate company. the unit has been one of the best performers in recent years. there you see the stock down about 1%. dom chu. >> tyler, cisco coming off its best levels, initiating coverage on the networking products with a buy rating saying most of the recent moves are growing profit margins faster than nay expect. the profit margin stories playing heavily into that trading. cisco systems is up 2% in today's trade. china's ends became the fourth most used currency in august, overtaking the japanese yen. this as some of the big central banks are meeting this week in china.

sorry, with coin, a big focus, hi there, seema. >> china the emerging markets slow down and the feds are likely to be discussed with central bankers. let's start with australia. they are suffering from lower commodity demand as the biggest trading partnerer. the aussie dollar has fallen as a proxy for china. despite these concerns, the cap rates unchanged in today's meeting. with business investment falling in the jobs market weakening, they expect further easing from australia, which would push the aussie dollar lower. japan, mounting pressure to extend it given the weak environment and lack of inflation. in the meantime the japanese yen, seen as a safe haven currency has been getting a bit of a boost amidst the recent market volatility. speculation of further easing is expecting to push the bank lower in the long run. the bang of england, it is

widely believed mark carney will wait for the fed to act first. services pmi representing 80% of the u.k. economy, falling to its lowest level in a year-and-a-half and industrial production has been hit, glenn core a great example of that, while direct exports is moderate, with luxury be, the focus, the indirect effect will be more significant if china slows further, because exports from the eu will weaken, which will be bad news for the you caning because the eu is the u.k.'s biggest trading partner. we should point out, year-to-date the u.k. is a big under performer given their high exposure to mining. >> very good point. thank you very much. all right, shares of pepsi trading higher after a big earnings beat, the company raising the full year target. nick mody has a market perform on pepsi and a $102 price target. nick, take us through your argument, your thesis for pepsi.

>> eia, pepsi put up a high operating quarter. they have been operating well despite the macros we have been seeing. the goods. about pepsi is two-thirds of the profits come from north america, which on a relative basis globally has looked better than other parts of the world. it's been one of the boones for pepsi this quarter. >> what is their principle advantage over the rival coke. you think of the two together. is sit pepsi's business is more diversified because they have snack foods? >> well, they're certainly more diversified. what i would say is the difference is about geographic exposure. 60% of pepsi's profits come from the u.s., whereas coke only gets about 25% of its profits from the u.s. so i really do think it's about geographic differences at this point. >> you see this stock going from 97 to what now? 105. >> $102 that's about a 4% upside

t. stock's had a nice rally over the past weeks. it's at a fair value. at this time we prefer coke. we think there is more upside over the next 12 months. >> you prefer coke as a buy now? >> correct. >> because of its value? >> yeah, i think coke has been out of favor. you seen a lot of negative revisions because of currency. when those revisions start to ease, as we see now, cost cuts start coming into play, we think coke might be a better opportunities over the next 12 months. >> that's interesting. your pepsi co-the coke target would be what if have you it on the top of your head? >> yes, about $47, that shots about 16% upside from where we are today. >> all right, nick. thank you very much. eappreciate your help. mandy. the tale of two companies or tech titans, moo microsoft versus apple. why one is working and the other is not. >> that is ahead. plus allegations of insider trading. our coverage of the scandal

hitting the word of fantasy sports continues in the second hour of "power." we want you to weigh in, do you think the u.s. deposit should regulate daily fantasy sports sites? you can go to cnbc.com/vote. "power lunch" is back in two.

. >> welcome back to "power lunch" amtrak a disruption to services come mid-december unless congress extends a december 31st deadline for implementing a safety technology. oil is rallying this hour. biotech battering the nasdaq this hour, illumina and vertex, also leading the declines. you can go visit the site and get a whole lot information at powerlunch.cnbc.com. tomorrow night the much anticipated show "jay leno's garage" kicks off here on cnbc. jay shares his passions for all things automotive, like this exclusive look at a rare car. >> we're going to meet the current vice president of design josh general motors, worldwide, a terrific designer, in fact,

i'll show you how much i respect this guy. i'm going to change my clothes and dress up. to view this rare creation, we are headed to gm's top secret design studio. hello. >> jay, you found us? >> yes, a hard place to find. i'm so excited about this car. >> it is going to be cool. >> nobody's ever really seen it. >> it will be a lot of fun. >> wow, you made it pretty dramatic t. black curtain the whole. >> it's a big deal. >> it is a big deal. >> all right. well, let's, we pull the camera ou out. >> and there is a sneak peek at that car. wow, to see the car, all of it. tune into jay leno's garage, tomorrow night, right here, of course, on cnpc is there that's

what i call a car. after flattening out for much of the summer, home prices in august seeing bigger annual gains, are low mortgage rates pushing them higher than they should be? we'll discuss that next.

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. all right, everybody, coming up on "power lunch" why wall street watchdogs may have to oversee fantasy football. with home prices surging across much of america, are there any real bargains left? your dpeft says yes, he will let you know where. what's wrong with apple? we will take a bite out of that story. >> you stole my joke. i was going to say that. i guess there aren't that many apple puns out there. okay. the interest rates on the ten-year yield is hanging around 2%. which is also keeping mortgage rates low. >> that could be one factor behind an increase in home prices. hi, diana. >> hi, mandy. >> that is a major factor in higher home price, even bigger

is the lack of sales, they were 6% highner august according to a year ago. >> that annual gain is larger than gains we were seeing at the beginning of this year, even as we enter the slower season, supply is critically low. home builders are increasing starts. that's from a real pit of production, compared to data in 1995 when single family starts came in just over 1 million 2015 likely over 700,000. our population is a lot bigger than it was 20 years ago. some are claiming with high home prices these days and the -- some are claiming with home prices this high and days of easy credit gone, we are in a price bubble worse than 2006. that's from analyst mark hampton. others say can you not compare it to the last housing boom because those emergency don't exist more and more. if you look at income and home prices, housing is generally

affordable. the concern is widespread, as we said at the start, these artificially prices if they rise significantly, we could see a major change in o'fordability. there is a lot of changes going on online. >> let me ask you a question, diana, obviously, all housing is local, price difference, price rises are local but inventory is local. there are lots of places in the new jersey suburbs, where there is no inventory on the market. there are lots of other places where there is too much inventory. >> pricing can be local. we are seeing widespread shortages of homes for sale. >> that is nationwide. of course, there will be pockets where they have more available for sale. this is a national phenomenon when you go market to market. you see it in the power segments we do. it is very short supply.

>> thank you very much for joining us, live in washington. >> it's in an hour here? >> time flies when you are having fun. >> time flies when you are having fun. this 2:00 show will seem like six hours. it is 2:00 on wall street. lunchtime in denver. thank you, stocks struggling, oil rallying though, up more than 3%. i'm the ray forementioned brian sullivan. little lisa lee is on nasdaq. we have to begin with a scandal in sports latest billion dollar business real money. cnbc eamon javers is joining us now. you have to have a fantasy gate? >> exactly. tom brady is not involved in this. at least as far as we know. look, a big story in the new york sometimes i times, just this morning, talking about fan tule and draftkings, those two

fantasy sites you might have seen spending so much money on sports advertising around the country t. allegations in the "new york times" story that a draftkings employee inadvertently released sensitive data earlier than he should have. >> that potentially could have been used by players inside the system to gain an advantage over other players, also, allegations that people employees of fanduel and draftkings were placing bets on the opposing system, possibly using information that they know from their own system and gaining an advantage that way. both sites say that there's nothing untoward has happened here. in fact, they released several joints statements. i'll give you one of them in which they say they're changing their policy. they say while the industry works to develop and release a more detailed policy, draftkings and fanduel have decided to prohibit employees from participating in online fantasy sports for money.

how is this unregulated religiontively new industry? a couple statistics to think where analysts think this is going. about $2.6 billion in entry fees expected this year, $14.4 billion in revenue by 2020. we should also note, cnbc,.com cast censures have stakes in fanduel. so this is a big business opportunity a. lot of large operation have been taking a look at, brian. >> thank you very much. and america, we want to know what you think. so we are asking you, our loim and trusty audience. should the u.s. government or someone else, regulate the sites? go to cnbc.com unless you are driving to weigh in. let's bring in an attorney specializing in sports law, also a contributor to forbes and adram kracheck. he specializes in interactive and digital gain gaming.

adam, i have seen some numbers from your researchers beforehand, thank you. how many people are out playing daily fantasy sports? >> yeah, so we estimate there will be about 4 million paying players in the daily fantasy sports industry. that's just for the daily game fanduel upwards of 45 to 50 million players. >> 45 to 50 million, a couple million playing per day. the reason i ask is this. by our numbers, 14% of americans own individual equities, 225 million adult, 14% of that. we're getting to the numbers, adam where you got effectively the same number of people playing fantasy sports, not only for money. yet, you got a few thousand people working in d.c. to make sure the stock spectrum is fair. it seems like right now, daily

fantasy is the wild west. as many people as in the stockmarket. >> yeah, they're seeing tremendous growth. and these issues that have come to light certainly be egg the question, does the industry need additional scrutiny and oversight and regulations and i think, you know, what form that takes will be very interesting fkts but what's likely to happen is this speeds up that inevitable process. >> is that your view, darren, as well? >> i think it's not a matter of if, but when, will you have enhanced scrutiny. you have a congressman frank paulon and the home of draft kings looking into the operations there so i think on a federal basis and certainly on a state by state basis, you are grand jury to see enhanced regulations. >> even before the regulations come into place, if there are to be regulations. aren't these businesses worried, they should be right now about running out of cash? just recently, for instance, draft kinks i kings had $300

million for a $is r 1 billion valuation. >> that i burn money, can they live through this? if d.c. turns offer the spigot because of the recreational damage to the industry? >> i certainly hope so, as you mentioned the two big players, draftkings and fanduel have raised over $300 million. the largest spend to date $20 million in tv advertising, outpacing the big motion pictures that are advertising their releases. >> i actually went threw one of the games, darren. i did sort of the bake math real kwivenlg i kind of got to the point i to the if everybody signs up. it's like a 47,000 person play, 90% of the money they get will be paid out. to mellissa's point, not only can they survive, but this is i'm not going to use the g-word gambling. let's be clear on what this is. we are talking millions of people to spend billions of dollars to bit on things they can't control. >> the only reason it's allowed. >> it's a game of skill. >> the acronym uigea.

all it has is a card out that says bets and waivers are illegal. fantasy sports, as long as skill pre dominates over chance, that is legal. then have you an ostate by state basis, including arizona, louisiana, montana that, explicitly say we're not going to allow it if there is any chance whatsoever. >> you know, adam, we will leave it with you want when you look at the growth numbers and you have given us a couple 06 them, do you see a critical mass any time soon? literally, are we still at the beginning of this? >> well, i this i we're still at the early stages of penetration rates. but you notice, however you read or what side you are on this whole insideer, you know, trading scandal, we actually don't think it was and a lot has been blown out of context. >> that being said the yes we ask now is whether this bad publicity impacts future growth. if they spend this on tv,

advertising right now and trying to scale the business, i think that is certainly one big major concern. >> darren, adam, we will leave it there. i think you have a good point. what we know so far this lineup data apparently was given out after the person who play ed tht everybody had their lineups. it's the optics. thanks, a great discussion. >> we asked you, do you think the u.s. government or states or somebody should regulate daily fantasy sites? guess what, no, 51%, yes, frin%, mellissa, still time to vote, however. >> you should vote. what this tells me the cyber hackers are looking at this as the next area to hack. that information is worth something, clearly. >> i can't remember the source, bloom burg, where we all used to work, i think it was bloomberg

that said 90% of the money was paid out to players. if i was a james same on, a massival mass algorithmic hedge funds. stocks are mixed. we have the dow barely in the 14 up 24 points. we should note the strength in dew pont is masking the underlying weekness. the s&p 500 down under a half a percent. the nasdaq is down the worst of the three major indices. health care you sew there, a big loser, 2.5%, a loss, dragged down by the biotech sector. ibb down more than 4% off the session lows. we ask, are there opportunities or is biotech too ricky right now? duncan roth is with miracle mile in los angeles. he got south of biotechs three

weeks ago. what prompted you to get out. what will prompt to you get back? >> well, i mean the sector as a whole has been great to investors. it's been a leading sector since 2009 when the pull market started. however, it is prone to massive corrections. we are seeing that play out today and over the last couple months in a spectacular format. when you have volatile sectors like biotech that sell-off. it's best to get out of the way. we own that in a part of our portfolio. we decided to set it out for a while and wait for this to kind of play out. i think some of the recent negative headlines have obviously contributed to the downside rick herrisk here. over the long run, we really like it. in the short run, it's been tough. >> what's your buy signal? is it an evaluation of an etf? how it is trading? what will it say to you as something who got out at the

right time essentially to get back in. >> >> i think that's a really good question. i don't think i have a great answer for you. when you really look at valuations, that's certainly one of the metrics we use. there is a momentum sector. when you have tweets that can move the sector by 6, 7% in a day. it makes it hard to figure out what the sector point is. our general progress snoefs we want things to settle down and play down here. we are getting to a point where some of these are becoming good deals. i would say we are taking a hard look at it. we are putting money to work here soon you make the point you like etfs more so. there are a few biotech etfs out there. we talk about that. there is one called the sbt, a more equal weighted etf. they are more equally weighted with the smaller cap companies.

which way would you go? >> that's a good point. we owned it in the past. fbt is a little more interesting. it's a little more concentrated. they are equally weighted. but you end up getting on average a much larger cap names. so again, when have you this kind of volatility. a lot of the smaller biotech names, you know, can be one drug wonders. right now, that's not a place where we're probably going to ends up going. ftp would be our first choice because of the market capsizeing and because you can get a little better security checking. >> duncan, we just talked about fantasy sports. let's say that player doesn't play the rest of the game. with these early stage biotechs, aren't you kind of doing the same. ? isn't there a form of gambling here. melissa will tell us about a drug down half.

the one drug doesn't look good. much is gambling at the very early stage? >> i agree, buying small cap is akin to gambling i think that's the reason we need etfs, you get broader diverse information across the board. as a sector, you have to look at biotech has been driving the s&ps since 2009. it was up 20, 30% earlier this year before it sold off. most of the names are trading better than the s&p overall, the one, three and five-year track record is still really good. from where i'm sitting, i think it's definitely a part of a long-term allocation. but you have to be very cautious about being able to accept the kind of volatility you are seeing. i don't think we're out of the woods here. i mean, another three-to-5% move on a daily basis over the next several weeks will not be surprising to me at all.

>> all right, duncan, a real pleasure if you play fanduel, always go with rogers. red hot in redmond. why microsoft looks better than apple these days, plus, better late than never, one stock down 70% got a downgreat with recalling somebody out on that coming up. later on, going par gain hunting and bargain stocks, some names that haven't had their run yet. we will give you those names and much more when "power lunch" rolls around. stick around. .

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welcome back to "power lunch, everybody. one of the hottest tech stocks is a scrappy start-up called microsoft. all kidding aside, shares have up 9% over 30 days. it's having a big product events in new york city today. which is why we dragged our tech guru to the east coast for it. josh. >> reporter: well, brian, yeah, you are on the east coast, it's feeling very west coast. to your point today in new york city, microsoft unveiling a number of new devices running windows 10 and microsoft executives telling me they're confident that these devices are grand jury to excite that many more people to adopt this new operating system. >> what we found is people can use our devices ends up using a lot more products like microsoft office, skype, search engine.

so it really is a consummitive audience. they love the capabilities. we live in a world where devices are. a big part of the world where people want to run their businesses on. >> reporter: now as expected, we saw new lumia phones priced at $549 and $649 respectively. also unveiled the surface pro 4 with a 12.4 inch display and style styleus. microsoft introduced the surface book t. price there $14.99. microsoft saying it's two times more powerful than the mac book pro. they show the advantages of windows 10 on host of devices. now we will find out if consumers are as excited as microsoft executives. guys, back to you. >> now in the last month, shares of microsoft are up 10%.

so do the products make you buy the stock right now? let's bring in a senior analyst, he has a $54 price target. he has a neutral rating. guys, great to have you both with us. i want to start with you. the gentleman made it seem like these devices were a gateway to other revenues. so is there actually. can you figure out or model how much more people actually buy a microsoft product if they buy a lumia phone? because they were losing money in the last quarter. you made a point in your own note. they had negative gross margins. >> i think there is, well, if phone is a bit of a special case. they really have been losing that battle to android and ios. but the strategy that we saw with microsoft today is a whole range of devices, given the beachhead into consumers, into businesses, that allow them to pull through services like

office 365 and get more engagement with skype, with corta na, with their other services, so there are different ways they c'mon advertise a whole ecosystem. particularly on the business side t. phones are a bit of a special case. they also made a case they have about a thousand enterprises adopting a lumia phone. it's certainly appealing to write an application once and have it run everywhere. that's the argument they are advancing here. >> what is your calculation on the pull through in terms of a consumer buys a surface device and then consumes x dollars more in software? is there any sort of way to think about it that way? >> yeah, it's a great question. in terms of backing out the exact number. we know the attached rate is significant. usually when people bought a pc, they would buy an office license. now they buy office 365 which

will give them access for five devices as well as storage. so it does encouragetime people to have multiple devices and consume these services there is no doubt attach rates are extremely important. they have been closely correlated to pc sales. >> ivan, you have a fruit u neutral to soft. what gets you to buy? this has had a nice run. >> i think they need to opt miedz the balance sheet. they have too much cash, which is diluteing their return on invested capital. as far as business, they're two strong revenue drivers are microsoft officer and the operating system. i loo tick windows 10 operating system. it has improvements over the 8 operating system. however the key difference is the faster boots time, which is a powerful selling feature. but the most important. is that microsoft office is still their key product. now when you buy a microsoft license, even though you are buying it for your pc, you can have the opportunity to run it

on am and android devices, i don't know if it drives the sale of the microsoft phone or surface tablet. >> in terms of the cash item, rank the ways microsoft can use the cash in the order of your preference, do you want to make it an acquisition, give out a dividend, buy back shares? what would the ranking be? >> all of the above. the need to still accelerate, returning cash to shareholders, because they have too much cash. they generate too much cash? this, of course, is the same problem apple has. more importantly, i'd like to see them spend on r&d. it's important that companies, especially tech companies, continue to innovate and make acquisitions that make sense. to me the biggest area of opportunity for both apple and google and microsoft is still in the car in the info tainment system. that right now is somewhat being dominated by apple. that's a huge market and it's still up for grabs for all three of these companies. >> thank you guy, thank you for joining us. i appreciate it.

ed and ivan. to plierk soft to apple. despite sales, stock has been ice cold. in fact down 12% over the past three months, channing smith is managing director at capital advisers, dan nyes imaging director chaning, what do you think is wrong if anything with apple's stock lately? >> i think what's happening is a lot of analysts are downgrading their sales, we don't see this we see a good weekend for the new model sales. you had tim cook come out in late august and say business was stable in china. we think the bar has been lowered for this quarter. and that's a great setup for apple to beat expectations. if they don't, it's limited downside. >> dan, do you think the stockmarket phone stockmarket globally, at least the iphone is mature something. >> that's the worry of investors here, given what's happening with aping that they feel like the best growth is in the rear

view mirror. there are a lot of worries the iphone 6 cannot be as successful as the growth is showing. changing is saying 13 million, but i think the big focus is on the guidance for the december quarter. at this point everyone is yelling fire in the crowd theater on apple. we view this simply as an iphone 16 hangover that ultimately investors digest this, they realize they have much better growth days ahead on success as well as the other product categories. >> is it just, dan, incremental. is it me going for the 5 or the 6 or the 6s or somebody that has never had an android before. what itself the more likely scenario? >> that's a good question, 30% of new users coming out of china, so the overhang we are see income china in terms there has hurt the stock. 70% will be upgrades. with ebelieve at this point less than 30% of upgrades to an iphone 6. >> that goes to 65 to 70% by 2016. that's really the fuel in the

tank for apple here. and ultimately turns the bears to bulls. >> that. as we see the next few quarters. >> channing, i know you've liked the stock, you upped your alex to the clients. give us the most bullish case for apple as you see it. >> i think margins hang in there. i think there is an opportunity for margin expansion. >> that rests on two key factors. one, i think that there is mo manufacturing issues. we haven't seen that, we seen that playing past cycles. two, if you look at the storage, a lots of it installed base users are starting to upgrade their storage because of the better functionality of the camera and the video wider screen for content. we' at the margins expanding him keep in mind, we have the iphone pro, three to 4 million sold, lastly, we will continue to see announcements coming from apple tv. that's a huge driver, both huge markets. >> betting on the television,

guys, thank you, we will let you go, appreciate it. all right, up next, mickey d's just upped the ante on the fast food wars, some investors seem to be loving it. those details ahead. as we head to break the stocks in your portfolio, pfizer down, verizon up, shell up 3%, big day for oil and oil stocks. we are back after this.

welcome back to "power lunch" i'm melissa lee. right now the dow has a 40 points gain. thanks, to dupont. small caps down a half a percent right now and biotech stocks the big story of the day. they're getting battered. your the session lows, still down about 4% right now t. long wait is over for mcmuffin fans, starting today, mcdonald's will begin selling at their restaurants. shares of mcdonald are higher by

almost a percent at this hour. meantime, pep soco is also raising the full year growth target. and the container store is seeking ahead after a quarterly profit of 6 cents a share, a penny shy of estimates. they point for a higher stockmarket and the decline down 18 and a quarter percent. well, big gain for oil today. jackie, what's behind the bull push? >> good afternoon, brian, well, more than $2 spike. not only did we take out 47. with etook out 48. it was the eia's short-term energy outlook. it reported a zroop drop in u.s product from august to september, a couple hundred barrels a day. count that with the decline last week, traders got excited. you had a weaker dollar the situation continues with russian airstrikes in syria. having said that, there are some

bearish factors that can bear this out. we will probably get a build from the department of energy tomorrow, having said that, lackluster energy as well, concerns about global growth are still out there. this spike today remarkable. traders are saying we can get back to 50 bucks, back to you. >> thank you, jackie. cnbc prime kicks into overdrive literally tomorrow night with a premier of the all new show "jay leno's garage" he is hitting the road with stars and pretty serious star power. take a look. >> right now we're going to sigh an awesome buddy of mine, another guy that grew up, probably the ultimate muscle car guy growing up in detroit. let's go check out his stuff. >> he likes to sleep a lot. "brooep beeping horn ] >> hey, tim. >> how are you?

>> what? >> that's what i said. >> geeze. >> can we come take a look at your stuff? >> i should have had my staff come down open the door. i don't have a staff. >> that's right. >> all the years we have known each other, you have been in my shop. this is my first time here. >> not that you weren't invited 40 times, are you a busy guy. >> i'm working. >> you are a retired guy, got a job. >> trying to see what he got there. i saw the porsche. he had an old mustang as well. it looked like a carmen gia, it could have been a spyder. take a look tomorrow night right here on cnbc. he needs to come out to the racetrack. i think we'll get jay out with us next year. up next, par gain hunting, analysts say there are still real deals out there, his picks ahead. as we head out to break arc look at all 500 stocks on the s&p 500 t. market split down the middle. the dow is going nowhere. we are coming back after this break. stick around.

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herrera. president obama telling a group of business leaders he is confident his administration will be able to win approval for the transpacific partnership trade deal. he made that remark at the agricultural department. nato charging bombing opposition groups and civilians not isis positions in syria. jen stoltenberg says incursions by russian fighter jets are not accidents, but distribute actions by the russian military. twitter trying to make it easy for users to find out what's happening. the lightning polt opens a list of movement, click on a moment will give the user a best event. the new tab debuts today. a group of mexico's most popular comedians lamb basteing donald trump in a new play called "suns of trump." it shows his face projected on to a $100 bill. before a voice in a heavy

american accent says an anti-mexican slur. that's the cnbc news update this hour. back to you, brian. >> that is exactly when we promo do it now. >> it is time for trading nation, because traders trade better. so let's do it better and talk about the commodities market. it's been a up can him days now. is this the start of a up canle days higher in a macro-secular downtrend? >> i guess i'm a little skeptical. i think this is a relief real in commodities in general. i think you measure it in days in weeks in here. two or three factors come together. first it started with the fed taking a pass and generally the economic data come income, on the weaker side. that's cooled a tough dar a bit. it's paused here.

i think that will be more of a short-term event. the second big one is positioning. if you think about the long trade this year was biotech and health care t. short trade was energy and the equity market. so now we seen those being squeezed in the other direction w. reseeing short squeezes in the energy commodity, in particular. what i think is interesting, when we get into earnings season, we know the fundamental apples for energy are still pretty poor. the question is have the expectation come down enough to step over those expectations? that may be the case. i think looking out it will be difficult for analysts to be raising their numbers, based on the supply-demand dynamic especially on the energy side of things. >> fair to file your sort of your position is not convinced. is that a fair conclusion, andrew? >> i think that's a food summary. >> rick ross, when you look at the crude chart, are you convince dpld any direction?

>> brian, look, we had an aggressive sector to start off the fourth quarter here with energy leading up 9%. it's too early to suggest we had a bigger structural sectoral rotation take place here. clearly, you need to respect it given the magnitude of the decline. i'll show you how i would trade it here. we see a pennant formation over the last couple days, you broken out from that pennant. it's not my favorite pattern. you will trade it nonetheless. you trade in the direction of the break. if we get through 49, the high after that 3.29 surge. we are targeting the test of the 200 day moving average. importantly, that level has held as resistance going back to june of last year, when crude was at $100 give or take. so, clearly, a break above $51 would set the stage for a technic alibi signal to take us to $51. let's shift to those currencies andrew alluded to, no conversation about crude is

complete without discussing the commodity currencies, look at this chart, brian, this is a weekly chart. if you flipped it upsidedown, essentially you would get the osx or energy sector, with i is to say is this trade is a function of dollar strength. so the recent weakness we have seen in the dollar against commodity currencies established back-to-back bullish weakly reversals for the real, that has bullish implications for crude should we continent to see weakness in the u.s. dollar, with i i would expect in the near tomorrow. >> that chart going up is bad for brazil. >> that means their currency is weaker against the dollar. rich, thank you. andrew, thank you. folks, reminder, check out trading nation cnbc.com. there are thousands on the internet. on this fine program yesterday, phil le beau said it would be difficult for tesla to meet delivery goals. now a big-time analyst agrees with him. >> that stock down as a result. phil will join us next. take a look at lou the most

widely helded stocks are trading today t. company formerly known as goggle, down half a percent. microsoft is up. j.p. morgan chase as well. we'll be right back after this. stake i stick around.

>> the united auto workers could go on strike against chrysler. it could happen tomorrow night. phil lebeau is in chicago with the latest. >> reporter: we have not seen a big plant since 2007. we could see one as soon as thursday, which plant might be truck. >> that remains to be seen within the last couple hours, starting at 11:59 wednesday night. no specific plans have been named, this impacts chrysler and

six assembly plants how much hurt the weekly production, about 35,000 vehicles. the revenue per day if you take an average price of $25, it comes out to one week, over 1.2 billion t. bottom line you look at shares of fiat, chrysler, remarkably, you didn't see a hit we saw a little falloff. it came back in. >> i was surprised by the lack of reaction. shares of tesla are, in fact, under pressure. phil, just yesterday on this show, you said the target cut and downgradescome could be coming. all tow, morgan stanley has the highest prices on the street? >> this comes by the analysts on

wall street when it comes to tesla and its prospects for profitability in the future. the model x at least the initial ones are selling at a far higher price point than adam jonas and many others were expecting. we saw it delivered last week. they've started a r at $132,000. there will be lower trim levels. you have higher transaction prices, does that mean we have the lower model x? he says unless he introduces a significant version soon with dough not expect the company to deliver more than the units in 2016. remember as much as we focus on what the deliveries will be for this year, already people are saying what are they going to do the year? most i talked to say 80,000 vehicles delivered in 2016. already, adam jonas is out

saying i think they will deliver 70,000. we haven't gotten guidance from tesla that's some of the pressure on the stock right now. >> they have eb that estimates out 25. somehow he is looking far out into the future. phil thanks so much for that in chicago. ryan. take a look at the ten year note. just about 2% on that yield. 2.40% to be exact. are they continuing to boost housing? if so, what housing stocks may have room to run? we will have pictures coming up. what zip codes in america have the most homes selling for more than a million dollars? you are probably thinking bad pills, 902010. the answer may surprise you, are you watching "power lunch." stick around. ation. sure. you seem knowledgeable, professional. would you trust me as your financial advisor? i would. i would indeed. well, let's be clear here. i'm actually a dj. [ dance music plays ] [laughs] no way!

i have no financial experience at all. that really is you? if they're not a cfp pro, you just don't know. find a certified financial planner professional who's thoroughly vetted at letsmakeaplan.org. cfp -- work with the highest standard.

. welcome back to "power lunch" check out what's happening with johnson controls and innersys. after dow jones headlines that johnson controls is in talks to buy the battery maker innersys, according to people familiar with the matter. they are looking to reshape itself in profitability. the talks are in early stage. >> that i found out they could

break down at some point. still two big names in batteries, johnson controls is one of the biggest car battery makers out there. probably in talks to buy innersys, this isenersys. up 11%. we will let you know when they reopen for trading. on a circuit breaker. housing has been hot in some markets, it's been hot for a few years. the same with the stocks. over the past year lennar, nvr and dr who are ton up double dij percentages. are any bargains out there, bon whettinin joining us now. now you're getting down to the nitty-gritty. why is your topic a company who makes doors? >> we love a company out of tampa run by fred lynch called mason night. we've done a deep dive on the story and what we find is our estimates for 2016 are roughly 20% above the street.

so all they have to do is continue to execute. strong volume from the home builders, good commercial demand but tremendous pricing power. we love the setup. >> when you met on a home builder you are bettering on a geography or price point, i will take 600 thousand protects us for 800, right, alex? do they sell to everybody, their geography agnostic? >> they're one of two suppliers. >> who is the other one. >> jelwyn. you have two well run companies, commercial discipline and strong volume and the end piece of the story we're getting on the consumer. everyone needs a door as we continue to rebuild america and come out of the housing recovery, demand will remain robust. we like the setup, strong pricing gains, lots of volume momentum. earnings are too low. the street smits in this story were recommending investors get in now, get in early.

>> what are people missing? >> this is a small cap stock with a 2 billion market cap. if people take the time to look into this this stock has 30% upside in the next 12 months. >> 30% upside. >> we see this stock going to $82. >> 82 bucks an easy to remember sticker, door. >> door. you are on the record, my friend. you are on the hook. >> thank you. >> everyone needs a door, brian. >> that's the quote of the day. >> everyone needs a door. >> unless you live in a yert. >> what is that structure, brian? how do you close did? >> the zip the flap. >> you need a zipper, then. >> it's like mitch head berg, if you get in an argument in a tent what do you do, zip the tent? never mind. >> sons of 1 million plus homes have been surging but which zip code in america has the most million dollar home sales? robert frank has the answer in a snu study. >> sales of million dollar homes up 21% over the past year.

the higher you go to the real estate market the stronger the sales, report from coldwell banker found 92000 homes sold, homes priced of 5 million or more jumped 54%, homes prielsed 10 million or more was up 43%. most of those sales were in new york or california. new york, l.a. and san francisco all the top three cities for million dollar sales and the top three zip codes for zld sales also all in new york, but there were some surprises for million dollar listings. atlanta ranked second behind new york and ahead of los angeles for million dollar listings. active listings in atlanta up 57% over that 12-month period. now, the top zip code for million dollar listings was park city, utah, followed by miami beach. back to you. >> all right. robert frank, thanks for the rundown. in just about an hour from now yum! is out with earnings. what to expect when they report. that's next.

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dentist appointment when my teeth are ready? ♪ can it tell the doctor how long you have to wear this thing? ♪ can it tell the flight attendant to please not wake me this time? ♪ the answer is yes, it can. so, the question your customers are really asking is, can your business deliver? after the bell it's all about tacos, pizza and that guy in the white suit trying to sell us chicken. yum! brands out with earnings. have they gotten over their china issues. >> we're joined by rj hatabi and peter sella. rj, a lot of btig, rj, okay, vip both of you are.

rj, is yum! brands finally righted the ship in china which for a couple years has been dangling over them? >> i think this will be the first quarter in four quarters we will see a solid positive same store sales number out of the company and also see great labor productivity numbers from the china division. a lot of questions about whether or not macro trends in the region will have an impact in the fourth quarter outlook, i think you will still be in positive territory for the fourth quarter. >> the stock is up 13%, come down recently with the rest of the market, how much more upside do you believe there is in shares of yum!? >> we've been neutral on it but we've been telling clients one of the interesting things to look out for is if you consider over the past ten years yum! has almost always raised the dividend or declared a dividend in the month of september. this year there has been no declaration of a declaration, no raise in the dividend. they've been silent on their capital structure and their dividend outlook. this is the first time in a long time that there has been no

announcement on the dividend. this could signal a change in the capital structure which is something the activist investors have been looking for, or it may be a potential spin in the china business. i think that's something for investors to look for on this print at 4:00. >> rj, your price target or fair value estimate for yum! is 100 bucks, 20% from yesterday's close to the upside. as you point out in your note it's all about china and the macro perception. are you expecting that on a macro basis things improve in china and therefore you get to that $100 price target or other external things like a change in the capital structure that peter is talk being that gets to you 100 bucks? >> our $100 fair value is based on a discounted cash flow forecast. we are expecting high single digit top line growth over the next five years and significant margin pressure especially throughout the china situation. that being said i would welcome a potential recap or spin of the china business. this is one case where it makes

a lot of sense allowing invest towers dictate how much exposure they want to china as well as other emerging markets. >> peter, let's say they do spin china horks wants to own the china business at this point? >> it all depends on how good the comps are and margins is. is the china business recovering? are we going to get comps in the mid teens or comps in the mid single digits? i think that's going to tell us what it's really worth is whether comps have accelerated or whether the two-year stack comp has decelerated. >> peter, you got a neutral rating on yum! rj has a four-star buy rating on yum!. thanks to our analysis. tonight at 5:00 on "fast money" we are going to break down yum!'s reports and decipher every comment they make, especially on china. you heard from the two analysts how important the outlook is going to be going into the fourth quarter. we are all over that tonight on

fast. >> appreciate it. have a great day. >> thank you for washing "closing bell" as well. "closing bell"? it's great when you have a nice show and you screwed up right at the end. >> you're doing fine, brian. bring it home now. >> thanks for watching, america. "closing bell" starts right now. yes t does, welcome to the "closing bell" i'm carl kant knee a in for bill griffeth and i'm kayla tausche in for kelly evans. maybe bill and kelly will be on squawk alley tomorrow. >> biotech bust, dragging down the nas dak today. >> and microsoft entering the pc wars, announcing its new surface book laptop and we will have a live report from that event in new york city coming up. >> today is the day egg mcmuffin lovers have been waiting for, the all day breakfast but will it be worth the high