>> i'm not kidding. alaska air? >> i love that one. i lot of regionals. i think this can surprise more than everybody's anticipating. i think the stock goes higher like the hawaiians of the world. i think the regionals are positioned well. >> we're going to eat now. "power lunch" begins now. >> scott, thank you very much. welcome, everybody to "power lunch." i'm tyler mathisen. stocks higher but giving up those gains. let's take a look at the dow, nasdaq and the s&p 500, shall we? we look at the numbers. where are they? there they are. there are the gains. up a little bit there for the nasdaq at this point. i mean the scantest gains. industrials up 60 points. they were up higher earlier. s&p 500 up 4.6%. >> one thing i noticed in this market was delta. delta came out and if you look

at the stock trading very well right now. however, one thing they did say was that the lingering effects from the paris attacks have had an impact. revenue is down to europe. they cut capacity to europe. and it speaks to this idea, you know, after a terrorist attack, everybody is supposed to live their lives and go on as usual. people aren't doing. that i wonder if that isn't a little bit of what we're seeing in tiffany today when you see the weakness in that stock. >> they caught in upside down oil hedges. >> when you look for yield when the cfo of your company will go sometimes. >> they own a refinery, i think. >> tiffany? >> no, delta. >> that would be a trade. >> i was totally confused. >> that would be an interesting trade. >> exactly. >> all right. we're also watching energy. you have brent crude and oil still trading under $30. i think wti is now $29 -- there we go. it's ugly. perhaps the three most important stocks to watch remain hess,

marathon and conocophillips. >> let's get straight to bob pisani on the floor. >> important we hold gains today. look at the s&p 500, 20 points at the open but gave it almost all of it back. largely because oil just fell apart. we stabilized it around 10:00 on oil. the market stabilized a little bit more. you can see we're not far off the lows. it's nice to see in terms of sectors, financials are leading. we got a decent report from morgan stanley and bank of america. they're off the highs as well. utilities and consumer staples that, is a defensive group. energy and materials moving to negative territory very early on. oil moved to the down side. as usual with, he got the usual crop of energy stocks at new lows. the conocos and hesses and anadarcos at 52-week lows. financials are mixed. despite good reports from bank of america and morgan stanley, they had a good beat by nine cents, again, a mixed financial picture. bank of america also pretty good. but still no traction there.

china was strong overnight. people's bank of china did an injection of liquidity. i think that really helped. we all know the gdp was mediocre at 6.8%. but the etfs associated with china, very strong today. good volume. there is the ashr. finally, it's very important we hold the gains. there was a lot of whaling and mashing of teeth over the fact that we closed at the august lows. let's not quibble about a few points. we were at the august lows. you break below that, you're in a new territory. you're back to the 2014 lows. technicals matter. when the fundamentals are confusing, traders look to technicals dropping below the levels would institute a whole round of whaling and mashing teeth. it is starting to resemble an irish wake down here. let's hope it doesn't come to. that but it's getting there. back to you. >> you think we're fading at this hour. what is the problem? >> well, oil is not behaving at

all. there is this knee jerk reaction to just sell anything related to global industrials, global materials and energy stocks whether that happens. just sort of feeds on itself at this point. like i said, there is an extremely negative sentiment out there. there was a great article over the weekend about the rise of the chicken littles, the people predicting the essentially the end of the world. you try to take them on, it was a little bit tongue and cheek. it was a very interesting article about why there is so much traction about these chicken little prognostications. >> mashing of the whales. >> mobey duck. >> kline's economy growing at the slowest pace in 25 years. china's consumer economy apparently still just fine. we're looking at a tale two of chinas. >> that's right. let's start with the headline numbers. 6.9% growth in china. but keep in mind this is widely seen as inflated by the government. wall street says the real gdp number for china, more around 4.5%. but as you point out, china

undergoing this long term transition from being an export oriented economy to one that is more consumption led. and recent figures while disappointing indicate that consumption accounted for 66% of china's gdp growth. that's up from 52% in 2014. the problem is china slowdown expected to get worse this year and sbo's william mcfadden says because the growth witnessed in services will likely not fully offset the weakness that we're seeing in manufacturing and export oriented sectors. plus, the dramatic drop in chinese stocks, that's had a huge impact on retail investor confidence which will lead to less spending on goods. add to that steps taking by the bank, injecting more money into the economy. mostly benefiting, again, the export oriented sectors cutting rates, again, beneficial for the state owned enterprise that's are sitting on a lot of debt. that's why experts say the pvoc has to get a bit more creative and use unconventional tools to

stimulate growth if they want to maintain their target of at around 7% and make the shift to a comsumption led economy. a lot of debate whether they will deval unite juan. that will lead to volatility as we've seen this year and backlash from the asian trading piers. we'll have to keep an eye on the uan. >> thank you. steve liesman, for america the question about kline is less about the manufacturing economy versus the consumer economy. but what's going to happen to all the debt that has built into that system? in real estate and that -- if that goes bad, that feels to me like something that could be very bad. >> i can till my conversation with federal reserve officials they do not feel like a lot of the american banking system is at risk or otherwise integrated into chinese debts. it doesn't mean that a lot of what you're seeing around the world today is people coming out of a trade and otherwise getting out of certain chinese debts. one of the big themes in the

world today is people exporting money from china into the united states. so there's that going on right now. there's a question about who holds the debts. there's a sense that it's not inside the u.s. banking system, otherwise has a potential to create systemic risk around the world. >> you know statistics really well, especially big government statistics. how do i already know the fourth quarter gdp? kind of early, isn't it? >> it is on the early side. you wond we are 1.4 billion chinese if maybe .2 of them are involved in creating the gdp numbers. for also, you know, sometimes the gdp numbers need to be in an around what the leaders say they need to be. >> contain june, they cut the forecast for economic growth. >> it's really a tale of two different economies out there. just go to the advanced economies full screen that i created earlier. you can see what happened to the advanced economies. down .2 in the u.s.

europe up 0.1%. look at the right side. remember. that i want to show you the emerging market ones. overall, 4.3, down .2. but big cuts in some of those energy and commodity related countries. china is unchanged. you'll note that it's down from the of 6.8 reported today. big cuts in brazil and saudi arabia and rush yachlt look at the right side of that screen. you see the red down air rorrow. remember the advanced? if there's a silver line together consuming nations, it's not showing up in the forecast. we're taking from peter, so to speak, or the producers, and we're not paying anybody. so there's this big absence. that is true in u.s. consumer where you do see lower energy bills out there. but you don't see a big increase. it's true in the stock market when you see the energy companies getting flailed every day. but you don't see big increases in market cap. >> why are we so obsessed with china?

it's a declining country. >> it makes one-third of global growth. of course we care about china. >> let me explain. china's population is on the decline. they'll be the third or fourth most populous kunry triin t cou it time we die, not number one. they're 125th per capita. we should be talking, i think, more about europe. europe is the biggest economy in the world combined, bigger than the united states. french economic declaration of emergency, italian banks are stinking, portugal is getting losses down bond holders, right? you have an on going refugee crisis. and we export 2 1/2 times more to europe than we do to export to china. and most of what we export to china is waste, scrap and agriculture products. >> you would think europe would play a bigger role in the global investor conversation. i think given that quantitative easing hasn't fed through to the

real economy, oil prices, even though europe is a net oil importer, it's not allowing europe to reach the inflation target of 2%. >> and to the first point which is the whole world expected to grow -- the growth to come from china. nobody has expected europe to grow. >> hold on. >> not knowing what brian was going to ask, i brought along the following chart. showing the forecast of the imf for china versus the u.s. now, brian, help me read this chart. what is happening to chinese growth? it's going down. >> of course it is. >> what happens to u.s. growth which is that it doesn't move very much. in the imf's global gdp framework, they do not see -- they agree with you. >> i know. >> but -- >> that line -- the red line is above the blue line. right? the orange line still says there is more growth there than here.

>> brian talked about it. >> not to say that they're not an important nation, just from our perspective -- >> you said china doesn't matter. >> no, for us. she made the point and she went like. this i'm going to go like this just mocking the commercial. which is to sat say the same th. it's where the margin alibier comes from. >> one-third of global growth. >> buyer of what? >> that's why she said. that it's so important. the reasons is so important is because she's focusing on consumption. that's where american companies are going to sell to. that's where they're going to get profitability from. it has been a commodity play. it's going to become and is already a consumption play as even though their growth is going to be inten waited, they're becoming middle class. that means a lot for the world. >> i disagree. the average income in china is

$45 $45 $4500 u.s. dollars and it's not moving. i don't know who is buying stuff. you can't breathe. >> the margin alibier, they've been the new marginal buyer every step of the way. >> of what? >> of commodities. they've had a boom in the united states which led to a boom in shipping prices which led to booms all over the world. >> when you look at five years ago, it was at a high. >> let me also point out there are 15 hours in the cnbc programming day. plenty of time to talk about europe and india and china as well. >> india rocks, by the way. >> we don't talk enough about india. >> we don't. the population is the same as china. >> 7.5% real growth unchanged in the imf forecast. >> about it way, in previous life, i did business there. you can enforce a contract in india very difficult in china. >> i worked in india. i can tell you that they added so much confidence to the market. but now --

>> all right. thank you, steve. >> is this how the show is going to go? >> we may you have back. >> i don't know if i'm coming back. >> i'm going to disregard everything everybody is saying even if i agree. >> welcome to the new "power lunch." >> i'm nut skip bayless. >> iran is now open for business. the emerging market is up despite oil's fall. so iran's economy and stock market not nearly as timed to price of oil as saudi arabia. we'll talk about that plus a big name company became the first to roll into iran since the evaporation of the nuclear sanctions. we're talking with the market insider in tehran next. this is "power lunch" on cnbc, we're first in business worldwide. re? i'm val, the orange money retirement squirrel from voya. we're putting away acorns. you know, to show the importance of saving for the future.

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good morning, hawaii. here are headlines for you. johnson & johnson says they're cutting of 6% of the workforce in the medical devices division all part of an effort to save a billion dollars in annual costs. dow component united health care rallying to help insure beating estimates. they're off to a strong start and considerably stronger than 2015. obamacare was supposed to ruin health insurance. macy's is rallying. taking a new stake in the department store chain. guys? >> over the weekend the nuclear deal with iran officially went

into effect ending nuclear related sanctions and daimler's truck division is the first to jum noopt iranian market signing the cooperation deal with two iranian companies. the stock up is 5% in last week. the ceo of iran's biggest brokerage firms, turquoise partner, joins us live on the phone from tehran. ramin, thank you for joining us. >> thank you for having me. >> what is the mood in the country and markets there in the wake of the sanctions being lifted finally? >> the mood is fantastic. everybody is super excited. you know, this nuclear negotiation has dragged on for so long and business people have been waiting for this moment for a very long time. over a decade of sanctions iran is now sanction free. so it's very exciting. everybody is looking forward to the future. as you mentioned, stock market already up by 5% in one week. and this was during the same week that other emerging markets and regional markets were

actually going down significantly. >> yeah. that is one of the few markets that's been able to move higher. you started a new fund, right, where european investors can begin to invest in iran? are you getting a lot of interest? tell me how it's structured. >> sure. we manage more than 90% of all foreign money that invested in the tehran tstock market. we launched a new eu regulated fund to invest in iran. interest has been enormous obviously because of sanctions, the issues of transfer of none iran has been a problem. but going forward with the lifting of sanctions, hopefully we get more and more money coming into the country. >> oil has been getting hammered, of course, yet the stock market's been going up. explain that disconnect to me. >> well, you know, iran is a contributor. but our reliance on oil is a lot less than other countries in the region. only 15% of iranian economy is

the oil sector. 30% of government income is from oil. and actually i'm surprised that there is so much media attention when it comes to iran on oil and gas. you know, iran has a very well diversified economy. it has a huge industrial base. and, you know, we have the largest producer of automobile in the region. iran produces more steel than france or uk. iran is the third largest producer of cement in the world. a very active agriculture sector. so, you know, it's not a single commodity economy like saudi arabia or the other regional countries. >> if i heard you right, you said your firm hand lz 90% of the foreign money that comes in to the iranian stock market. who are the buyers specifically and what have they been buying lately? >> as i mentioned, we -- to our funneled, we're the largest fund in the tehran stock market.

we manage the funneld. investor based is mostly european, i would say more than 95% of our investors are european. it's a mix of institutional investors and family offices and high net worth individuals weechlt been running that fund for over ten years now. we have a very long track record. but over the last six months, we've been able to get a regulate regulated fund. >> so where do you put their money? are they telling you that they want to be in a particular sector or do you choose and where is the money going? >> we choose. we manage the fund. and, you know, the strategy of the fund is to invest in the potential of iran as a whole which is a commodities and consumer because commodities are out of favor right now, we're basically our portfolio is mostly focused on consumer potential of iran. so we have good exposure to

pharmaceuticals, telecom and also with the removal of sanctions banking sector. >> all right. ramin, good luck with the new fund. we'll check in as time goes by and we see more progress on what happens with the lifting of sanctions. thanks. dominick chu is standing by. >> shares of jcpenney on the retail side, near the lowest levels of the day. close to 4%. the retailer announced they're going to start selling appliances next month as the first time it's going to happen in 30 years. the company says the move is part of an effort to bring in millennial who's are entering the real estate market as a demographic group overall. shares are down about 9% over the past year. jcpenney, onest big retailers. >> thank you. despite the recent selloff, a number of housing related stocks have been moving up. we'll look at the plays in this market. >> tyler, it's not just the builders but the bulling supply companies. we'll name names coming up next on "power lunch."

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welcome back to "power lunch," everybody. glad you're us with. let's give you a check on the bond market right now. the equity markets stabilize a little bit. maybe some of that flight to safety buying in bonds that we saw over the past few days has abated just a little tiny bit as prices decline and the yields basically stable, 2.03 on the ten year. not much change there. the 30 year treasury bond higher in prices.

the yield sits at 2.809%. and that, folks, is your bond report. well, despite home sales remaining strong, get this, there are zero housing stocks higher this year. nada. diana owe lick taking a look at this volatile and unusual market. diana? >> brian, actually some of the housing supply and material names were able to do a little bit better on friday even as the broader market sold off. i'm talking about names like home depot, masco, sherwin williams, several reports out last week pointed to big gains in home remodelling in 2016. now these companies benefit both from new build and from remodelling. and to the home builders, i'm hearing phrases like oversold and overly abused. goldman sachs analyst wrote in a note to investors that home builder equity prices are currently trading below what recent macro dat yoe flow suggests. they point to job growth. stern ag upgraded lennar and dr

horton. they downgraded dr horton saying that recent outperformance will limit upside potential. now housing stocks are mixed to day. didn't take the weak sentiment number too hard. they missed expectation business two points in the report this morning holding steady in january but from a downwardly revised december reading. sales expectations over the next six months hit hardest. we get new home sales and earnings from d.r. horton and pulte next week, we'll, of course, be watching all the names very closely. >> we certainly will. all right. thank you. rising rates, slowing china economy which maybe doesn't matter. according to brian, the stock market that tanked since the beginning of 2016, what should the fed and china do to ease global growth fears? larry cud slow going to weigh n stocks are higher right now but giving up the earlier gains after getting mauled by the bears. are the bulls getting ready for a major charge soon? "power lunch" is back in two minutes.

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the dow jones industrial average right now still in positive territory. the s&p 500 is higher by 1.7 points. we're fading this rally though. nasdaq is now in tegtive territory by five points and the russell is negative as well by nearly eight points. what's going on with the price of oil? it is negative. lower by 69 cents, $28.73. below $29. again, report out this morning from the iea saying we're going to be a wash in oil in 2016 with a big glut. at least until the end of the year. some of the big name chinese stocks that trade here, allibab and baidu are rebounding. >> here's your cnbc news update for this hour. democratic presidential candidate bernie sanders campaigning in iowa says his campaign's growing momentum counters any argument that rival hillary clinton is the inevitable democratic nominee. sanders has been closing the gap on clinton's lead in the hawk eye state. >> j.c. penny is getting back

into the home appliance business after more than 30 years. it says it will start selling kitchen and laundry appliances in 22 pilot stores beginning february 1st. brands will include ge, hot point, lg, and samsung electronics. the messaging service what's app will be free. they're exploring ways to charge business who's wa businesses who want to contact users. >> justin up son has signed a six year deal with the tigers. the outfielder hit 26 home runs for the san diego padres last year and that leaves the last big name free agent on the market. that's the cnbc news update this hour. back to you, brian. >> all right. sharon, thank you. why don't we see how the metals market is doing? we're talking about gold, silver, copper, platinum, gold

is down $1 right now. not really any kind of a move on cold. and we're seeing the rest of the metals market not posting a big move as well. some of them are up slightly. all of them are up slightly except for gold. let's get to dominick chu. >> splij amith & wesson down by. so the gun maker did announce plans earlier in a regulatory filing to target the outdoor sports market in an effort to reduce its reliance on what could be volatile sales of guns and ammunition. in that filing, the company said they could create up to three new divisions for outdoor products as part of a broader restructuring effort. still, smith & wesson shares, no potential takeovers were named though, they said, smith & wesson said they could take five years to identify acquisition targets. the shares have doubled over the course of the last year. back to you. >> thank you very much. a lot of questions on investor's minds today. will china or cheap oil sink the global economy? how rattled is the fed by last week's selloff? can earnings rebound? it is 2008 all over zbhen

thoughts now from our senior contributor larry kudlow. welcome back to "power lunch." >> you want to start with your election prediction? >> no. >> you want to start with china? >> yes. also with dominick's report, right now the gold-oil ratio is high as it's been in 25 or 30 years. >> price of gold to the price of oil. >> yeah, how many barrels of oil does an ounce of gold buy? it's an interesting market measure. >> of what? >> it shows how expensive gold is relative to oil suggests we can't be too far from a bottom in oil and it suggests maybe if you have some bravery, you want to buy a little oil and you want to sell some gold. just a thought. gold-oil ratio. >> let's go to china. you were saying that in many ways you agree what brian said which is that china doesn't matter in terms of the american economy. or it matters a little. >> i'm not going to say it

doesn't matter, i think his point it is matters only a little. i agree with him. look at the data points, experts less than 1%. john ride dg this to me. he's a great economist. it ain't much. i think the psychology is probably more important than the reality. and i just want to say that there's a capital flight from china. we know about. that that is bringing their currency down. >> that's not bad. >> it isn't bad. it has to be they have to be. the government should let the market dictate. they are lifting xlafrpg and capital controls or so they say. and if they continue to do that, i would expect the occur enstoi continue to fall. >> i had dinner with two chinese national couples two months ago who now live here. they're u.s. based. they came over recently. they live in my neighborhood. they said anybody who can get their money out of china is trying to. >> right. >> see, that's -- >> they have a demographic cliff. they have zero population growth. they're at 7,000 u.s. dollars a

year, i think it is more than i stated earlier. >> and the pollution stinks. >> you can't breathe. >> but it's true. they never had the option of investing outside china. and they're getting that option unless this government pulls back. so i just think sometimes free markets should be free markets. we should abide by the consequences. >> it's one thing to say the economy of the united states maybe doesn't matter. but we have seen the u.s. stock market get very riled and suffer dramatically from overseas events that seemingly didn't matter. so you can have a very big stock market impact. it can get even worse, right? >> yes. >> i mean, remember the tide bought? who gave a damn about the currency of thailand and we had an 18% decline. >> you are the newly crowned international economic analyst and i get that. i think you're right up to a small point. i don't think any of this stuff is lasting. that's all i'm saying. i think at some point we're not there yet, but at some point

lower oil is really good for the american economy and most of the rest of the world a strong and steady dollar is really good for the u.s. economy. and most of the rest of the world. i think what people should really focus on is profits. profits are the mother's milk of stocks. >> u.s. profits? >> u.s. profits. profits have been flat for about a year and a half and recent quarters they've been down. >> yeah. >> they've been falling. >> and revenues are not. >> and i want to -- before anyone should jump in, take a look at the profits. profits are slow to report in terms of the economy's real time. but profits will give you a signal. how bad the stock market correction is going to be and whether it's going to be a true bear market. i don't think we know yet except profits, profit margins, they're all slumping. and that's not a good sign. >> but when you look at nike's hopes for growth, for example, and how much revenue they want to bring in by 2020, that revenue growth doesn't come from here. it comes from china. right?

so at some point if we have to re-adjust to a china that isn't growing nearly as fast as anybody expected, there is a re-adjustment process. >> yeah, but they make the stuff. there they sell it here for less. the profit margins here go up. >> nike's bottom line is affected if they buy less. >> i agree. >> some companies will be affected. >> i'm losing money in everything but make it up in volume? >> there are going to be winners and losers. >> the volume is going down if they don't buy in china. >> but you can't nikize the whole american stock market. i'm speaking the percentage -- i just can't go there. i'm a macro guy. a nike analyst would be very, very bearish, yes. i get. that but i'm just saying the currency does not have the big effect that people think it has. and to some extent, by the way, a lot of analysts say it is unhinged by the rest of the economy. profits, profits, profits.

>> this is why to me, larry, the trade deficit doesn't matter either. if i'm intel, give me a second, and i sell a $300 micro processor to china but it cost me $50 to mashgs i make $250 in profit because i hold the intellectual property. acor buys the chip, throws in some other crap and costs them $575, they sell a $600 computer back this way. the trade deficit on that deal is $300 in favor of china. >> right. >> but i made $250 in profit. they made $25. who you would rather be? >> i want the advantage to go to u.s. consumers and businesses. and a lower yuan gives you the advantage. i don't know why people get so panicked about this whole story. i think it's overrated. here's what's not overrated besides profits. the federal reserve should not be telling people they're going to be raising rates every quarter over the next three years with profits falling, a,

and, b, there is deflationary pressures all over. oil, raw materials, commodity indices. so the fed ought to really stop yapping. i think the comments by mr. fisher and others while i respect him enormously, he saved israel, they should cool it for a while. you don't want a fed tightening on profits and commodities are falling. >> iowa is coming up. what do you predict? let's get to it. >> the iowa caucus is between trump and cruz. we know. that i don't know who's going to win that. here's my forecast. i have a new -- it just came to me watching the democratic debate. when was that? monday? sunday? i tried, i couldn't watch it. >> just what i want to do on saturday night. >> so now i believe donald trump will take 49 of 50 states from bernie sanders. okay? trump is going to sweep -- >> you do not think hillary clinton will be the nominee? >> i do not. i think bernie sanders is going

to beat her. i think she has big problems. >> is this for real? you think trump is going to be president? >> as matters now stand, yes. knowing what we know, all the available information -- by the way, i'm not endorsing here. although i do like the corporate tax cut, big pro growth. yeah, hillary is in trouble. >> what knocks hillary out? >> when you're running for president and day after day after day your name is in the same sentence as the fbi this is not a good thing. this cannot be a good thing. now can i be wrong about her and sanders? of course i can. but right now bernie sanders has the mo and democratic party turned very far left. it suits sanders and his philosophy. i may be wrong here. but if i had to bet, just for a fun bet among old friends, i say trump takes 49 states. i give bernie sanders vermont. that's all i give him. and as trump moves the corporate tax to 15%, it's going to be so

bullish for the american stock market and economy. this is a first, by the way. i'm giving it to you first. i have not written this. >> a year ago i didn't think hillary would be the nominee. but that's when i thought biden would get in. >> biden -- look, she may be in so much trouble that biden will get in, will get in. by the way, joe biden is a wonderful man. he just is wrong on issues. >> can you broker a convention? how late can he come in? >> you know what? the dnc will let him come in as late as they need. >> as they need. >> as they need. whatever the rules are, they will be changed. >> i heard this at a dinner i was at with people who would be in a boposition to know. i never said a word about it until just now. >> what? >> pretty heavy hitters on the right side of the aisle. money hitters. said they thought or were pushing for a romney last minute jump in. is that possible?

>> no. >> okay. that's what i thought. i was afraid to mention it. you are kidding? no, he's waiting around and wants to let everybody decimate themselves. it could be complete garbage. >> it's theoretically and legally possible. are you asking me politically and realistically, heck no. >> somebody could jump in? >> yeah. i don't know where they're going to jump. you have trump and cruz. right now, bar something incredible thing that is not on the horizon, those are your two choices. i'm just saying, right now, trump 49 states. sanders -- by the way, in vermont, i just want to say, in vermont my former bear stearns partner is running for governor. so he's going to win for governor. i'm not even sure i give vermont to sanders. >> larry kudlow. >> you heard it first. this is an exclusive. >> all right. to dominick chu with breaking news. >> tyler, here's some news here on the state regulatory front on daily fantasy sports.

the texas attorney general has now weighed in offering his opinion and his opinion is that daily fantasy sports in the state of texas violates the law and should be considered illegal gambling. so texas now joining a host of other states who believe that daily fantasy sports should be regulated and are at least should be constituted as gambling under their particular laws. texas, the latest to join that group, brian. an interesting development here on the daily fantasy sport side of things and the state regulatory front. >> thank you very much. our big news there. take a look at your overall market. the markets, the first couple weeks of this year have been an absolute train wreck. worst start to a year ever for the u.s. stock market. we're up .1% right now in the s&p 500. sitting right around that. some say key 1900 level. coming up, we're going to speak with one market strategist who is sticking by his year end target. and that's still implies a gain of at least 15%. plus, legendary investor big gross joining us. we'll get his perspective.

and you'll be surprised to see how bill is doing. hint, pretty doggone good. we'll show you. stick around. "power lunch" rurndz. returns. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

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and on long island, where great universities are creating next generation technologies. let us help grow your company's tomorrow, today at business.ny.gov welcome back to "power lunch." interesting intraday trading into ibm. it shot up a couple bucks at the open and then came right back down. so there were buyers and then there were sellers. ibm is right now trading up just fractionally. ibm by the way, reports earnings after the bell today much it's been a tough time for big blue. they're down 17% over the past year. eli lilly an insight filing a new filing with the fda to treat rheumatoid arthritis. insight will get a $35 million payment from lily and could get 100 million more if that drug is approved. so stocks have given up gains after rallying at the open. despite a negative start of the year so far, deutsche banc chief

u.s. equity strategist says the next 5% move by stocks will be to the upside. joining us to discuss, the chief investment strategist at janning, montgomery scott. could we get a rally here at this point off the bottom or a potential bottom? >> sure. we could easily get a rally. we saw that happen in september. days when we were up and then days when we were down. i think there is still uncertainty on china, though. we may have to play out the string a bit longer before we get a more sustained rally. >> okay. so not necessarily a sustained move. what you about, mark? do you think we hit bottom here? could we have a short term rally before we move lower again? what is your assessment? >> i think we're right for an intraday reversal or something that stays over the course of a couple days. the body of evidence continues to suggest that the market has to work probably a little bit lower. i mean, sentiment bombed out. but we have not yet reached levels of pessimism that we saw

in that late summer swoon of last year. so as a consequence for me to make any kind of case for a sustained rally, something to take us back up to or threaten all time highs like we saw in may of a year ago, i think we need to see fundamental evidence that there is a turn for the better and we haven't seen that yet. >> as you look ahead through 2016, you've got a fed that is not as friendly towards asset prices as it was. you've got slow profit growth that larry was talk bchlgt you have de minimus revenue growth which is a greater challenge. and you have the uncertainty of an election. do you see stocks making much head way this year? >> actually, we do. we think that china fears will dissipate as they have for the last several years every time we have another china spike. those will dissipate. we think oil prices will start to recover here and pose much more favorable fundamentals for earnings going forward. we look for a dollar consolidation right around midyear. that should help as well. we think easily single digit,

mid single digit growth for earnings this year and a very washed out market here that should benefit a lot from improved sentiment. so we're still happy with our target 20230 to 2330. >> so you think oil is near the bottom, are you committing to oil stocks at this point? >> no, it's too soon for. that after all, there is going to be a lot of writeoffs that are still in the works that have to happen as a result of the selloff. it will take some additional time before we're willing to buy oil companies based on just a rebound in oil. >> obviously, there is a change that happens in the spring as people begin -- they switch over to different blends of gasoline. they also drive more. consumption of oil in the u.s. goes up. but where is the overall global demand from oil if paul is right about that? where is that going to come from in the face of probably a half a million more barrels a day coming on to the market from iran?

>> well, tyler, the fact is we actually see growing demand, not just oecd countries but non-oecd countries alike. so it's really supply shock problem rather than a demand issue. i think what we're going to see is continued supply disruption as a consequence of two low of oil prices taking out higher production costs, shale production and maybe other cartel members of what was once known as opec. and that will lead to a supply/demand balance in the second half of 2016. so i'd be poised to start to get into the energy sector. at this juncture, we think it's too soon to bottom fish. >> paul, here's is what i'm hearing is the big problem with low oil. we've been trying to say this for a year now which is this. the biggest -- you know who the biggest investor in the world is? it's the government pension fund of norway. okay? you got some asian pension funds that are huge. saudis investment fund is huge.

they're selling stocks. they're not making enough money from oil to fund their needs. so what do they do? you tell what you got. so they're selling stocks. how much of a weight do you think oil is -- forget about driving miles and lower gas prices. is just the net selling effect. because countries need money. venezuela is on the verge of default. >> right. countries need money. they'll keep producing at low prices because they'll be playing each other for the market share around the world. and that will continue. but a lot of that adjustment is going to come in the u.s., maybe some in the north sea. we think you will see a million or a million and a half barrels come off this year, iran notwithstanding. >> good discussion. thank you for joining us. >> thank you. >> you can go to powerlunch.cnbc.com to see when paul thinks the selling will stop. >> all right. oil trying to hold on to the $29 a barrel level. not actually doing it as you see

there. it's fallen $28.59 despite more evidence of oversupply. we'll see what happens in the final 40 minutes of trading. lats more coverage of the world economic forum in davos. it starts tomorrow. cnbc, an interview with jamie dimon.

welcome back to "power lunch." here are this hour's power points. stocks are in the green. they have given up much of the earlier gains. telecom, utilities, consumer staples, they're the best performing sectors right now. and news breaking this hour that texas attorney general saying that fantasy sports sites constitute illegal gambling. joining a host of other states that say fantasy sports should be regulated. >> all right. let's get over to dominick chu. >> all right. so shares of netflix keeping a close eye on them. they're surging heading into this particular earnings report. set to report earnings after today's closing bell. the stock is near the best levels today, up by 5%. with continued expansion into new cities and recent months investors are keeping an eye on subscriber growth going forward as well as all that new original

content. shares are having a rough start to the year though. down 4%. remember, the more than doubled in 2015 and brian, i know that you guys are going to have a big bull-bear debate on netflix. it's a stock that is the source of air lot of interest of a lot of folks. >> all right. thank you very much. with the markets in turmoil, bill gross is beating his bench marks. he'll tell you how he is making money in these markets and what he thinks of china and everything else. that's coming up next on "power lunch." performance... ...reimagined. style... ...reinvented. sophistication... ...redefined. introducing the all-new lexus rx and rx hybrid. agile handling. available 12.3-inch navigation screen and panorama glass roof. never has luxury been this expressive. this is the pursuit of perfection. hii'm here to tell homeowners

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the market is struggling to hold on to the mega ral yes we saw at the open. nasdaq is negative territory as well. checking on all the ten s&p 500 sectors right now, neatly divided in hachlt financials, discretionary, consumer staples and telecom in positive territory. tech, health care, industrials, materials and energy in negative territory. half and half at this point which would explain why we essentially gone to almost a flat market at this point. >> and the defensive sectors are the ones that are actually doing the best there, telecom, utilities, consumer staples is in that category as well. >> we seem unable to hold any

rally at this point. and every rally so far this year has been meant to sell into. >> all right. we well, why don't we move on then. one person known for bonds and finding big opportunities, let's welcome back bill gross. his fund is outperforming, pimco unconstrained bond fund since the inception. welcome back to the program. it's good to see you here. you've talked -- i love having you on the last few times because in part bill gross is known for the fed and treasuries. you talked about build america bonds. you've talked about individual companies like precision cast parts here. given sort of still -- you're still new with your new unconstrained bond fund. how far are you stepping out sort of the fixed income world? >> well, to some extent, to my waive thinking in today's

market, the only attractive area really is in duration and high quality sovereign countries. that's a bond like statement. to the extent that unconstrained can move at times into credit and into volatility plus or minus and into either liquid or relatively ill liquid types of securities, those are forms of carry, then you have that and that allows an unconstrained fund to buy at the right time hopefully and to sell at the right time. what is going on is the financial economy is divorced from the real economy. and we've been talking about china. but to the extent that hedge fund managers and unconstrained managers and mutual fund managers are experiencing margin calls and outflows that, causes them to sell, you know, even relatively high quality

investments to meet the margins. you see the markets cave based opinion the financial economy that is still highly levered. >> i have to imagine it's a really interesting time to be you. because as you said, bill, seems like most people are net sellers. that gives net buyers leverage. how much are you being pitched? how many are saying i have this energy bond at 17% yield. don't worry, it's safe. what kinds of stuff are you hearing? it's got to be crazy. >> you do see a lot of that in $2 to $3 million pieces, it's hard to see a $10 to $20 million piece in the bond market. you see high yielding energy bonds. you see petro on six and 12 and 18 month maturity yielding close to 10%. and so there are situations in which the yield, you know, appears relatively attractive.

i don't think that grabbing for a yield at the moment, i have not suggested shorting the particular instruments because, you know, they've come down a lot in terms of price and gone up a lot in terms of yield. but i wouldn't own them at the moment. i still think that the real economy and commodities and china are affecting the flow of money in and out of thof the le financial economy and i would wait for the moment and stick to high quality, sovereign debt as in u.s. treasuries. >> wow. so that's not very much. i was going to ask you, bill, we have waited for yield for so long. people have been so hungry for yield in a zero interest rate environment. and then when yields finally arrive, everybody is terrified of it, right? because what it signals. is there anything out there that you can recommend to somebody that says, yeah, the coupon you're going to get here is higher than average, but you are compensated for the risk that

you're going to take or the sleepless nights you're going to endure because it's probably sold off more than it should? >> well, yes. and i have as brian pointed out. you know, i recommended some arbitrage situations like pcp and build america bonds, bbn. there are a lot of closed in funds that are selling at 10% to 15% discounts to net asset value. that means you're buying something at 85 to 90 cents on the dollar. and to a certain extent, some of the closed end funds deal in high quality municipal bonds which are baa and single a and type related. and sometime they deal in preferred stocks of banks which are much better capitalized these days than they have been over the past few years. you know, another idea in the closed in space would be a closed in fund with the symbol fpf. and that's a preferred stock closed in fund that yields close

to 8% or 9% and invests in high quality bank preferred stocks. so there are situations there. i would simply suggest buying value at a discount as opposed to buying value at the current market price. >> i was going to ask you what you like or love as a kind of core holding. i think you answered it. you like treasuries. i'll change and ask what you duration are you targeting as a kind of sweet spot? let me get your thoughts on puerto rico. >> okay. yeah, unconstrained typically doesn't stray much in term of duration space. the janus unconstrained fund is 2 and does pretty well in a market in which the long bond goes up slightly in price and down slightly in terms of yield. so, you know, duration is a plus from the standpoint of the yield it creates. it doesn't necessarily appreciate much when ten year treasuries are close to 2%.

puerto rico, i think a treasury official came out today and basically said that treasury -- the puerto rico was close to a hopeless case. not his words. he did suggest that they weren't going to intervene in the situation. and so i would think at the moment that the odds favor, you know, a resolution in the form of additional bankruptcies down the road. they have substantial liabilities in terms of pension funds and not enough to cover. >> you know, bill, the dire straits song "money for nothing"? let's separate the second line and focus on the first line. there's a lots of governments that are effectively getting money for nothing. everybody else, yourself included, all of us, have to pay. where does it end? how does it end? >> it ends at -- it ends at some point in terms of a certain yield, pry an. you know, for instance, the ecb, they have negative interest rates. can they lower interest rates

even further in order to prop up their bond and equity markets? perhaps. but at some point when an interest rate goes so negative, say minus 50 or minus 1% or minus 1.5%, then investors and every day citizens basically say i'd prefer to own cash as opposed to invest my money in an overnight security that, you know, takes one or 1.5% from me. so there are limitations in terms of what central banks can do. and i think investors have basically begin to sense that. that, yes, certain central banks can continue to lower interest rates and, yes, there's a possibility as opposed to additional qes from one corner or another. but, you know, the edfficacy is reaching an end in terms of generating growth and asset prices on a higher level. >> at some point we're going to get tmz will show the fed and treasury have been secretly

dating and we just never knew. they were spotted together at a restaurant. >> like gwen and shelton. >> go ahead, bill. >> give me ten seconds. yes, all central banks certainly the fed rebates the interest on the $2.5 trillion portfolio to the treasury every year. and so in effect the treasury issues debt, the fed buys it and the treasury doesn't have to pay interest on it. it is sort of a shell game that investors aren't really aware of. >> tinder for treasuries. bill gross, thank you very much. we appreciate it. bill, thank you. have a great day. let's get a market flash. >> we just want to point out if you are at home or you're in the car listening on sirius/xm, all stock indexes are in the red. the dow slipping lower about five points or. so the s&p 500 off by a quarter of a point, a percentage point in today's trading so far. the nasdaq pacing the declines down by .6%.

also want to call your attention to what is happening with shares of square which are sliding 9% so far. the stock is close to falling below that $9 ipo price. it's not immediately clear what is pressuring the stock specifically, one specific catalyst. the mobile payments company square is one of many 2015 high profile tech ipos that are starting to fall below the ipo price and have been so far this year. on the names also, fitabout it, box, etsy trading lower in the session and all floating at or below the ipo price. back to you. >> all right. thank you very much. all three indices now in negative territory at this point. so the rally that we saw at the open has disappeared and once again faded the rally. >> down back below 16. >> if we can bring the few stocks up here, again, i'm not picking on these names. i've talked about them a lot. i bring up the credit default swapz. marathon oil is down 7% today.

hess, down 6% today. conocophillips down 8% today. marathon is now down 40% this month. marathon oil. >> wow. >> one of the biggest oil companies in the united states is down 40% in three weeks. okay? we're talking about 71% declines over 12 months time. credit default swaps on hess and mro. those are what you buy to buy against the risk of default on insurance. that is still not suggesting default. you look at cles peek energy, chk, they're swaps, can we maybe throw these up? chk, cd 5 is the code. >> i looked up marathon's debt. and so far it doesn't look distressed at all. chesapeakes looks incredibly distressed. >> exactly. it's getting to be a situation where you look at -- you want to stop looking at this stuff every day. and, you know, the funny thing is -- again, if marathon if, you're watching, i contacted marathon a bunch for interviews of the ceo.

i'm going to call him out a little. he said we're not doing interviews. at some point the ceo has to say we're okay. we're okay. >> it looks like -- is the price down on chesapeake for some reason? maybe because of the early rise? >> i don't think that's -- i don't know what that is. but again, if chk, cd 5, that is the five year credit default swaps. the point is that the reason the markets are down is this, again, just to continued bloodbath in oil and the bigger point we tried to make was that it's not just about the oil stocks falling. okay? that hurts. it's just -- the american economy is much more than oil f you're norway or saudi arabia or venezuela, right? you're probably selling a lot of stock because you need to raise money to pay for the gap that oil is not bringing in. norway, seven like why are you talking about norway? norway is the biggest sovereign wealth fund in the world. >> because they produce so much oil for so long. they had all the revenue, right?

now they have less revenue. >> they need to sell. again, i'm not saying norway is selling stocks. i'm saying the sovereign wealth funds, they're sellers of size. >> think about saudi arabia and the social spending that they do that is fueled by oil prices. >> enormous. they're running a budget deficit now. they started to cut subsidies. they attacked that. they made actually gasoline more expensive. they've done some things. if this price continues lower, they're going to have to make harder decisions. austerity is what you call it. >> you're seeing a realization after months. listen, we were up in calgary and every ceo that was on with you guys, around the world or us, has said things are going to turn around soon. i think there is a growing realization that the dog may not need a bath. the dog ran off and whistling. >> can i ask you a provocative question? if the reason oil is down so much is because china's not buying as much, does china not

matter snil. >> i -- still? >> they're not buying much. they've been the margin alibiers of oil. >> so it's not just supply, it's a demand question. isn't demand part of the question? >> supply. demand remained constant. maybe it's down a little in china. it's up in america. we're driving 5% more miles. 5% more miles for americans is a lot. we're driving more. you want to hear the sad story of oil? somebody needs to make this documentary, right? if i had time, i'd make it. the iraqi war, trillions of dollars, thousands of lives, right? and now they're pumping four million bare rels a day and they're back on a boom. and iraq is fostering into the destruction of a great american industry. it's not their fault. you know, it's western countries are pumping money to rebuild the oil industry of iraq. meantime, they're the marginal seller of oil. now it's iran. it's saudi arabia. and you got people who i met in

north dakota and midland, texas. they're losing their jobs. >> consider this. there was a point where they predicted iraq would produce 12 million barrels a day back when the iraq war first happened. they said don't worry. can you imagine if they actually got it right and we would be -- >> you don't know. >> they may get there. >> libya is back on line. anybody that can pump oil is pumping oil because they need the cash. >> you remember in the '80s and the houston oil bust that took place. it lasted years. >> "power lunch" will be right back. you can't predict the market. but through good times and bad... ...at t. rowe price... ...we've helped our investors stay confident for over 75 years. call us or your advisor. t. rowe price. invest with confidence.

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all right. if you just joined us, we look like we're going have a good morning. i went on to cnbc.com at the crack of the sunrise this morning. and futures are up 250. well now all three major indices are down. we're seeing you two out of every three stocks are down. guess who is leading us down? chevron and exxonmobil. dupont which is a commodity company down 2%. caterpillar. there is your china story, too, michelle. down 2%. so the four worst stocks in the dow, again, are oil or commodity related. >> yeah. we saw oil move higher earlier today. and then just slip lower again. speaking of dow components, johnson & johnson plans to trim 6% of its workforce from the medical devices unit.

the cuts are part of their effort to slash $1 billion in annual costs. twitter hit with sporadic outages impacting users on computers and phones. the outages have been report add cross europe, middle east, africa and america. a handful of stocks are hitting 52-week lows including tiffany, alcoa, and murphy oil. >> the u.s. markets are all turning negative after an early rally with all the recent turbulence, where can you find the best value? barry james is president of the james advantage fundses and also co-portfolio manager of the james balanced rainbow funneled g to have you with us. let's start with one of your picks which i find curious in light of everything we've been talking about. it is valero. why? >> right. well, first of all, the cost of goods is dropping as the price of oil has been dropping. and what we find is that thing called the crack spread between what they pay and what they wound up selling it for. the price of gas hasn't come down at the same pace as the

price of oil. so they're making money hand over fist. they're cheap. they have very good earnings. they're growing very, very rapidly. they're up in the last year as opposed to the typical stocks you were just explaining in the energy sector. >> so they are an outlier and maybe to the extent they haven't suffered, that's a good thing. but they have all been hurt by being associated with the energy sector there. a couple of your other pictures are cooper tire and rubber. here again, i guess that cost of goods sold is part of the thesis. and alaska air which is one of your biggest holdings. >> yeah. again, both of those do play off of energy. they have lower cost inputs. both of them and all of the stocks that i mentioned, they're very relatively cheap. they have very good earnings. and they've been outperforming the market over the last year. they're on a little bit of a correction now. the other things we like is they don't have great exposure overseas to the dollar. and also they've been buying back shares. they pay a little bit of a

dividend. we think that's important. value oriented, we think is going to be the shift that we see in 2016. it's been all growth up to now. and it was a pretty narrow advance last year. we think it's going to spread into, you know, the value even if it's not straight up type of market. we think that it will play better in 2016. >> the market tried to bounce today. it wasn't sustainable. do you think it will bounce this year? and is it sustainable if it does? >> well, it has a couple of things it's facing. the fed took away the punch bowl that was making it free money. and you also have a relatively weak economy. and so we're vulnerable to what happens in china. a lot more correlation between our market now and what's been going on in china. so i think it's overplayed. you look at the markets way oversold today. 10%st stocks in the s&p 500 are above the 50-day moving average. that is typically an indication of a bottom. you see insiders are buying. professionals are selling. those generally work just the opposite. the people inside the companies tend to be right.

so we are due for a rally. probably a fairly strong one. but there is still going to be a lot of volatility this year. you got to be careful what you pick in the stock market. maybe bonds will do a little bit better this year than they did last year. so it will be pretty wise to have some of those in your portfolio as well. >> barry, thank you. barry james. james advantage fund. >> up next, the five big stock kaflz the day you need to hear about it. it is called "street talk." we're still doing it. a big reversal for the dow. we are now negative and optimistic start to the day. no more, by the way, we have to go out with a little eagles. >> one of my favorite songs. >> glenn frey passed away yesterday. we're back after this. ♪

time for "street talk" sh analyst recommendation of stocks you need to know about today. first up, shake shack. william blare upgrading it to an outperform from a market perform. the valuation is much more palettable even though it is still the richest among the restaurants. they think earnings growth should be strong. commodity costs, michelle, are favorable. the shack needs help down 22% over three months. in the same call the analyst downgraded dunkin' brands. >> a big effect on shake shack.

next up, procter & gamble. upgrading it to a buy from a hold with a 12 month price target of $85 a share. procter & gamble's relative size, scale, product diverse fiction provides down side protection adding that they foresee accelerating sales and also operating profit growth. down 16% in the last year. higher by nearly 2% today. >> hopefully we're all still buying toothpaste. mcdonald's, btig upgrading it to a bichlt $130 target. they note in september of last year the multiyear trend of domestic market share losses seems to have reversed. they expect recent change in market share trend to continue in mcdonald's favor. they've been winning back some business with breakfast all day menu. >> i love breakfast all day. it's my favorite thing. yes. it makes me so happy. >> are you a mcgriddlist? >> i love egg mcmuffins.

>> there are recent menu improvements and a more compelling digital and mobile platform. but that $130 price target is about 13% up side from here. >> when i order an egg mcmuffin on my phone? i don't know. d.r. horton has been upgraded to buy from neutral. the texas-based home building company has seen large revenue growth, impressive cash flow, they're raising the price target to 33 from $28. >> incredible. there are no publicly traded home building stocks up this year. zero, none, nada. none of the names are in oil-related areas. >> last pick. the smaller under the area name. be beacon roofing. you have the analyst at william blare upgrading it to outperform from the market perform. price trends and volumes are improving. residential demand experienced a "clear acceleration last

quarter." they think 36 to 40 cents of earnings achievable and the possibility of 40% upside in the stock. as the world ends, apparently the housing market is okay. >> it's amazing. why would a roofing company be up 57% and yet not a single home builder in positive territory? people are fixing their houses instead of buying new ones? >> it's that notch down that's been a tough two weeks for everybody. not a bad name. "street talk," beacon roofing rounds out our five stock kaflz the day you need to hear about. tyler? >> all right, sir. the final oil trades are crossing for the session. we're going to head live to the nymex when "power lunch" returns.

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let's get a quick look at the markets. stocks really in the red right now. what rally, folks? dow jones industrial average down 25, back below 16,000. the s&p 500 off about 8, about .5%. the nasdaq composite down about .75% at 3453. the russell 2000 is down 1.75%.

>> here's your cnbc news update at this hour. murders rose by more than 6% in the first half of 2015 according to the fbi. violent crime overall increased 1.7%. the agency found. director james come suggests it may be partly due to the fergusfur ferguson effect. with a life sized replica of the duke as a backdrop, donald trump was endorsed by the daughter of the late john wayne at his birthplace museum in iowa. trump saying he was proud to get the support. super model stephanie seymore has been arrested for driving under the influence of alcohol. she was charged friday after she backed her suv into another car in greenwich, connecticut. she refused to perform field sobriety tests. and pete rose is going to the hall of fame, of the cincinnati reds. the team also retiring his number 14.

rose has been banned from baseball since 1989 for betting on numerous baseball games. and that is the cnbc news update at this hour. back to you, brian. >> thank you. the oil markets are set to close for the day. once again, close down. go to jackie at the nymex. >> a 3.3% decline in oil prices today. we closed under $29, $28.46. we set fresh intraday lows as well dating back to 2003. the pressure, of course, coming to day from those headlines that iran would start to discount its oil as saudi arabia has done in the past to certain parts of europe. so the concern right now isn't just that supply is going to come back online from iran. but that they are going to get into a chicken, a game of chicken with saudi arabia regarding prices and continue to dig their heels in the sand. to give you context here, it's not a loss of revenue for iran. they haven't been getting any revenue in certain cases. this is anything they get for oil will be an add to them. saudi arabia really stands to lose here.

saudi said it won't lose market share. so this could continue to get increasingly tense. a lot of traders telling me they think we're going to seat declines in oil price that's people have been calling for, the low 20s are certainly possible from here. that's the supply side. on the demand side right now, not really an encouraging story either, michelle. >> all right. thank you very much. so oil closes lower. let's get to bob pisani at the new york stock exchange. is it that sim snm we see oil moving lower and stocks followifalling with it? >> yes. there is a technical level that was breeched and that is friday's lows. there is no piece without oil in the stock market. it's that simple. i'm sorry to say. that i wish it wasn't true. we hit 1880 a little while ago on the s&p 500. that was friday's closing low. and essentially we were sitting right near the august lows. so this is a very important psychological level. the minute we broke below 1880, there was an avalanche of sell orders. if you put up -- you can't see it. you can see the etfs.

volume spiked when we hit s&p 500 1880 and broke below. that put up the xle, you can see the divisive move down. there is the leg down in energy. the whole complex that is dependent on global growth, materials for example, you can put up materials, you can put up industrials intraday, they took a leg lower as oil moved to the lows of the day. the reason this is important is this technical level is we're at an inflection point. i noted this this morning. friday we closed essentially at the august lows. take a look at the 1867 was the august low for the s&p 500. nasdaq also closed essentially at the august lows. and right now we're sitting at 1870 or so, around there. and we're sitting at around 4444 on the nasdaq. the point here is that we're essentially, tyler, sitting at the lows for august which was the lows of last year. we break decisively below that. that is a very important

technical market. whether we hit that 1880 level and drop below it, there was an avalanche of sell orders that came throughout market. people are paying attention to those levels. >> the selloff in the market happened around the time that a headline crossed that said the saudi foreign minister is refusing to rule out seeking a nuclear bomb if iran manages to obtain one. they've said this before, actually. but would that headline have any impact for any reason? >> i think that could have been an impact. the reason people are debating that is in theory that can cause oil to go up because, obviously that, would be a concern about supply situations, obviously. and concerns about safety around the world. so you can make an argument. we have seen it down here. that doesn't really support oil going to the down side. but it did correspond with the time when the oil dropped to the down side. all i can tell you is when oil drops on a day like today, the markets go down. by the way, i believe the s&p

500 has not had a single day this year where it hasn't been negative. i'm checking that right now. i believe -- not a single day. >> yeah. pretty negative milestone. all right. tyler, let's get over you to. >> thanks, folks. big day of earnings. we visit covered right now. mary thompson on morgan stanley out this morning. bert bertha combs on united health. >> it was a good quarter for morgan stanly. they beat on the top and bottom line thanks in part by two continued streng njt equity trading business and mergers and acquisitions advisory fees. of course, problems continued in its fic business. basically, the debt trading business. now look ago head to the company plans to go ahead with the new cost cutting program looking to cut a billion dollars in cost by 2017. and as a result, investors believe that company or the hope is that the company can hit a long awaited profit goal of roe, return on equity, between 9% and

11%. investors initially liked the news. market sold, stock sold off a little bit after. that one thing i want to note, the company also talked about oil exposure saying hit $16 billion in loans outstanding. they haven't seen any run off into the real estate or the other corporate loan market right now in the company has been reserving for. that. >> very complimentary story today in one of the papers about how their brokerage business is closing the gap on the long time leader merrill lynch. >> yes. although, we do note that the results are not quite as good as some people were expecting. a lot had to do with the markup. the company looking to improve margins in that business in the year ahead as well. that is part of the cost cutting program that they're initiating. >> thank you. let's go to bertha combs who is covering united health. >> that's one of the few standouts today, united health. fairly bullish outlook is lifting the entire health insurance sector. after posting profits $1.40 a share. that is two cents better than estimates despite taking a $245 million charge for losses on

obamacare exchange plans. the united expects to end the year with about 700,000 obamacare xlafrpg measures. that is a net gain of 200,000 from last year. but the company feels they have accounted for the impact up front now. overall, ceo says 2016 is off to a strong start, particularly wlit comes to medicare advantage where united expects a gain of 300,000 new members this quarter. that is almost as much as they have looked at for the full year. and open item, the pharmacy unit which is growing faster than the insurance business in 2016, united sees 20% top line growth at optoum. and they now represent more than 40% of the company's operating income. so that's a real driver for growth here. >> all right. bertha combs, thank you very much. and finally, netflix. julia? >> the big question is whether the company will top the 5.15

million net additions itself projected last quarter it would add this quarter. is that number that will send the stock swinging in one direction or another? now the second topic to watch is the success of netflix's international rollout. this comes weeks after it announced it's gone global sooner than expected. investors will be looking for insight into traction so far. concerns about new international rivals and updates on when netflix will launch in china. investors will also be looking for updates on netflix content strategy. they're spending on orginals and licensing content. in light of competition and push back from studios looking to control distribution, we may hear many questions on that topic. tyler, back to you. >> thank you very much. julia, thank you. mary, thank you. bertha, thank you as well. so is now the time to get into netflix? we have a bull-bear debate on that one when "power lunch" returns. here at the td ameritrade trader group,

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welcome back to "power lunch." activist investor eric jackson pressuring media giant viacom to make changes to the leadership

and undertake cost cuts and push into digital offerings to boost the stock price. the stock higher by 4%. free port rose 5.7% in the free market as copper prices around the world gained on the heelsst chinese data that was in line with expectations. however, that stock has now reversed its gains falling 8.5%. incredibly tough year. and shares of yahoo jumping after a report from bare yonz say the stock could gain 35% if it sells its core business. brian? >> if your kid brings home a c in math, you might actually be happy if you thought that he or she was going to get a d. after all, they beat expectations. pretty much sums up the state of bank earnings right now. but does that make any of the banks worth your money? the director of research at ubs, morgan stanley wasn't terrible. are any of the banks really on that solid of footing right now? >> yeah. i think that's the issue right now. that's why we have seen the stocks act the way that we have. i mean at this point, there is

only one of the bullish investment banks trading above book value and that is j.p. morgan. that is a safe haven in the effect that any of them have been safe havens. people are worried about corporate credit turning. oil is just the beginning. it will leak over into other parts of the credit book. to me, a very conservative approach. i think it's created a great deal of concern around the group. makes for very, very attractive entry points if you got the ability to have a longer term view and you don't have to be worried about the next few months. >> houm how muw much oil is sit around the big bank books or just this awful low grade stuff? >> right. most of that stuff is packaged into bonds and sold off to investors. but to some degree, there are loan books within all the banks. they're often very, very small portions of the balance sheet. in the example of the money centers, the b of as, j.p.

morguiae morgans, you're tacking about 2% of loan books. they're building reserves and holding reasonable amount of reserves against them. to a large degree, these are to inve investment grade credits. they're not the things you need to be too worried about at this stage. >> who do you think out there look better than anybody else? anybody worth while for our viewers or listeners to put their money into? >> the stock that i'm recommending with the most conviction right now is morgan stanley. i think that they're about to change around the franchise here. they're shrinking the fic business which didn't generate sufficient returns. they're focusing on equities and the wealth management business. this is the direction regulators want them to go. it should lead to capital returns to shareholders. right now, you're getting it at about 75% of tangible book, you know, nine or eight times earnings next year. very, very attractive entry points. f. you have the ability to be patient and not be worried about the panic that we're seeing in

the market. if you're concerned about the market down turn over the next few months, then i could understand wanting to hold back. it's just going to be very tricky to understand once the fears start to ease and we see the rebound in the marketplace. >> it was a pleasure. thank you very much for joining us. >> thank you. >> we should point out the s&p 500 is now below its august low. it sits at 1865. 1866, down 14.25 points. julia walked you through the highlights of netflix's earnings earlier in the program. we want to show you. this just since the beginning of the year, less than three weeks ago, in case you came to realize it's the 19th of january or whatever it, is big moves in netflix stock. year to date, down 7%. up 9% on january 9th when netflix announced a move into 150 countries and down 9% last week on reports that netflix missed the subscriber numbers. one of 2015's hottest tech

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unless you're short stocks, a bad year is getting worse right now. the s&p 500 not only down, but below its august closing low of grant, but otherwise a terrible year in the stock market, exxon, chevron, caterpillar. >> and it doesn't feel like that cathartic selling that might suggest the bottom, it's this orderly painful drip, drip, drip of decline. >> if you are a big hedge fund or sovereign wealth fund and you need to raise money you sell what you can. everything. you just sell. sell. whatever. >> netflix stock moving higher by nearly 2% ahead of earnings after the bell. the stock traded lower by 10% over the last month. analysts are predicting -- let's bring in michael pachter who has a sell on the stock and rob sanderson with a buy on the stock. not only does he have a buy on

the stock, rob, you think it can triple its market cap by 2020? make the case. >> well, i think when you look out to 2021 which is the fifth year after they do the global launch if the penetration and adoption curves even flatten from where they have in the market ten traded today, we are growing out to 100 to 110 ammel national subscribers, i think it peaks out at 65 to 70 and $12, $13 of earnings power in 2021. >> michael, what don't you like? >> i think rob is right about everything he said except the earnings power. they absolutely can get to 100 million international sub, they are not even remotely close to making a profit and as they're rolling out in the 130 countries their content costs will escalate dramatically. we are seeing a lot more competition for consent, you're seeing hulu bidding up content, amazon bidding up content and a lot of local operators bidding up content.

i don't think there is a chance they will be profitable internationally ever, i think they need probably 3 million customers in a given jurisdiction to even sniff making a profit in that jurisdiction. canada and u.k., yeah, they will be profitable, every place else, india, never, indonesia never, japan never. >> rob, answer michael on that. >> yeah, obviously he thinks very differently. i think when you're looking at a market like japan they do license content for that region. when you talk about indonesia, india and many others they're going with a global offering, they're getting global distribution on all of the originals which will triple in terms of the number of original series launching in 2016 and that will only grow. this is a company that's the largest procure remember of content on the plant with $6 billion content budget next year. they're scaling that when you get global distribution rights. >> are you willing to pay that high a valuation?

is this true, 500 miems earnings? >> if they make 20 cents and they're trading at 100 the math is pretty easy, yes, it's 500 times. i think rob is wrong on global distribution. so far netflix has not aired a single piece of content that it owns. it does have 30 programs in development right now that it will own so it will get leverage on those. that comprises about 1% of their total viewing hours, let's be generous, 2 to 3% of total viewing time, it's going to take them 30 years to get that up to a meaningful percentage and compete with hbo. >> the hit rate on content is not all that high unless you're really good, real lucky or both. >> you see the stock going where? >> i'd say that they're not going to break until they run into a domestic subscriber ceiling, i think you're going to see a hiccup in the middle part of that year, got a $40 target but i think it probably drops only to 70 or 75 or so.

that's still a nice down side from here so i would not be long with your money in june. >> rob, where do you see it going? >> i think that we are looking at off a $12 earnings, a $300 stock price in five years, what's that worth today? put a heavy discount rate, even 25% per year and that can be a $145 stock in 12 months. >> michael, quickly, forget netflix for a second, can i ask you about twitter? >> go for it. >> twitter down another 8% today. howard linz said shame on the board, huge wealth destruction. this is not a joke, speak up. are you disappointed by twitter's management? >> i don't think that they understand what they've got and i don't think they do a very good job of promoting the brand to people who don't use it, but i think people who don't just twitter have no clue what it is, i think that's incumbent upon management to educate them and they are not doing that.

i'm disappointed. >> michael, do you think twitter will be an independent company in 12 months? >> the only company i think that should buy them a facebook and i don't think that they will. that make a google would step up but after google plus i don't see that. >> how about this, michael, do you think twitter will be a company in 36 months? >> they have 300 million users. thatest not going to zero. there are power users like me, i'm on there every single day, i'm not going away. >> i'm there, too. in fact, i will tweet that i was talking about twitter. people pitching about the -- about twitter being down but complaining about it on switcher. where are the managers? where's the ceo? what's going on there? >> i think the problem is that jack is one of the founders and i think it's like looking at your kids and acknowledging they're ugly and they need plastic surgery. it's hard to fix something that you created and i think the company would benefit immensely from an outside manager. costello was not that guy.

they need somebody like cheryl samberg in facebook who can come in and be a face of reason. >> i love vivid met force. >> michael and rob, thanks for joining us. by the way, reaching out to every major oil company's ceo and, again, i got an e-mail back, thank you for your interest but we are not going to do the interview. i'm not saying everybody should do the interview. if anybody out in pr for oil are listening it's not my interest, it's your investors interest because they are down 80%. they're getting wiped out. it's not my interests that i'm worried about. it's like twitter, it's the investors are getting wiped out. so don't thank me for my interest. >> you had some of them on at that conference in mooimg. >> some are talking. >> a lot go to the bunkers. >> i think investors, maybe i'm wrong because i don't own any individual stocks, they need to come out, see the ceo and say everything is going to be okay. these are difficult times. difficult times. >> the financial crisis was the same thing, none of the asset

manager ceos would come on. >> "power lunch" will be right back.

all the major averages now in negative territory, the early morning rally has completely disappeared and it was a strong one to lose. what's up? utilities, consumer staples and telecom. that's t guys. >> and netflix, the stock we were just talking b the fourth best stock in the s&p 500. third now in the s&p 500 so far today. >> with a huge valuation. let's see if it holds on after

the bell. that will be an important stock for after the bell. thanks for watching, "closing bell" starts right now. hi, everybody, and welcome to the "closing bell," i'm kelly evans at the new york stock exchange. >> and i'm bill griffeth. remember the old days, like last year, when buy the dips was the mantra on wall street. no longer, it's now sell the rally, that's the new mantra for the stock market these days. the dow was up 184 points on the open this morning and then it lost all of that. we're down 61 points right now near the lows of the session. we will look at what's behind this move and the other moves we've been seeing lately just like it. also we have corporate earnings, that going to improve sentiment? >> and plenty of people who are hoping so. energy keeps getting hit today and that