85% say bonds are discounting a rate hike. pretty much expected in there. how many rate hikes next year according to the cnbc fed survey? looking at a immediate wran of 3%, but a lot of disburgses here. 25% of our 32 respondented say they're expecting two rate hikes. 29% say 4. 23% say they expect 3. we're going to listen carefully to the guidance from the statement and from the fed chair at the press conference about what is to come after the expected rate hike tomorrow. carl. >> all right. steve liesman, thank you very much. we get guidance and dots and may even get an interest rate decision. we'll hand it to you for "squawk alley." >> joining us as always this morning, john fort and kayla. myself here at post nine. we want to get bah to that breaking news that broke an hour ago. the l.a. school system closing due to a security threat. our sharon eperson has the latest over at hq. sharon. >> yes, carl. we are looking at the nation's largest second largest school system here. the los angeles unified sool

system cancelling classes after receiving what it called a "credible threat to students' safety." the threat was received in an e-mail message. it was broadly targeted at many schools. not just one or two locations. l.a. school police chief speaking at a news conference today explained where the school district took this action. >> in an abundance of caution as superintendent cortinaz has indicated, we have chosen to close our schools today until we can be absolutely sure that our campuses are safe. >> now, police and school officials plan to search schools and continue to evaluate the threat. the school has more than 640,000 students. we're talking about 900 schools that cover some 720 square miles. it is the second largest school district in the nation. parents have been asked to keep their children at home or to get them if they've already left school, and this is an ongoing situation. of course, we're going to continue to follow this and

bring you the latest. >> hanks so much, sharon eperson, with an update of that situation from headquarters. los angeles times reporting we'll get an update from officials at noontime. of course, that threat coming in just about an hour ago when those sool systems were closed. let's bring in julia who is in los angeles on the ground to discuss what this security or increased security situation actually looks like. >> well, i think that the security today is going to be really remarkable, but i do think it's worth pointing out that just last night was the premier of "star wars." that was perhaps the biggest premier that we've ever had here in los angeles with three heaters on hollywood boulevard dedicated to this in a half mile stretch of hollywood boulevard shut down. what was striking to me, as someone who has been to a lot of big events here in l.a., this is the toughest, tightest security i had ever seen at this event last night. i saw half a dozen bomb sniffing dogs at one end of this massive half mile long red carpet.

everyone was inspected. everyone went through metal detectors before entering the red carpet. more metal detector brz entering the theater. everyone's bags were searched. there were bomb sniffing dogs all over the place. everyone's bags was inspected multiple timdz. i do think that here in los angeles everyone is very much in high alert in light of the events in san bernardino. just two weeks ago san bernardino being really very much in los angeles's backyard as well as the events in paris. just thinking about the security we saw last night at that massive event, i think that everyone is going to be very careful, and i do think it speaks to the heighteneded level of caution that the folks here in los angeles are taking. those certainly are a massive undertaking to send teams to all 900 schools, plus the charter schools and plus the other locations associated with the lasd. kayla. >> julia, it's interesting. you heard from officials that

there will be cooperation required across the city. we generally think of los angeles as a city with great sprawl. talk about the scale of this school system. how far it spans in a city that is already extremely large and extremely spread out. >> where he. very, very spread out here. the lausd is spread out over 720 swear miles, so this is a massive wrar. they're going to need to be just many, many teams. it's hard to imagine that this kind of investigation into each of these schools is going to be able to be completed in a single day when you look at the fact that there are 900 schools, 187 charter schools. this is really going to be a very large undertaking and very, very spread out. as well as los angeles, there are parts of 31 smaller municipalities and other sections of southern california, so it will be very interesting to see how long it takes to complete this, but it sounds like in light of all of the recent terrorist attacks and the

events in san bernardino, there's going to be certainly a heightened level of caution for right now. >> and that, julia, is what makes this feel a bit different. i mean, it's the second largest school district in the nation by enrollment, but just in terms of the sprawl of it, it's probably the more complicated security situation. it's one thing to secure one building or even a few square blocks, but this is basically a threat, the way they're taking it, to all of los angeles. it's spread across pretty much the entire city, is it not? >> oh, absolutely. the entire city. i mean, 720 swear miles. i mean, just think about how massive that is, and these schools are, you know, ranging from middle schools to high schools, elementary schools, kindergartens, they are very much just sort of woven throughout the city, and they're also very different types of schools in parts of their different neighborhoods. i'm sure this is going to be a

real effort of the l.a. police force, and it is going to take an entire city to deal with the fact that there are all these kids who are out of school today, and the police chief and the head of the school district said in the press conference earlier this morning that they really hope that everyone will be understanding if employees have issues getting to work today because they have to deal with the fact that all of a sudden every single kid is out of school. >> yeah. big, big impact, surely, to the city. can't do this every week or certainly every month, but an important development. we'll continue to track it. >> one other thing i think is worth noting. here in los angeles we are not used to having snow days. in other parts of the country schools are shut down many times a year because of weather. schools aren't shut down because of weather here. it just doesn't happen. we are not as accustomed to dealing with that kind of city-wide school shutdown. >> yeah. indeed. many follow-on affects. we'll have to watch that as well. thank you, julia. meanwhile, we do have a rally in the market bringing to more mundane affairs with the fed, beginning its two-day policy

meeting. major indexes up over 1%. wob pasani on the floor with more on what's moving. >> the rally is going on for two days. essentially the last -- take a look at the s&p 500. steady as she goes. we gapped right up, and essentially that's where we've been all day. up 20 points. people keep e-mailing me. why are we up, bob? it's the day before the fed meeting. traditionalingly the markets are up. even on something like this. the most volatile sectors of the market -- the two most volatile -- sources of volatility, oil and high yield are behaving themselves. oil is down a little bit today and high yield. if you look at the hyg here in terms of market movers, both of them are behaving themselves, and that's certainly a good sign. in terms of dow movers here, exxonmobil, up more than 6% so far this week. another good move today. oil was to the down side. apple -- oil on the up side. apple, of course, dialogue semiconductor. it's a british firm that makes chips for apple.

they lower guidance about maybe lower iphone sales. that's down. 3m, they came out and cut their forecast, and they've done this before. this early in the we're, this is how tough industrials are. in august they were talking about 773, not 793 for the year. october they cut into 760 to 775. now 3m's number for the year is 755. that's a substantial cut. this is part of the problem. all the big industrials are having a slower global growth, so it's not just 334 to the down side today. other names like caterpillar and deere and rockwell and eaton and illinois tool works, those stocks, put them up, they're all to the down side today as well. in terms of cross currents. there you see the stocks to the down side in the industrial group not participating in the rally. the market has a lot of cross currents right now. nobody knows what's going to happen the next three days, and i mean nobody. opinions are all over the place. we have tech selling season. he have the end of december strong. movement that everyone is anticipating. we've got a big quadruple -- we

have the biggest volume day of the we're. it could happen on wednesday. it could happen on friday as well. that's in the mechaniix. opinions all overtime place on whether the market will move in a positive or a negative direction on that. one thing i can assure you is you are going to see a lot of volume and a lot of intraday volatility in the next few days. guys, back to you. >> all right. thanks, bob. coming up, it is day one of a two-day fed meeting. we've got a lot more on how a rate hike would affect stocks and real estate. plus, we'll get one analyst's take. he has been bearish all year. plus, the events in l.a., the school system is closed on a security threat, and a news conference in under an hour. we'll be right back. proud of you, son. ge! a manufacturer. well that's why i dug this out for you. it's your grandpappy's hammer and he would have wanted you to have it. it meant a lot to him... yes, ge makes powerful machines. but i'll be writing the code that will allow those machines

to share information with each other. i'll be changing the way the world works. (interrupting) you can't pick it up, can you? go ahead. he can't lift the hammer. it's okay though! you're going to change the world.

>> some headlines in tech today. joining us this morning from san francisco is jason, angel investor and founder of inside.com. jason, welcome back. good to see you. >> good to be here. >> i got a lot to talk about. apple is first up. lower this morning. shares are down more than 17% from the highs since reaching the high back in april. now it's dialogue semi, cutting the revenue outlook, and other chipmakers like sky works are lowering sympathy. it comes a day after morgan stanley cut its iphone outlook as well. jason, we always like to sort of needle analyst who's do channel checks, but more and more people are asking whether these are actually on to something.

>> wrau. i mean, listen, the iphone sales have been tremendous, and it's 60% to 70% of their revenue earnings, and, you know, the watch has done fairly well. they're going to do 20 million of those in the first year. the question is are people going to keep upgrading their phones, and they going to chippewa at the android base. i think that's actually where i'm optimistic about it. there's talk of a smaller iphone in this next generation. the 7c, if you will, which will be -- in terms of size, four inches, and fit very nicely in your hand. i'm very bullish on that if they can capture some of the low end market and people who want a smaller phone that's maybe a little more competitive in terms of price. i'm bullish on apple. i think people under estimate what a delightful product the iphone is, and people's propensity to upgrade them early. people love to have the latest iphone, and if you look at the investment they are making in screens and, you know, in new

features and in the operating system, apple is moving at a very tremendous pace. very fast pace in terms of adding features to the iphone, lug, you know, wrup grading the cameras and pushing down on the device to get a new experience. i'm actually bullish on it, and apple has $200 billion in cash and is investing it very heavily in new products, new screens, new chips. i'm very bullish on it. >> it's one thing to be bullish on apple from a product perspective, even a platform perspective, but i think it's interesting as a stock, we've seen the company get actually increasingly reliant on the iphone. particularly in the profit arena as the wreerz have fwaun by. even as it's trying to diversify out with the ipad. also, that iphone cycle has gotten more and more concentrated in the holiday quarter. it seems possible to me that in the next year you see them gain on average selling prices of iphones as they get more wrup grades more quickly as people

trade up to huer capacity versions, but that doesn't necessarily mean that they're going to move a lot more units. isn't that the issue? >> the issue is have they reached their natural audience for this, and is it a high-end product, or can it keep going down market? i believe it will keep going down market, and i think they're going to keep coming up with compelling ways to trade in your existing product. just as an anecdote, moving from the 6 to the 6s was a delightful experience. can you go to the store now, and apple will buy your phone back from you and resell it. you don't have to go to some third party. of course, we're all waiting to see if another category like the watch or the apple tv, which is really a gaming device in my mind, i have the new device, and it feels like a gaming device more than just an apple tv device, and, of course, investing in cars and perhaps a television set can any of these become material and keep the percentage of revenue coming from the iphone from becoming 80% or 90% of their -- i mean,

it feels like it could go that way, right? >> yeah. >> it's a testament to exactly how powerful smartphones are in our leaves. >> very true. they are a phone company through and through. at least today. meanwhile, jason, howard stern sticking with sirius xm. on the website he said "this deal enables us now to move really into the future. not only to continue to bring you radio for the next five wreerz years, but an app will be developing that will now include video streaming of the show." sirius xm is trading higher this morning. for a guy who made the leap from terestal pretty early on, this is another indication of where distribution is headed, right? >> absolutely. i think what sirius has done well is improving their app. their app has gotten much. better. 10x better in the last year. hourtd is probably responsible for 10% or more of the

subscriber base of sirius xm. three or four million people paying $120 a year or something in that range. howard is making $80 million. he is probably getting one-third of the money coming in for people who are directly subscribing because of his show, and his show is really become much more mature. people perceiveds howard stern ten, 20 years ago with a lot of sexy stuff, it's become a very more charlie rose type experience with a lot of high-end guests. i thought actually spotify or apple might make a run at the more mature howard stern at 60 years old. he chose to stay there, and obviously with 4g and lte, streaming the video to the phone is something that sirius will become capable of, and people don't want to, you know, have sirius xm in their dashboard because you can't time shift it. people will want 4g and lte in their dashboard, or connect to their dashboard, obviously, with their smartphone so that you can do it on demand, and they've

made great strides that way. you can now download shows on sirius xm off line. if you are on an airplane or don't have a great connection, you can download yesterday's howard stern show and listen to it offline. sirius understands they are an app company. they're in competition with spotify, ask keeping howard was a brilliant and necessary thing for them to do. >> i'm wondering from a big picture standpoint, jason, we saw sirius shares up as much as 4% wrerl in the market day. to have so much riding on one key man or a few key people in this day and age with all of the over supply of content, is that too big of a risk for a single company? do you need to spread it out a little bit more? >> wri think thi he had need to become netflix and hbo-like in their ability to develop more talent and take more risk. wrovl, they have howard stern, but the next biggest, you know, draw on there, it's a steep drop-off. you know, the oprah and martha

stewart channels and those type of things, they never really panned out. it would be really good if they could develop second, third, fourth celebrity spz stars who could drive one million or two million subscribers. i think they have to take a page out of netflix or hbo's book and try to have their own house of cards, try to have their own, you know, last week tonight kind of shows. if they're going to do video with howard, i think this is a sign that sirius is looking to become more like hbo. if you have got 29 million subscribers, wow. what an amazing thing to do. maybe they should invest in doing some video shows, and, you know, if you look at podcasting, it's become quite a revolution in terms of the number of podcasts out there that are making $1 million to $10 million a we're. we never thought that was possible ten years ago, but there is some serious talent doing video shows on the itunes lat form and on podcasting platforms. they should be stealing the top ten podcasters and paying them a real wage to move to sirdius and their app. >> finally, jason, the --

another crack in the private tech market. gill group sells itself to hudson bay. it's after the company raised money at a reportedly $1 billion valuation. they had to delay the plans for the ipo. same day that one kings lane is laying off one-quarter of its staff. 18 months after earlier cuts and that was valued at $1 billion and an early 1414. what's going on there? more of the same? >> listen, we all know that the private market got a little ahead of itself in some cases, and now we're going to see companies say, hey, maybe i'm not going to be able to raise that next round on the terms i did last time, so in one kings lane they're probably saying let's get the company super profitable and tighten up ship. in gill crest group, they're only going to sell the company for a quarter billion dollars. it's still a tremendous success. as we've discussed -- >> tremendous? >> the people that invested in the later rounds have protection. they have down side protection. i don't think you'll hear any of those late stage investors

complain because they're going to get their money back and a little bit extra, and they would have had that company becoming worth a couple of billion. >> isn't the story that the revolution in mobile retail never really happened? you look at fad. etsy has been hanging in there, but has not blown the doors off. i bought stuff from guilt -- amazon owns, by the way. i look at who is really making advances in mobile retail. amazon and to some is extent ebay, far and away head of the rest. this isn't one of those stories where the next wave of companies came in and disrupted the first wave, the way facebook came in in the social era, and did hes rupted google and others. isn't that the real story? >> 100% corrected. wrau. it's 100% correct. if you -- if you are unluck where i enough to get into e-commerce and are to deal with jeff bazos as a competitor, 80,000 pound gorl wra in your market. whatever innovations you do, he is going to do better, and he will do it more efficiently with tens of millions of prime subscribers. it's an incredibly difficult

field to get into, and i think the natural audience for flash sales was hit long ago, and it might have been something like groupon that did particularly well in a recessionary environment where people were looking for bargains, but as the economy comes back and people are doing tremendous, you know, and you have people making double, triple the minimum wage in these medium wage jobs that are on demand, people have more money to spend, and, you know awhat, they're not driven by discounts. they're not trying to get a $10 yoga lesson. they don't mind paying $25 for the yoga lesson. >> on some extent, my habit was had he stopped with the really high-end brands at a discount. they started selling kind of like generic luxury, and it's, like, wrau, i can get that anywhere. >> when is the last time that we had gone to the outlet mall, right? when times are good, people don't go to the outlet mall. >> that's a big country, swrjas but i think we get your point. at least at this desk. >> a pleasure to be here.

>> coming up, an update on the l.a. school system shutdown. plus, we'll have a close of trading in wrurp in just about five minutes time on the other side of this break.

>> welcome back. we are continuing to watch a situation. a rare system-wide shutsdown of the l.a. unified school district earlier this morning, but the a.p. is reporting a credible terror threat e-mailed to one of the school board members, ut we're getting more news on the situation. let's toss it back to julia. >> that's right. i just want to point out that while the lausd and its 900 plus schools, plus the additional 187 charter schools is shut down. we've reached out to the other cities in the region to see if they are shut down, and, in fact, they are not. >> these school districts while

adjacent, those school districts are open. we are getting more information from nbc's pete williams. he is telling us that it was the wording of the threat that caused concern. it will be interesting to see if the parents will decide to -- >> thank you. as the story develops, we are expecting updates. some officials a little later on this hour. >> meanwhile, wrurp is going to close with some gains approaching 3%. simon hobbs back at post nine. >> that's right. this is a very, very strong rally. certainly, swrerm anne and paris have just beat top gains of 6%.

its broad-based of a stock. only 29 stocks are in negative territory. oil, commodities, luxury goods. you name it. repositioning after recent concerns. they effectively raise rates tomorrow, there you go. important to notice content here, though, of where weave been in europe. let me take you back to the beginning of the month. all that disappointment about mah mario draghi. down 1.6%. that's why the gains are greater because you're coming back from greater. in many senses, the world may be buying the rumor, selling the fat with the fed or, rather, selling the rumor and buying the fact as the case may be. let me just finally take you over to spain where the spanish election really kicked off with some ferocity in the tv debate.

the elections, of course, on subpoenaed. we've now had the last of the six polls that they're able to publish. they showed that rahou with the current prime minister will have the largest share of the vote at 28%, which is surprising many. though he may have to pull in other parties to actually govern after sunday's election. this is important for europe because it is an indication that despite austerity, you can still win back power. >> when we return, a lot more on the shares. mostly recovered today. the stock still hovering near the november lows. we'll talk to a long-time bear after a short break. but what if you could see more of what you wanted to know?

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>> here's your cnbc news update at this hour. all schools in the los angeles unified school district have been ordered closed due to an electronic threat to students' safety. the ap says the threat seems to have come from overseas. they say the action was being taken out of an abunt u bunnedance of caution. the district has 640,000 students. a german islamist preacher was arrested in germany for recruiting fighters for a militant group in syria, and purchasing and delivering

military equipment. 35-year-old is suspected of supporting a terrorist organization abroad. small levels in shanghai hit their highest level in nearly a year. prompting schools to ban outdoor activities and authorities to limit work at vukz sites. akargd to triple-a, an estimated 100 million americans will travel more than 50 miles this holiday. that's a 1.4% increase over last we're and the most ever. the increase is being driven by improvements in the labor market and -- that's our cnbc news update this hour. back to squawk alley. >> thank you very much. back to the breaking news. school districts have been ordered closed due to a threat on the cnbc newsline is former cia officer and terrorism expert jack rice. swrak, it's fwood to talk to you again. i wish it was under different circumstances. good morning. stroo true, true.

i agree. thank you for having me. >> what does it say to you when apparently according to some reports a single e-mail can shut down school for half a million kids. i'm originally from the west coast, and i'm from san diego, los angeles, and 640,000 kids, more than 900 schools have thousands of buildings. at the same time have you to realize if there is a particular source where you are starting to hear a threat from, you have to take it seriously. the ramifications could be

horrific. sfroo as we've been talking, the nypd has tweeted -- and i'm quoting here -- just in, there was a specific but noncredible threat made to nyc schools this morning." they go on, "we don't see this as a criminal threat. these threats are made to promote fear. we cannot allow us to raise the levels of fear. where is the line at which a noncredible threat becomes credible? >> i think the place i look first again is back to what i was saying earlier. it's fwot to be the source. one of the things you got to figure out is there's going to be the regular sort of group of cooks that are out there that are simply trying to get a response. this isn't about that. this is about determining if it's somebody much more serious, somebody so much worse. this is something that's an example. after i received calls from your producers, i received a bunch of calls from moscow. in russia what's going on the

russians had a series of terrorist threats of their own over the years. one through the chechens who actually took down an entire building and killed hundreds of kids. if you see something that has happened in the past, internationally, the idea that somebody else could actually pull off an operation like that is actually spurring others to do things too. the fact that it's happening or potentially happening in los angeles is something that the rest of the world watches because it happened before. >> jack, do we have a national standard for judging the credibility of threats? the school boards are amazing local democratic institutions. you have an e-mail to an individual board member.

it's not clear to me exactly who and at what level in lausd the credibility of that threat is being vetted and who is brought in to help with that. >> well, typically they're going to call the bur wroe. i mean, the problem is there is no real national standard out there for each individual school. at the end of the day they're the ones that have to make the call. yet, at the same time you can conattorney general late the ramifications the federal government. you can come back locally. that can be hard to do. there are a lot of calls that need to be made. there is going to be a lot of caution in the l.a. riverside san bernardino wrar simply because of the recent attacks.

i am concerned, of course, that it's the source of this call that the source of this e-mail that is most important, and i think that needs to be aggress efly followed up on the ground. hopefully we'll get more information on what that issue is and then really target that down. if there is -- that is the biggest concern that los angeles or anybody else has. we can't lose our minds about it, but that is the length that we need to be watching for. >> appreciate your time this morning. very much. swrak rice, swroinks on the phone. we'll talk to you soon. meantime, the market continues to hold up its rally. dow up 192. back right after this.

>> coming up, the very latest from los angeles following that threat against the city's unified school district. plus, a big day in the markets today with two special guests. virtu financial and vinnie vie oel wra. plus, apple versus amazon. we debate your better bet with the stocks going in opposite direction wrshz. >> sounds good. scott. looking forward to it. apple in focus today. a chip maker cutting its outlook. morgan stanley note. a decline in 2016 iphone unit

sales. our next guest agrees. unit sales have already been slowing down. colin is an analyst with vcg financial. it's always really hard to gauge where apple is going to end up. this last cycle with the 6, then the 6s, the larger screen. not unusual for apple stock-wise to struggle in december. my first question is what's apple worth? assuming that things are flattening out, maybe average selling prices go up with the units aren't selling like they used to, and it takes them a year or two to get the subscription models going. how much is apple worth? >> this is the grand debate that goes on right there, right? there are two camps, obviously, and there's two ways to look at it. one is on the price to earnings ratio, and everyone says, wow, back out the cash. apple is so cheap. the flip side is the absolute market capitalization with apple being the largest company on a u.s. listed exchange.

$230 billion. it will be a source of cash any time there is bad news that comes out. like the recent dialogue. any time there's a hiccup, people are concerned that we are moving into a stalled out part of the cycle and the fact is there are worries about whether the consumer can continue to afford or continue to demand the i phones that they have in the past. >> of course. right? the big point about china, i mentioned, is domestic competition. there's still going to be demand for apple at the high end of the market.

the fact is they are a victim of their success because they are so dependent on the iphone. getting back to john's question, how do you value this? where do the bulk of their proms profits come from. they come from hardware, and that's where the company still values it similar to hardware companies. that's why it has such a discount multiple. there's a lot of talk about the ecosystem and a lot of talk about, you know, the stickiness of the platform. we need to see if the upgrade cycle lengthens and stays the same or -- i point ut to ipad revenue, and that's declined from eight quarters in a row. eight quarters in a row have had declines. >> it's a hiccup. >> it's a big hiccup. >> the concern is could that happen for the iphone, and what apple can do on the services layer to replace that revenue. >> the point was made wrerl in the hour that, yeah, everyone has one, but the inwroe vegass are so good that you need to have the newest one. right? how many bells and whistles can you build? >> that's the issue.

right? we'll see is this the big upkick that we had really to the larger screens because we know there was demand for larger screens or, right, is there this need to constantly be on that cutting edge? we don't know will the upgrade cycle for iphones shorten like apple wants it do to moving to a subscription business, which is a great move on their part, or will it stay the same on two years, or will it lengthen out as people find that the functionality tends to be sufficient, and we've seen with a lot of other consumer devices where you -- apparently when have you to pay a full price, the wrup grade cycle lengthens. >> i bet it shortens. we'll see what that is it. who knows what that does to the stock price. colin, thanks. >> and embattled drug company down it unveiled a new pricing and distribution agreement with walgreens today, and cnbc biotech reporter meg terrell spoke with the valiant ceo on "squawk box". now there's more. >> hey, john. it's agreement with waulg walgreens, and really this gives clarity after a lot of

uncertainty after they ended that relationship with the filador specialty pharmacy that was so controversial with allegations about its business practices. now, under the agreement announced today, valean will provide its dermatology and opthamology drugs at a did yous count through walgreens. it will have 30 drugs branded and through generic competitions. discounts of 5% to 95%. we did talk to mike pearson this morning. he said this will drive growth. take a listen. >> rather than selling to middle men, we directly deliver to walgreens. >> so still, a lot of questions remain, though bshg that relationship with filador. he also talk about pearson about

that. here's what he said. >> there's been no proof that these allegations are true. i was unaware of any of the allegations going on. >> tomorrow and following that. back to you. >> big interview. i know investors will continue to have questions. meg terrell on the valiant story as always. meg, thanks. >> coming up, we'll have more on interest rates. the fed, as it kicks off its two-day meeting, and how real estate will be affected if those rates do rise. of course, that's all ahead of the fed announcement and news conference. we'll have special coverage on cnbc tomorrow starting at 2:00 p.m. eastern. announcer: sleep train thanks all those

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that while not everyone can be a foster parent, anyone can help a foster child. thank you. thank you. gracias por su ayuda. [baby coos] thank you. welcome back. rick san tell where i live on the floor of the cme group. day one of the fed meeting, of course, a little over 24 hours from now. we will know if normalization is here. it's taken a while to get here. what are the things traders are going to be looking at? actually, some simple things to help viewers and listeners kind of hand where i cap how the markets are going to receive the news should normalization occur, or how to receive the news if it doesn't. let's look at the charts. 5s, 10s, and 30s. if you look at the high yield close in r5s, ofdown, second week, 179, for tens, 248. around the same time period.

it took the 30sation longer. they've been a little bit lays where i all we're in terms of their yields, their yield has been a little more stubborn to the up side with more buying and less selling. high yield closed for the year around the end of june. around 324. how can we make this simple? well, if the fed doesn't normalize rates, if the response -- i'm not talking knee jerk here. i'm talking after it simmers out a bit. if it's a flatter curve, i think the news is not being received well. if it's a steeper curve, i think that would be the most optimistic. now, how can we hand where i cap an early sign so we have room to potentially strategically deal with the curve on the move? i think the five-we're, if you recall we did somewhat of similar exercise about six weeks ago. what we realize was the biggest opportunity in the market in the 130s was the five-year note wreeld, and indeed, that selloff was kind of ease where i to predict. 179, even rounded to 18 on, that's kind of your strike curve price. should we see trading especially

on a closing basis in yields above that 179? i personally think that will be a sign of flattening, and maybe the notion of the path. on the long end i think it gives you generally the range. it's selling at -- its high was 324. it settled on 275 for 2014. 3 1/4. that's a band that you should pay los attention to. finally, not only the wreeltd curve, but the dollar. if the tlar starts moving up or moving down after knee jerk reactions, i think what that gives you is a glimmer into the past. the fed is always going to be dovish on the path. here's the real hiccup. data dependent doesn't jive with the tightening of timing. what jooifz with the time issing more bubble dependent.

>> stocks coming off of the highs. dow now up 162. the dow and the s&p still up almost 1%. we're back after a break.

>> is the real estate sector ready for that rate hike from the fed that could come as soon as tomorrow? joining us now here at post nine, robert, co-founder and ceo of real estate start-up compass. it's great to have you. >> thank you very much. it's good to be here. >> you guys are in mostly developed cities that have recovered pretty early on from the housing crisis. new york, boston, miami, l.a. are your customers going to be phased by 25 basis points? >> i don't think people make a life decision based off 25 basis points. also, the market has known about this for quite some time. we've been anticipating it for almost a year, year and a half. to some extent, the hike has already happened. now, on the buy side, rates are at historical lows, and developers on the inventory side, the mortgages that, you know, in the findings that they took out have been from, you know, from years ago. they were expecting, you know,

an increase oh the subsequent wreerz. >> but you work with buyers, with sellers, and with renters. is there any specific group that you think will either be benefitted or hurt to an out sized degree by 100 basis points in a year? >> yeah. look, 100 basis points won't be fwood for anybody. i think particularly the middle class. >> wrau. i saw a chart this morning. looking at by price point, different categories of home buyers for whom rates are a big part of their decision, and sub-200k. it's a big 70%. >> exactly. at the high end international buyers, high-end buyers, if they're not using finance this much. it won't impact them. definitely the middle class sub-500,000. it will have a big impact. >> what kind of impact is it going to have, if any, on inven tone overall because the lack of inventory seems to be having an out dsz sized impact on this market. does it make me more or less likely to put my house on the market if interest rates go up?

does the calculus change and the raeft kras in housing prices slow down since interest is a bigger portion of what people are going to end up paying? >> again, a water point in the grand scheme of things. it's not enough to really move the needle. i think if we go up on inventories -- >> exactly. developers, you know, the outlook for the next three, four years is already set. four, five, six wreerz from now, it could have an impact, but not the next couple of wreerz. >> what about your growth? the established home builders or realty companies we're used to how they perform in certain cycle sxdz what the earnings look like. you guys are completely predicate odd growth, new inventory, new cities. what happens if that stalls? >> so i'm very bullish. we're going to continue to expand. the -- there has been a slight dip, sailed i, 10%, maybe 20% over the last three months in terms of vkz volume.

all that said, you know, we were very excited about the market. >> is there a city that you are studying right now that you are waiting to jump into? >> wrau. san francisco. san francisco is a very fortunate city. it's been a bull market for almost 13, 14 years. that's the one major luxury market which hasn't seen a dip at all over the last four months. >> we hear a lot from our viewers sfr are from our guest bz the san francisco real estate market, and it is hot. >> yeah. it really is. >> depending where you stand. rob, good to see you. loo good to see you. thank you. >> rob from compass. >> meanwhile, keeping our eye on a rally that has faded a bit since the highs of the session. you are looking at some names like a google or netflix that have, in fact, gone into the red. people are watching facebook as well. the fang contingent has lost a little steam since the highs of the session, but keep your eye on exxon. 4% up day. the first for exxon since july 28th. gives you a sense of just how much oil is trying to come back from those big losses last week. >> and how much people are using companies like facebook and like alphabet to take some profits

when they see oil retrace. there's really not supposed to be a correlation between companies and the tech sector and what oil is it, but that has been the case this week. >> some unloved names getting bought today so far. >> carl, thanks so much. welcome to the halftime show. let's meet our starting line-up for today. joe tear november wra is here along with stephanie link, john brown, and pete negarian. with us for the hour, doug sefu, the ceo of virtu financial. also with us today and for good reason senior economics reporter steve liesman. our game plan looks like this. apple versus amazon. which one is the better bet for 2016? our desk debates the two tech all-stars with the stocks going in