let's get it overwith. then the risk trade goes on for the next two weeks. and then we kind vf to reassess where the economy is for next year. >> maybe that sums it up best. the thousghts of a lot of investors. >> you said it, sister. >> you got it. >> stocks are on the highs of the day. "power lunch" picks up stothe sy now. >> indeed we do pick it up from there, scott. thank you very much. this is "power lunch." welcome, everybody. i'm tyler mathisen. the bulls are running a day ahead of the fed decision. the dow moving near its high of the day, up 250 points or thereabouts. nasdaq in percentage terms, they're all there at 1.5%. s&p 500 3u7up 31 points. commodities, though, continue to be a story as well as you see right there. look at the move in west texas crude at $37.64. up 1.31 $1.31 better than 3%.

the ten year note at 2.27%. prices down, yields up. mandy is out today. melissa lee is at the nasdaq. more markets in just a moment. welcome. we're going to start with breaking news and that story out of los angeles. the schools out there closed because of a bomb threat. we do expect a news conference any minute now. but sharon epperson is covering it all for us from the news desk. >> tyler, president obama has been briefed on the situation. this is what we know. the los angeles unified school district closed all schools after it received an e-mail threat to students safety. the district superintendent says the threat was against students not just a single school and a school spokeswoman says the threat was sent via e-mail to a district board member from an internet address in frankfurt, germany. keeping in mind, it is not that difficult to fake an internet address or create a fake one, but l.a. officials say the san bernardino shooting on december 2nd influenced their decision to

close all schools in the l.a. school district. it is the nation's second largest school district with more than 640,000 students and 900 schools. new york city actually received the same threat but determined it was a hoax and mayor bill diblasio said he was absolutely convinced there is no danger to school children in new york. meanwhile, l.a. mayor eric garcetti said it is premature to make judgements. we're awaiting a press conference. the l.a. mayor expected to speak at that press conference. back to you. >> thank you so much. in the mean time, let's get a check of where we are on the markets. a big bounce back day for the markets ahead of the fed meeting tomorrow. the dow up is about 250 points, close to session highs right now, 1.4% is the gain. the s&p 500 up by 1.5%. right now, big movers that we're watching, pushing the dow higher today, goldman sachs, disney, boeing, exxonmobil. it would be up more today fit were not for 3-m. this, of course, after cutting guidance.

we're seeing the oil picture. rebounding after briefly falling below $35 a barrel yesterday. dixie near six week low is helping that trade as well. here at the nasdaq, we're up more than 70 points or so. right now 1.4%. biotechs really helping to lead the way. take a look at this trade. it's been the high yield reports. today hyg and jnk both sharply higher. >> so what should you expect from the markets between now and 2:00 p.m. sharp tomorrow? let's bring in allen valdez. he is a senior partner at silver bear capital. let's have a look at what is going on at the nyse. what do you expect the trading to be? how do you explain today's big move up in anticipation of what? >> i think we saw oil under pressure.

down almost 10% over the last few trading days. we're seeing a bounce back in that certainly. and the other sector that's going to benefit from higher rate environment is financials. and those are the two leaders that we've seen today. so we're expecting a rate increase and the two sectors that are going to benefit the most are responding. >> allen sshgts market goi, is o be relieved if there is a rate increase? >> no doubt about it. i think the worst thing that could happen tomorrow is that they don't raise rates. that will send a message to the traders that, you know what? maybe the economy is much worse than we thought it was. i think you'll see a rate and it will be a lot of the minds for traders. the wording afterwards is critical. that 2:30 conference. >> all right. we're going to break in on the gentleman and go to the president conference in los angeles regarding the school system shut down out there. >> -- the chief deputy superintendent, the chief of police of school police and

after they reviewed with me the information that had been shared with them, based on past circumstances, i could not take the chance as it relates to one student or our staff that serve our students. it is important that in the last four hours this city, this community has come together on behalf of our students, our students in the regular schools, our students that are in the charter schools that are authorized by this school board. we are taking all sorts of precaution. our plant managers are walking the campus with law enforcement people. our plant managers and principals with law enforcement are looking at all of our

schools. both small, large schools, et cetera. we have made sure that our parents are notified through connect-ed. we have repeated that time and time again. those students that walk to school, especially young children, neighborhood children, we have had the principals meet and administrators meet them at the gate of the school. an they were not dismissed until parents came to pick them up, a guardian, et cetera. we are doing everything possible to make sure that children are safe but that also students and parents understand that the precautions we are taking are dm

done in a calm way, are done in the way that is in the best interest of everybody in this particular city. not only is it the city of l.a. as you negotiation the school district represents many independent cities. we have reached out to them also. there are unincorporated areas in the school district that we reached out. to i have reached out to the board of supervisors. i've reached out to the city council. i've notified the state superintendent of schools. i have notified the secretary of education. mainly because there are in secrets. somebody has sent information that leads us to pause and make sure that we are safe, that our children and our staff are safe.

nobody could be more interested in this city than our mayor. our mayor and his staff, his staff has joined us early this morning and our mayor is now. i'd like to turn it over to him. >> good morning, everybody. the decision to close the schools is not mine to make. it is mine to support of mayor of the city of los angeles. we have seen whether it was colleagues there that asked for the hech the los angeles police department as that shooting unfolded or this morning when they reached out to los angeles police department in the city of l.a. for assistance, we are here because our first job is to ensure that people are safe in this city. it is very easy for people to jump to conclusions and bif around long enough to know that what people think in the first few hours is not how it plays out in later hours. we see investigations unfold sometimes for a series of days.

decisions have to be made in a matter of minutes. i have been immediately on the phone with we learned of this with the ceo of mta. be sure they get home safely to make sure that they are able to get through this city without having to worry. a lot of parents have to continue to get to work and can't afford to miss one day. but we are here, chief beck and i with law enforcement here through lapd's very extensive and experienced training and leadership that connected some of the dots nationally on this. we, of course, reached out and the school district reached out immediately to our federal law enforcement officials who have been extra taxed in recent weeks since san bernardino. but to bring them into this investigation. but also it was in talking to our counterparts, new york and learning other places we realize there is not the only city to face that threat. we will continue to hope that this is nothing and that our

children can be back at school tomorrow. but as a parent and as a mayor, certainly i'm here to support this school district as it seeks our help to ensure that we can look at each one of the campuses and make sure that they are safe for all of our children. an bauabundance of caution is something that we all appreciate. we have activated the city's emergency operation center at left one which is the lowest level but constant staffing to make sure we can follow this and continue to share any intelligence, work with our federal law enforcement officials and do whatever the school district asks of us. my number one priority is keeping this city safe. i will continue to do that no matter who reaches out to us. we have incredibly well trained police force. one last thing i would say to the people of l.a., whether this pans out as something that could have happened, i don't want

people to think because it didn't result in a shooting foiled plot to not speak up and seek out f you see something, say something. visit iwatchla.com and learn how cub more vigilant as we continue to live our lives here in the city of los angeles and the values we hold of freedom of our liberty. we want to make sure also that we're safe. [ speaking spanish ] >> we're going to sfep away from the mayor who is speaking obviously in span bisht shutdis shutdown of the l.a. school district today. unspecified but clearly threats were made via electronic means, presumably e-mails. first to a member of the school board in los angeles.

we're going to listen back again now as they take some questions. shall we? >> los angeles police department was contacted by lau unified school police chief zipperman about a very specific threat that had been delivered via e-mail to a number of people on the school board. after the threat, we became very concerned and contacted the fbi and began to work jointly through our joint terrorism task force to vet that threat and to be able to give the school board and the superintendent our best advice. >> we support his decision and as does the mayor. i say this to people that are critical. it is very easy in hindsight to criticize the decision based on results that the decider could never have known.

the school district safeguards three quarters of a million lives every day. when they make a decision, they have to take into account the safety of the children of los angeles. i think it's irresponsible to based on facts that have yet to be determined to criticize that decision at this point. all of us make tough choices. all of us have the same goal in mind. these are tough times. these communities oushgs communities, southern california has been through a lot. should we risk putting our children through the same? i'm also joined by my partner in law enforcement here, the other

half of what keeps the region safe, sheriff jim mcdonald. i would like him to say a few words. >> we immediately became in contact. we co-located our represents in the emergency operation center and strategically from there start vetting the information that's available to us working with all of our partners at the federal, state, and local level. a lot of work is being done and we're working together to ensure that the 700,000 young people who go to la unified are safe and that we continue to move forward with that common goal in mind. so i thank you for your

understanding and for working with us as we deal with this very difficult issue. >> i want you to meet the school of chief police and then i will turn it over to the board president to introduce the board. >> i want to say to my law enforcement colleagues, honorable mayor. as indicated before, sometimes we have to make tough decisions. i assure you that our number one priority is the safety and security of not only our students but our staff as well. we go based on the information that we have. and we collaborate with other law enforcement partners at lapd has taint leken the lead on thi the result of the threat and protocol.

i assure you as the chief of police of the school district that while our campuses are being -- are having a walk through as we speak that none of our schools will be reopeneded until not only i feel that we have been given the information. >> all right. that is the head of the los angeles unified school board. they intend to introduce other board members. when they get to the q&a which may abe quite lively session, we'll go back it to. meantime, steve liesman is here. you're always here alongside me. we have a big day tomorrow. >> yeah, we're both heading to washington for a small meeting that's going to happen maybe. >> the markets be relieved if -- stock market, are they going to be relieved?

? wall street's expectstations have come down. the same time they brought down the expectations for the fed funds rate wlachlt does that tell you? also what came down is the expectations for growth. what the market wants is not all that complicated. along with that, the funds rate will go up. not seeing that the funds rate is the thing that determines stocks. if we're talking about a punitive, restrictive funds rate, let's say it's 5%. nobody's talking about that. we're talking about a quarter point. >> what about the trajectory? >> we're talking more about a process that begins of normalization. and that has real serious quotes around it. nobody quite knows what that means. we're pretty sure it's not zero. it's also probably not five. so that's a good start to the

discussion. >> that's a good thing. >> we're probably talking about something that ends up around 150 basis points the end of next year. and maybe 2 to 2 1/2 the next couple years after. that what we expect tomorrow is from fed chair janet yellen. by the way, that's the answer to our question, how many rate hikes are expected next year. notice the difference there. a third at two, a third at four, 21% or a fifth at three. so we're going to get guidance we expect about what happens next. by the ware, the next expected rate in december is march as well. so that rate hike, that guidance from yellen should tighten up that dispersion of expectstations in the market. then we'll goup and down as the data come in. >> but you and obviously that dispersion graphic does not suggest we'll have a quarter point hike every single meeting. she is not likely to telegraph

that tomorrow. >> that's the one that's been specifically ruled out. the process by which they raised earlier this century, the 04 to 06 rate hike cycle, when they did a quarter point, they believe that was a mistake. that is not the way they'll proceed. probably every other meeting, maybe they do 51 times. >> what is the likely ending rate at the end of 2016? >> steve, i'll see you tomorrow. every day on "power lunch" it's special. you know. that tomorrow will be extra special, ladies and gentlemen. right at 2:00 p.m. eastern time that, is 2:00 p.m. sharp, we'll have that big decision on interest rates. i'll be down there outside the fed's marble palace.

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oil is a drag boy 30%. could there be a rebound in 2016? francisco blanch is at bank of america. good to you have back on cnbc wlachlt do you think? a rebound? let's just start with oil there. possible rebound in that

commodity for 2016? what do you see? >> we think probably the next two or three months you'll be able to challenge them. there are several issues that have come together from new iranian barrels to a weaker chinese yuan or an vent for the year which will be a big part of the saudi currency. so there are a number issues that have to be worked through. i think once we head into the summer driving season, remember, gasoline is the star fuel. demand will pick up strongly. prices will move higher. and in 2016, we'll have a pretty big supply/demand gap which will reverse. today we have a lot more supply than demand. supply is rolling over and demand remains strong aren't world. >> supply is rolling over where specifically? here in the u.s.? there has been some reduction in

the barrels per day output. more is anticipated. but where does the supply cutback come from? >> the u.s. has actually seen a big reduction in shale. we lost over 600,000 barrels a day in u.s. shale. part of that is compensated by production in the gulf of mexico which is why we've only see production declines of around 300 or 350,000 barrels. but it actually is. if you take out the gulf of mexico barrels, which are really one off, so i think u.s. production will look pretty weak by the middle of next year. frankly, i think it is what saudi does. if saudi arabia keeps increasing production here, then the market is going to stay pretty negative. but if they hold fire for a bit longer, think prices could rebound into the high 40s definitely by the summer.

>> francisco, let's say congress, in fact, lives the u.s. oil export ban. how do you work that through the scenario? yes, the prices rise which could be good. does that throw a life line to the producers to keep on pupping and not bring production down? so how does that work itself out? >> u.s. crude oil producers and the forward and back end, they're not making all the money. in fact, a lot of them are not making any money at all. if you look at the differential between wti and brent price onz a forward basis for next year, it's actually at pair ti. they're the same price. there is no recent export out of crude on the current market forward structure. so i think it's going to be marginal help today. but remember, within a couple years time we have a big gap in supply globally and u.s. producers can export that, will be a great thing for.

they they'll be able to benefit from a growing market. we think the market will see incremental demand. so potentially it will be a market share play for some of the shale producers that can survive the very low prices and, frankly, all the pressures coming out of high yield and high grade, some sections of high grade. i think it's a great thing for the u.s.-emp sector. it's bad for refiners though. they'll lose the core advantage for the l.a. four or five years. >> thank you very much. we're trying to accommodate breaking news today. there you heard it, folks. he said through the second half of next year, oil may be on a path, too. and maybe even through $50 a barrel. >> all right. speaking of breaking news, we're getting more information now on the nature of the threat that closed the l.a. school system lech. >> as you know, l.a. saying they took prudent precautions. the nypd got the exact same threat and called it a hoax.

so why this disconnect? as explained to us, law enforcement officials telling us a letter went to the los angeles school district claiming i am a senior in the los angeles schools. i have a small army. i'm tired of being bullied and we are going to attack the schools with bombs and guns. that is the nature of the threat. then the exact same letter gets sent to the new york schools. i am a senior in the new york schools. i have an army. i am armed with the guns and bombs and going to attack the new york city schools because i'm tired of being bullied here. the nypd in consultation with the fbi came to the determination that how can you be a student in l.a. and a senior in new york exact same time? they determined that this is likely a hoax and there is a criminal investigation into who sent these letters to both school districts and perhaps several other districts. that is why the nypd is saying they treated this as a hoax.

a short time ago, i talked to the nypd and he said they deemed to to be noncredible after analysis with the fbi. so that perhaps provides some clarity as to why new york authorities treated this as a hoax knowing that the exact same letter went to both school districts, both letters claiming to be a senior at this exact time in both cities, something that's not possible. the writer didn't have a lot of knowledge about how they call the schools. there was a lot of questions. look what we went through with the recent terror shootings there. we weren't taking any chances. we're taking all prudent precautions. so that perhaps helps explain the disconnect and why nypd officials treated this as a hoax. >> all right.

jonathan, thank you for that update. that's the very latest surrounding the nature of the threat that closed the l.a. school system. "power lunch" will be right back. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet? when a moment turns romantic why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure.

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welcome back to "power lunch." rick santelli live on the floor of the cme group in chicago. the last fed meeting was the 27th and 28th. i like to look at the first dave a meeting and see how the markets have moved. to that end, a two year note,

can you see it is preparing for quite some time for the first-rate hike. tens, a little different story. but we know that right around the mid 230s is the high water mark. we experience twod two of those. on the dollar index side, it's not on a ties. maybe it's a spread between drogy and he was dovish and questions about our own fed. look at how similar the dollar index and the s&p 500 charts look, especially given the position from their high structure to where they're currently trading. melissa, back to you. >> rick santelli, thank you. the markets rally across the board. the dow up by 200 points. just off the session highs. where are the best places for your money now ahead of tomorrow's fed decision? michael scannedlin is portfolio manager of the john hancock balance fund. michael, great to have you with us. one of your biggest overweights in your portfolio is financials. financials in general like economic growth. they like the steepening yield

curve. are we going to get either of those two things in 2016? >> yeah. good afternoon. thank you for having me. i think we're going to get both of those things into 2016. i think as we get the fed decision this week, i'm not sure there say great opportunity to make a lot of money on the themes that will play out in 2016 in the next couple of days here. but i think when you look at the financial sector, especially lit name we highlight here, we think they're really well positioned looking out 12 months. >> you like goldman sachs and j.p. morgan is a top holding in one of the funds here. are they going to benefit? are those the ones -- i mean goldman sachs would benefit most from fixed income or increased trading. j.p. morgan on the lending side. why do you have these two holdings? >> sure. goldman sachs, i think roughly book value per share is where the stock is trading. you know, producing a low double digit roe. i think they're poised to really generate really strong returns whether it's from the very nice m & a psych that will we're

having and the trading business can pick up from here. j.p. morgan, obviously, has leverage to higher rates with a quarter of the balance sheet invested in cash or cash-like securities. and then other name we like a lot in the space, sill con valley bank, a stock that's been hit very hard. and, you know, i think the financial sector as a whole is set up well for next year. >> is it concerning to hear about the reports of some of the pre-ipo companies, the unicorns being knocked down in the portfolios of the fidelities of the world. early investors. >> that's a great question. that that's why we've seen the selloff in the last couple of weeks here. i think that creates a phenomenal amount of opportunity. they're leveraged to the big themes and that part of the country as well where there is a lot of private investment. when you look at the ability to grow, how much of the departments are zero cost departments? again, they probably have one of the highest points of leverage to higher rates as we look out

to 2016. and a real growth story in the banking industry which is pretty rare. >> michael, we're going to leave it. there thank you for your time. appreciate it. tyler? >> the dow with a big rally 2shgs 00 points higher right now. but off the highs of the day. this rally coming ahead of the fed decision tomorrow as you see there up about 1.1%. even the high yield bond etfs are moving higher today. looky there. the massachusetts state secretary, i should say attorney general investigating a high yield bond fund that is shutting down. he will join us next with more on the high anxiety surrounding high yield.

i'm sharon epperson. here's your update for this hour. nbc news reporting that a senior law enforcement official in los angeles said the decision to close the school district was a bad one. and we quote, "told them not to do it." officials there closed the schools after receiving a threat

via e-mail. meantime, nyc mayor bill diblasio says l.a. and some other cities across the country received the same threat in the form of a generic e-mail but the nypd concluded it was a hoax. >> defense secretary ashton carter visiting an air base in southern turkey urging the rest of the world to step up the fight against isis. he said the mission is civilization standing up to defeat something truly evil. pakistan's military says they have successfully test fired a nuclear capable ballistic missile that can reach targets in ind yachlt the missile's impact point was in the arabian sea and witness bid senior military officers. a russian space capsule carrying three astronauts from the u.s., britain and russia blasted off for the international space station. the launch went off with no reported problems. that is cnbc news update at this hour. back to you. >> all right. we'll go over to dominick chu

for a market flash. >> we're watching shares of yelp. near the lowest lowsst day. down by 5% this as facebook quietly rolled out a new feature that helps users find local businesses based on consumer reviews bringing in -- pretty much direct competition with services from yelp and angie's list. the feature was spotted by search engine and we reached out from facebook for comment. meanwhile, talk about yelp, shares are down 48% this year. still, again, a 5% down day right now, tyler, for shares of yelp. >> thank you very much. u.s. securities regulators looking into third avenue management strategy to halt shareholder redemptions from a high yield fund without getting the green light first from the sec. the state of massachusetts is stargt its own investigation into the closure of the fund. let's bring in massachusetts secretary of state william galvin. mr. galvin, welcome back to cnbc. i apologize in advance, you are

the secretary of state. what lead you to believe and heart of your investigation here is that there may have been some individual shareholders who learned of the plans to close before others? what leads you to believe this? >> our first concern is the remaineding investors. they prevented daily recovery of assets. so the i will liquidity remaining for the investors is our greatest concern, terming how many of our massachusetts investors are affected, whether they're individuals or institutions. obviously, secondary question then is were there other individuals given early notice of this? clearly, the increase in interest rates is anticipated. people knew this was coming. i don't think it's reasonable to suppose they sud lyn decided overnight they were going to shut down recovery from the fund. so i feel that it requires us to investigate and to determine how many of our massachusetts investors are still in this position and secondly, what

others knew. did the independent trustees, for instance, provide any management advice? as i said, daily redemptions are something in a fund that are accepted and guaranteed. this was not the case here. this is very extraordinary. it raises broader questions. but the immediate question for us is the effect on our massachusetts investors by this decision. >> do you -- as i understand, this is the first time that a fund had limited and open end fund like this had limited with draws since the financial crisis. >> that's the concern we have. >> right. but wouldn't the fund be a pro inspectous and governing charter be allowed to limit those with draws in times of extreme stress? you're not allege theg did something illegal, per se, by shutting the fund? >> we're not alleging it at this point. there is enough reason to investigate what exactly was done and who did know. when you say it's not illegal, we don't know that. we're assuming that they' acted

legally. we want to review the evidence. what was the rate of redemption through 2015 and who were making the redemptions? where is the concentrations that required to be met? were they met? in fact, were the remaining inve investors left with high concentrations of liquid issues? those are the concerns we have. >> the fund had, of course, went to under 700 million. that was a real collapse in the asset base. >> that alone will be a distress sign you look at and say why didn't they have a better plan? why was this abruptly done? in the december 9th letter, it was suggested that it may take a full year to get ahoefld the assets. >> should awe fund like the focus credit fund actually exist? investors, had they read the pro inspectous, they would know that this is a fund that deals in very i will liquid securities. that it would take a long time

in order for a fund like that to rationally get out of positions. so from your standpoint, from the protection of the retail investor standpoint, should a fund like that that deals with these i liveliquid securities exist? >> it was marketed as a fund. it wasn't a hedge fund that attracted high risk investors. this was a fund that had an opportunity for retail investors as you describe them, mom and pops to invest. and that's what we want to discover. who is still left? what was the rate of redemption from the earlier redmtions earlier this year and how is this decision reached and it seems to us very abruptly reached. and what is the effect on the remaining investors? what does it tell us going forward? i think going forward, all of us anticipate that environment is going to change presuming the interest rates raise tomorrow. and there may be other funds. there may be other entities that

are going to be affected in this way. and what does this offer us in a way of advice? i think your point is well taken. the immediate concern we have is to make sure that those who are remaining investors in this, at least our massachusetts investors, are protected to the best extent we. >> to bottom line it, amongst the remedies should be increased regulation of funds such as this and possibly making these funds nonexistent or not available to retail investors? >> i think scrutiny is the first issue. we need to scrutinize them greater than they have been. we need to review exactly what happened here. and i think that will provide us with the answers that we need to make sure that this can't be replicated again. but i am concerned that could happen. i think looking at it from a longer term point of view is important. as i said, right now i want to hept folks who are in this fund right now. this is an extraordinary event. we don't want to see it replicated. >> thank you very much for your time. we appreciate it. "power lunch" will return after this.

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welcome back to "power lunch." a short position in flooring retailer lumber liquidateors. the stock would go to zero changed his mind based on new information saying that management was not aware of the ferm ald hide in the products. >> boeing is up 2.5%. and merk failing to win the backing of an fda panel in a case involving the cholesterol lowering drug. tyler? >> all right. thank you very much. a quick check of the major in x indic indices. allst major market about a rom per that's we follow. the dow off the high. still up 209 points. the s&p 500 up about 26 points. 1.3%. the russell, look at the nasdaq there, up 1.25. the russell which is a real struggler lately up 1.3%. "power lunch" returns right

after this. ashley bryant, you are a teacher of small children. that's right. i have read it is the hardest job in the world. that's why i'm here. can you... i can offer advice from the accumulated knowledge of other educators... that's wonderful but... i can tailor a curriculum for each student by cross-referencing aptitude, development, geography... sorry to interrupt. but i just have one question: how do i keep them quiet? (pause) watson? there is no known solution.

tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. 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. stocks are rallying as the fed opens that two day meeting in washington on interest rates. joining us are lisa shallot,

head of investment at morgan stanley wealth manage. and steve oth at federated. folks, welcome. good to have you with us. as i read my notes, you both believe that the market is a little oversold, unduly pessimistic. but you answer that pessimism in different ways. lisa, you prefer for 2016, japan and europe over u.s. stocks, why? >> our view is we're going through a rebalancing process right now. the strengthst u.s. dollar really reflects the fact that u.s. markets have outperforms for close to 6 1/2 years. now with liquidcy and attractive currencies now existing in europe and in japan, we think some of the growth is really going to rebalance towards those economies. and we forecast that morgan stanley the growth overall in the u.s. is probably going to

slow in 2016 to something closer to 2% from what is probably going to be 2.3% this year. whereas in europe, we think growth will be accelerating closer to 2% coming from about 1 1/2. in japan, we see growth improving. we want to own companies that are leveraged to tham proving growth. we think there are better operating leverage in europe and japan. so steve, stake out your surf. >> first all, we like japan and europe. i like lisa's story there. i think it's good. we prefer the u.s. over europe and japan. we would be long there, too. we have big invest. there's. we just think that u.s. is growing faster. we would be higher than lisa on where the u.s. growth is going to be. we think it's closer to 2 1/2. more importantly, what happened this year is the market got very narrow.

we had decent earnings growth outside the sectors. that is the average in the u.s. so a lot of strong u.s. companies across many sectors are trading at low double digit pes. we think there could be a pretty healthy multiple expansion. and that's against the backdrop, tyler, of a pretty pessimistic attitude towards what the fed is doing and its impact on the markets. we like the valuations here. and investors sent iments which is negative. >> lisa, it looks like the entire market is being sold and we pully were in an instance where they attract high yield in the united states. are there opportunities there for investors? >> our per inspect sieve there absolutely are opportunities in

high jeeyield. a lot of what is going on is the result of the liquidity issues that you talked about earlier in the show around funds like third point. there some distress in the industrials and the energy part of the economy, what we're finding is a lot of fund managers are finding better liquidity in the higher quality names and having to sell some of those off and holding some of the energy related problems as distressed. we're encouraging our clients to be looking at investment grade credit and high yield particularly in the consumer oriented sectors where balance she's and cash flows are very, very solid. absolutely nothing in terms of the mu the fundamentals have issues. you're looking at 5, 6, 7% yields. those are going to be very attractive in a world where u.s. stocks next year may only be up 3% to 5%. >> all righty.

lisa and steve, thank you very much. >> thank you. >> you bet. l go to our website right now to see how steve is playing energy next year. that don't forget our fed coverage tomorrow right here on "power lunch." i'll be heading to washington for the 2:00 p.m. decision. and then chair yellen's news conference. it will be a big day on "power lunch." this is the place to be as it is every day. but especially maybe tomorrow.

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what's in your wallet? we're standing here in frontst big clock. me list yashgs you can see the big clock. we have one day and 54 seconds until the decision on the fed. vanna sullivan is showing wlaus is going on. i cannot remember and i've been following these things for a long, long time, a time where i felt the market would be more disappointed if the fed doesn't raise rates than if it does. because usually rising rates, the conventional wisdom is it's not a great time for stocks. i know the history that stocks continue to go up a little bit

even as rates rise. >> but it's like we're going from an f minus to an f. >> yeah, i suppose. i suppose. >> what does that mean, brian? >> not much of a rise. >> i think the broader, you know, the markets definitely expect this rate hike. see what happened to the sort of crowded trades going into the notion that the fed is going to raise rates. what is going to happen to that long dollar trait, short commoditi commodities? what will happen to those trades if they unwind on the news that we get tomorrow. that should be an interesting thing to watch. >> we'll be watching it all here on "power lunch." >> thank you guys. >> i'll see from you d.c. tomorrow. >> yeah. safe travels there. good luck. average speed, 24 miles an hour. hi, everybody. melissa still with us at the nasdaq. if you have just crawled out from a rock somewhere in the world, let us break some news for you. tomorrow the federal reserve widely expected to raise

borrowing rates for the first time in 9 1/2 years. stocks don't seem to care. at least today. the markets are in rally mode. the dow jones industrial average up 221 points. we'll have much more on stocks and the fed in moments. but first, new developments into a threat that closed down the entire los angeles school district today. let's get to julia boorstin. >> a press conference was held here in los angeles an hour ago with the los angeles schools superintendent as well as los angeles mayor eric garcetti discussing this decision to shut down over 900 schools in the lausd. they also responded to criticism that los angeles overreacted. take a listen to the l.a. mayor. >> we are here because our first job is tone sure that people are safe in the city. it is very easy for people to jump to conclusions and been around long enough to know that what people think in the first

few hours is not how it plays out in later hours. we see investigations unfold sometimes for a series of days. but decisions need to be made in a matter of minutes. >> now the new york mayor diblasio saying they received a similar threat but they found their threat to be uncredible. a senior law enforcement official told nbc news that it was a bad decision to shut down the school system here in los angeles and we told them not to do it. now earlier today here at walter reed junior high school in north hollywood, police walked in through the front door. other than that police investigation checking out the situation here, the school has been pretty much deserted. now the term abundance of caution has been used throughout the day to day by pretty much everyone involved in the decision to shut down the schools. there is no question that here in los angeles the proximity to

san bernardino is something people are keeping in mind. it is two weeks since that attack in san bernardino and that sen couraging people to i more cautious. >> we're less than 24 hours way from the fed's policy decision of the year, maybe the last five years or even 10. no matter what happens tomorrow, your money will likely be impacted in some way. let's bring in steve liesman. >> i want to talk about more results from our fed survey. what we did is asked people if the fed hikes rates what impact will have on different sectors of 9 economy and the economy overall. most of it is negative. it's not all that negative. i think that's the way to think about it. we asked them to respond to minus five for being painful or hurting in that regard. you can see the worst impact is on bond prices minus 1.2. stocks are next.

economic growth, a modest impact of minus .2. business investment as well. consumer spending is about neutral. i wouldn't call that much of a gain there. you know what? zero interest rate policy has helped borrowers as much as it's going to help them. now you start to put a little interest into the accounts, you might help savers in that regard. let's talk about how this will end. the moofd tve of the market. will it end badly? 38%. 48% are neutral. only 13% see it ending well. and what about is the market ready for it? 80% of our correspond ents say, yes, the market is discounting a rate hike. big change from the prior survey. i want to show you one more ching. should you fear it? notice here that the outlook for

the fed funds rate and the stork market in our survey has come down repeatedly, brian. that really tells us the market is look forg what is happening with growth and inflation more than it's looking to the fed here. i think if the fed has a series of increases and they're because growth is stronger, then i think the market will be okay with higher rates. brian? >> is the fair to say, steve, not to discount anybody else on this network or anywhere else that talked about it, that to your point, all the stuff, stocks, bonds, dollar, have been priced in at least as far as the move goes is now the only mystery what they say along with the possibility of a move? >> that's an excellent point. it is fair to say. what i don't know the answer to is how much is priced in. i can tell you that our survey sees three rate hikes in 2016. but that's a very wide dispersion with a third saying two, a third saying four. one thing we hope to get some

clarity on tomorrow. so we'll be looking for guidance for interest rates tomorrow that will give us some guidance and maybe the market comes together in some sense of, hey, this is where the fed is going or best guess over the next year. >> thank you very much, steve. let's bring in a chief u.s. economist. steve, you believe fed hike home could be a policy mistake. how come? >> back in 1990, they raised rates under the sum that is the economy was okay and deflating a bubble. they lived with 25 years of deflation since then. and arkbly still are not out of it after ridiculous amounts of easing. and the two sets of three arrows shot by prime minister abe. in addition to that in 2011, prime minister, i should say ecb president in europe felt he was doing the right thing with regard to forward inflation and

raising interest rates. he did raise twice. that result is europe on the gus p of deflation right now. there's a problem that we're looking at and it's bigger than just a monthly payroll employment number. it's bigger than an inflation rate at 2%. it's a question of excess supply in tradable goods and commodities. and, therefore, we have an economy that this year will do three of its four quarters at less than 2% growth with zero short term are interest rates and heck of a lot of accommodation. and that's not a particularly robust sign for me that we're going to have stronger growth or higher inflation as we go forward. there is little risk for the fed to raise rates. little risk that they do not raise rates, excuse me f the fed raises rates, there are all sorts of risks. >> you do believe they will.

you would disagree with the decision but you think they're going to? >> no. i disagree completely. if you look at the bank ofening end. everyone was convinced they were going to raise rates. everybody thought the ecb was going to surprise everybody with how much accommodation they were going to provide. they disappointed markets. and everyone was convinced that opec had a production quota. opec didn't have a production quota. i don't think there is a preconceived notion in this fed's mind. they will sit down at the meeting. they will look at the data and assess that nothing really improved relative to only one statistic, payroll enemployment. everything else is marginally weaker. in addition, the manufacturing industry is consolidating as we got more rev nooiz news today. they'll sit back and say, you no he what? what is the difference if we punt night early 2016? there's no risk. >> the two most dangerous words are everybody knows.

right? but i'll get back to the markets then. if most of the stuff that we just talked about with steve liesman is priced in or suspected to be priced in, you are right. we do not get a rate hike tomorrow. does the dollar collapse? >> does the collar collapse? i think there is a situation in here where, you know, the dollar lost ground eliminative to europe and the dollar has gained relative to europe. the dollar gained a little bit relative to japan. yes, i think the dollar will move back. i think that's a good thing for this economy to have happen. the only reason you're seeing an uptick in european growth is because the euro that's weakened. in an environment of a world of excess plsupply this leads to stronger growth. i think in this environment we shouldn't be doing anything to help other people out. we have to make sure we avoid deflation here. we don't want to take the chance of importing deflation because

we are the largest net getter nation in the world. germany has done well with the deflation airy pressures in europe. the rest of the perative i have suffering. we'll suffer dramatically if we make the mistakes and import deflation. >> all right. steve, a little different view from what we heard. we appreciate it. thank you very much. >> so let's start trading this fed decision, before we get the fed decision by joining me on set is brian kelly, fast money trader. brian, let's get to what steve was saying. that is if -- this is the minority view that we do not get a hike tomorrow, i would think that stocks sell off sharply. >> what we've seen over the last year tlashgs is anticipating one rate hike. the volatility is anticipating 25 basis points. i think the fed has a problem here. they're going to make a mistake

one way or the other. they're going to make an economic mistake by raising rates 25 basis points or ruin credibility by not doing anything. it was only two weeks ago that two of the fed governors, in fact, most of the fed governors said everything is great. what changed in the last two weeks? i think there say huge risk that stocks sell off. a huge risk that dollars sell off. >> let's talk about the most likely to be made mistakes, they raise 25%. what happens to some of the trade that had been the consensus trades going into this period of rising rates? they're crowded trades. >> they are very crowded trades. particularly when the ecb made the communication errors. we saw 3% move in the euro versus the u.s. dollar. that is an enormous move for a currency. the risk is not so much whether or not they raise or not but what they say or they're going to do going forward.

one and done, think can you see the trades you talked about. the crowded trades unwind a bit in the dollar, dollar versus euro and yen. >> people want to lock in the gains. >> right. >> thank you. brian kelly, thank you. >> all right. the fed down, kind of. and after the break, we will turn our collective eye to apple. that stock sagging this week, has the shine permanently been taken off the company? plus, one five star fund manager breaking out her playbook for next year just for you. and she has got some stocks she says you have to own. and later on, why you just might want to keep pandora on your rad radar. something very unusual is happening around the stock. we're going to tell what you that is. and we're all over this premarket federally. here are the most active stocks. you have b of a, ge, pfizer. it's not quite a rip your face off rally. we'll call it a rip your toupee

off raly. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern.

welcome back to "power lunch." shares of 3m sharply lower now. they cite a slow growing global economy. howard stern announced he'll remain with the satellite radio provider. his contract was due to expire

at the end of this year. several food stocks entering the all time high club in today's rally including mcdonald's, dr pepper snapple and hormel. >> the month of december has not been kind to apple stock. in fact, there is only one dow component doing worse than apple and that is caterpillar. now apple analysts have been tripping over themselves to cut iphone estimates and since april more than $120 billion in market value has been lost on apple stock. paul has been selling out of the portfolios. you know andy very well. pacific crest is known as a key bank after a deal. welcome to "power lunch." first off, paul, why you have been an apple seller? >> this essential ott second time in the last ten years that i've been negative on apple. the last time was 2012. number one, growth is really

slowing. i recognize how much cash they have on the sidelines. however, a company that's going to raise their dividend or is keeping cash, if they're that a growth company, a growth story, they got to find better use for the cash than just raising dividend or buying stock back. to me, that's not a growth storey. it's a mature company. it's a value story. frankly, it looks like ge did. beloved stock. ge in the 90s and in 2000. ge peaked with the market and has not looked back. apple has been a leader for years. it is still beloved. 40 plus analysts. i couldn't find a single negative report. all i saw were trillion dollar valuations. it seems like it's overowned, overly crowded trade. and i think it's going to underperform for the foreseeable future. >> the bond manager actually made that comment a couple years ago about apple. he said everybody owns apple so who is left to buy it? that's yes was negative. he was right.

of course then the stock came back and actually broke through the new highs. paul, what would it take are you to change your mind on apple and become a buyer again? >> well, first of all, show me some new revolutionary product. i don't want to -- the fact there is a rumor about them buying go pro, that is not the apple we used to know and love. that's a company grasping to hold on, not a company that's going to outperform. apple's underperforms the nasdaq 100 for the entire year. so i want to see certainly some kind of outperformance over more than a month by apple against a nasdaq 100. i certainly want to see it get off the ground and move. i would sell it today? i wouldn't. i would sell it in the lower 120s. i think at best case it's a market performer for the next couple of years. >> andy, the bottom line is that apple is an iphone company. in order to move the needle and have any sort of traction, it's

got to change that sort of scenario. the only way to do that, i presume, is to do some sort of acquisition. but apple is damned if you do, damned if you don't. it will be perceived as a mature company. that is what mature companies do. they acquire growth. what you would like to see apple do? >> yeah. i think -- first of all, the whole premise it might be perceived as a mature company being a bad thing, it is a mature company. everybody recognizes that. so i don't think that's an undiscovered secret. it trades at six times not because it's growing, it's because it's not growing. and so i think i start with that premise. everybody already knows that it's matured. if you start there, the number one goal is make sure that people want to keep buying iphones. if you do that, come the next cycle, we probably will be growing again and you can get some stock appreciation from. that the i-phone is so big.

it's hard to make a difference even with wildly successful stuff. so, yeah, i find them on being prubt, i'm looking for opportunities. but i'm certainly not going out and buying go pro or doing anything like. that. >> andy, what would it make -- you used to be the only -- by the way, to paul's point, paul, you should know that andy for a long time was negative to neutral on apple. he took a lot of heat for it. andy, you were on your own. what would you have to see to go back to being a little more cautious on apple? >> yeah. i should have read most of our reports from the last year. there was a lot of negativity. >> to be fair, he can't read them all. >> yeah, number only the best. look at what we're looking at is -- you know, we were really negative. the nakt everybody else has come around to our opinion is why we turn around and got positive. it's the rate of replacement should be quite bate better. so what would concern us, what would get us negative is if we

thought gross margins in that cycle were not going to be up to par or if people were leaving the platform and moving to somewhere else. because then we really would have to second-guess our replacement assumptions. >> and this all sounds like you got, as andy said, you have a mature company. that's why i use the ge analogy. they were really, really mature n 2012, i said apple will go down 20 25% to 50%. i'm not saying it will collapse. i'm saying that it's best days are behind it. it's going to underperform. and there's a lot of other opportunities in the super large cap tech space that possibly could give you better certainly returns and maybe risk returns than apple. >> like what? give once name? >> i would take google or amazon over apple.

i think their better days are beyond apple. >> paul and andy, hey, a good discussion. both of you, thank you. >> thanks very much. >> let us check oil. oil has done something a little weird since yesterday's bottom. it is up nearly 10%. yes, oil up is $1.25 and only at $37.57 a barrel, i get it. but we are up more than 10% from our lows some people suggesting maybe that's a sign of a real low for the year. keep ninld, the oil market closes in eight minutes. we're going to bring it you to. on deck, why beating up valean pharmaceuticals is rallying big time. but first, big analyst calls on mediterranean maleals and high d handbags. it's street talk and it's on deck.

shares of pacira is higher after a post surgery pain medicine. the shares are up 15%. shares of valeant also rallying after 15% after they inked a distribution deal with walgreen. we sat down with the valeant ceo earlier. it's like he's trying to move out of the penalty box. >> after they cut ties with the very controversial pharmacy coming out this deal with walgreens and it spans 18,000 pharmacies in the united states. they're going to be offering a 10% discount to walgreens and drugs and dermatology and ophthalmology. they were so worried about where growth is going to come from as they cut ties with filador. it also covered more than 30 branded medicines that they're going to offer at generic-like

prices, discounts of 5% to 9 a%. those are for drugs that have generic competition. folks are wondering what they're going to do to replace filador and whether this is going to lead to the same amount of revenue. they're saying the discounts are going to lead to $600 million in annual health care savings. we did talk to the ceo on "squawk box" this morning. >> this is going to drive growth. right now if you look at our branded products, for example, that have generic competitors, we have small share. >> is this driving growth from increased volumes or increased marge sninz. >> all. this is all. >> a major shift in the way awe proechd this? >> we've always had strong growth and volume growth. but the skeptics have said it's all price. this will turn on almost all the volume. >> saying there is going to more than make up for philador. they're rallying 19%. the company holding an investor day tomorrow. we'll be covering that and

bringing you more headlines including a new forecast. >> i think becky hit the right thing. this is yet another major departure from the business model to say that we're going to make the money primarily on volumes as opposed to price increases, not just price increases but holding price firm on drugs that exist that compete with the generic equivalent. for them to say we'll sell it at generic prices. that's got to be a lot of volume to make up for that price loss. >> that's the question. the other question, is they're not going to do as much m & a. they say they're going to focus on paying down debt. that is a pillar of their business. people are wondering what does the new valeant look like? tomorrow should be interesting to see how people respond. >> that will be an interesting meeting. thank you. >> the final oil trades are about to cross for the session. we could have a rare up day for crude lately. in fact, a big move up. but where will we close? you have to stick around to find out.

victoria stilwell, you appear on tv working with canines. are you a dog lover, watson? i do not own a dog. but i work with veterinarians. how do you do that? i help them analyse over one hundred thousand pages of medical studies. that's great... 'cause they can't exactly tell us what's wrong with them. isn't that right, rosco? rosco. who is a good boy? who is a good boy? you are. yes, you are. watson, i think you need to work on your dog voice.

tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. 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. here's your cnbc news update at this hour. los angeles school and city officials are defending the

decision to shut down the city's school system due to an e-mail threat. the mayor stands behind the superintendent's orders to close the schools. new york city officials say they received the same threat and quickly determined it was a hoax. >> president obama describing immigration as the nation's oldest tradition and part of what makes the country exceptional. immigrants from 24 nations were sworn in as u.s. citizens. secretary of state john kerry meeting with russian prime minister putin in moscow to try and find ways to resolve the syrian crisis. afterwards, kerry said they reached common ground on opposition groups will that participate in syrian peace talks. and a report publics to day revealing the vatican prosecutors launched 13 investigations into suspected money laundering this year. prosecutors have also frozen over $12 million. the measure part of efforts to prevent elicit activity at the

vatican scandal marred bank. that is the cnbc news update at this hour. >> no money down vatican mortgages. just for you. >> oh, my goodness. no one needs to take advantage of that. >> that would be the story of the year. i'm going to have to do jackie's job. here you go. crude oil is up right now $1.05. that is almost a 3% gain when you trade at $36 a barrel. rare update for crude oil ending up a buck a barrel. not the same story for natural gas. northerly gas cannot get out of its own way. it is down fractionally. here's the thing. basically a seven cent move is now about a 3 1/2% for natural gas. that stock -- or natural gas at $1.82. it is completely oversupplied. dominick chu with a market flash. >> how about more red? we're talking about shares of my smith and wesson.

they're near the lows of the session. tracking for the worst day since august of last year. there is following a "new york times" report saying that a new york city public advocate is asking the sec to investigate if smith & wesson made adequate disclosures in the financial statements. this has been a highly active stock in the wake of recent mass shootings in the u.s. and abroad. shares are snapping a run of seven straight days of gains on expectation that's sales may increase. now so far this yeeshgs shares have doubled even with today's move. the stock will certainly be a close focus for investors given what is happening on all sorts of fronts. back over you to. >> thank you very much. you're watching swhc. time for "trading nation." why not? trade doerz trade better together. let's take a look at a very big an important group tlashgs is the financials with the fed's rate decision around the corner. did you know the fed is going to

make a rate decision tomorrow? albert brenner joins us from people's united bank. stacy gilbert from us is we hannah. albert, everybody says will tl is no sector more exposed than the financials. do you believe that? sometime the common wisdom isn't that wise. >> well, brian, the sector is certainly exposed to interest rates but composed in a positive way. what we're going to see tomorrow if the fed hikes, we're going to see an almost immediate move in the prime race and that's going to flow directly into the interest income of all the lenders here in the united states. >> yeah. it is called the secret of nim minus the rats. stacy, what is the options market expecting for the financial stocks? >> yes, you're right. options market in this broader financial select sector etf is looking for a bullish sent. to come out of the fed.

that would be likely a rate hike here. just putting it in perspective, the implied move is around 2.5%. that's basically twice of what we've seen around fed meetings over the last five years. this is by far the biggest improbability that there is a rate hike if we compare to september, pretty similar size move being implied. another way to think about it is the options market is not setting up for a huge pop to the upside nor it is setting up for a notable pullback. that 2.5% move is expecting things to move tomorrow. >> okay. so even another different betting metric saying the fed will go tomorrow. thank you very much. reminder, we're going to do two more segments. can you see them every day on our website. let's talk about what is emerging. perhaps that is the emerging credit market concerns. you have basically the emerging

markets etf right now up 1.5%. everything is up to day. here's the question, folks. how does the credit market impact you? let's bring in larry mcdonald. i mean listen, you deal with this stuff every day. you probably dream about it. most of our audience out there with a 401(k), they don't. tell them why the credit markets and what's happening now matters for their retirement, their 529, whatever it is. >> remember back in the summer, the chinese did this 4% devaluation. and all around the emerging markets, the currencies weakened because china essentially exporting deflation. and that eventually hit the u.s. market a couple weeks later. now the same thing is happening again. china has devalued again. the question is how much bites of the apple are they going to take? in other words, are they going to do this controlled devaluation or three, six, nine month period or get more aggressive? the reason why it's important to people watching us right now is

when they do this, it has a dramatic impact on credit. so since lehman, we had about seven trillion of dollar denominated debt in the world. new debt. that is dollar denominated. so as the u.s. dollar surged because the fed is going to exit, it creates all this credit risk and it creates the genesis of a credit crisis. and i think at the end of the day credit risk could veto the fed's policy path in 2016. >> whoa! you think that federal reserve could be impacted by what is happening in the bond market which by the way is also wholly -- i don't want to say wholely. largely dependent on what is happening in oil and gas? >> all across financial networks people are talking about the fed and what i noticed is about 90%, maybe 95% of the discussions around the u.s. economy. there is a lot more going on than the u.s. economy. the u.s. is much smaller proportion of the global economy

today. there are $60 trillion of economic activity outside the united states. only 18 in. so you can't just look at the -- >> the euro-zone had a larger collective gdp than the good old usa? >> yes, it pains you to say it. but it's true. >> you remember jim cramer, the fed, he almost forced them to start cutting. so in other words, credit in 2007 changed the fed policy path. it changed it. and the same dynamics are happening today. it's setting up for potential that the fed wants to do a number of hikes. credit could overrule. >> the bond market is the big bully whether they want to be. thank you very much. >> appreciate. that. >> all right. still ahead, the five big analyst calls that need to be on your radar. "street talk" is up next. we're over this prefederally. the nasdaq here up is more than 1% now. we've got more market coverage coming your way when "power lunch" returns.

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shares are spiking up by 7% at advance auto parts. this is on an unconfirmed report via street insider citing a source familiar that says advanced auto martz may be looking to explore a possible sale of the company. this following an approach from a possible buyer. now again, the shares are up on this bit of news here. we want to call your attention it to. it is trading on heavier than average volume. shares are up again on a report from street insider that it could be looking to sell itself. we'll stay on top of the story. for now, we want to call your attention to the stock move. back to you. >> did you. that stock is soaring up more than 7%. thank you very much. >> time now for "street talk."

our daily dive into key stock kaflz the day. a aig. upgraded. they raise the target price to 72 from $65, about 20% upside from here. last week aig had a huge senior management shake-up. kbw thinks that created a valuation opportunity. the analyst says while they're still concerned about the current strategy, they think that activist fears should press the ceo to take more drastic steps like exiting property and casualty to get at better returns. >> all right. second stock we're watching, zoey's kitchen. credit suisse downgrading to underperform from neutral. lowering the price target to 27 from 36 thr. they look expensive. the analyst also highlighting the risk of heavy expo slur to oil relinlt areas and specifically houston. zoiy's, jack in the box and del friscos having the heaviest exposure. also part of the call, they reiterate mcdonald's as the top

pick. >> are we starting to see oil trickle through? >> coach, another upgrade. bumping to an outperform. a $38 target. 20% upside. greater conviction. coach can achieve total positive comps. the new product is customer centric with wider gift offerings. piper jaffray upgraded the stock yesterday. it's had a nice run in the last month. >> yep, up 11%. amazon, a buy rating. $800 price target. it's a dominant player in the secular growth opportunities out there. amazon, the analyst says is a core holding or should be for growth investors and believes it will be a $1300 stock in the next three to four years. >> if you put $1,000 into amazon in 1997, you have $460,000 today. all right. today's. >> narrator: radar name is new relic. newr. if you did not have another

acronyms to remember already, america, here's a new one. apm. application process monitoring. yikes. now this is a san francisco-based company. starting coverage with a buy rating. a $50 target. that implies 40% upside. they say they are uniquely positioned to capital viz on the volume of soft war data being generated as well as a huge push loads to be moved, to you guessed it, the cloud. they think revenue growth can stay above 25%. new relic, your under the radar name of the day. >> all right. that's it for "street talk." up next, new details on that threat that shut down the entire los angeles school district today. former homeland security adviser to the president joining us next. stick around. here at td ameritrade, they work hard.

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los angeles shutting down the entire school system over an e-mail threat. new york city got the same threat but merit in the big apple said it wasn't credible and l.a. overreacted. the former homeland security

adviser to president bush, here's the issue. forget who is right and wrong for now. are we in an era literally where somebody can pick up a phone that can't be traced or send out an and we shut down 60,000 students and inconvenience tens of thousands of hour parents? is that how easy it is to do economic destruction? >> well, in fairness, look, i think we're all go -- people are pretty critical of the way that los angeles handled this, but let's remember it's two weeks since the san bernardino shooting. i think they're at the moment particularly sensitive to the threat. now, for sure when these threats come in, local law enforcement has to do a risk assessment. they have to judge whether or not they can get clues as to how real it is. no, not to every single bomb threat. we can't be emptying out the nation's schools. >> no. >> but we have to make smart

choices. in fairness, the other piece to this, let's remember the l.a. threat came in before school started so they had the opportunity to make the decision to cancel school. based on what we know, new york's threat came after all the children were there. that's a higher standard to say you'll evacuate schools. >> listen. this hits home for me as well because my daughter's school district in new jersey has been hit with over 40 swatting calls. literally in the last 12 months. >> right. >> and it's -- you know, as a parent you're thinking, by now we realize -- thank god not credible. but you realize how easy it is. someone with an untraceable phone can do limitless damage. what do we do? how do we solve this? >> i wish there was an easy solution because what you're relying on is local law enforcement to be adequately trained. to be able to make the judgment between what is a credible threat and what is not.

you know whenever there's human judgment of course you run the risk that somebody is going to miss something or make a mistake. los angeles, it may have been an overreaction to the hoax. >> how do you know? if it's not a hoax, right, people die. if it is a hoax, then you get criticized, look, you overreacted. you can't win. >> no, you can't win. quite frankly when you're talking about children, i mean, the nation's children, i think people are going to be hypersensitive there and want to err on the side of caution. >> all right. francis townsend, very important discussion. thank you for coming in. increased terror means increased threats and people and agencies on edge, so which companies are impacted? dan, good to see you. you know, 2015 was really marked with serious winners and losers in the cyber space. fort net, they were winners and barracuda and fireeye were

losers. do we see any sort of rotation in 2016 at all? >> i think in terms of the next gen winners like proof point and perva will be losers here. and symantec could be acquisitioned in names like proof point. now they have $8 billion from veritos. i think they'll have a lot of issues integrating that technology. >> so do you think that a major theme for 2016 in the cyberspace is consolidation? because that's what we thought was going to happen in 2015 with some of the names you mentioned. and we haven't seen that. >> i think it's overdue. i think 2016 is the year of m &

a cyber security. barracuda, proof point, i think you look at the names like cisco, ibm, hp, that looks to get into this what we view as a $30 billion market opportunity. grown 30% in the year in the 2 to 3% spending environment. that's where you'll see the clear winners and losers and a lot can be acquisition candidates. >> dan, thank you. brian? up next, why you might want to keep your eye and maybe your ears on pandora. something is happening in the options market around pandora which is absolutely incredible. if you own this, listen up. the story is coming up. ♪ now more than ever america's electricity comes from cleaner- burning natural gas.

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[ train whistle blows ] ♪ my mom works at ge. ♪ baker hughes and halliburton, two huge oil services company that were scheduled to merge, stocks are both halted right now for news pending. there were earlier headlines that perhaps the government was not happy with the deal and may ask them to tweak it or push their ruling back into next year. we'll see what happens. either way baker hughes and halliburton are halted. if you didn't have enough to talk about tonight on "fast money," pile that on. >> we'll be talking the "star

wars" premiere and in light of the shut down in los angeles, what increased security measures will be taking place across the theaters at the company. we'll have the ceo of imax. >> movies, cyber threats, oil deals, good luck. all right, pandora's future is in the hands of three federal judges. they're scheduled to issue a ruling on the royalty rates music streamers like pandora to has to pay for the next five years. the stock has been hit big. let's bring in cnbc contributing john najarian. you and i talked about this earlier today. pandora is a hot option stock, but what is going on with the options activity right now with pandora? >> that's right. it's trading like a biotech stock right now. that's because the normal historical volatility in pandora is around 59%. which is high. but today's number is 360%. in other words this is through the roof, brian.

a high historic implied volatility is half of that. to see a reading of 360 this is like they have an aids drug or some sort of hepatitis c drug. >> a potential billion dollar blockbuster that people are betting on. any way to tell which way they're betting? >> so far the bets are on the upside, brian. the stock of course seems to have put in a double bottom right around $12. maybe that's why people are optimistic. the volume is not as heavy as it has been over the past two weeks. but today people are betting on the upside. a fair call for basically a $13 sfok now. but again the volatility in these is just through the roof. >> yeah. >> the only way to play is it with spreads. otherwise, you could be -- >> we have to go, but people are making huge bets ahead of tomorrow's royalty decision. fair enough?

>> fair enough. three judge panel. this is make or break for the company. >> one of those judge isn't even scott wapner. wow! so look for pandora tomorrow. we have the federal reserve decision, they can raise the rates for the first time in nearly a decade. 2:00 p.m. eastern. wow, ready, melissa? >> i am. meantime, "closing bell" starts right now. hello. welcome to "closing bell." i'm kelly evans. >> i'm bill griffeth. market's getting ready ahead of the fed decision tomorrow. oil popping. energy companies like exxon and chevron lifting the dow higher today. we'll talk about whether the bottom is in for crude and what that may mean for the broader stock market as well. a lot of green today. >> everybody seems to be expecting a dovish rate hike come tomorrow.