which one? >> j.c. penney and tiffany's. you look at retail sales number, it was positive. that's what's going to be going forward. >> that does it for us on "the halftime report." "power lunch" starts right now. >> thank you, melissa. we'll see you in just a bit. welcome to "power lunch." stocks are selling off. expectations grow over a possible june rate hike. there's a look at all ten sectors now. utilities and consumer staples are in positive territory today. hi, everyone. i'm here along with brian sullivan. tyler mathisen is going to join us in just a bit from washington. but first, let's kick off what's going on with the markets. more on this thursday market slide with dominick chu.

>> 168 points to the down side. at the lows we were down about 185, 186 points. so we're off the worst levels of the session so far. but an interesting carry through from yesterday's trade when it was all about the fed minutes and the idea. the possibility of a june rate hike from the federal reserve and that really drove markets kind of a little bit more towards the volatile side. today, most is to the down side in terms of moves. you can see they're off by 1% for the s&p 500. utilities and staples have taken up the lead if can you call it. that up about a quarter to a third of a percent. they're showing signs of life here in this particular down day. the financials are interesting to focus on because so many of them, including regional banks, were such big gainers in yesterday's trade. on the idea that interest rates could rise on the longer end and the shorter end and maybe expand the yield curve and give them a profit margin. the net interest margins, you'll

hear traders talking about financials, the big lagger today off by 1.5%. retail is the key today here. walmart, the biggest retailer of them all, dick's sporting goods, up by 7% to 8%. ross stores and gap, i want to point out because they report after today's closing bell. back to you. >> i got, dom. thanks so much. so new york fed president william dudley echoing what we heard, a summer rate hike sont table. let's bring in steve liesman. >> and maybe going a little further, michelle. by suggesting it's even likely, more than just on the table. bill dudley in a press conference today following up on yesterday's surprise minutes that set a june rate hike is likely if the economy improves. dudley suggested, hey, that's what he expects to happen. he expects conditions to be ripe for a hike come summer. >> if i'm convinced that my forecast, my own forecast is sort of on track, then i think a tightening in the summer, the june/july time frame is a

reasonable expectation. it is really a question wlf the economy he could operates and performs in line with my personal expectations. >> he did say the british referendum remaining in the european union is something that he is watching. it comes eight days after the fed's june meeting and could affect the fed's decision. he laid out three factors that could affect the decision to raise rates in june. fed will be assessing the probability of the leave vote. the impact on financial conditions if the uk does leave the eu. and, of course, the underlying strength of the u.s. economy. dudley is won of three key players on the rate setting federal open market committee along with janet yellen and stan fisher. dudley thinks that the data is going to improve whether it comes to the fed hitting that critical 2% inflation goal. >> i think if you look at the labor market data really closely, maybe can you see the signs of a little bit of an uptick in wage inflation pressures. so that is also consistent with the notion that we're getting closer to full employment. so in general, i think i'm

pretty confident that we're going to get back to 2% as long as the economy continues to grow and is somewhat above trend pace that leads to further tighten g tightening. >> they're quick to caution there, making my promises here of a hike and the intentions to raise interest rates have been derailed before by weak u.s. growth. the best can you say is they think the data will break their way by june. and if they'll hike around then. and a hike around then if it does. just to be clear about my personal breathlessness, we're talking about a quarter point. >> and the markets -- i'm breathless. it's 25 basis points. let's just chill out. i want to sell the storey. the market is trading on it. it's down. but we're talking about 25 basis points. >> the 25 basis point increase is basically a 50% jump in the fed funds rate. >> that is true. >> so you can sell it that way. >> right.

>> so probability of a brexit vote, i do read into that if the polls are very, very close, they likely wait and if the polls are like there is no way they're going to lead, then they're okay to go to june? >> that's exactly the way to think about it. i think you're also pointing to a way the fed looks at. this from their standpoint, june or july is the same thing. it doesn't really matter to them. like if you investing for five years or 20 years, if you put that dollar in june versus that dollar in july, it is meaningless. >> i agree. except june is a press conference meeting and we've been told that fed won't make a big move until there is less of a press conference. >> exactly. but this he could also -- >> they have you in the front row pounding. >> but they can signal in the june statement and we know they have a process in place to create a press conference if they need it. >> all right. steve liesman, sit tight. let's bring in another steve with mazuno securities.

>> he thinks this whole thing is nuts. >> he yelled at me, too. he a lovable bear. that's how we're going to frame it. will the fed raise interest rates in 18 trading days? >> will the fed raise interest rates if not june, july they intend to do it. i don't think the datal give them the opportunity to to do it nor i do think they should do it. i'm two on the no side, one on the yes side. they have this in their desire to do. they could probably do it. remember last year they started in june. they went to september. they didn't get out until december. it's a year anniversary of the whole discussion about. this i'm sick and tired of talking about it. if you're going to do it, do it. live with the ramifications of it. at this particular juncture, it is crazy. >> all right. you know what? i agree with him. i think this is the first time we have agreed. but what are then stephen the ramifications of it? >> the real problem you're going to get is we're living in a

world of excess supply. not inflation. i think the fed is living in the past in this regard. we may get 2% inflation like that's horrific. we have an economy that is barely getting up to 2% inflation. they're barely getting up to inflation with the type of growth we've been having. and we've been struggling for years. let it run for a little while. what is the ris snk shutter the thought. >> steve, can we stipulate there are two states that economy can be in. one is in emergency state where it's falling at like will 8% annual rate. and that would warrant an emergency type interest rate quaun take t quantitative easing. we're not in that state anymore. is it 2%? we're doing trend. we're in and around trend? if job growth needs to be is 50 to 200,000 to keep the unemployment rate stable at relatively low at 5%, we're.

there can you not justify really really low rates at that level. it justifies a higher rate but not necessarily getting back to normal. can you agree with that? >> everything you just said i kind exception with. one, i'm not so sure at 2% is trend rate of growth. i'm not so sure 5% is really full out unemployment at this point in time. i'm not so sure any of those things are in place. and that's part of the problem. you're looking at a global environment where you're looking at negative interest rates and economy that's can't get out of their own way. and we're sitting say we're perfectly fine. we're normal. we've gone through the slower growth environment. i don't that i is the case. i think america is extremely productive. i think america is capable of doing a lot more than it's doing. and i think the federal reserve is one of the reasons why it's not happening. get out of the picture, guys. let this economy run for a while. >> get out of the picture and stay at zero. >> what is wrong with that? why is zero a problem?

japan functioned for 25 years at zero. >> functioning. >> there is no reason -- >> not thriving no. >> no, it hasn't. but they have other problems. they're in deflation. we're not yet. that's the critical issue. if the federal reserve plays games, we may very well be in deflation. in 2011, all the pundits were saying drop -- you know, he's got to raise interest rates. he raised rates once to prove he can do it. raised rates again to prove he really meant it the first time. where is europe now? >> that's a different story. >> again, you have the same thing. you've got a lot of problems right now. there are a lot of people saying the fed is wrong in this particular juncture as well. >> if you think trend growth is 3% or 4% and the unemployment rate can tick down meaningfully by several percentage points, then i agree with you. the fed should keep its foot squarely on the accelerator. >> that's the big difference. >> if you think. that. >> i do believe that. >> guys, good discussion.

i have a feeling our conversations about the federal reserve are not finished on this network. steve and steven, thank you. >> pleasure. >> there's awe new development in the case of the egyptair flight. the wreckage of the missing aircraft has been found near the greek island. that information coming to the airline from the country's minister of civil aviation at this point. officials are not ruling out any possible cause including terrorism or mechanical failure. the flight from pair tois cairo was carrying 66 people. let's bring in debbie hershman, the former ntsb chair. good to you have here. no one is willing to rule out anything at this point. but we have had people individuals and officials go as far as to say they are leaning toward the possibility of terrorism due to lack of may day calls, et cetera, from the crew on the plane. what is your assessment thus far of what you heard?

>> you know, it really is very oorl early. they say they found wreckage in greece. they're heading into the night time hour. there it's going to really hamper the search process and recovery process. but it is so early now. you don't want to rule things out. but certainly looking to those officials that have information, that have intelligence that they may not be sharing us with yet. >> for americans who are watching, there is a flight from paris going to cairo, operated by a foreign air carrier. obviously foreign airports. is there enough difference between what happens in the united states when it comes to passengers and cargo, et cetera, versus what happens overseas? >> i'm not sure we can make any statement that is declarative like that. there are always going to be risks and opportunities. that's why it's so important for

everyone to stay vigilant on the individual level, on the organizal level and also there is a lot of debate with respect to security and security lines in the u.s. and so there is always going to be that tradeoff between safety and security and convenience. this brings into sharp focus the conversations we're having about delays here in the u.s. system versus other systems throughout the world. >> where do you come down on the conversations? are they overdone? do those lines make us safer in your opinion? >> you know, i live here in chicago and so i am certainly focusing very closely on those lines. but at the end of the day, it is about putting safety first, putting safety of the passengers first. we never want to be in a situation like we were in 9/11. but we absolutely have to understand what are the value add activities that we can do and how we implement those in a

way that allows commerce and transportation. >> zrou an opinion on what those are? like what can be done? have we gone too far? >> there are people with more information to share with you on that subject, with respect to security. but we have to allow them to shart information in a way that is appropriate and protects all of us. >> thank you. >> okay, new developments on a high profile insider trading case involving phil mickelson. the latest next. as we head out, a look at the dow 30 on this down day. you both have a perfect driving record. >>perfect. no tickets. no accidents... >>that is until one of you clips a food truck, ruining your perfect record. >>yup... now, you would think your insurance company would cut you some slack, right? >>no. your insurance rates go through the roof. your perfect record doesn't get you anything.

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♪ whoa go with me now it's made for those who vacation like they mean it. universal orlando resort. welcome back to "power lunch." there is new developments at this hour on an insider trading case involving phil mickelson. let's get the latest. >> also involved here are former dean cr dean foods chairman billy davis and the attorney for the southern district of new york laid out the scale of what he alleged is a fraud here in terms of insider trading. in a press conference in new york a little while ago, here's what he had to say. >> for over five years, davis repeatedly and systemically fed nonpublic information about dean foods to walters who in turn

benefited handsomely to the tune of about $43 million in profits made and in losses avoided. from his trading in dean food stock. >> here's what we know. according to documents laid out by the government, the sec earlier today said the charges are against former dean foods chairman thomas davis and billy walters. davis has pleaded guilty and agreed to cooperate. walters, however, his attorney says the accusations are false in this case. davis is charged with tipping walters off to a spinoff from dean foods of white wave foods and organic entity and other corporate activities. walters said as you just heard there, to have profited by $32 million. avoided loss of $11 million. and in the sec documents, they say that professional golfer phil mickelson a relief defendant. he generated $931,000 in

profits. they want limb to return that money. so we're learning a lot more about how auld of this happened. mickelson's attorney put out a statement in which he said that mickelson was not charged in any wrongdoing here. so that is the latest state of play as we have it right now. a lot of details here. back to you. >> thank you. >> all right. let's bring in seth waxman, government investigations and sec enforcement party and john coffee from colombia university who specializes in securities regulation. all right. seth, mickelson agreeing to disgorge, give back the profits, paying nearly $1 million. no criminal charges filed. in your opinion, if this is the final outcome, is this the right outcome? >> well, i can tell you he's breathing a sigh of relief today. so the right outcome will yet to be determined overall. but for mr. mickelson, i think giving up the profits and moving on with his life is a result that he's probably more than happy to move forward with.

>> mickelson is known as a relief defendant. basically they say, hey, he profited but he probably didn't know the extent at which this walters and the davis from dean foods were talking about the insider information. do you believe that mickelson is getting off on the right way here? >> no you, i think this is the short fall of insider trading rule because of the newman decision. the newman decision says can you only convict or prosecute a remote tippee which is what mr. mickelson is if that person knew that the tippee paid some personal benefit to the tipper. he could know it's inside information and know it's corrupt and know it's unlawful but still be immune if he was not aware what benefit was being paid about it tipper to the tippee. and that's really irrelevant to the moral culpability here.

and we're seeing is another demonstration that although this is very effective prosecution, very good work by the u.s. attorney and the sec, they can't reach everyone. they don't know basically a irrelevant factor, the presence or absence of a personal benefit. >> get into that idea n that case that you referred to came down early last year, everyone said wow you threw a hand grenade in all the prosecutions. if we look at the fact that mickelson owed walters money, i guess walters for lack of a better term was mickelson's bookie. i don't know how else to frame it. the guy calls and says buy this stock. wouldn't that pass some legal muster as a benefit under the rules of the law? >> if he doesn't know that there is inside information behind the trade, then there is no liability. but we're talking about the new

elevated rule that the newman case imposed which says not only do you have to know that this is material, nonpublic information that has been in effect stolen or misappropriated from the company, but that there was a payment made by the tippee to the tipper. i don't think he is being sued for multiple damages as the sec could sue him because there say problem in prove in showing he knew this additional fact. >> you know, seth, this case today is sort of coming out with a resolution. so we're talking about it. it is actually been going on since last year. last august or july there was talk about mickelson being investigated around dean foods. why did anything take so long to get here? take us inside the process. did they say how did you know to buy this stock? why did you trust your professional gambling friend when he gave you a tip on a milk stock? >> sure.

>> the fbi did sit down and talk to mick willson. but these investigations are sometimes long term. the fbi and other resources will collect e-mails, documents, spend a lot of time analyzing bank records. so oftentimes what may seem as a delay to the public is really the department of justice kind of dotting their is and crossing ts and making sure they got what they consider to be proof beyond a reasonable doubt to ensure convince and, of course, on the sec side, liability. >> professor coffee, it's michelle here. i'm not a lawyer like brian s when i listen to you, i'm thinking why did mickelson give in at this point? could very not? >> there could be many reasons why mr. walters the gambler tips mr. minimum will son. maybe he wants to get paid back on the loan by giving mickelson a little wealth. maybe he's doing it for friendship. but this is how insider trading nets develop. people tip other people and we go to a long circle of

information. and it corrupts the system. here we have to admit that government has gotten the principle actors. they've gotten the chairman of the board of a publicly held company to plead guilty. they're going to go after mr. walters who is in a lot of trouble. the information in the dean foods information is very devastating and it's going to be very hard for mr. walters to be able to deny all of that. >> i have a law degree, dinlt practice, thank god. >> that doesn't make you a lawyer? >> no. i'm just another idiot a law degree. >> just play one on tv. >> sometimes doichlt seth and professor coffee, thank you both very much. last comment i would say this, what john coffee just said is interesting. the fact that chairman or former chairman of a publicly traded company has a really close relationship with one of the biggest gamblers in vegas itself doesn't appear well. >> and full disclosure, i don't think there should be laws against insider trading.

i have a whole chapter in my book. >> you know i'm right. >> still available on amazon. >> that's right. let's get back to the markets. yes, the overall markets are lower to dafrment but even in a sea of red, there are green shoots coming up. we're going to bring you that sunshine with stocks hitting all time highs today. are these names you own? find out coming up. my experience with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and i'm a usaa member for life. usaa. we know what it means to serve. get an insurance quote and see why 92% of our members plan to stay for life.

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welcome back. they're saying that according to a u.s. senior intelligence official familiar with u.s. capabilities when it comes to imagery from the area, strong indications there was an explosion on egyptair 804 but it is unclear. the indications are strongly there was an explosion on egyptair we just do not know the cause at this point. >> with technology, can you see heat and light. i think at this point, without speculating anything about this crash itself, we know one thing with fairly certainly which is that planes generally in this day and age simply do not fall out of the sky. >> right. there was some kind of catastrophic events. >> taking us back to the malaysia air crash, if he with have the imaging, i guess that's what they're going to call it,

to tell fluss with an xblaegs on this flight, we have not had any subsequent news of that nature on the malaysia air flight. >> right. there is an area of the world that has an intense amount of coverage, so to speak, intelligence officials and et cetera. is all right. more "power lunch" right after this break. don't move. this just got interesting. 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, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction,

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hi, everybody. welcome back to "power lunch." we want to once again alert you to what u.s. intelligence sources are saying. they've been looking at imagery that indicate strongly indicate in their word, that in that egyptair crash, it probably was an explosion. that's what they are saying. they have been looking at a number of things according to the senior intelligence official, it says although we do not know the cause of the crash, infrared on multispectral images strongly indicate there was an explosion on egyptair 804. the cause remains unclear according to the source. it is described as a persistent stair on the region which

collects everything from sound waves through multispectral images to pressure. so it sound waves. it's light, it's pressure. it is all of that. as they look at the images, it strongly indicates there was an explosion aboard egyptair 804. what the cause of that explosion was, we certainly do not know. we're also getting word from greek defense sources and others saying that they are starting to find debris. it is obviously still developing story which we'll continue to update throughout the day. back to you. >> thank you. time to get back to the markets. if you have money in stocks, not a great day. not a great month for your money. only six down stocks are higher. let's find out what is moving and why and get back to dom chu on the floor. >> what we're seeing right now is the dow off by 130 points. we're 60 points off the lows we

saw earlier this morning with regard to the market move lower. one of the interesting things about the market is only in the last hour or two very seen a little bit of relative, i mean relative strength in the markets overall. if you take a look at the sectors starting to gyrate, interesting to point out that we're now seeing energy which had been moving lower on the day most part, trying to get to that flat line level. utilities staples leading the way higher. the interest rate proxies as ten year yields moved lower. interest rates moved lower. typically the stocks move higher. but energy trying to get back to flat now. we're seeing moves in oil prices now off of the worst levels as well. you can see the big movers in energy today. back over you to. >> all right. thank you so much, dom. speaking of commodities, the final gold trades are crossing for the day. you heard steve liesman earlier,

dudley said not only is the rate hike on the table for the summer, it's likely. that means the dollar is stronger today. that feeds through to the entire commodities complex. gold is lower now by 1.5%. all them lower, sharply lower. pill a palladium is off by almost 4%. we're seeing bill moves in the bond market today as well. rick? >> you always frame everything perfectly, michelle. you know, it's all about twos in the dollar and all about the word likely. when likely hit the wires yesterday, no traders i know read beyond. that they were in the pits. it seems like some extent likely is getting walked back. i think that's unfortunate. but at least twos and dollars still in the believer camp. look at one week and twos. what is of particular interest is we did extend the yield spike

higher today than yesterday. that's important. we dment match yesterday's high spike. 30s missed it by a wider margin. but let's go to the two day to get a micro look at the dollar index. it definitely was momentum driven to the upside. continuing the likely dynamic that the fed popped into the market and one week of the dollar index look add gresive. we'll have to see what market participates believe as we get closer to the meeting. michelle, back to you. >> you bet. june rate hike is likely. let's bring in larry kudlow. larry, your thoughts on with the data last week, what we heard in the fed minutes and now today, dudley. >> no. >> no hike? >> no. don't do anything. >> that's what you think they should do or that's what you know -- you think they're going to do? >> i don't know. but i think they will not raise their target rate in june.

i dmot think they'll raise the target rate in july unless you get a very significant bounce in higher inflation which we simply had not seen. inflation spreads in the bond market which yellen looks at. those things 150, 160 basis points. haven't really moved. it's a very low number. commodity indices have been flat over the year. the dollar is flat over the year. i don't see anything that suggests inflation breakout. and that ought to be the fed's principle number one criteria. is there or is there not a big inflation wave coming? the story in the "wall street journal" today, he thinks inflation is overstated by lousy accounting. he is probably right. my advice to the fed, stay put and pray, pray for some fiscal stimulus in the form of slashing the corporate tax rate. that's what i would do.

>> okay. so larry, and i'm going to apologize for this awful pun s this then just a fed herring that they -- i'm sorry -- i had to do it. they floated out because the language indicated it might happen, larry. so are they just, a, floating something to see how the market reacts or, b, just awful communicators? >> i would prefer the latter. by the way, i love inflation herring. i that i is a wonderful thing. hang on to. that you know, you got a lot of mouths. you have a lot of noises. you have a lot of babble going on inside the fed. i would rather hear what if anything stanley fisher says or janet yellen says. i know mr. bill dudley is an important guy. but i think he's got his head is too far over the skis. look -- what is it they're tightening against? you would tell me this? the real gdp year on year is less than 2%. we're in a business recession of

sorts. year on year -- >> in the market where people have to actually place monetary bets on whether or not they're going to hike the fed funds futures, they're only pricing in at 28% chance for june which is up from 14%. but it's by no means a slam dunk. it's almost like what you're saying, they want to hear from janet and stan before they really commit. i don't think the fed has any real long lasting power over the economy. but if you look at the real economy, the consumer is okay industrial production is falling. durable goods, factory orders year on year is falling. you're going to get a bounce on the second quarter. that is because of the seasonals every year.

i don't see any reason why this kple is going to take off. and again, if the federal reserve wants to see faster growth, they should rely on fiscal policy. in particular, my hobby horse is slashed corporate tax rate. but if the fed is tightening, then the inference is inflation is high and rising and the economy is too strong. you would show me the evidence of either? >> got it. >> really. >> i mean, come on. all that stuff, i love reserve bank presidents. god bless them. they take huge sacrifices to be in their position. they have fed herring every day for breakfast. but the fact is, it is a big but. it's a free country. they're entitled to their opinion. i dmot seat evidence and, michelle, i go back -- i don't know how many years i've been doing this, 30, 40 years. fed is supposed to tighten the

money supply and interest rates. right? when inflation is rising. >> larry -- >> would you show me evidence of inflation rising? show me. show my a little bit. show me. >> we're going to cut you off. we have to get to london for breaking news. >> yeah, we understand just within the past 15 minutes or so being told by a u.s. senior intelligence official familiar with the area where egyptair 804 went down, their surveillance technology did detect or strongly indicates that there was some sort of explosion connected to this flight. to egyptair flight will 804. the senior official telling nbc news the cause of this potential explosion is unclear. they can't say whether this was caused by a bomb or something else. but the technology does suggest

that there was some sort of explosion on this plane. they're saying it's more likely that terrorism brought down this plane than any sort of technical fault at the same time cautioning that we don't know the cause at this point. and also, we're hearing just within the past hour that wreckage has, in fact, been found. it is fairly close to this area where they were searching throughout the day. reuters reporting that some of the wreckage is blue and white. that would match the color scheme of egyptair. but egyptair also putting out this statement saying that they're continuing to search for

more debris and also expressing their deepest sympathies and condolences to the families and friends of those affected. that's the latest from here. back to you. >> kelly, we were -- we were discussing earlier big difference between this and the malaysia air crash is that this is an area of the world that is highly monitored by many intelligence agencies, by many governments. we'll get a lot more data information in this case than we did in the other case. >> absolutely. very closely watched for obvious reasons. it's a strategic area in the world. you have egypt, you have northern african countries, you have the middle east, israel, and so forth and so on. so syria, of course, so this is an area where intelligence officials are keeping an eye on things almost constantly. the words of this senior u.s. intelligence officials percent sift e

sift e persistent stare on the region to see if there is any sign of any explosion or anything unusual in this area. of course, there are people who report on this constantly, pete williams in d.c. who can tell you more about this technology and our capabilities there. but the senior official saying, yeah, it appears as though there was an explosion. we probably will hear more. >> got it. >> there say pentagon briefing under way right now. let's get right to it. >> navy league sea airspace form on tuesday, this approach is deeply troubling for several reasons. it is gambling with war fighting money at a time of war. second, it's a step in the direction of unraveling the bipartisan budget agreement agreed to just seven months ago. >> all right. if the pentagon -- and that is peter cook, former colleague of mine, if the pentagon does address this issue, we'll bring you the headlines or take you

back. the reason i bring it up, michelle, actually down 100 now. and often whether we have seen concern of terrorism. >> yep, you. >> you see the market react to the down side. i don't know if this indicates any unfortunate level of sort of sanguine ti that people now have around what is likely to be a terrorist act. >> it's hard to know today, is it takerism? it is fear of the fed? it could be both of thoem wrapped up together. >> we'll have smart guest onz to talk about all this stuff. we'll take a short break and be back right after this. a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars. but we saw an opportunity in sharing cars.

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from the pentagon. tyler? >> that's right. this is the investment company institute. this is really the nexus of where america main street meets its own money because these are the folks who run your money in 401(k)s, etfs, mutual funds and so much more. they gather every year. you know what is going to happen over the next ten years is the way people interact with their portfolios, with their portfolio managers, with their ib vestment advisors is going to change. think about how the way we communicate have changed over the past couple of decades. change is coming. you need to get ready for it. i've got two women here today who are on the forefront of that change. that's practically all they do is think about what is coming down the pike in the way you relate to your money. lisa jones is president and ceo of pioneer investment management and andrea lisher from jp morgan asset management. >> you were on a panel earlier

today. you're about to do one, lisa. there's a lot of indexing. there is a lot of automated investing already out there, etfs. they're not active. there is a lot of technology that's going to come in here. should portfolio managers and investment advisors start look forg a new job because we won't need or want them? >> absolutely not. i think there is context. this is a $24 trillion industry. 25% of that today is in passive products. so not to suggest that they're not important and not to suggest that you don't need both active and passive when you're building portfolios but that context is important. where i think the industry is going is away from returns, return type analytics or i'd beat the benchmark by 1%. and we elevate the dialogue. this is already starting in the industry. elevate the dialogue to talk more about goals. what you are actually trying to

accomplish? is it that you want to send your child to college like we were talking about earlier. >> less focus on 4% than 9%. more focus on am i getting to where i need to be. >> yes. >> but aren't they basically different sides of the same coin? >> well, you certainly need the underlying building blocks in order to get there. those are ought krilicily important. how you are building a portfolio that aligns to the goal you're trying to achieve? and most importantly, how you are communicating to your end client how you bridge that gap? >> so, lisa, your pnl is on financial technology. it is the buzz word. walter isaacson is talking about that very thing. how is it going to disrupt and maybe enhance the ways americans interact with their financial team? >> when we take a look at our industry and the amount of money we invested in technology over the last many years, the trans

formation that we're seeing is in the past the spend on technology has been predominantly in the back office. infrastructure, business as usual, disaster recovery, cybersecurity. and what you have today which is taking place in other industries is the growth of technology which is now being brought into the front office. >> we're tight on time because of all the news developments today. is my money safe from cyber hackers in the mutual funneled business? >> the amount of money we spent in cybersecurity is significant. there is no foolproof safe way but there is so much technology and protection around the industry. >> my money is safe? >> yes. i would sat same. >> i'm sorry we didn't have more time to talk. we've had lots of news developments today that we're following. we'll fin to follow after this short break. at the marine mammal center, the environment is everything.

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. stocks are holding in the red. fears of a june rate hike being in play and concerns about terrorism related to the egyptair crash. you can see the major averages, they're off the highs but they're also off the lows. as they move off the bottom one, two, three, now we have three s&p 500 sectors in positive territory, basically whatever sold off the most recently seems to be higher today. melissa lee has more on the transports. >> thank you. dow transports down 1% today. leading the losses here. airline sector no surprise given the news of the egyptair in the headlines, but also we got a major call from clsa initiating coverage of a lot of the rail stocks. very, very kaushgs cautious on

space. we should note that ksu, cp and csx all started at an underperform here. let's bring that that anl whoist has got more on this call. david, great to have you with us. >> good to be here. >> one of the rails initiated a sell rating. $79 price target and that is union pacific. the culprit seems to be coal. it's not necessarily the same for all of them. why is coal in particular a bigger problem for unp as opposed to the rest? >> the issue is that they move mostly coal. they're extremely high, almost double historicable average. eastern inventories are higher. nms natural gas prices are going to rise significantly or have a big heat wave and cold wave next winter, the inventories will stay high and shipments will remain weak. so they should remain weak into 2017. >> all right. kansas city southern this is an strg one. you point out that it is trading at a premium to pier peers.

a big story is the mexico storey. but you're worried about a stumble in the mexican economy. mexico is tightly correlated with the economy here in the united states. this seems like a big call. >> well, you know, i'm not making -- i'm trying not to make it a huge call. but at the end of the day, yes, mexico is tightly wound. the big thing there is auto. i mean that's the big growth story there. so if they start to pull over in general, it's still the same whole pot. at the end of the day, that's what we're worried about with the mexican economy in term of kansas city southern. that is the big growth engine. canadian pacific wrung out the operational savings that they can at this point. what is left for them? >> they're trying to take volume from canadian national. i think the ceo has done an incredible story turning that company around. i don't know what is left. you have coca-cola is under pressure. you know, you have crude by rail which obviously is under

pressure. i don't know what is left from a volume perspective there. plus, they have canadian dollar headwinds right now. >> right. david, i appreciate it on the very bearish call on the railroads. >> thank you. >> it is now just about 2:00 on wall street. there is a lot going on today. stocks are down but the dow is well off the session lows. the dow is down 124 points right now. we'll get more on the markets and your money in a moment. first, another major development on egyptair flight 804. imagery strongly indicates an explosion from the aircraft. phil lebeau joins us with more on this breaking news. >> and that's really the development getting the most attention in the last half hour. nbc news making that report. when you look at the gentleman trektry of the plane and this latest indication along with a number of other factors about what happened or what we know happened with this egyptair

flight, it's pretty clear that people are increasingly looking at the possibility of perhaps terrorism being the factor that brought this plane down. they strongly indicate an explosion. the egypt authorities are now leading the investigation. by the way, debris has been spotted. it has been found in the mediterranean. as they get that debris, start to look for the black box, data recorder. that will hopefully give them more clues tooz what happened. 66 passengers and true on the egyptair 804. it was flying at 37,000 feet when it leflt the radar at 2:39 a.m. local time. so in basically in the middle of the night. it plunged down to 15,000 feet immediately. thfact there was no distress call. that is one of the indications that this is not something likely to be a mechanical failure. usually you have pilots who will say something's wrong. we need to do something. there was no distress call at all. as for this airplane, there have been some questions today about

whether or not maybe something went wrong with this plane. it was built in 2003. the pilot had vast experience flying an a-320 and flying commercially. 6275 flying hours. the first officer april 2700 flying officers. this was a veteran crew piloting the plane. the real news that came out, u.s. intelligence sources telling nbc news that imagery strongly indicates an explosion in that area. guys, keep in mind, there are a lot of assets focused on in a area, intelligence assets, different countries focused on the mediterranean for all the obvious reasons. if they have a good indication, can you bet they're moving forward in that direction. >> the phrase, persistent stare. all right. thank you very much, phil. so that flight originated in paris. that is where our reporter is. >> flight 804 did originate here

10 minutes after 11:00 p.m. et was en route to cairo, expected to land in cairo at 3:15 a.m. this morning. as know, that flight never made it. french authorities throughout the day are very much focused on the families of the potential victims here. at least 15 french nationals were onboard that egyptair flight 804. and there was a crisis center set up very easterly dwroi day. the french foreign minister coming out and speaking about the big investigation that's going to include not just the french authorities and the egyptian authorities but the greek authorities as well. we heard multiple things out of the french government. they're working hard with partners in this investigation. we also heard, of course, from the french president. he said he wouldn't rule out any possibilities as to how this plane came down and the potential of terrorism. the foreign minister saying that was all options on the table. guys? >> yeah. we'll talk more about that right now. thank you so much. joining us on the cnbc news line is collin clark, he's a terrorism analyst at rand.

mr. clark, thank you for joining us. you specialize in insurgency and terrorism. when you see the details thus far as we know them, was this terrorism? if so, who do you think did it? >> well, i think so far all signs are indicating that it was. i have two initial thoughts, which group was responsible and what kind of explosives were used? of course, the answer to the second question might help better inform the answer to the first. i think likely candidates are isis or an isil affiliate or one of the al qaeda franchise groups. that's a group that's tried to take down airliners several times before and has the resident bomb making experience to make it happen. >> what do we know about egyptheir egyp egyptair? the origination from paris and landing in cairo or attempt to land in cairo. egyptair in particular likely to be a victim of something like this because of lack of

security, because of the nature of the airline? what? >> i think it's the threat combined with, yeah, the lack of capability. we know the isil affiliate and they claimed responsibility for the downing of a russian airliner over egypt in 2015. it's a combination of low capability by the egyptians and high threat level. >> collin, we know that al qaeda basically issued an order to go after western airlines. egyptair is not. that it is an arabic airline based in an arabic country. it is member of an arabic air alliance organization. are you surprised that if this does turn out to be terrorism that it was indeed an arabic airline that was targeted? >> not necessarily. because again, the isil affiliate is fighting against the egyptian government. they look at the current government as largely in a regime and so with little regard for civilians who may be on that

airline, it doesn't surprise me in the least, especially given the connection to paris. >> let's talk about paris. what did we know about the ability to screen cargo? >> i don't want to speculate there. i that i is something we'll see in the days and weeks to come. again, what was the substance used? we've seen it used in other attacks and other attempts like the shoe bomber or something like petn, similar to glycerin which we saw with the failed underwear bomber. >> what are the chances we'll get answers to the questions? >> it will take some time. >> does paris -- does france have a problem? the attacks in paris and now this? >> yeah, clearly. i mean, sfrans high on the list of targets as are other western nations as well. >> okay. sir, thank you so much for joining us. collin clark joining us. really appreciate it.

we got more coverage throughout the day here on cnbc. >> all right. and we're going to get back to the markets now. stocks are off the worst levels of the day. let's get back down to the nyse with dominick chu. we're seeing, list in, you know on days we've had and there are way too many of them in the last couple years, some sort of terrorist attack, whether or not this turns out to be it or not, we've seen the market react less and less. ate pea it appears. that we're growing numb to this from a market's perspective. >> we've been talking about this phenomenon from the desensitizing stand point every time we have seen one of the tragic situations come up. again, overall, there are a lot of worries in the market now. terrorism is obviously if, it is proven to be some kind of an explosion of an explosion, we could see a reaction here. right now, plashgts digesting this relatively with ease right now. you can see here we did see them move lower. s&p 500 is off by .5%.

we mentioned early better the energy trade and how energy stocks were moving higher. also remember, the retail side of things is doing well as well here. and we have big retail earnings coming out in the form of both ross stores and, of course, gap after the bell. back over you to. >> all right. dom, thank you very much. now let's go back down to washington, d.c. with, tyler mathisen who is at the big investmen company institute conference. tie sfler. >> thank you very much. tremendous amount of cross currents in the investing world now. obviously, we talked about the future of investing and key investment trends in our last segment. let's focus more on what to buy, what to sell. we have chief investment officer and head of fixed income at oppenheimer funds. good to you have with us. >> pleasure. >> let's start with today's tragic events. alas we have seen these kinds of brutal killings, multiple times over the past year or so.

how is an investor to process this kind of information? it is something you can process and try and deploy? >> sure. first of all, all of these are tragedies. and we have to first and foremost accept that. but once you kind of look beyond that, i think you have to evaluate whether it does this event itself has long term implications for globalization, the risk environment in the world, whether it's likely to lead to some conflict. and then make your decisions based on these. i think what we are finding out with these types of sporadic but real and tragic terrorist activities is they're not a good thing. but the implications for the investment world is probably not as substantial. >> they're part of the landscape. wli use the phrase deploy, i mean how do you internalize it really basically?

and think about it? what do you think they're going to do and when and how do you react to it? >> i think the fed certainly was very worried about the fact that the markets were not pricing the probability of a june hike. and as a result, the minutes basically did the work for them by getting the market refocused on june being a live event. however, i still believe that they probably don't do anything in june. my personal view is they don't do anything at all. i think that is a low probability outcome at the moment f they do something, it's probably more likely july or september. >> and a gradual slope upward. how i do change as an individual

my investment theet is in light of that? as we were talking on the program yesterday, the dollar moved up immediately there. and the dollar is going to be part of the equation no matter what. >> i think that's what the fed is focused on. what happens to the dollar because at the end of the day, the dollar is the trans mission mechanism today. and if the dollar strengthens a lot, i think the fed has a lot to worry about. it will slow down the u.s. economy. >> that's what we have to look forward. to we'll see what happens. we'll know a lot more in june and a lot more than after. that good to be with you. >> thank you very much. >> all right, folks, we'll wrap it up here and toss it back you to. misch snell. >> looking forward to having you back here in studio, tyler. activist heavy weights bill

ackman and a new lobbying arm. look at them there in their cool outfits. they're there to promote the benefits of shareholder activism across the entire u.s. economy. what does this mean for all the major hedge funneled managers and other fellow activists investors? beth any mcclean, cnbc contributor. just spoke to bill ackman. she has interesting insight to share. this say big fund money they're putting together to lobby congress to say we're not bad people. right? is that a good character station? >> i couldn't help think that when is they're on the opposite side of the controversial store yifz our time. so there is something funny about this group get together. i think they think she have a story to tell. there are some legitimacy to that. activism is a very good thing. if you think of an entrenched board and entrenched management team that isn't running the company for shareholders, that needs to be shaken up in order

to run more efficiently, a company run more efficientlily should create more jobs and be better for the economy. i think the activists feel like they're under some degree of threat not just from politicians but from those entrenched management teams that would rather not have people out there shaking it up. >> do we know how much money? i'm looking at our story. i don't see a number. did ackman say how much money they want to spend? >> no. i don't think -- i don't have a dollar figure for it. i don't think it will be hugely substantial in the sum of what gets spent lobbying in washington. the problem is that there is also a down side to activism, right it? reminds me of that old nursery rhyme, whether it's, good it's very, very good and whether it's bad, it's horrid. the verdict is still out whether activism is good for nerve the u.s. economy or just good for the people who run the funds. >> is there concern about the involvement of bill ackman given his involvement in valeant which has been a target of congress

s? >> ackman was a passive share holder in valeant until the end when it became a disaster when he stepped in to fix it. so i think his reputation as an activist still has to be judged. we still have to see what happens to judge him on valeant. i would say that is a less of a positive story for an investor which was in there through the entire thing through mike pierson's strategy of raising prices in order to reduce earnings. i think it's more of a negative for them than it is for ackman. on the flip side, j.c. penney a negative for bill ackman. microsoft a positive. you arean't take one activist investor and say good and take another and sad h. say bad. it's case by case. >> bethany, they are rich and they will find some lobbyists to take their money. somebody will take their money. but i'm going to ask you, if you were the lobbyist or the pr person for this group, you would work with them or do you think they have an impossible tass

snk. >> i don't think i can do p trochlt save my life. let's just start with that. but that said, i think there is a compelling case here. look, a company that's not being well run and that is rewarding its ceo and has an entrenched board and rewarding the ceo for failure that, is not a plus for the economy and that's not a plus for employees either. it all depends on the long term versus short term orientation of the activists and whether they're any good at what they choose to activate. so i worry about is that as activism becomes a buzz word, you're more likely to have targets that don't really need activist involvement because everyone is looking for a target. and a lot of people who might be more interested in squeezing short term performance out of a company than making it a successful company for the long term. but there are a lot of passive investors that are thrilled to have them out there speaking for

them. it's a much bigger group than the vocal activist community. >> thank you, bethany. thank you for joining us. >> thank you. a gene that could reduce the risk of heart attack. a new way of targeting cancer. we have a couple big medical stories coming up. speaking of medicine and the markets, take a look at the biotech etf. this is down nearly 2% today. it is down nearly 28% over the past year. medicine and stocks, they're both good for you. n. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris. all on account...of penelope. but with the help of at&t, and a network that scales up and down on-demand, this hospital can be ready. giving them the agility to be flexible & reliable. because no one knows & like at&t.

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medical story out today, we have a story here. first one is a gene that may reduce the risk of heart attacks. this is a great story. >> this is a really cool story. this is coming out of amgen. they used basically big data and sequencing in iceland and they identified a gene mutation that confirms a 34% lower risk of heart disease and heart attack. and now what they're going to do is take that target and develop a drug targeting it. this is very similar to how they develop most recently approved cholesterol drug. and they say that this is an underrecognized part of amgen's pipeline. investors should be putting more stock into this. >> decode is just getting started, that unit. in theory, more and more people are mapping the genome. you'll have more data in the future and more of the genes can be identified. this is the tip of the iceberg. >> definitely and something we're trying to do in the united

states through the precision medicine initiative, sequencing more healthy people. >> in terms of amgen, how much of an advantage do they have by having identified this drug through the unit decode? >> you might think they'd probably be a little ahead of the curve having identified and now only just now publishing this. so now maybe some other groups can start working on this knowing it's been published. but amgen has been working on this for several years. >> a gene is a gene and everybody can develop a drug to target it. stay with us. >> merrimack pharmaceuticals announced first of the kind clinical basket trial that they say they could test drugs tests are conducting. they're down 5.25%. year to date, they're down 21%. the ceo joins us here for a "power lunch" exclusive. bob, great to have you on set. now in cancer treatment there is a extreme focus on focusing on the gene. but you're focusing on the path way. explain how this is different.

>> so today's trial really is a big milestone from our company. it's something we've been working on for a long time. what you think about in terms of the gee nome is the number of genes and mu sags thattations t occur are limitless. so we've been trying to categorize cancer based on the pathways and come up with treatments to deliver on them. the trial is the first of the kind. we've run the basket studies that look for 2% or 3%st patient that's look for a specific mutation. they group them into actual pathway disease mutations. so we can do precision medicine for 95% of the patients in a huge set of indications, come on cancer, lung and neck cancer. >> how is a pathway different from targeting a protein or something like that? why is this more applicable? >> the proteins, they all participate in pathways. think i biology as organized into the little circuits.

we're engineers. so there is a circuit of switches and codes that are all made up of integrated circuits that are proteins. and they pass message as long. and so genes initiate protein signalling. but it's the circuits that leads to decisions, right? by focusing on the pathways and understanding the pathways and how they're altered in cancer and how to treat them specifically for a given patient is really the key. and that precision of understanding how pathways are altered and where to treat it in patient a as opposed to patient b is the key to what we're developing today. >> you mentioned the potential of using this in combination with other drugs. so it's not that you're going to target the pathway and that's that. this drug can be used in conjunction or i guess the hope is that drug can be used in conjunction with other drugs that might also target the gene or the protein? >> this study is very different in another big way. not just treating almost all the patients. but it is assigning combination regimens that are precisely targeted for a patient. and so we all know the cancer is

complex. one thing that they've been pushing is understanding that, you know, tumors really are not typified by one biomarker or one diagnostic. there are multiple problems going on. so this trial is diagnosing a patient's tumor and saying okay, it's got problem a, b, c. it needs drugs a, b, c. that is one patient with colon cancer. this patient needs d, e, and f. usually you get one marker, we get one new drug. >> i know we've got to go. i want to ask you a really quick last question which you is wholly own the assets in the united states. a lot of folks are very interesting in buying cancer companies right now. what is the path forward for merrimack. >> we're focused on developing the drugs and pipeline. the trial we've done today is enabled because we're able to build a whole collection of six novel drugs that can be used. this is not the kind of trial can you execute with 15 agreement as cross the country. it's the kind of treatment we

need november things like colon kans wrer we're stalled in therapy and it's not a disease that is responding to therapy. so i think it's fwoest keep the assets together and develop them together. but we're really focused on the science and benefits for the patients. >> bob, thank you very much for joining us. our thanks to our own meg terrell. incredible bladder protection from always discreet

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you with see the dow was down triple digits. it's off the session lows. lower by 81 points right now. verizon, ibm, boeing, goldman sachs leading the index lower. walmart, cisco systems, nike, they're in the green. "power lunch" will be back in two minutes. there's a place for vacationers who seek more

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universal orlando resort. welcome back to "power lunch," everyone. this news update we focus on that egyptian air crash. a jetliner bound for cairo from pair witness 66 people onboard crashed into the mediterranean sea earlier today. u.s. intelligence says imagery indicates there was an xbloegs. egypt confirming the finding of wreckage near the greek islands. there were no immediate signs of any survivors. secretary of state john kerry expressing condolences to the families of the egyptair crash victims. he was speaking following a meeting of nato foreign ministers in brussels. >> i want to express my condolences to egypt and to all other countries impacted by the disappearance earlier this morning of the egyptair flight over the mediterranean.

the united states is providing assistance in the search effort and relevant authorities are doing everything they can. >> u.s. navy patrol aircraft stationed in italy taking part in search operations. the plane's took off from a naval air station in sicily. the u.s. navy is providing the air cast in response to a request by the u.s. embassy in athens. there was a heavy police presence in paris as grieving family members of the flights passengers checked in to travel to cairo. a curtain shielded them if the journalists at the airport. we'll bring you further updates as they warrant tlachlt is the news update this hour. i'll send it back you to, michelle. >> thank you. >> let's bring in our cnbc contributor gordon bethune. now that we have more details about what we know thus far, what do you think? >> well, it sounds like a catastrophic, you know, loss of the aircraft control from a bomb

i would surmize given the intelligence they have. i understand a rapid dissent of 20,000 feet which would be -- which you would do with a loss of pressurization. evidently, we're not able to regain control and they lost it. >> egyptair, what comes to egypt, we had the issue with the plane leaving the russian jet that went down and reuters reported in january there was a suspect from an egyptair mechanic at this point. they had a flaen was hijacked. is this a problematic airline at this point? can we say that? >> i don't think so. you know, first of all, the airplane departed paris. so a bomb was introduced to the airport either by passenger or baggage. so there is that breakdown there which is not in egypt. but, you know, i don't know there is a lot of agendas over. there can't tell who you would do. that but it sounds like that was a cause of the airplane's loss.

>> a lot of americans will stha is happening overseas. what if anything changes that u.s. travelers will see here? >> i think we've got a fairly disciplined workforce. in spite of all the criticism the tsa gets, they do a thorough job. there are numerous double checks of employees and access to the airplane and including the bags and cargo. so i think strict adherence to those disciplines is important. and we have that in this country. >> we see airlines suspend service to cairo in the meantime? >> i would doubt that. i'm not one -- i wouldn't want to speak to. that that's a major important market. and i'm sure that they may introduce some extraordinary security. but i would suspect that they would search them. >> i was in paris recently. it's a modern airport with similar screening techniques that we v going back to michelle's point, is the trust level among airlines falling? i mean, this was -- this is a

modern and secure airport. the same as the united states. and then this likely happened. >> absolutely. nothing is perfect as you point out. i would say that to the extent humanly possible they're doing the things to preclude. that but at the same time, the world continues to revolve and we need trade and the economy and people need to move. so we can't, you know, climb under our beds and stay home. but at the same time, we need to do everything we can to preclude this from happening again. >> all right. gordon, thank you so much for joining us. much appreciated. >> all right. oil is closing for trading right now. we will a pretty about recovery in the afternoon which led to oil closing flat. i mean oil closed down .1%. you can see it right now at $48.20. not a big move today. we've seen a bounce off the lows of a month ago. we're still down 50% from our highs of two years ago. let's bring in the founder and ceo of citizens for affordable energy and former president of

shell oil. john, first off, we've seen capital cuts galore among the big boys. your former company, bp, exxon, chevron cutting tens of billions in capital spending. what is the industry going to look like in five or ten years if this leanness continues? >> i think the hundreds of billions of dollars of capital cutbacks will effect the next two to three years. and it may if the low price continues extend further. but in reality, three to five years from now we should be seeing the industry coming back at a higher spending capital spending rate because i believe the oil price will sustain it. >> what would happen, john, what would -- wouldn't we have to anyway? even if oil stays low. i was in louisiana and the barge i was on was there for well maintenance and repair. i'm thinking if the well maintenance and repair barge is not repairing wells, they're going to go away. so at some point regardless of the price, won't the industry

have to reinvest? >> absolutely yes. because the consumers are wanting 94 to 95 million barrels of oil a day. at these low prices, they want and more. so what has to happen is an equilibrium has to be established which gets an oil price high enough that companies can invest and can grow their supply because without the supply growth, we're going to see even more tighter demand and even higher prices. so we will reach that equilibrium in the next six to 12 months. we should be at a better equilibrium than we are today with higher prices from where we are today. >> and above $50 a barrel by the end of the year? >> certainly. i'm actually more bullish than that. but we'll see. now if you ask the question five to ten years out, we cannot ever produce enough oil in my opinion to satisfy global demand five or ten years out. we have to start using natural

gas and more biofuels as a source of transportation fuel. >> yeah. >> we can make five different transportation fuels from natural gas from ethanol to methanol to cmg, compressed natural gas, liquified natural gas and gas to liquids which is a diesel. and what we need are some regulatory changes. we need some entrepreneurs and innovators to come into this and start to push alcohol fuels in addition to oil products fuels. >> i think that's the only way we're going to achieve long term equilibrium and it's going to change the industry somewhat. >> i think you've been hanging out with boon pickens, the natural gas for transportation thing. let's talk about that. cars really do drive gas which then drives oil. some suggest the electric car, tesla or whatever else it may be, will drive the petroleum business out of business in ten to 25 years. in 25 years from now, john, will we still have gasoline powered cars or will it be all electric, fuel cell, what have you? >> absolutely we will have

internal kbungs engines that will be driven using oil products and alcohol fuels. in my opinion, by 2050 and a study has come out under the fuel freedom foundation, you'll see that by 2050, we'll have roughly the same number of intern internal combustion engines. yes, we'll have mshgs many more electric cars, batteries or hydrogen fuel cells and they total in the 30, 40, 50 million range. remember, the population is going to be over 400 million people. the growth and the fleet is going to include the combination of electric cars and internal combustion engines. i don't see them going away in the first half of the century. >> feen you use electric, you're getting that power from somewhere whether -- you may be powering your electric car with coal.

we appreciate your vision. thank you very much. thanks for coming on. >> thank you. >> all right. coming up, why one trader calls this a whack a mole market. and what you can do to hit the target. take a look at some of the widely held stocks are trading alphabet, apple, j.p. morgan and microsoft. they're all down on a down day for stocks.

sometimes on "trading nation" we like to go micro, down in the weeds. welcome to macro. welcome into "trading nation." your guest today, jonathan crinski and erin gibbs with s & p investment advisory. jonathan, you call this a whack a mole, you know the game, you call this a whack a mole market. how come? >> yeah, brian. so if you look at the overall market, we know it's gone essentially nowhere for 18 months. but within that, you had the mini rolling bear markets. it started in late 2014 with the energy and materials sectors and we saw it in biotech. earlier this year the financials and we've seen it in retail. we had the mini bear markets across different sectors but as

each one sector rolls over, you sigh another sector or industry show strength and take its place. the net result is that market has gone nowhere. there is no trend in the s&p 500 and we're really in this long term trading range. so we were on last week talking about the implication it's we could make a new 52-week high after going such a long period without one. that would be a very bullish. but i think given the action of late, that pushed out road for quite some time. if we're looking at the chart of the s&p 500, where do we go from here? there's a lot of talk about this 2035, 2040 level on the s&p 500. that is kind of your key support. if we kind of close below, there we're looking at a test of a 200 day moving average ss to in the a great support because of the slope of the still moving down. if you can't hold that, you're looking at 1960 which is a 50 retracement of the entire advance from the february lows to the recent highs. >> path of least resistance is lower is what you're saying,

correct? >> near term we think we have more weakness. we're starting to see volume on the down side pick up. so we would be a little cautious near term. and we would really wait for that confirmation on new highs before getting too excited. >> okay. so erin gibbs, fundamentally if we get this rate hike in june or july or whatever, does the market need to come down because we're likely to have to go back to a more rational valuation? >> yes. >> thanks for coming on. >> yeah. we're done, right. okay. so there are few things. but what jonathan's been saying, when you look at it from a fundamental valuation standpoint, we're coming off of valuation highs. we've actually been in a valuation trading range for the past two years basically between 15 1/2 to 17 1/2 times forward earnings. we just come off of that. and that's partially because we keep hitting the peaks as new sectors hit new highs and then we see the mini bare markets come back down. right now we're starting to head

back towards the mid range. we near term i can see the s&p 500 go back down another 3% or even 6% particularly if the market isn't happy with the fed raising rates and investors moving money out of the equity markets. and that would actually bring us to normal reasonable valuations. >> okay. so a bit of a negative view there fundamentally and technically. thank you very much. for more "trading nation" gorvegs , go to our website. from a single stock perspective, shares of l brands are falling after a disappointing earnings report. the latest retailer to do. that but what one anl sift saying about the stock and four other calls on "street talk" coming up. this car?

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it's time now for "street talk," our dive into the analyst recommendations we think you need to know b the first stock is lowe's. citigroup upgrading lowe's to a buy if neutral. they cite, yeah, weakover all market but notes that customers are spending more outside of apparel. and that lowe's should continue to benefit from what they call wallet share shift. en that comps should move higher despite the 15% gain over the past few months, they say it is not too late to get into lowe. notes of valuation disdown the against home depot. the target is $90. >> i was going to say, all the attention get enby home depot. this is an underperformer. that's where the opportunity may be. stock l brands, downgrading this to a neutral. slashed the price target to 60 there are from $83. the bullish theet is is busted. enks disapoint last night. what is worse is that comps in april, a bigger miss than in

march which was a bigger miss than in february. so the trajectory is just awful. also international expansion was a key part of a thesis. that has yet to be materialized. sales only see modest gains in margins >> yeah, this is -- stocks down 30% this quarter. >> it's been a terrible ride those three months. >> no one is buying clothes. all right, third stock -- >> certain kinds of closed. l brands. >> there you go. >> underclothes. >> another big sector on refining by ubs. they start eed coverage on teso but ubs only likes tesoro. they started about 25% upside to where we are now. they have a neutral rating except for a sell rating on marathon. the analyst says refiners are "no longer a safe place to hide." they went up as oil went down because of crack spreads widening. but they say tesoro warns a premium multiple in part because of the diversity of its business. >> so not as refinery as the

others? >> not as refined. >> petrobras, raymond james is downgrading the stock to an underperform. this is interesting. petrobras is the world's best performing large cap oil stock this year. >> not brazil's, not america's, the world's. >> it is a leader in the energy junk rally. it's up 60% but it's not trading on its own fundamentals. it's been a proxy for brazilian politics and following last week's vote in the senate, raymond james think this is trade is over so pbr is the only underperform rated stock in that analyst coverage. >> lest we forget in june of 2008 petrobras was a $68 stock. >> of course. >> it's now six and change and that's coming off the aforementioned double. finally, today's under-the-radar name tis teck resources. goldman starts coverage with a buy and $12 target so they see about 25% upside. goldman says they like the

commodity exposure teck offers because 80% comes from zing and metallurgical coal. it's been a wild stock. up 140% this year already but down 28% over the past 12 months. clsa cut that stock to a sell about a month ago. >> that is member of that so-called junk rally we saw in energy as well as materials. interesting the time of this call given the run it's had in 2016 so far. well, that's "street talk" for thursday. we have a big late day turn around for tesla. what is driving the stock higher when "power lunch" returns. this just got interesting. 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,

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they had prepared for even the unthinkable. and they danced. see what a raymond james advisor can do for you. tesla plans to sell $2 billion wto overstock to ramp up its model 3. the remaining shares will be sold by elon musk to cover his tax obligations. it l it be enough to give tesla enough of a cushion in the next year or so? axiom's gordon johnson is here with us, so is drew cupps who is a share holder in the shares. thanks for being with us. >> thank you. >> drew, gordon thinks the company will need $11 billion. >> yeah, i feel pretty good that this is going to get them a long way, whether they raise some money at some point in the future, i think that very well

could happen but i don't think it's going to be for at least a couple of years and there's going to be a lot of proven success on the record before they would do so. >> you're not mad about being die lut dlu diluted? >> 5% dilution, i'd take that any day. >> gordon, on the spectrum, you're way off the charts at $11 billion. how do you get that number? that seems outlandish to the bulls. >> right. so i think the issue here is let's look at the giga factor. they raised $2 billion initially to ramp up the giga factory. we know that only 10% of that plant has been built and only $500 million towards the $2 billion that was raised. they need $5 billion to get there. where are they going to get the other $4.5 billion. and if you listen to what elon

musk has said, he said they're going to get their new car up to 100,000 to 200,000 vehicles produced by the end of next year. so if you look at the sx and their new car, that suggests they'll be at 500,000 cars by the end of 2017 and we know that they need the giga factory to be ramped by the end of that time frame. so the key point to be made on tesla and i want to make sure we don't cover this stock and have an official view but if you look at the numbers being put out there, they don't add up. given the valuation of this company, $505,000 per car, tesla produces just under 30,000 cars per year, the valuation is very high if they continue to miss production estimates and i think that's scaring investors. >> you know they could miss estimates. that's baked in, why is that acceptable. >> i think what i know is they

can miss their internal goals. they have a history of doing that. they have a good history of hitting the broad estimates of the sell side and the buy side and i think that will probably be the pattern. these are incredibly aggressive goals to get to that 500,000. they're probably not going to get there. but to go from 50,000, 60,000 cars today to 300,000, 400,000 cars is an incredible feat. i would just go back to the capital issue. to the extent that that capital is required to produce the quantities needed for tesla to thrive i would say it's as much of a competitive advantage versus the others. if they have to raise that amount of capital, those same amounts of capital need to be raised by any competitor. >> true. does it bother you that he's borrowed against the shares? >> no. not at all. my understanding is less than 5%

of his net worth, et cetera. but i just say -- >> but it doesn't matter what percentage it is of his net worth, if something happens he has to sell rapidly. i remember the now deceased aubrey mcclendon, big pressure on the stock at some point, no? >> well, i this they's where percentages come in. it does not bother me he's done that to the magnitude he has. this last point, tesla's ability to raise capital, they just demonstrated it, $1.7 billion basically overnight with a stock price that held so that's one of their competitive advantages i think rather than a disadvantage. >> guys we have to leave it there. thanks so much for your time drew cupps and gordon johnson. >> thank you. >> pleasure. >> i liked your point, michelle. the reality is, it's tough to make direct comparisons but generally company ceos borrowing against personal assets or other corporations has not ended well. >> aubrey mccclendon lost a

billion dollar in a day. >> we'll talk about that and along with the ceo of domino's pizza who will hopefully join us on the set with some pizza. >> except it's 2:00 pacific time. >> thanks for watching "power lunch." >> "closing bell starts right now. hi, everybody, welcome to the closing bell, i'm kelly evans at the new york stock exchange. >> i'm wilfred frost. stocks in the red but off their lows after the new york fed president said a summer rate hike could be on the cards. >> walmart the biggest winner on the dow after its stronger-than-expected earnings. this after target's disappointing numbers yesterday. what is walmart doing right that target is doing wrong? >> phil mickelson ordered to pay back nearly $1 million related to an insider trading case. we have the details and the impact on the mickelson empire. plus, what some are calling the anti-heart