the people of romania have endured many, many hardships, but they have made a truly remarkable, historical journey. the future of romania and romania's relationship with the united states is very, very bright. president iohannis, i thank you for your leadership, and i thank you again for being here today. i look forward to strengthening our alliance with your country and our bonds with your people. the relationship has been good, but now it's stronger than ever. thank you very much. >> mr. president, thank you so much. president trump, thank you so much for the words you found for romania romania, for the romanian people, and for me.

thank you very much for the invitation to be here today with you, and thank you so much for arranging this nice weather in this place. mr. president, i'm very glad that we had such a good meeting, and this is due to your strong leadership. and this is also due to our strong partnership. obviously the fact that we celebrate 20 years of strategic partnership this year is important for both our nations, and it is important to know, and this is what i want to underline. that this partnership with the united states of america shaped romania as it is today. romania, a solid democracy with

the a solid, sustainable economic growth. romania, which stands together with the u.s. troops in afghanistan. we stand together in iraq. mr. president, this partnership contributed greatly to what romania is today, and this partnership was and is very important. and i think this partnership not only has to continue, this partnership has to become stronger. this partnership has to define our bilateral relation, and this partnership has to contribute to solve so many problems. president trump, you mentioned terrorism. i'm very glad that due to your strong leadership, nato decided

to go against terrorism. your involvement made so many nations conscious of the fact that we have to share the burden inside nato. this is why romania also decided, and if i'm right, i think this is the first country during your mandate to step up to 2% of gdp for defense spending. a significant part of this defense spending is going into strategic acquisitions, and i hope, president trump, that we find good ways together to make good use of this money. romania is very conscious of the fact that we stand on the eastern flank, and we heavy rely

on your partnership, president trump, because we cannot stand there without the u.s. we cannot stand there alone. on the other hand, our partnership has huge opportunity to step up not only in security matters, but also in commercial and economic matters. and this is very important. romania is a member of the european union, and i think it's the best interest of you, mr. president, to have a strong european union as a partner. this is vital for all of us. our relationship, the transatlantic link, is vital. the transatlantic link is not about policy or diplomacy. it's at the basis of our western

civilization, and together we will make it stronger. together, we will make it better. nato and the european union do not have to compete against each other. they have to work together. they have to work in such a manner as to produce synergetic effects, make europe stronger, make the united states of america stronger. and this is what we decided, president trump and i -- to make our partnership stronger, better, more enduring. and this will lead very soon to an enhanced economic exchange, to better commerce. and this is what we all decide and what we wish because we are responsible, president trump and i, not only for the security.

we are responsible for the well being of our citizens, and this is what we are deciding to do. thank you so much, president trump. >> thank you. dave boyar, washington times. dave? >> thank you. >> come on, dave. >> thank you, mr. president. apologies. >> that's all right, dave. >> mr. president, this morning on twitter, you were referring to the testimony of james comey vindicating you. but i wondered if you could tell us in person, sir, why you feel that his testimony vindicated you when it really boils down to his word against your word. and if you could also tell us, sir, do tapes exist of your conversations with him? >> well, i'll tell you about that maybe sometime in the very near future. but in the meantime, no collusion, no obstruction.

he's a leaker. but we want to get back running our great country, jobs, trade deficits. we want them to disappear fast. north korea, big problem. middle east, a big problem. so that's what i am focused on. that's what i have been focused on. but yesterday showed no collusion, no obstruction. we are doing really well. that was an excuse by the democrats, who lost an election that some people think they shouldn't have lost because it's almost impossible for the democrats to lose the electoral college as you know. you have to run up the whole east coast, and you have to win everything as a republican, and that's just what we did. so it was just an excuse. but we were very, very happy. and frankly, james comey confirmed a lot of what i said. and some of the things that he said just weren't true. thank you very much.

do you have a question? >> thank you. mr. president, if you could tell us a couple weeks ago, president trump was in brussels at the nato meeting, and not only was he encouraging nato members to pay up the 2% required of gdp for national defense, but he also was saying that countries including yours, who had not paid 2% in the past, should make up for that difference. do you think that's fair? >> i was in brussels, and i met president trump, and i listened to his speech. and i liked it because, you see, nato is based on values. but it is ultimately a military

alliance. and, you know, military spendings are complicated, and you need a lot of money because nato is the strongest alliance the earth ever saw, and we want to keep it that way. so we have to spend money for defense purposes, and spending money means if you're an alliance, everybody has to spend money. this is called burden-sharing, and i fully agree, mr. president, to that. so, of course, some people liked this better, and some didn't like it so much. but it's a simple fact that we have to do this not as a purpose in itself. we have to do this to stay strong, to be strong, and to defend our nations.

>> 100% correct. and, you know, one of the things i was referring to during that speech was the fact that, yes, they haven't paid what they should be paying now. but for many years, they haven't been paying. so i said, do we ever go back and say, how about paying the money from many, many years past. >> now, i know no president has ever asked that question, but i do. we're going to make nato very strong. you need the money to make it strong. you can't just do what we've been doing in the past. so i did say, yes, you haven't paid this year. but what about the past years, the many past years where you haven't paid? perhaps you should pay some or all of that money back. you have a question? >> thank you h. i ha. i have a question for president

trump. on the matter of security, sir, many of the countries on the eastern flank of nato, including romania, see russia as a threat to the security and the peace in the region. do you share this vision, and do you think that united states should act under article 5 if any of these country will be under military aggression? thank you very much. >> well, i'm committing the united states and have committed, but i'm committing the united states to article 5. and certainly we are there to protect, and that's one of the reasons that i want people to make sure we have a very, very strong force by paying the kind of money necessary to have that force. but, yes, absolutely i'd be committed to article 5. >> thank you. mr. president, were there any

discussion about the visa waiver program for romania? is there a time frame for including our country in this program? thank you. >> yes. >> we didn't discuss it, but there would be certainly -- it would be something we will discuss. mr. president? >> i mentioned this issue, and i also mentioned it during other meetings i had because this is important for us. it's important for romanians who want to come to the united states. and you see more and more people come, president trump, from romania to the united states. some come as tourists. some come for business, and those who come for business should be encouraged. so the matter of visa waiver would be probably important to discuss, and we all hope that we will advance on this. >> good.

oh, look at those hands up there, president. do you have this in romania too? i don't know. >> i've got the microphone if you allow me, mr. president. >> if i could only sell that. if i could only sell it. >> mr. president -- >> who would like to ask? should i take one of the killer networks that treat me so badly as fake news? should i do that? huh? >> mr. president. >> go ahead, john. >> thank you. >> be fair, john. >> oh, absolutely. >> remember how nice you used to be before i ran? such a nice man. >> always fair. mr. president, i want to get back to james comey's testimony. you suggested he didn't tell the truth in everything he said. he did say under oath that you told him to let the flynn -- you said you hoped the flynn investigation, he could let it go. >> i didn't say that. >> so he lied about that? >> well, i didn't say that. i mean i will tell you i didn't say that. >> and did he ask you to pledge his -- >> and there would be nothing wrong if i did say it according

to everybody that i've read today, but i did not say that. >> and did he ask for a pledge of loyalty from you? that's another thing he said. >> no, he did not. >> so he said those things under oath. would you be willing to speak under oath to give your version of those events? >> 100%. i didn't say under oath. i hardly know the man. i'm not going to say, i want you to pledge allegiance. who would do that? who would ask a man to pledge allegiance under oath? i mean think of it. i hardly know the man. it doesn't make sense. i didn't say that, and i didn't say the other. >> so if robert mueller wanted to speak to you about that -- >> i would be glad to tell him what i just told you. >> you seem to be hint there are recording -- >> i'm not hinting anything. i'll be telling you over a short period of time? >> when is that? >> do you have a question here? >> when will you tell snus? >> over a very short period of time. >> are there tapes, sir? >> you're going to be very disappointed when you hear the answer. don't worry. john, do you have a question for the president? >> yes. thank you.

president iohannis, you are no stranger to russian aggression. vladimir putin recently suggested that romaine could be in russia's crosshairs. how concerned should the world be about russian aggression in your region, and how concerned should we be here in the united states about what russia tried to do in our election, sir? >> everybody's concerned. but, you see, being concerned should lead you to being prepared. so in my opinion, we have to be very clear, very simple, and very straightforward if we talk about russia and with russia. in my opinion, we need dialogue. but on the other hand, we need

what we all together decided in nato, a strong deterrence. so this combination, strong deterrence and dialogue, should lead towards a solution which is feasible for every part. >> hello, mr. president trump. you mentioned earlier in the corruption fight in romania, it is a matter of high importance in our country. but we see now that the anti-corruption fight and the air force to consolidate the rule of law are sometimes undermined by some politicians. part of what we can call the bucharest swamp. is your administration going to support the anti-corruption fight in romania, and how can you do it? thank you. >> well, we support very strongly romania, and therefore

obviously we do support that fight on anti-corruption. we will always support that. and we support your president. we think he's done an outstanding job. very popular, very solid, working very hard. we know everything that's going on. and, yeah, and he's going to win that fight. he's going to win that battle, but he has our support. >> thank you so much. >> -- romania as a problem for the u.s./romania partnership and for the american investor as a threat because we still have corruption in romania despite this anti-corruption fight. >> well, you do, but i can tell you that there are many american investors right now going to romania and investing. in fact, i was given a chart just before our meeting, and we have meet going over to romania and investing, and they weren't doing that a number of years ago. so that shows very, very big progress, and there really are a lot of congratulations in store. but a lot of people are

investing from america, and people love, from romania, the united states. and they come here a lot, and we're very proud of them. thank you all very much. thank you. thank you very much. >> president trump with the romanian president klaus iohannis there at the white house with a -- how should we characterize this? at times rather awkward news briefing. >> off the cuff. >> it was very much off the cuff. bill griffith along with kayla towshi who is joining me for closing bell here at the new york stock exchange. we have a pretty interesting day on wall street as well, which we'll get to. we're seeing the faang stocks roll over and take the nasdaq with it. >> there's quite a turnaround in tech in the day. we had been on a record day. the vix set a 24-year low, but then all of a sudden analysts

started putting out some notes about perhaps high valuations being too high in the tech space. >> apple, the new iphone, talk it would not have the strongest, fastest chim op out there and t stock has been down 5% today. let's wrap things up from this news conference at the white house. did you say john is ready? john harwood there. some interesting follow-up from the testimony yesterday. >> that's right. there was three big headlines from this news conference. the most important was the president saying he was 100% willing to testify under oath about his interactions with james comey. of course, the fired fbi director testified under oath yesterday. the president today said that he had been vindicated by comey's testimony while also saying that comey had said things that were not true, including that he had asked for loyalty and including that he had told the fbi

director -- then-fbi director that he hoped he would drop the inquiry into michael flynn. we will certainly here follow-up to that issue, and he said he would speak to robert mueller, who is the special counsel. the other two headlines were the president said, which he did not at the nato meeting not long ago, that he would commit the united states to the article 5 collective defense provision of the nato alliance. that is something that was taken out of the speech that he gave at that time. that's significant. then the third thing was complicating the life of secretary of state rex tillerson because rex tillerson earlier today had tried to tamp down the tensions between qatar and other nations in the region. the president stomped on those tensions by coming out and reiterating his statements that qatar was a funder of terrorism and took credit for the fact that other arab nations, including saudi arabia, were

cracking down on qatar. so qatar, of course, is an ally of the united states where more than 10,000 troops are stationed. this is a diplomatic problem that the president has exacerbated for his secretary of state. >> all right, john. thank you. john harwood there at the white house. let's bring in dan clifton. you have a trump portfolio. >> yep. >> that you've put together based on the expectations of wall street of what could be done in terms of policy here. but let me get just your take on the last couple of days and the way the market has responded or not responded to that. >> yeah. so thank you for having me on, bill. let me start off by saying that our trump portfolio performed very well right up until it was revealed that comey had memos of his meeting with donald trump. and that's when you started to see the market move away from trump being able to get his agenda through, really pushing into some of these tech stocks like the faangs, and you saw a

bifurcation between the sta&p 5 and the trump stocks. that's important context because starting yesterday, as soon as that testimony began, you started to see the trump portfolio begin to outperform. and it's amazing to see the divergence between the washington press corps saying that trump is in more trouble after comey's testimony, and the market et is saying something e. that it's a he said/versus he said, and this gives congress time to get the trump agenda through. that's why you see bank stocks up so big. so the market is saying that trump basically bought himself a life line yesterday through this testimony and did no real damage to himself in this hearing. >> but, dan, that could partly be because congress is able to act and to keep its head down despite the distractions coming from the white house. but i'm thinking back to comey's written testimony. he mentioned two specific instances where he said the president mentioned a, quote, cloud over his presidency, that

the russia investigation was impairing his ability to make deals for the united states. we just saw a press conference where the lion's share of the questions were about the former fbi director. for how much longer does this go on? >> oh, i think it's going to go on, and it's going to be a cloud, and it's going to drag him down. kayla, you're a washington pro now, so you understand. members of congress are worried about trump bringing down their boat. so you're seeing a renewed urgency on capitol hill. look at the progress that they're making on this health care bill in the senate. something a week ago that seemed unimaginable. >> dan, are they? >> oh, absolutely. >> what do you know? >> you know something we don't? >> you'll start to see texts of that come out next week. you'll see medicaid phase out over five years. you'll see the subsidies enhance. maybe some of the tax cuts pushed back a little bit. the reason why that's important, kayla, is because getting health care out of the way opens up the door to what investors really want, and that's tax reform. you've got to close that health care before you get there, and you're starting to see some progress on that front too. so congress is starting to say,

the president is a little bit pre-occupied. we're going to start making decisions normally a president would make. and as a result, you're starting to see a partnership develop. again, it's not immediate. we've got to go through these very vicious budget fights, but investors are getting optimistic for fourth quarter in some of these policy initiatives getting through. that's a big deal. >> some of the stocks in your trump portfolio, dan, have to do with the infrastructure issue. this was supposed to be infrastructure week in washington. >> yep, yep. >> but it kind of got pushed off to the side here. but how much time do you think the companies that are involved with infrastructure spending, those for-profit prisons, those other companies, education companies -- how much time do you think they will give washington to get something done in that regard? >> excellent question, bill. i would think about this. what's regulatory and could get done right away and what's legislative, which is going to take longer? energy infrastructure. look at a company like qantas service. it's up 3% today. they get to line the pipelines and the lng export terminals.

i need no act of congress. i need no congressional money. and then when you start thinking about traditional infrastructure, that's where your question really comes into mind. that's going to take several months to get through. that may be part of tax reform. it may be part of the debt ceiling. there's a bit of uncertainty around that. but i would overall look at that as maybe possibly first quarter 2018. but your question is right on. it's going to take a while before you see that. >> all right. dan clifton, always good to see you. thank you, dan. >> thank you. >> see you later. all right. we're going to take a quick break here. 35 minutes left in the trading session. really the one index to look at will be the technology stocks, the nasdaq. that's down 1.6%. that was done about 2.3% for a time here today. >> and up next, we'll look at that fallout in tech stocks today. what it says about the outlook for stocks overall and is that going to drag down the rest of the market? be right back. (work sfx)

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[ dramatic music ] give in to me. i'm scared. [ screams ] [ dramatic music continues ] [ grunts ] the mummy. rated pg-13. welcome back. we're heading to the last half hour. if you're just joining us, the story of the day on wall street have been the technology stocks heading lower. the nasdaq for a time was down almost 2.5%. it's off the lows right now, but it brings up the question is the tech run over at this point? let's bring in david wadell from wadell and associates. peter costa is with us at post 9, and rick santelli is at the cme in chicago. peter, i know you've been short this market. i hope some of that at least was in some of the tech stocks.

these have been the leaders. we've been talking a lot lately how the tech stocks have become the modern nifty 50. they've led the charge, and today they're going down hard. >> you know what it is, you can equate it to a rubber band. you know, they stretched it. they stretched it. they stretched it. at some point it's either going to snap, which would be this major selloff, or it's going to start retracting. and i think they are retracting a little bit. it's just a natural evolution of pricing. you know, they ran up very, very quickly. you look at the way amazon was a straight shot up. at some point it's going to have to come back in. there's going to be people taking profits, understanding that the earnings, granted, amazon's a different animal altogether, but you still have to look at their pes, and they're way ahead of where they should be. >> david, normally when you think of profit taking you think of a stock going down 1%, 2%. a lot of these big namgs are down 5%, 6% today. is this more than profit taking? >> well, i mean they're still up, what, 35% on the year?

so i think it's okay. >> so let's not get greedy? >> yeah. i see it a little differently. i think this market is amazingly thematic. so indulge me for a second. there are two major trades going on. one that dan clifton just spoke to is the reflation trade. my indicators for that are financials and small cap value. then you've got the secular stagnation trade which is utilities and technology. between election day and inauguration day when trump expectations were high, the reflation trade outperformed by 15%. election day through two days ago, the secular stagnation trade outperformed by 15%. now, both have worked over that entire period, and they're actually tied. so i think what happens now as we go into act three and we rotate back into the reflation trade now that expectations for trump are so low and then comey's testimony was not damning by any means, and so if you get any recovery in

confidence in the trump agenda, it just reports the reflation trade. you want to be long small cap value, long banks, and maybe long energy. to fund that, you sell the secular stagnation, so you sell technology. >> rick, let me add to the conversation this report that showed a huge inflow into bond funds. $16 billion in the latest reporting period. the biggest inflow we've seen in about two years. and of course it happens at a time when we were at low eas fo the year along the yield curve here. what do you think is going on there? >> you know, it may be join the party, central banks and their balance sheets aren't going to be shrinking anytime soon. the notion that global growth may be being upgraded by certain entities, but certainly disappointing. the u.s. no exception. it's hard to tell exactly which channel investors are swimming in, but it certainly does make sense, and there's also a lot of stories that some of the big

boys like the chinese are back dabbling in treasuries and that would have a bit of a contagious effect. we all know that the treasury does put out data on those buys by foreign entities, but they're always two months in arrears. so we're going to have to wait a bit to connect all the dots in that regard. but you bring up a fair point, and especially on a day where you get this rotation, to watch the fixed income market not pay a whole lot of attention to the nasdaq reversal or even the fact that it's gotten most of it back or that the dow has got a lot of it back, or we're still solid with respect to the equity markets, and we have a fed meeting coming up. i'll tell you what, i walk away with one thought. i continue to love watching the yield curve because i don't think janet yellen and company want to see it get a whole lot flatter. but i also don't think that there's any way they can stop it unless they stop tightening because i think the long end is going to remain buoyant, meaning you're not going to see a lot of big jumps in yields in a quick time fashion. >> not a lot of catalysts coming

up. looking specifically at volatility, when it spiked today, it spiked to a whopping 12. >> right. >> is that masking some evils here? >> i think that this was overdue. to see the vix trade down to 956 this morning, which i mean was unheard of, we haven't seen it in 25 years. >> lowest since '93. >> so 24 years. you knew that there was going to be some sort of movement on that part. it's not -- you know, people can't believe that everything is perfect. and without any kind of fear and without any kind of movement of money around coming out of the tech sector, going into the financials or whatever, you knew that was going to happen. it was due to happen within the next couple of weeks. it happened today. >> it happened all at once. >> that's for sure. >> that's also the nature of the market too. it moves very quickly. >> yes, it did. guys, we're moving on. thank you all for your thoughts. have a good weekend. appreciate it very much. >> thank you. >> when we come back, mohammed el-erian will tell us why the

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bell." british prime minister theresa may is working to form a new government in the wake of

yesterday's election surprise. will ford frost is live in london. how quickly can prime minister may get started on this? >> reporter: well, she's pretty much complete. she's reappointed the same cabinet. kayla, after all the uncertainty we had last night, she's back in 10 downing street, prime minister again, and brexit negotiations will go ahead. >> i will now form a government, a government that can provide certainty and lead britain forward at this critical time for our country. this government will guide the country through the crucial brexit talks that begin in just ten days and deliver on the will of the british people by taking the united kingdom out of the european union. >> reporter: so those talks go ahead, but may's hand in them much diminished. her hard brexit rhetoric undermined, and because of it, her opponents on the negotiation table rubbing their hands with

glee. now, the other big question here in westminster is how long can she realistically stay as prime minister? not because of threats from outside of her party, but the mps within it. now, those mps have opted to go with stability for now, which is understandable, and in return theresa may has done the same. she's appointed essentially exactly the same cabinet as she had before. but one tory mp told me she has six months max, likely a lot less, and will certainly never lead us into an election again. so as we stand here tonight, the government has a very similar shape. it has almost exactly the same personnel, but its power and mood much diminished. guys? >> all right, wilf, what an eventful week for you as well. thank you. good job. wilfred frost there in london. let's bring in our friend, mohamed el-erian. we have so much ground to cover with you both here domestically

and internationally. let's start with uk elections. your thoughts? the equity markets there today rallied and we know about the plunge in the british pound. what's your assessment of that all? >> so i think that what you ended up, as wilfred said, on the outside it looks the same. think of a bottle with the same label, but the content is completely different. after the election, britain faces a lot more political uncertainty. it faces economic weakness, and where you're going to see the major movements are mainly in the currency. the equity market will be torn between the outwardly oriented companies that will do well and the inwardly oriented companies that will suffer. >> what's the time frame over which that actually takes place because even the hard brexit that prime minister may had been talking about before, i mean that was described as a thousand paper cuts. how long does a softer brexit now take? >> so i'm not sure, kayla, you'll get a softer brexit.

i think what the election says is the range of potential outcomes is much wider today than it was 24 hours ago. and somehow the conservative party is going to have to find a way to unite. they're going to have to find other allies in parliament, and then they're going to have to argue with quite a weak hand vis-a-vis other europeans. so the range of outcomes has increased a lot, and you could get a messy hard brexit, or you get a soft brexit. but no one outcome dominates at this point. >> back here in the u.s., today's tech selloff notwithstanding, and we'll get to that in a moment maybe. but are we wrong to look for a connection to want the u.s. stock market to continually respond to the events coming out of washington because lately it hasn't been. what do you think that's all about? >> so, bill, i think we are in the midst of a historic liquidity trade. it's very powerful. it's being fueled by central

banks, by lots of corporate cash, some of which makes it back into the marketplace, and by income inequality that puts money in the hands of people that have a high propensity to invest. so it's a very powerful liquidity trade, and that has totally overwhelmed everything. forget about the trump rally. this is purely liquidity trade, which produces two things. one, very crowded trades. so once in a while you're going to get a bump like you got today. but also a mentality that you should buy on dips. so the next few days is going to be really interesting to see the tension between these two outcomes of the liquidity trade. >> but how will you be able to tell when a dip is not just a dip, when it is in fact a selloff of more than a garden variety, and what do you think would actually precipitate that? >> we're getting closer to that point simply because of valuation.

there's a limit, kayla, to have far you can decouple valuations fundamentals. so liquidity works really well for a while, but it needs to hand off to fundamentals. so if that doesn't happen, which means if we don't get the policy response that the market is hoping for, then it could be quite a marked selloff. but it's very hard to judge that point. what would accelerate it, to answer your question, is a policy mistake. that would certainly accelerate. >> very quickly before we let you go, the flattening of the yield curve, how do you read that? and especially i was just citing that statistic. the biggest inflows into bond funds last week that we've seen in two years. so people are rushing in at a time when the thought was rates were going higher here. >> yeah, people are rushing in because they've bought into the notion that this will be to borrow a phrase, a beautiful normalization of rates. so they're not worried about the fed hiking next week even though we are in a relatively soft

economic patch. but critically, bill, kayla, and others, the key issue is this is a different fed. the old fed would look for any excuse not to hike. this fed has an excuse not to hike, but it will hike next week, which tells you that the fed's reaction function is evolving, and that's something that markets haven't focused on yet. >> always good to talk to you. thank you very much for your insights. >> thank you, bill. >> mohamed el-erian, chief economic adviser at ally anz. when we come back, we'll go back to ottawa where treasury secretary mnuchin is meeting. stay tuned.

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it has been a day of movers. here are a couple of them. nvidia among the laggers in the s&p as it pulls back from that 52-week high it's been setting recently. short seller citron research called the chip maker a casino stock -- his words. cintron points out that nvidia

has added more to its market cap recently than the total valuation of rival amd. the firm expects nvidia to decline back to $130 today. it's $149. meanwhile snap is lower for the fourth time this week with citi downgrading this snapchat parent to neutral from buy and trimming its price target. the firm cited the expiration of the public offering lockup in august plus disappointing user and monetarization growth. that stock down 4% today. >> elsewhere, treasury secretary steve mnuchin is in ottawa today meeting with his canadian counterpart on trade, defense, and much more. ylan? >> reporter: this was mnuchin's first one-on-one foreign trip. it wrapped up just about an hour ago. but even here in ottawa, he couldn't escape questions about the domestic agenda. at a press conference, i asked him what the consequences would be if lawmakers failed to raise

the debt limit by august as he has requested. >> we will be fine, okay, if they don't do it beforehand, but i want to emphasize that i think the sooner they do it, the less uncertainty there is in the market, and that is important to send a clear message to the market that, again, this is not an issue. >> reporter: now, some of the most pressing issues that mnuchin discussed with his counterpart, the finance minister, were taxes and trade but also recent u.s. actions on soft wood lumber and also defense. canada just days ago announced it's going to be increasing military spending by 70% over the next decade as the u.s. steps back from the world stage. it's important to note that the deputy national security adviser was also on this trip as well. now, mnuchin and more noe were asked for their reaction to the

election in the uk. mnuchin said his answer was we're used to surprise elections here in the u.s. back to you guys. >> thank you very much. the nasdaq is selling off or has. david doris is in rally mode, though, with his market acronym for the week. >> i've missed those. >> you get to participate in this one, coming up next. at fidelity, trades are now just $4.95.

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a moment ago, art carbon stopped by and told us the market on close order showed an imbalance to the buy side of $700 million. i think we're seeing that in the dow especially, up 72 points right now. the nasdaq, though, we're not seeing that. it's still down 2%. >> although pairing its losses in a pretty bag way frig way fr earlier. >> joining us right now, our weekly visit with our friend david darst, the independent investment consultant. >> with everything going on, kayla and bill, rally would be the watch word for this week. >> you want to go back and rethink that one? >> rally is the rising asset

prices. listen, stocks, the dow is up 7%. the s&p is up 9%. gold is up 11%. nasdaq before today's selloff, was up 17%. and don't forget bitcoin is up 180%. it started this year at 1,000. it's 2,800 right now. it's crazy. >> that is crazy. >> anything that goes exponential on the way up always -- in 10,000 years of human recorded history, goes exponential on the way down when it does go down. >> you don't repeal the laws of physics. that doesn't go away. >> a is anemic jobs. 138,000 jobs was the latest report, okay? and the oil price has been under some pressure, okay? so the oil price comes down from 54 to 42. as a result, inflation numbers have been lower than the fed would like them. the personal consumption expenditures, which is their preferred measure, is basically two months ago was 2.1, then

1.9, and now 1.7. so you've actually seen inflation going down. l, low volatility. it's gone up above 11 today, which is a nice move actually. >> yes, it is. >> but it was hovering around 10 and actually below 10 there for a while. lackluster. lackluster. you have lackluster oil and lackluster banks. oil down 15% for the year. banks flat for the year even after their 1.7% rise yesterday. >> banks are up 5% this week. i mean can you call it a comeback? >> that brings it back to flat. that's a good thing. the banks are the bodyguards of the market. if the banks aren't doing well, the market cannot do well. on that note, why is the yen -- the yen is up 6%, and the dollar -- and that's up against the dollar only, the 6%. the dollar against 16 currencies, a basket, is down 5%. i just want to remind everybody the market is resting on four pillars like chair legs. you could knock one away, and it

could still keep going up. those four pillars are earnings. those are global synchronized gdp growth, low interest rates, and the fact that you only have 35% bulls. we wish france a good election on sunday. i hope france does not become a uk. >> the secretary said we're going used to surprises now. >> i'd love to see macron basically get some support and turn that place into an asian tiger. go france! >> there you go. i didn't know that was your alma mater. clearly it is. thank you, david. we'll take a quick break and come back with our closing countdown in just a moment. >> and after the bell, parts of a controversial rule from the obama administration, a fiduciary rule quietly going into effect today. it will have a big effect on retirement advisers. not everybody is happy about it. we're going to debate it coming up next. and packages.

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nifty 50. well it's been the fab five. we're not including apple in that, and apple was down 5% today, bob. >> the important thing about all of this is why have these stocks gone quasi- parabolic in the last few months. goldman had a great note out saying these are volatile traditionally but everyone is buying them like consumer names that are not volatile. be careful, and they were right. this is what happens when you get a little bit of a healthy correction. >> to the uk. we got surprising election results and the british pound plunged after the first exit poll came out last night. we're at 1.27, down 1.2% for the week. the ten-year yield went back up again after hitting a low for the last nine months. we were 222 briefly. >> bank stocks, big beneficiaries of that. they were buying bank stocks today and they were buying energy. there's some rotation going on in the market, and so far no

sign of a big market correction. let's call it a healthy correction in some of the overbought tech names. >> i could show you so much more, but we're going to move on. thank you, bob. have a good weekend. we close out a fascinating week for the markets. we're going to try and make sense of it as we wrap things up on the second hour of the "closing bell." welcome to the "closing bell." i'm kayla tausche in for kelly evans. here's how we're finishing the day on wall street. quite a rotation afoot. from the tech sector, which had been up 18.5% so far this year, but taking a shoarp leg downwar. the worst day for the nasdaq since brexit. the composite closing down 1.8%. the s&p roughly flat. we did see some bay buying on the dow, which closed down about half of one percent.

banks yet again and energy the strongest sectors there. tech stocks, they have been tanking. coming up, we're going to talk about if the tech rally is over or if potentially now is a buying opportunity for those fang stocks. so we're going to discuss all of that. you're seeing some pretty sharp moves. netflix down close to 5%. joining us today are season's mark santelli and jim khan. mike, everyone had been saying that the market was overdue, especially tech, for a correction. but the timing and the precipitousness of the decline today, what do you make of that? >> it's interesting. now, banks started to rally a couple days ago. you started to see the inklings of some kind of rotation in the works. i think once we got those sort of big feared events out of the way yesterday, i think people thought, okay, this is the time for the rotation. a little bit of cautious tone on apple catalyzed things. you also had a heavy selling in the etf, the qqq etf, and a little bit of a crash flash in

amazon stock, around 250. that put in the bottom for the day. i think the relevant thing is not that we got a shakedown in the overly crowded names. it is that it rotated, and the s&p is dead flat. on a day when tech was down 2.5%, it did not cause the entire market to break apart. >> let's go to the nasdaq market site right now. >> we're going to talk more about this. bertha coombs is up town with the movers. >> the irony is we hit an all-time high on the nasdaq this morning, and it was really led by tech once again. you had an all-time high in the nasdaq 100 and then that selloff just really precipitated this afternoon. we ended up with 400% more than the average daily volume when it comes to the qqqs, and chips were what were leading the way. that negative note from citron research on nvidia helping send that to a huge plunge today. these were other names at all-time highs. lam research, kla-tencor, also

facebook as well. then you add in the other big cap tech names, goldman sachs with a note out midday as well talking a bit about the fact that these have gotten ahead of themselves or a little overpriced, and that led to the selloff. about half the selloff in terms of the point impact coming from just five stocks including facebook, apple, amazon, microsoft, and alphabet. back to you. >> easy come, easy go for those fang stocks. >> down is always quicker, i was always taught. down is quicker. is this good riddance to the technology stocks that have been leading the way here, or is this an opportunity do you see? >> well, it's pretty clear that the bow tax that was on the tech stocks has worn off and now the volatility is back. but i don't think tech is the big story today. there are two stories. one is around financials and the other is around small caps. small cap stocks we usually think trade with technologies, but in this case small caps were actually up. so what was going on? let's start with financials. good news for financials. we got the first step in the

repeal of frank daud. lower regulation and higher interest rates which is what the street's expecting from the fed mean good things for financials. so why not own them instead of these tech stocks that have questionable futures ahead? >> now let's take a look at small cap stocks. small cap stocks managed to rally even though we had tech down. why? it's because the testimony from james comey looks like it's not going to derail the trump agenda of getting a tax cut through. we know that tax cuts tend to disproportionately benefit small cap stocks and i think you saw that come through today. >> evan? >> give you a lot to think about there. >> the other thing i would say is for the first time in what seems months, the energy sector was up big. i mean the energy sector was up 2.5%. we've side, mike aaid it's very view for the s&p 500 to keep on hitting new highs if it's increasingly dependent on the tech sector. at some stage, you need the financials, the industrials to take place. maybe you're having that rotation.

what i would kind of give as a caution these tech stocks, they may be down 4% today. they're still up -- most of them are still up close to 30% for the year. this is not a big pullback. the fact is the s&p 500 is flat for the day. the nasdaq may be down 2%, but in the scheme of things, i think there could be a lot more pullback in the fang stocks before this is over. >> so you don't think they're at fair value? >> no. i mean they are -- you can -- valuation is not the way to really understand or look at those stocks. you could put any number you want on amazon and justify it with numbers. that doesn't mean that it's worth $1,200 a share. it doesn't mean that it's going to be worth $500 a share, you know, within a month. it just means that it's a slippery -- it's very slippery to put your hands around what is fair value for amazon. >> mike, the public follows the dow. the traders love the s&p, but the cool kids follow the russell. >> yeah. >> as jim's pointing out here, that has been a standout here lately. >> it has. it did click to a new high.

it had been a laggard for the long time. i don't think the russell has any special predictive powers. it's less than one tenth of market value of the entire u.s. stock market. but it does show you that the underloved, cheaper stocks -- not cheaper across the board. it's 20% financials, the russell 2000. you're talking about banks largely and domestic stocks. so if anything i would observe about this rotation today, it was almost forced and contrived. it seemed so black and white is ending right in the middle that we'll see if it's part of the longer term move or just kind of a reflex. >> i have the cool kids on line one. they say they're in bitcoin. >> the coolest kids. >> those aren't the cool kids, trust me. >> do you think this is a one-day phenomenon? does it carry into monday? >> think the big question is what are you buying when you boo i a tech stock. if you buy facebook, if you buy apple, you're buying growth 15, 20 years out. when they're building up cash reserves and they don't find places to invest the money to actually generate earnings out into the future, i think that

raises real question about the viability of these businesses to generate cash flow way out into the future which is where their valuation is. i think ultimately, it may be today, it may be tomorrow. it may be in six months or three years. i think these valuations are going to be under relative pressure unless they find something innovative like self-driving cars. but look at apple right now. i got a new iphone. it doesn't do anything new. the question is until they start adding value through their products, it's going to be tough for these companies to keep going on. >> get a blackberry. it's got a terrific camera. >> the hard thing for investors today is you can watch us, and you can watch us say, oh, valuations are high and all that. this is not the internet bubble of 2000. there's a huge distinction. these are real companies. they generate excellent cash flow. >> goldman says they might be less profitable than those companies. >> no, but the point is that, you know, apple is a well run company. the valuation is not stupid by

traditional parameters. that doesn't mean that it's worth $150 a share. it also doesn't mean that the company is going to disappear tomorrow like companies did in 2000. >> my investors are looking out 15, 20 years, and they want to hold the stock for 15, 20 years. i look at sony and nintendo and the history of the tech sector, and it's very rare that these companies can sustain that type of growth in valuation over a long period of time. when you see these cash balances build up and there's no new product in the pipeline, that actually makes me worried. >> microsoft is 30 years in. >> nvidia had become the poster child of this rise here lately. >> if you looked at the chart, you said that's pretty steep, bumping up against $100 million. that was something that i do think got -- it was overdue. you talked about the nifty 50 a couple times with regard to these big megacap growth stocks. a lot of them got categorized not just as momentum stocks and low volume at this time stocks.

they were going up in such a general fashion. i think you had all these people looking at these different investment factors saying -- >> were they a wolf in sheep's clothing. >> this was a lot of quant stuff getting up ended in a hurry. >> just a short while ago, president trump in a joint press conference with the president of romania taking questions about former fbi director james comey's testimony on capitol hill. john harwood joins us now with the highlights. john, it was vintage trump, off the cuff yet again, taking questions on a wide range of issues. what stood out to new. >> reporter: well, kayla, on any other day, you would have had two big news stories coming out of there, which was in the first instance, the president said he was committing the united states to article 5 of nato, which he had failed to do, taken out of his speech when he spoke at nato

a couple of weeks ago. that was striking. the second thing is he contradicted his secretary of state rex tillerson who was sitting in the front row of the news conference by going hard after qatar for its funding of terrorism just after rex tillerson in the morning had said -- appealed to other gulf states, including saudi arabia, to ease tensions, to ease the block aade on qatar. but all of that was overshadowed when the president got questions about james comey's testimony yesterday at the senate intelligence committee. when he was asked whether he would be willing, having called comey out for giving what he called false statements and lies, asked whether he was willing to testify under oath himself. here's what he said. >> 100%. i didn't say under oath. i hardly know the man. i'm not going to say i want you to pledge allegiance. who would do that? who would ask a man to pledge allegiance under oath? i mean think of it. i hardly know the man.

it doesn't make sense. no, i didn't say that, and i didn't say the other. >> so if robert mueller wanted to speak with you about that -- >> i would be glad to tell him exactly what i just told you. >> now, if president trump follows through on that commitment to testify before the special counsel robert mueller, that would be a fascinating moment, one that had significant risk for the president given the fact that james comey has given his testimony under oath, guys. >> all right, john. thank you very much. if he did that, that would tell me there are no tapes. >> i think there are no tapes. >> it keeps -- >> we will learn in a very short time. >> well, the president did say we would learn in a very short time, and we would be disappointed. we might be disappointed, he said, on learning whether or not there were tapes, whatever that meant. >> the market believed that thursday was a win for the president and for the white house and that the air was cleared. >> it was a win in the sense that there was nothing new that

was particularly imminently damaging. basically the takeaway is both sides dug in. this is going to be an overhang for a while but not necessarily along any new front that we didn't know about two days ago. >> about you if the president testified, possible to handicap what the market would do? >> my guess is the president will testify under oath at about the same time as he releases his tax returns. i'm not looking forward to it, although i think it would make great television. so i do think that there's an opportunity here for the president to actually push his agenda through, and that's maybe why small cap stocks were reacting. i think we will see a tax cut later this year and that will be beneficial for stocks. >> don't hold your breath on the tax cut. i think one of the strangest things that's going on right now, ten years ago if we were here or nine years ago and every time the greek parliament did something, the stock market would go down 5% and the eu is

falling apart. we're now living through the total inverse, which is you have things like the uk election. you have the election of trump, and the stock market doesn't panic at all about any of this stuff. it's like it is immune to what is going on. >> is that because it's run by computers? >> i think a lot of investors -- >> i don't think it's specifically that, no. first of all, if you look back, did it feel smart to panic out whenever you had a vote in greek election? no. you've kind of learned the lesson that the economy is okay. central banks are there. that's what matters more than this stuff. >> but the fall is going to be really bad because everyone has learned not to get out. so when that day comes to get out, everyone is going to be running for the door at the same time. that's the concern we have for our clients. >> that's how it's always worked before. thank you, gentlemen. the rest of you, stay where you are. we're on the clock still. tech stocks under a lot of pressure as we've established today. is it time to get out of this red-hot sector, or you know it's coming. is this a buying opportunity? that's coming up. >> plus the long-awaited

fiduciary rule officially kicks in today. >> right now as a matter of fact. >> tonight. >> yes. >> we'll debate whether the rule, which says it requires financial advisers to act in the best interest of clients, actually does more harm than good. you'll want to hear this. >> and we want to hear from you. you can contact the show. you can do it via twitter, facebook, or e-mail, and those are all of our addresses right there. our handles and whatever else you call them. >> handle? >> that's what it's called. it's a handle. >> what's your 1020, big daddy? >> back to the '70s there. thank you, evan. you're watching cnbc, first in business worldwide. sure we could travel, take it easy... but we've never been the type to just sit back... not when we've got so much more to give

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xfinity, the future of awesome. evan is now reciting lines from smokey and the bandit. we'll get to that in just a moment. >> we're going to discuss the pros and cons of the movie "convoy". >> a new rule goes into effect tonight that is designed to protect investors from getting ripped off by financial advisers. under the new rule, all

financial professionals are supposed to put client interest before their own. while it may sound good, it's been very controversial and certainly has its critics. >> joining us now, a senior fellow at the manhattan institute and the director of financial security and consumer affairs at aarp. welcome to both of you. diana, i believe you were a member of the department of labor's transition team. the labor department is the agency that is attempting to institute this rule, and it sounds great in theory. wouldn't everyone who has retirement assets want their adviser to be acting in their best interest? if that's the case, why has it been so controversial? what's wrong with it? >> the problem is that it's difficult to define best interest. so you might say if you have a lower return, maybe your adviser isn't acting in your own best interest. but you could be getting a lower return because you prefer a more conservative fund such as a bond fund. so best interest depends on your risk preferences, and people have different risk preferences.

there are some people who are 75, 80 years old, they still want to be 100% in stocks. and some people might say, well, that's not in your best interest. you should be partly in bonds. but they prefer to take that risk. >> isn't that a conversation that any investor would be able to have with their financial adviser even before this rule? >> well, first of all, there's really no controversy here. most firms, advisers, brokers, and groups that represent them have commented to the department of labor that they agree that the fiduciary standard is the right one. second, i just want to address diana's remarks. for decades, registered advisers and financial planners have been providing fiduciary advice. the best interest advice standard is well understood and makes sense. it's also what consumers and investors want. so there's really no controversy or confusion about what people want and what they deserve to have. >> well, christina, part of the problem has been -- and it's something that prompted the

fiduciary act, was potential conflicts that exist between a financial adviser and the mutual fund companies that they are recommending, that maybe they're getting paybacks or there's a financial disclosure problem there as well. so the critics of the fiduciary act say that by eliminating that, you are narrowing the number of choices that an individual investor has available to them because they don't involve any kind of potential conflict of interest. is that a fair criticism of the fiduciary act, at least the spirit of it? >> sure. so first let me address your question directly. the department of labor, which by the way has the authority and is responsible for regulating retirement accounts -- that may surprise people, but that is what congress chose to do. they were very thoughtful in putting together a rule that allows firms to continue to advise for investments in proprietary products. so that addresses what you were raising directly. but more to the point, there is a lot more choice right now in

our view representing investors and people saving for retirement in the marketplace. and the reason is smart firms are looking at this rule, and they are now offering far more investor-friendly products with lower fees and more transparent compensation structures than ever before. >> diana, it's hard to really quantify exactly how much this rule costs, what it means to the wallets of the consumer, and the people who are investing in these products. but the senate republicans have tried to quantify what repealing the rule, what undoing it would mean for the regulatory costs of the firms that would have to comply with it. they've estimated that over time, they'd save $31 billion, but the obama administration said that not having this rule in place would cost investors $17 billion. so which numbers are accurate? >> well, the $17 billion number was estimated by the council of economic advisers on the basis

of a lot of different studies, and there's been new information since then. professor jonathan roiter of boston college put out additional data showing that the costs were really much lower than the $17 billion number. but the point is that a lot of middle class americans cannot afford to pay up front for their investment advice, and they are being discourage td by this rul from getting commission-based advice. and many people get the commission-based advice. their broker takes a very small amount off the top rather than an up front fee and that's how many people prefer to pay for their financial advice. the problem is this advice will no longer be available for them, and also lawsuits might put these brokers and insurance brokers also out of business. >> christina, i'm sorry. you know how we are on live television. there's never enough time. we have to go at this point. thank you so much for joining

us. two thi-- the house just voted yesterday with the choice act to rescind it all. >> it will get changed substantially. speaking of washington, we do have breaking news right now. the house intelligence committee is sending letters to both former fbi director james comey and the white house, requesting any information from comey's private meeting with president trump, specifically comey's notes from that meeting and whether any recordings exist now or have existed in the past. the committee wants all of that information by june 23rd, just two weeks from today. the deputy press secretary yesterday was asked if the white house kept notes of the president's meeting so that it would not be a he said/he said -- >> situation. >> -- situation, and they said they can't know what every single staffer does in every meeting with the president. but the intelligence committee is on the hill trying to get as much detail as they can. when we come back, are

slowing auto sales a sign of cra cra cracks. >> japan's softbank is buying two of alphabet's robotics businesses, including boston dynamics. our fast take on the rise of the machines when we come back. what's the value of capital? what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley

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it's time for fast take, kayla. >> this is my first time doing

fast take. >> it's only my second time. first up, softbank adding to its artificial intelligence portfolio by buying robot makers boston dynamics and tokyo-based shaft, both from alphabet. softbank shares hit a 17-year high on this news. so, michael, you think we'll see more companies moving into robotics? >> what's interesting is it's getting transferred from the other bets inside alphabet into a more kind of private investment structure. maybe makes some sense rationalizing where it goes. obviously we're going to see more investment in robots. maybe not all of them are going to have this really cool video. >> i hope they ship all those terminators to japan. >> why would alphabet be selling both of these companies? >> my wife is an executive at google, and i will not answer that question. >> the one question he knows the answer to. >> hang on. who had 30 seconds that evan was going to mention that? >> i was going to say, though,

that softbank made a promise to trump he was going to put $115 billion to work in the tech industry. there's a little bit of it. >> next up, sirius xm is making a $480 million strategic cash investment in pandora. sources telling cnbc the partnership came together after pandora rejected sirius's offer to buy the full company for $8 a share. who benefits more from this deal? >> i love this. so he wants to buy pandora. pandora says no, thank you. so malone says, okay, here's a half a billion dollars. >> he's the one logical buyer. he's very rigid on the price, and now he kind of has you captive because he's an investor. >> and the stock goes above $8 a share, which is where they're going to buy it anyway. >> exactly. >> what are they going to do with that kind of money? they're buying their preferreds, but i mean -- >> fund future years of losses because pandora does not really have a business model that works just yet, right? >> and they're trying to get

into cars. they want to be heard in cars, which sirius has deep penetration on that. >> sirius meanwhile down 4% on that news. finally, it was once common for wall street firms to only hire from prestigious business schools, evan. >> oh, yeah. >> but now a hiring head at blackrock says the company is hiring more liberal arts majors in an effort to have more employees with a diverse set of skills and world views. it's about time. >> you got two people here. santoly and i went to the same college. we were both liberal arts guys. >> you were also a business school guy. >> i also went to business school, but i studied russian and soviet history. that was my thing. and santoly, i think, did history. and when i got to goldman originally in the mid-'80s, they had two groups of people. they called people like me were called the poets, and then there were the people -- >> the quants. >> who actually did business, knew what they were talking about. >> what was yours? >> i like to think the poets did

better in the long run. >> i went to the university of north carolina vocational school of journalism. >> journalism major here as well. >> business journalism in fact. >> they have a major like that? >> they do. >> good for them. >> i think it's about time that they broaden the horizon, don't you? >> especially because even if you get an mba, you show up at a place like goldman or a private equity firm, you didn't actually learn the things you're going to do every day. you learn the concepts and the principles. you can pick that up. >> you talked about lofty ideas. >> adaptability. can you read, can you write? >> it's called critical thinking. that's what it's called. >> i'm interested in this. >> we're very good at critical thinking. >> time now for a cnbc news update with sue herrera. >> hi, kayla. thanks very much. here's what's happening at this hour, everyone. secretary of state rex tillerson is calling on saudi arabia, egypt, the uae, and bahrain to immediately ease their blockade of qatar, saying that it is hindering the u.s. military efforts against isis. >> the blockade is also

impairing u.s. and other international business activities in the region and has created a hardship on the people of qatar and the people whose livelihoods depend on commerce with qatar. the blockade is hindering u.s. military actions in the region and the campaign against isis. >> prosecut prosecutors have rested their case against bill cosby on the fifth day of his sexual assault try. cosby's lawyers will present his side of the story before the jurors get the case. and the men's semifinals were played the at the french open, number 3 seed stan wawrinka punched his ticket to sunday's finals with this unreturnable backhand against the number one seed, andy murray. he will face nine-time french winner rafael nadal, who defeated dominic thiem in straight sets. the final will be on nbc sunday morning beginning at 9:00 a.m. eastern time. i will shall there watching with my cup of coffee. that's the news update this hour, guys. >> vamos, rafa.

>> you'll be in paris? >> oh, no. i'll be on my couch. i'll be on my couch wishing i was in paris. but i will have a cup of french roast coffee. i don't know if that counts. >> it does. >> have a great weekend, guys. >> up next, the tech wreck. some of the biggest names in that sector down sharply today to say the least. up next, we'll discuss whether this is a rare buying opportunity or the end of tech's run. believe me, we know. >> plus one wall street analyst says we are about to see an unprecedented buyer's strike in the auto market. we'll explain why and what it could mean for the economy coming up. think again.

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welcome back. if you're just joining us and want to check on the market, what an interesting day it was on wall street. the dow does not tell the whole story. pretty good rally. was up more than 100 points for a time. the s&p was negative. look at the nasdaq, down 1.8%. it was down 2.5% for a time on a day when the market was de-fang'd. yes, i went there. we'll talk about that in a moment, and the russell was up a fraction on the day. the nasdaq did post its worst week of the year, and the high performing fang stocks were down more than 3% across the board. so is the tech rally finally

over, kayla? >> joining us now, tim lassco, granite investment advisers, and david bonson to discuss this. david, i'll start with you. tech for a long time had been the only place that you could find growth in the market. is that still the case despite today's activity? >> i don't know when tech has been the only place you could find growth in the market. i mean most sectors have done quite well since the early part of 2016. >> perhaps the most reliable source of growth in the market. >> no question about that, kayla. that's right. and it's been really robust growth. and even you look at the performance numbers, some of those large cap names put up just year-to-date, over 40% in a lot of cases. so big performance. and that, i guess, is the issue we're dealing with now. they're just plain overbought. they're extremely stretched from valuation standpoint. and now all of the language piling on about how, no, earnings don't matter. multiples, traditional valuat n

valuations don't matter. this is the most dangerous talk we hear as value investors. >> tim, now what? we're having this break. one day does not a trend make, but what do you do with this, do you think? >> well, one day does not a trend make, and the fang stocks are not really monolithic. they're each in a different business. so as value investors, you take them apart, and you figure out what you think the future value of those companies are. and in some cases, the valuations might be stretched, and in some cases, it might be some buying opportunities. and you just have to wait until these big call it -- i don't know if it's etf-driven or index-driven selloffs create some buying opportunities. >> you ju >> let's talk about amazon specifically. i bring up amazon because of all those stocks, that one from a valuation -- valuation has never really mattered for amazon. i mean historically going back over the last 20 years, it has managed for a couple of decades to avoid the typical valuation parameters that even microsoft, apple, alphabet have been

subject to from time to time. is amazon really different than the other stocks? >> well, amazon, it's different in that i think if you look from a valuation standpoint, it's probably on the higher end of stretched than maybe a facebook or a google where both netflix and amazon are out there in the stratosphere. so to say that amazon is cheap at 160 times earnings versus 180 times earnings is a hard one for anybody. i think what amazon is, people who buy it are betting on amazon five years from now, not amazon next year. so we as value managers don't own it, but that doesn't mean people don't find value looking out in the future. >> david, you said this group got overbought. that's clearly the case. one of the interesting things, though, is that the really largest tech stocks like the fang stocks and whatever other ones travel with them have become almost part of the defensive trade, right? when people aren't sure about world growth, they don't want to buy the cyclicals right now, they actually buy what they consider to be these reliable

companies and it's similar in a way to what happened a year ago with some of the safe consumer type products. is that some recasting of what tech is for investors? >> i think there could be some of that element, but i would add to that. i think you also just simply have not only the window dressing that mutual funds are famous for, but the etfs are having to. their capitalization has gotten so big that it's forced a lot of technical buy volume. there's a sense that a lot of investors feel there's safety there. a lot of managers are afraid to not own these names, and i can understand that. this takes conviction right now to say, look, if they get more expensive, we're okay to look bad for a little bit, but we don't want to be caught owning something that is going to drag the portfolio for three, five, seven years, which is historically what's happened when really good companies get way overbought. i could give so many examples here. we know the names we're talking about. so to avoid them at these levels, you do have short-term

risk that there continues to be funds piling in more, pushing them higher. but longer term, i think it's just a bad value proposition. >> okay. we have to go at this point. good stuff. i suspect this is not the last time we'll be having this conversation. tim lesko, david bahnsen, thank you for joining us. for more on the fang fallout, tom lee, who said to buy the fang stocks last week, he'll be back on fast money tonight at 5:00 p.m. eastern time. see what he says now. >> meanwhile, auto sales have been on a record run, but one analyst sees potholes in the road. get it? >> you went there. >> they went there. he'll join us next to explain why. i'm not opening that one. >> plus we're go to puerto rico where the commonwealth is voting on possible statehood. but problems certainly face that island no matter the results. details coming up. hey, i've got the trend analysis. hey. hi.

hi. you guys going to the company picnic this weekend? picnics are delightful. oh, wish we could. but we're stuck here catching up on claims. but we just compared historical claims to coverages. but we have those new audits. my natural language api can help us score those by noon. great. see you guys there. we would not miss it. watson, you gotta learn how to take a hint. i love to learn. watson, you gotta learn how to take a hint. this is where i trade andrs. manage my portfolio. since i added futures,

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whether for big meetings or little getaways, there are always smiles ahead at holiday inn. e*trade's powerful trading tools, give you access to in-depth analysis, and a team of experienced traders ready to help if you need it. it's like having the power of a trading floor, wherever you are. it's your trade. e*trade welcome back. the auto sales slowdown giving some investors pause. morgan stanley out with a note lowering its u.s. sales forecast for the year to 17.3 million units from 18.3 million units and saying the stage is being set for a quote unprecedented buyer's strike. >> joining us to talk about it, adam jonas, the analyst behind that research. adam, there's a number of factors that you cite in this. give us a quick rundown of what

those are. >> well, you know, we're not uncommon being cautious on used car values, but that is probably at the core of the thesis. there are many reasons to be ca cautious on auto credit. the thing i think differentiates our work, folks, is what i would use or refer to the osborne effect. osborne computer company in the early 1980s, they had a great 30-pound portable computer. they really hyped up their next-generation computer. they were a little bit late on it, so everybody stopped buying the current computer and they ran out of money. what we're talking about here is technological obsolescence of the $2 trillion used car park. i'd remind you nine out of ten new car purchases involve a trade-in. so the auto companies are really promising, hey -- and they're differing in the next few years dramatic improvements of safety and electrification. why am i, as a consumer, going to drop $40,000 today? why don't i just wait? that could create a

self-fulfilling prophecy. >> that's going to play out, adam, through 2020. at one point do you think the consumer is again ready to invest in that? >> we think the timing may be uncertain. we don't think it's too early to be concerned about this right now at a time when just about every metric in terms of credit, length of auto loan term, leasing penetration, participation of various credit classes in the market, looking pretty full. we think it might take every bit of three to five years for this to play out. i'd say if you go out to 2019, 2020, we're at a 15 million sar, but we may need some public policy initiatives like cash for clunkers in order to prevent it from being worse than that. >> peter, you're concerned about economic conditions that may be a headwind for the automotive industry as well, right? >> i'm going to add something to the osborne effect and call it the fed effect. eight years ago when they lowered interest rates to zero,

it was to make you buy a car today instead of waiting till tomorrow, make you buy a home today instead of tomorrow. i think we've just pulled forward a lot of auto sales and we're beginning to see the repercussions. we've termed out loans to six to seven years. we have loan values that are now above the value of the car. we have delinquencies rising for both subprime and prime. so this is more than just waiting for technology. this is the end of a cycle, and the auto sector, after basically overselling for a few years, is now going to have a bit of a hangover. >> adam, your projection of where annual sales go from here in the next few years. i'm guessing that the large automakers are not on board with those types of numbers, or at least their businesses right now are not constructed in a way that's going to absorb that. is that what you're already seeing in these stock valuations? that the market has kind of figured out these guys are going to be in shrink mode for a while or not able to navigate this cycle?

>> we do. sometimes the market is right. the market has a wisdom. when stocks trade as such low levels, low single digit pes in some cases, you have to ask what's discounted there. we believe that's an industry that's probably ca pass tiezed at maybe 20 million units, overearning, and selling vehicles via financial instruments, okay, to some consumers that may not fully understand what they're getting into and at this point may not perceive what it's like to service that car. these cars are designed to be on the road 20 years. some of these may not be insurable in the next ten years. >> adam, what role does tesla play in all of this? this is a company that's ramping up prod shun of highly sophisticated cars and the prices keep coming down at the same time. >> tesla is kind of at the bleeding edge of this. they're trying to make their cars relevant by putting super computing power and over the air firmware updates in every car so that perhaps those vehicles, through updates, can be even

better and more capable of dr e driving three or five years from today, so at least they have a chance. if you have the luxury premium players, boy, you know, if they're really able to commercialize a $40,000 or 50,000 half price model s with a 250 mile range and great performance, if you're in the money for a bmw, for example, and you care about safety, you might have some reason to wait it out and see what your neighbor's model 3 might drive like and how the performance is before you buy. >> we just showed the four models that they have coming up there. >> that's the shocking thing that i find about this whole discussion. it appears in the past nine years, the auto industry, certainly the global auto industry has learned close to zero about cutting overall global capacity and trying to shape demand. that's why the stocks haven't gone anywhere. >> they leave it to their competitors. they don't have to do that,

right? thank you both. >> thanks. >> appreciate it very much. not since hawaii and alaska became states 58 years ago has a new state been admitted to the union. >> gosh, i barely even remember that. >> when i was born, there were 48 states. that is sick. u.s. commonwealth of puerto rico is voting this weekend to possibly change all of that. there are financial challenges, of course, that could impede such a move. a live report from puerto rico when we come back. use treats ed and the urinary symptoms of bph. tell your doctor about your 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 this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis. and get medical help right away.

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we have the results of the first ever cnbc survey monkey small business survey. our small business confidence index shows an overall value of

60. anything more than 50 indicates owners are more optimistic than pessimistic about business direction in the next year. republican owners had a much higher confidence reading. that was 70% versus 47 for democrats. so it's not surprising while president trump's national approval rating, just 38% in the latest gallop pool. this survey found 58% of the 2,000 small business owners polled in april think he did a good job. they want tax reform. they want health care. >> more infrastructure. less regulation. >> residents of puerto rico may want statehood, they're voting on that issue to be a state, remain a commonwealth or to seek sovereignty. leslie picker is in san juan and spoke with some of the residents who were hit hard by puerto rico's debt crisis about what they want to see happen on sunday. leslie. >> reporter: hey, guy, that's right t. battle to recoup

pennies on the dollar during the bankruptcy is largely epitomized by wall street's wealthiest. citing with them were the residents of puerto rico who bought into these bonds in droves. at the time they were seen as a safe bet. puerto rican bonds are tax exempt. they're not, at the time they weren't legally able to file for bankruptcy, but all of that changed last month and now many of the creditors we spoke with are facing thousands of dollars in losses when they can least afford it. a judge is, of course, determining how much of the remaining funds could be used, could be divied up in terms of whether they will go to government services or to pay these creditors. >> we are hard working people. so why, and beside that, so why i have to contribute not less i guess, we are expecting a decision of the judge. why would we have to contribute

75% of my savings? >> reporter: we spoke with about half a dozen bond holders here on the island. many of them spoke about severe health issues related to the stress they're facing due to the losses in their savingsk and as for the vote this sunday, well some say that the u.s. deserves some culpability for what happened to the island and therefore they will be voting for sovereignty, where others think the u.s. in becoming a state could be their way out of this mess, guys. >> we will see how that works out. what did you say, a lot of times they owe owe. >> i thought the poming was split one-third, one-third, one-third. i don't know if that's still the case. >> leslie, thank you, not a bad place to be. leslie in old san juan. thank you. meanwhile, apple ceo tim cook has had vice for new graduates. we'll tell you what he said coming up.

i put everything into my business. and i had all these points from my chase ink card. so i bought ingredients, utensils, even made custom donut cutters. wow! all with points. that's how i created the ripple: the doughnut in a doughnut in a doughnut. suddenly it's everywhere. i mean, it really took off. what will you create with your points? learn more about the ink business preferred card. what will you create with your points? we, the tv loving people, want our whole house to be filled with entertainment. roooooaaar!!! easy boy. but we don't want annual contracts and hardware. you scoundrel! ugh! we just want to stream live tv. and we want it for 10 dollars a month. (raspy) wow. i'd like that in my house. it's a very big house. yeah, mine too. look at us. just two bros with sick houses. high five. directv now.

a big streaming deal for 10 dollars a month. it's entertainment your way. [ digital voice ] my friends call me "hack daddy." mos[ evil laugh ]rs. but then cdw orchestrated a network transformation using cisco digital network architecture. allowing scalability and providing fast, comprehensive security from intruders like me. luckily i found a new calling. faster. security transformation by cisco. just run. run like you know how to run.

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computers the act to think like humans. i'm more concerned about people thinking like computers without values or compassion, without concern for consequences. >> that is what we need you to help us guard against. >> tim cook the commencement at m.i.t. today critical think zplg he talked to m.i.t. graduates bakably about whbasically about a liberal arts education. >> as long as the computers in russia have nothing to fear. >> they have nothing to fear. >> i go believe just in general, i will make a generalization about people graduating today, social media, technology, i think that i don't want to over generalize. they tend to miss some they think are important. they should become an adult. they get older. go out in the real world.

>> that is, how to think about the world the discretion, courtesy, a lot of things that you don't necessarily learn by doing social media all the time. >> what do you think, what do you make, though, of the ceos and the big guys like apple and peacebook and others warning about the impact of artificial intelligence and the rise of machines and technology. it strikes me, it's pretty disingenuous or am i wrong about that? >> the companies are seen as instruments of job destruction and everything else, alienation, also, i do think they probably exstrap late within their organization and say, look, if these keeps going the way it goes the capacity keeps going up for devices, it will change things radically. i think tim cook comes from that bubble that has perspective on it. >> they are enablers. >> they come up to my daughter, i see her coming up and shay they have their heads down.

this week i think you will see more. >> it's in the end. >> i don't know. >> just like we will close the alert. >> santelli and i had a private bet going. >> a shame is what you remember? >> he only brings it up when i fail. >> once again, i have to be the adult and say everybody stop talking now. have a good weekend. have a safe trip back to walk. >> that is it for "closing bell." "fast money" starts right now. >> "fast money" starts right now. overlooking new york city's time's square t. traders are tim seymour, steve grasso and guy adami, i'm mellissa lee t. top strategist fang says it is the perfect time to buy. he'll be here to explain why. amazon causing a flash crash in the stock, surging if seconds. it could be a major warning for the markets. plus the bank is on fire hosting the best week of