leaders managed to find a deal therefore, would like to commit to that effect in the weeks and months to come this is the only way to bring about stability. france is not made when it comes to iran. we have also a lot of respect for the iranian people which each history has shown its stre strengths. we do not repeat the mistake of the path we try to replace the sovereignty of the people and we brought about some more terror but for our allies, we want sustainable stability. i believe our discussion together will pave the way and work beyond them

we would like to involve the regional paris and of course, russian and turkey within this framework, together, together in the long run, we can find a solution to the syrian situation. in syria, we are together and engaged with the coalition against terrorists we'll continue to act until the end within this framework until victory. with that being said, in the long run, we need to win peace and make sure that syria does not fall into germany in the region so to that effect, the approach which is agreed means not weaken for it and work on all the

situation, the whole situation of the region. these efforts to contain iran in the region we'll continue to work to that effect within the u.n. security council to make sure humanitarian law and the probasic of chemic-- we'll workn building a sustainable and an inclusive one that'll prevent in germany and once again will prevent terrorism in the future. we also talked about the climate and here also we know where we stand, france will continue to work on major pieces including the global cam paompact of the environment. i can say our researchers acan continue to work on the field and we are both attached to

that now on trade, like you mentioned it and i hear what you said and when you call upon fair trade. when we look at trades, we have some common packages, there were some capacities and a number of sectors that's well known. we should work together. but, i believe that we can say that we are both attached to make sure that between allies, there is compliance with international trade law and at least french is attached to that we have preferences and other situations that we can improve but, i believe that both you and i are also attached and want to make sure that our businesses or

companies can operate in a long and sustainable and stable framework. mr. president, i meant to mention these few points which to your comment as well and allow me to say once again the discussion that we'll have today and tomorrow are fed by this historical bond but also by a sincere friendship which i believe we share thank you once again mr. president for the three-day warm welcome and thank you as well for being there to meet the challenges which imported by the united states of america and france and all people. >> thank you thank you. >> i like him a lot. first of all, i want to thank

our vice president and karen for being here thank you very much, appreciate it now we have a wonderful conference today and we have a one on one in the oval office, we covered a lot of territory and having to do with austria and iran and various subjects. i think a lot of good things are going to come out of our meeting. i appreciate you being here. i will take a couple of questions, how about jeff mason from reuters >> thank you mr. president >> hi there. >> after your discussion today with president macron, what is your thinking of a time line of bringing u.s. troops out of syria and on one other topic you mentioned that you thought the leader of north korea have behaved openly and honorably, this is someone that many people accused of starving his people and killing his family member. what do you mean when you call him that >> i hope that we'll be able to

deal in an open and honorable fashion with north korea i started a process and when i did everybody thought i was doing it absolutely wrong but in the meantime for 25 years, people have been dealing and nothing has happened a lot is happening right now i think it is going to be positive i hope it is going to be positive for north korea and for south korea and japan and the rest of the world. but, i am starting at a level that frankly i should not have to start, this should have been worked out a long time ago and many years ago we were discussing that we should not have this situation happened to the united states and the world. this should have been resolved by other presidents and by other leaders of other countries a long time ago. with that being said, i think we are doing well meetings are being set up and i want to see denuclearization of north korea. a lot of concessions have been made

we have made no concessions despite some of the media saying i made concessions and i have not discussed the concession and other than the fact that meeting is a great thing and i am sure that a lot of other people would have liked to have had we put the strongest sanctions on the country that we have put on any country by far. china and president xi has been strong in helping us he's allowing very little to get through. he's doing that for a number of reasons. we have a good relationship and it is important in terms of trade because i do play the trade card if you look at what's happening with trade and china, it has not been fair for many years for the united states and we are dpoigo to solve that problem. we are having secretary mnuchin and a couple of other folks heading over to china, at the

request of china, they came here last week. we are having discussions on trades i think it all plays to the border and the fact that they have been extremely strong on the border and very little has gotten through much of a surprise of a lot of people i believe the trade will work out but i also think that china have treated with respect than they have. i have a very excellent relationship with president xi and i think that relationship is important to what's happening to kn north korea. the end results, we'll see, maybe good things will happen. as far as syria is concerned, i would love to get out and love to bring our incredible warriors back home. they have done a great job we have essentially just

absolutely obliterated isis and iraq and syria we have done a big favor to neighboring countries frankly but we have also done a favor to our country. emanuel and myself have discussed the fact that we don't want to give iran open season to the mediterranean especially we control it to a large extent and we have controlled it and set control on it. so we'll see what happens. we are going to be coming home relatively soon. we finished with our work with respect to isis and syria and io isis and iraq. we have done a job that nobody has been able to do. i do want to come home i want to come home with having accomplished with what we have to accomplish. we are discussing syria as part of an overall deal

when they made the iran deal what they should have done is included syria and what i say should have before giving them iran, $150.01 point # milli bild $1.8 billion in cash you think about this before giving this kind of tremendous money, $150.01 point $8 billion in cash in barrels i hear it was taken out and in boxes it was taken out, cash they should have made a deal that covers yemen and covers syria and other parts of the middle east where iran is involved they did not do that we want to come home we'll be coming home but we want to have a very, very strong. we want to lead a strong and lasting footprint and that was a big part of our discussion, okay

>> follow up if i may, sir >> on north korea you said you believe in complete denuclearization, what does it mean >> it means they get rid of their nukes. >> president macron. the president referred to your meeting in the cabinet room of a potential deal between the two of you on iran, can you give us a sense of what it may be and are you confidence that you are the assertion of president trump that -- >> i just want to hear on the trade issue to be very clear when you look at the trade issues between our country is balanced there is not unbalanced relationship second, we are following and

respe respecting the rules we contributed to and it makes sense to respect the rules and generalizing in life, that's good method. third, i do believe that we have a very first issue on trade which is over capacity, it does not come from europe or france it is good to work together and when you work so closely together on security issues like iran/syria i am confident about the future of the joint relationship. i think it is part of a broader picture of our interests are totally aligned. as for the iran situation and i think i detail in my prediction

for me, the key point is my approach, it is exactly what mr. trump said, we have nuclear on the long run we have ballistic opportunities. we have to fix the situation syria is part of the fourth one. and, what we have to work o on -- our allies is to find a further deal where we can fix the owe vesituation. otherwise, we'll have to come back for sure i am very happy about the execution that we have together.

and especially the fact that the syrian crisis and the syrian situation should be apart of this broader picture the fact that we are here and we are today in syria together as international collision against isis tomorrow we'll have to find a way to fix the situation from a political point of view, a military point of view which means to set up the agreements part of this big deal in order to be sure that syria will be a sovereign country with inclusiveness in this situation to decide for the future this is very important and that's all >> i think we'll have a great shot at doing a much bigger, maybe deal or maybe not deal we'll find out we'll know fairly soon

mr. president? >> on behalf of the french press, you were saying there were no plan b that the iran deal was to be preserved and now you are talking about a new deal with iran. why do you change your mind and did you join those stronger approach suggested by president trump, is it because you could not convince him and in addition, do you think the others who sign the agreement deal will follow you >> when i say there was no plan b, i refer to the fact that there is no b planet it was about the planet. regarding iran, you can go back

to what i say of the u.n. general assembly in september, i always said that there was the jcpa but we needed to add the three pillars and the post 2025 o a 2025 -- it is his responsibility the jcpa is the first pillar of this framework so i am not saying that we are moving from one deal to another. it is one aspect of the problem. i have not been critical of the jcpu of what president trump have no matter what position president trump would take, i would like to work on a deal of four pillars including what's already covered by the jcpu of current activities

the long run nuclear activities and the regional influence this is constant over the past few weeks and we have been able to go and very much talk in details about this topic including the situation in the region i believe that we convert on a common reading of what's happening in syria and iran and the fact of the nuclear issue is not the only one that in need ds there is a problem of ballistic missile in iran. our willingness to set the condition of the region. once we built this convergence, the idea of moving onto a new deal that would include the force for syrian , i believe it is a strong step forward of the

discussion that we have today. i would like to work together with all of our partners and the minister, they'll be doing it again any time soon. of course, also the regional power and this small group, we'll have some privilege discussions with russia and turkey as for now, we'll work using the me method in favor to work towards a deal i believe we can combine our common views and differences because we are not to innova innovate -- i always say we should not tear part with jcpu

and have nothing else. once we are placing ourselves in a momentum, the purpose of which to put together the broad agreement covering the four topics i did mention it is very difficult because firl first of all, we can take on board of the concerns and the criticism of president trump regarding this deal. the deal supported by former american administrator and previous administration, but we can work and it is also about respecting the sovereignty of the states of the region it is not about intervening no matter what t matter what. it is about building a stable framework. i think this is what we have

been adprgreeing upon today it is about building something new. >> i may add, as i aloluded to i the area, some of which are immensely wealthy would not be there if not for the united states and to a lesser extent, france they would not last a week they have to step up and pay for what's happening i don't think france or the united states should be liable for the tremendous cause the united states is embarrassingly into the middle east as of a few months ago as you heard me say before and i don't take responsibility and i would be embarrassed if i had to seven trillion dollars and when we want to build, mr. president,

our infrastructure and everybody says we want to be careful with our money. when we want to fix a highway or build schools or other things or tunnels or bridges, they say oh, let's be careful with our money. yet, we have spent seven trillion dollars in the middle east and we have gotten nothing for it less than nothing. that's over an 18 year period. the countries that are there that you all know very well are immensely wealthy. they'll have to pay for this and, i think the president and i agree were much on that. they'll pay for it they'll pay for it we spoken to them, they'll pay for it the united states will not helicopt continue to pay. they'll put soldiers on the ground which they are not doing we'll in fact bring a lot of people home. we'll have a strong blockage to

the mediterranean which is very important to me. if you don't, you have iran going roiight to the mediterranean, we are not going to have that there is a chance and nobody knows what i am going to do on the 12th, although mr. president you have a good idea but we'll see and also, if i do what some people do expect whether or not it will be possible to do a new deal with solid foundations because this is a deal with decayed foundations. it is a bad deal and a bad structure. it is fallen down, should have never, ever been made. i blame congress and i blame a lot of people for it >> but, it should never have been made. we are dpoigoing to see what han on the 12th. i will say if iran threatens us

in any way they'll pay a price like few countries have ever paid >> okay? >> yes >> john? >> john roberts of fox >> i have a question for mr. macron as well your nominee to run the veterans affair, dr. donald jackson is running into serious political head winds of allegations being levelled at him. do you intend inteto stand behi him? >> i have not heard of the allegations but he's one of the finest people that i have met. he's been the doctor for president obama and for me and

president bush, i got to know him very well. he's a great doctor. i know of an experience problem. the veterans add mministration very important to me we have done a great job with it we are working on it and it is going to happen. we are going tyo take care of or veterans i told admiral jackson a while ago, i said what do you need this for this is a vicious group of people that melania and i do and we all live through it you people are getting record ratings because of this so congratulations. what do you need it for? he's an add mmiral and he's a gt leader and they question him of everything little thing and with the success of what will hopefully soon be secretary of state pompeo, everybody was surprised and i heard ten minutes before the vote

yesterday on committee that he'll not be approved at committee which will be the first time of many, many decades on something like that would happen with regards to the secretary of state i spoke to rand paul and he never let me down. rand paul is a good man. i knew things that nobody else knew and rand paul says he's going to change his vote and he voted and everybody was surprised. it was actually 11-9 which i believe there was one vote, what would you call that, john? >> a present vote. >> so it was 11-9. that was a terrific thing. but, they failed to stop him so now they say who's next, who's next

this person admiral jackson, dr. jackson, a wonderful man, i said to him what do you need it for as for as experiences is concerned, the veterans of administration is approximately 13 million people that's so big, you can run the biggest hospital system in the world and it is small time compares to the veterans at administrationadmin. what he is is a leader and a good man i told him, you know what, doc, you are too fine of a person his son is a top student at minneapolis. i said what do you need it for it is totally his decision he'll be making a decision but they failed with mike pompeo and that was a big, big hit because they thought they could stop him and embarrass him. the democrats have become obstructionists, that's al they are good at. they have bad ideas and

politics the one thing they do is obstruct that's why i am waiting for and you would never believe this i am waiting for a good people, the ambassador to germany. it has not been approved yet >> we have angela merkel is coming to the united states on friday at this rate and many of the papers checked it out yesterday and they said i was right. but, it would beni nine years, have hundreds of people are waiting to be approved and the democrats are taking in 30 hours per person, they are obstructionists and it is very bad for our country. i said to dr. jackson, what do you need it for? and so we'll see what happens. i don't want to put a man through who's not a political person i don't want to put a man through a process like this. it is too ugly and disgusting. so, we'll see what happens he'll make a decision.

>> are you saying mr. president that you will stand behind him >> yes, i will definitely stand behind him i will let it be his choice. >> great doctor and great everything and he had to listen to the abuses. if i were him, i would listen to him and the fact that i would not do it. i really don't think personally he should do it. it is totally his, i would stand behind him totally is his position. >> you and president trump come to some agreement on the way forward to syria u.s. troops are at the heart of any solution, how long president macron do you believe u.s.

troops need to stay in syria through the defeat of isis or do they need to stay through a stabilization period >> first of all of al, let me sw proud i am to be alongside with the united states to fight against isis we decided to increase our contribution the first goal of this international coalition underground is to finish this group with isis and if with our ene enemy. yo

different ethnics and religious and all different dprgroups that's a diplomatic work that we already started but we have to finish we are involved on the ground with isis. at the same time we have to open the new work together, that's what we decided to do in order to build in the other region of a new framework and especially in syria we'll assess during the coming weeks and months of what we have

to do. when you are at the end of the war, you have to adapt, we are not here to say since then we'll leave the floor. that's impossible. for sure what we want to do now is to finish the war with our troops and finish on the long run of situation to have peace in this region, that's our duty and it is not just with our troops it is with our diplomats and our teams and with all the alliances and people involved. >> we'll be making some big decisions. we are working closely with france and the president, thank you very much.

>> you know you enjoyed a friendly relationship with president trump compares to the previous president at the same time i can see you do not adpree gree on the numbe topics it seems like the initial deal with iran will not be able to be saved so what about the relationship, can you have some concrete impact on france, can it be beneficial to france and europe in you talk about reciprocal interests, is that the case today >> definitely. i believe the reason why we enjoy this relationship because of the relationship between our two countries indeed we have a different background it is maybe because we both are not typical politicians and

president trump is not easily to change one's mind. regarding iran, we have a disagreement but we are over coming it by deciding to work towards the deal that'll enable us to deal with the issue of nuclear issue and treat it together with another three issues which were not being dealt with so far. so should the decision would spend more on the two of us and how the conclusion being of the united states of america would walk away from the jcpu would not move then our friendship is wasted it is about making sure we are

taken into the account of the interest of our country. it is unprecedented and we never before taken joint position and defense on syria on the way we date and in favor of a deal that'll enable us to cover the full pillars there is intense work between ourself and our teams. otherwise, we would not be in the position to do as much in the past, sometimes france argued that it was time to take action against chemical weapons and france was not followed by its allies including the united states at the sitime it is not what happened this time we decided together what was possible and what was not. we conducted a military and

cooperation and please allow me to pay tributes to our troops and our army and to the united kingdom. we led a unique operation, a proportionate one and we were able to do so thanks to the relation that we entered on syria and iran, against the use of chemical weapons, you have seen it and you have the evidence that showed that the relationship between our two countries and our friendship enablers to achieve some concrete results and this is an improvement compares to what was done a couple of weeks ago >> we have many in common. certainly most things we agreed with and we can change and be flexible you know in life you have to be flexible and as leaders of countries, you have to show flexibility and i think we get

along on many of the subjects we discussed today. france is a great country and i believe france will be taken to new heights under this president. it is going to be an outstanding president. one of the great presidents and it is an honor to call you my friend thank you. welcome everybody to "power lunch," it was a 30-minute conference between macron and president trump. the dow jones have slipped and almost 2%, s&p 500 down 1.3% in the nasdaq and you see down 1

and 2/3rd % percent. >> it is a 10-yr >> i am getting ahead of myself now. >> michelle and sara, welcome. >> quite an interesting press conference most of it taken off with a discussion of redoing or rethinking of the iran deal. >> emanuel macron trying to convince the president when may 12th comes, stick with the jcpu and get a new deal that's expansive that's already on the ground as opposed to tearing up. we saw oil moving lower on a previous appearance when he says he and macron were close on some kinds of deals on iran there could have been news made there. you never know though. >> we saw oil spike at the previous appearance of the president and it sounded like he was going to break that deal

now oil is falling on some sort of hope of a new deal. that was macron's terminology. >> right >> let's bring in jaime ruban, public affairs under the clintons and robert frost. >> i think we have to wait and see, i don't think it is clear i am sensing like you are, there is an old saying when you run into a real problem and one area and you cannot resolve it. you enlarge it that's what macron is doing. he's taking the disagreement between france and the united states over the iran agreement and let's face it, it is a disagreement that is very strange because president trump does not have an alternative he criticized the iran agreement and said it was awful and the

worst deal he never shown anybody, france and the united states and the country how he's going to make it better or why the proposal to get rid of it is going to be good for the united states what macron has done is essentially trying to hide the agreement a lot of diplomatic terminology that suggests there is going to be a larger agreement that has four pieces to it. >> and there is one old agreement that's going to be down at the bottom and we are going to build all this new great stuff on top of it the truth is the new great stuff that they want to build on top of it has very, very chance of being built any time soon because iran has made clear that it is not interested in building on >> super difficult robert acosta, the immediate headli headline, whether or not the president is going to stick with, he's got to reprove this

thing very, very frequently, i am sure that hurts him and he's constantly talking about it. may 12th is the next deadline. if i have to bet, i would have to say he's going to go alistenialong with it. >> the president's campaign pledge promised to go after this if you look at the way he negotiated nafta, there is a gray area of president trump and my sources inside the white house say he wants to be seen taking the hard line on the iran deal but that does not mean the details are mnegotiated the other big news is ronnie jackson, i keep on asking him why he's doing it. he's perhaps hinting that dr. jackson can step away from the process. >> he's giving him an out should he choose to take it he says he stands behind him in light of some revelations that

came out early today >> jaime, let me turn back to you. as i watch this how they loosely agreed on the advised iran deal. i tho uught are they can he be theth connected t reality? china and germany and britain all signatories to this. >> exactly i think macron is trying to use thinks skills, people compared it with a roll of a banker working in a company you are persuading the executive, in this case, it is mr. trump that i am working on your problem and you have a whole bunch of slides that's

pushed in front of you when you look inside, what you see is the older iran agreement way down at the bottom and the three pillars that macron kept on talking about the ballistic missile component and what he called the military power on the ground in syria we'll have other agreements on top of it. i would say if france and the united states could sit down and say what they wanted in those three other areas, they could agree. as you point out, will iran agree o oth agree and other parties agree. there is no evidence that iran is going to give up its ballistic missile program right now and little or no evidence that iran is going to pull out in syria or pull out of its control of lebanon or its influence in iraq. i think the one place where i did find something new from president trump however was it

was the first time i heard him say that he realize that if the united states pulls out of syria too soon that iran would be able to have a land base from the mediterranean to the persian gu gulf >> president trump wants to get out of syria and many americans do iran is the country most concerned about. us betting out of syria is great for iran because they are there and they're in the lead. >> it is a terrible -- >> gentlemen, thank you so much. we got to get back to the markets of the dow at 500 points we really appreciate it. james rubin and robert costa >> caterpillars and 3 m is leading the dow lower. how are these earnings being digested in the nasdaq is getting slammed because of

alphabet and amazon. is the fear of rising rates playing out? what else got this market bearish? "power lunch" is back in a few minutes. from generation to gene. we'll listen. we'll talk. we'll plan. baird.

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don't get mad. get e*trade, kiddo. the dow jones and industrial average is down by five moipoins earnings and rising rates. we have covered it a lot bob pisani is on the floor and rick santelli is in the bond pit where he'll talk about the 3%. bob pisani, let's start with you, everything us looking great and caterpillar crushed it and they said something on their earnings call and everybody is concerned about it >> this may be the peak of earnings that's the number issue right now. caterpillar had great numbers raised and eli and lockheed and look at it all on the downside you missed 3-m, just a little bit. they are down 8% and masco is

down 8%. then you had the 3% on the ten ten-yr when it hit 3%, we saw utilities moved to the downside. inflation is a bigger issue, i think. kimberley-clark and procter & gamble i think inflation is becoming an issue in the market. fang stocks, most numbers are down 3% or 4% today. all are essentially 10% or more. then every single day consumer staple stocks with new lows here again, 52-week lows at least in all the big names and there is no big leadership coming into take the place a few energy stocks hitting new highs and those are down today that's not enough to move the market for it. while president and president

macron were talking, they were interested in iran we dropped 150 points while they were talking about iran. they'll have much bigger problems than they ever have before i don't know how much it will play into it i got questions about it i am sure it did not help the markets overall. a lot of issues for the markets to digest now. >> to rick santelli. the bond report. we got an auction of this. rick santelli is processing all of this for us the two-yr note auction, i gave it a two minus that's a highest yield in an auction since july 2008. we saw two-yr note yield the short end should have more attention and draw right now

considering how flat the curve is which brings me a 10-yr note yield. the point is why is the stock market doing this. is it coincidental with the stock of 3%. i have not heard super heavy day today and it is like valium and treasuries were testing its levels we have not closed above since the end of 2013. bob is right this is like a worry market whether it is the comments on inflation and some of the ea earnings front friday's gdp numbers will be the devining rod of my opinion nervousness of rates is a topic today. i think that's an added pressure even though we don't see the pressure of it in the actual rate mark. back back to you. >> 3% is a round number. i know all the notes are looking at, is it just a round number or

a trigger for something that's going to happen faster if we start to see a jump at this point? >> well, i think you split it in two. central banking bias to interes all along the curve. having said that, we've been used to this notion that things were pretty good well, the pretty good part isn't what people perceive is carrying the ten-year note at this point. we had better data and it didn't go above 3% and i think it's that action of why are rates going up are they going up for the good reason or kind of the stale reason based on central banks, and i think when that gets answered with bigger data points, we'll get a clearer picture about how the coexistence of equities in a 3% world will be. >> all righty, thank you very much, rich let's get more perspective on this selloff. joining us the senior investment strategist and samir, global equity and technical strategist

at wells fargo investment institute. joe, let me begin with you what explains today's selloff and the intensifying nature of it >> you know, i think hitting that 3% number while there's nothing magical about it is certainly a bit of a psychological barrier. it's something we haven't seen in a very long time, and it certainly feeds into this fear that interest rates are going to continue grinding higher, inflation is going to continue picking up, and at some point, that is going to weigh on equity multiples. it's going to weigh on equity returns. we just don't believe we are there yet. >> samir, how about you? do you see 3% as anything beyond a psychological barrier? >> not really. you know, we said for some time that we see this regime shift under way and 3% is just a continuation we were at 1.38%, 2%, 2.5% and now it's 3%. the margin for people, those higher rates are, again, starting to become a little bit

of a substitute. they're not quite there yet for equities and i think that's what's bothering equity markets is the additional volatility that comes with rates starting to become at least from a real standpoint, you know, positive the ten-year -- >> i guess we just lost sameer joe, we'll turn to you wla what about the intraday move we saw in caterpillar we thought 3m was an outlier but now we got two major industrials saying maybe this is as good as it gets. earnings season was supposed to bolster this market and is it failing us right now, joe? >> if i were to look a little bit more broadly at earnings for the s&p 500, let's just say, i don't necessarily believe that earnings have peaked in order to have earnings peak, you'd have to see negative earnings growth. i do believe is that earnings growth itself is probably topping the numbers that we're going to see in the quarters ahead. this quarter alone, we're projecting something around 20%

in earnings per share kbroegrowh roughly 8% of that is coming from tax legislation and that is a one-time thing once we get past this year, i don't believe you're going to continue to see these huge year over year numbers, but the underlying numbers themselves, the revenue growth, the organic growth, profit margins, all of that data actually still looks quite strong and i think in part, it's due to very strong global economic data >> so, sameer, what is it? why is this market so hard to impress when it comes to earnings is it just that the guidance is coming up short? >> you know, again, investors are just wrestling with what multiples should they put on the organic earnings and these kind of windfall from tax earnings and we had that big selloff in early february so i think the market is trying to put in a bottom and figure how the when they do the risk-reward calculation what does that reward number look like and you need to know what the multiple looks like >> what's your answer to that question what should the multiple be right now? >> we think year-end, the s&p

trades between 2800 and 2900 and the multiple should be around 19, 20 times because in this world of 3% rates, you call it a couple more percent skprt earnings yield and get a really nice appreciation for the s&p for the rest of the year >> joe, sameer, thank you very much for more on today's intraday selloff, the dow down 500 points let's bring in jim, managing director at tjm institutional services jim, is it 3% bond yields? what is it >> well, the short answer to that is, yes but the bigger fundamental question is, rates have come higher relatively quickly. a lot of excess is built up over ten years of zero rate policy, and the market starts to worry as we pull back the wall paper and we're going to see a lot of marks in the wall and that's a very valid concern now, technicals blend with fundamentals i know you guys sometimes think technicals are some sort of voodoo but they're not

they're really about market psychology and if you look at the way the market traded today, when you put in that higher high and that lower low and went through yesterday's low and all of a sudden accelerated, the point there is that everybody's kind of looking at it saying, is it over? okay, we can't keep that bid it's not over. so all the sellers come back in. so to me this is an indication that we head back to 25/75ishes in the s&ps. >> where does the yield eventually settle for most of this year, above 3%? >> yes well, for 8 months, i've been saying 3%, then 3.25%. 3% is going to be difficult to chew through and i think it's going to back off from this in the shorter term but i think eventually iz it goes to 3.25% you guys mentioned 4%. that's all psychological 3.25% ten years is not really going to provide so much more an attractive investment opportunity that tokz we'stockse just going to throw to the curb but people realize, oh, wow, we're genuinely pivoting from a historic period that was 8 or 9 years of excesses building up and you can see it in debt

statistics and zombie companies and these things are very real when i make a fundamental argument like that, to me it is to bolster my technical argument and my technical is that we're not done with this yet >> jim, thank you. great as always to see you as the dow now below 535 points, a better than 2% decline. the markets are our big story right now. they have been weakening throughout the day 3m is, as you see there, the biggest culprit, down more than 8% much more on the weakness in the big industrial stocks as the second hour of power begins on the other side of this break most etfs only track a benchmark. flexshares etfs are built around the way investors think. with objectives like building capital for the future, managing portfolio risk and liquidity and generating income. that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives, risks, charges and expenses.

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fund a new account. ♪ welcome back to "power lunch," everybody. i'm tyler matheson hour number two on a very busy market day as you see there by those numbers. hard to impress companies this morning, blowing past earnings estimates but investors aren't rewarding them so what will it take to get a rally back going again plus, fewer properties, higher prices and now threat of rising mortgage rates could there be trouble ahead for the housing market, and after a blowout 2017, boeing losing the wind beneath its wings this year it is in correction territory. will tomorrow's earnings get the

stock back in flight "power lunch" takes flight right now. >> welcome to "power lunch." i'm michelle and as you can see, stocks are sinking in the past hour the dow down more than 500 anticipa points at this hour. the s&p 500 off by 1.66% and the nasdaq lowered by nearly 2%. industrials, technicals -- excuse me, materials, and tech are the laggers. telecom and utilities are in the green. the intrasensitive stuff is doing okay today even though we've been talking all day about the ten year on the move briefly hitting the 3% mark in earlier trade. big intraday reversal for caterpillar. this is probabili this is probably the dominant stock story of the day lost a 4% gain after saying on the conference call that the q1

is the high water mark and they expect material increases in 2018 to be higher than expected and now that stock is off by more than 6% faang names are also deep in the name, facebook, alphabet, amazon, netflix and google are down 4% at this hour and also in correction territory. on the flipside, regionals in the green with the kre etf on pace for its fourth straight day of gains hey, sara. >> i'm or eisen. let's go straight to mike and bob. you have to tough to impress market. you say it shows it can be quick to anger what got it so angry >> not one single thing. i think those words from caterpillar definitely were one trigger. i think 3% on the ten year isn't so much some magic threshold but it's a psychological stress test we have not been here with stocks valued up here where we are right now and have been for a few months, so i see that -- all that's context for this move right now.

also, the market came in, i think, with -- came into this week with plenty to prove. it was not able to show much upward momentum, even when it was trending higher all month and i think basically this idea that maybe we've seen the best of a lot of individual sector rates of change in earnings, if you can put it that way, is what's weighing on things. >> i would agree i think the question is peak earnings is the primary question i don't think caterpillar helped auto all by saying that would be the peak but we've seen this with a lot of stocks, very modest upside and if you miss or don't provide good guidance like 3m, you're down rather big today. rates being higher, i would note something more important than that i think it's the inflation commentary from a lot of companies, caterpillar, kimberly clark, procter & gamble. then we have every single day those consumer staple stocks hitting new lows on concerns about brand, concerns about margin issues, and then of course every day, too, the last four days, the faang stocks have

been down. all of them are down least 10% and i don't know how much geopolitics came in but we dropped 150 points during the press conference with president trump and president macron president trump spent a lot of time on iran saying if they restart their nuclear program, they'd have much bigger problems than they ever had before. that's certainly not helpful >> and guys, also in that press conference, president trump also said -- he was pretty optimistic about china. this was a market that was moving on any commentary around a potential trade war for china. president trump said he's dispatching treasury secretary mnuchin. he's optimistic. she's been very helpful on north korea and market didn't get impressed by that either, mike >> they're not and i think that the fact that, you know, this market has kind of keyed off an ever-changing set of issues, right, it's, first it was all about rates, then it was all about tariffs, then a volatility trade blow-up and then politics in d.c. so guess what, we're in a correction the s&p is broadly speaking

between 252,800 ,500 or 2,800. right now, credit harkmarkets a fine so i think that it just shows you the markets kind of caught up in its own issues. >> bob, is there any reason for this market to go higher from here in the short-term you've got iran and a decision on may 12th. you've got a summit between the president and kim of korea you've got rising interest rates in a fed meeting coming up, what, i guess the next rate hike would be in june you've got concerns about rising input costs. is there anything that clears the air? >> yes if you are convinced that a -- any concern about a slowdown in the global economy is either very, very minor or temporary, which is the big debate right now, and if you are convinced that there is not going to be any decline in earnings for the rest of the year, you are getting a multiple contraction now. we're like in the 16s now for

the s&p 500. if the global economy is still holding up and earnings will be fine for the rest of the year, yes, you can argue that the market should make a bigger -- >> and i would just add quickly, tyler, that more people who believe there's nothing to make this market go up and there's nowhere to hide, i think, is also the makings of some kind of a rebound. sentiment has really cooled off. maybe you need it to get a little bit more fearful before this is all over >> i would also add the economic fundamentals are not bad consumer confidence bounced back the data is coming in good you can have this debate about whether this is as good as it gets and the peak of that, but so far, earnings and the economy seem to be in a good place >> they seem to be in a good place. the dow is in a worse place, though, off 600. >> thngz thananks, bob and mike let's talk about the ten year. steve liesman is here with a look at the potential fallout. >> hey, michelle something is different right now. for most of the post-election period, stocks were happy to

rise along with bond yields. the two were very closely correlated bonds seemed to rise with the expectation of more fed rate hikes and better economic growth but you can see a noticeable break where the orange line goes up and the blue line goes down in january of this year -- end of january when suddenly the rising yields seemed too much for stocks and just this week, they separated even further. so what's changed? first quarter weakness higher inflation concerns and now the markets pricing in a more aggressive fed and maybe something pricing in a fed about to make a mistake. higher rates will affect everything from home lending rates to credit card bills to corporate borrowing costs, the economy, though, has with stood rates this high and higher and still growing but if the rates come with better growth, it's a potential offset to those negative effects what's happening in the corporate bond market right now is you've had rising rates but the spread with underlying

benchmarks as come down as money has come in as a result of those higher rates >> what do you think the signal is that's coming from the yields curve? in one day, we're talking about getting steeper and the ten-year hitting 3% and we're all worried and on other days, we're explaining what the flat yield curve means and whether the ten year is going to drop below the two year >> my read of the history is that the signal is binary, as in 0 or 1, that it's only a recession signal when it gets down to zero there have been other times, if you look at the history of, for example, the two spread right there. >> it's at 51 right now. >> where does that go back to? it's the longer term chart that we may want to show here if we have time but if you look at the 2000, there it is right there, and what you see is that middle period, say '95 through 2000, it was down and close but it was not a recession signal in fact, the economy grew very strongly then. now we're heading back down towards that binary moment right

now but i don't think you can -- >> also, david rosenberg points out that the long bond, we talk about the two and the ten, the 30-year yield has not made a new high with his rising rates in fact, it's been stuck around 316. >> you realize that there's a huge contradiction in what we're talking about. on the one hand, we're talking about the idea that rates are higher on the other hand, the problem is that long rates aren't high enough >> they are higher e >> relative to what's happened underneath that. so i think if we talk to neil on friday and what he said is he's surprised they haven't gone up more >> in the long-term. >> right and so what i think some people say -- see when they look at that number is that the fed is at or near the end of where it's going. >> so fewer rate hikes >> exactly if, indeed, the economy cools off along with it. if the economy keeps going gang busters, you're going to do a 3% growth for the rest of the year. >> and if inflation kicks in as you hear these companies talking

about rising input costs, who was the guest that was on yesterday that said whenever the spread between the two and the ten gets below 0.5%, it usually goes flat. we had a guest on that who said that the other day usually, the history says that when you get to that point, it goes flat. >> you can see that in that chart. >> but obviously sometimes it doesn't. and sometimes the flat yield curve doesn't always mean recession. >> it's hard to predict a recession given the amount of stimulus coming from the tax cuts and the upside both from the fiscal spending and the corporate side where they have all this incentive to invest the questions that i have heard, the ones that are difficult to answer, what happens in 2019 does continue or is that a time when perhaps we run out of steam. >> as sara says, you give the economy a report card right now, it's an a minus or a b plus. >> right and you have this -- >> we're looking at potentially 3% growth this year. >> reciprocal first quarter swoon in the numbers but a lot of people are discounting that and saying, the second quarter is going to be a strong

bounceback >> look how stretched we are on the fiscal side, look how much stimulus is out there. >> tax cuts. >> you want to hear a little heresy from a trader i talked about today? this has not been talked about a lot and i wasn't really ready to talk about it yet but i think it's worth it in the context of what you just said there's some people, and i think it's very few out there, that think the current tax rate cannot stand that they're going to have to go back and revisit it, depending upon what happens with revenue and the deficit. >> and raise it. >> and if the bond market demands impact there is a precedent for this. one of the great tax hikes in the history of this country happened in 1982 in the summer of that year, after the first round of reagan tax cuts, republicans and democrats took a look at receipts coming from the treasury and they went back and instituted a very large tax hike as a result. they had gone too far. has this gone too far? i don't know i don't hear a lot of people talking about it a couple people have mentioned it to me as to whether there's doubt that the current tax rate

can -- z >> we have to see what happens in the bond market >> i think that's right. i think the bond market can force that revisitation. >> steve, thank you. what do investors do from here with all this talk? art hogan is chief market strategist and tim courtney, chief investment officer with wealth advisers. art, we just talked on trading nation you said things look fantastic they don't look fantastic right now with the dow down 500. you getting worried here >> yeah, they sure don't and i think, you know, one of the things that we led off our conversation with yesterday was concern over trade, right? and the -- what happens when you have bad trade policy. and one of the things that's happening is the big difference is we're hearing from corporate america that input costs are going up, whether that's caused by tariffs or sanctions or commodi commodity prices going up on their own but i think they're going up artificially. the concern is you've got a great earnings report but your guidance is cautious there's no economic benefit to

commodities going up when it's being caused by bad trade policy and i think that's what the market's reacting to it has nothing to do with 3% yield on a ten year, certainly doesn't have to do with the fact that the economy is doing well and the earnings are doing well. it's that caution around how far does this go or are we ever going to back down and negotiate with people and get some deals done on trade. >> but it sounds like you're still relatively optimistic. are you buying >> i will tell you this. i can be optimistic if we actually renegotiate nafta and that would point to the fact that this is an administration that can actually get a trade deal done. i would be optimistic around that but right now the biggest concern this market has is around trade so right now we're in a counterintuitive market i think michelle pointed out the fact that the dividend darlings are the best performing sectors until the market today, the first time the ten year touches 3% is just crazy land. the earnings that are coming in, both tech and industrial, are spectacular but i think that we need to get our hands wrapped around where we stand on trade

and trade policy, get some of these tariffs and sanctions normalized and have guidance that matches the kind of pace of growth we've been seeing >> tim, if art is right, it is possibly a trade deal on nafta that could be that spark that could turn this market's funk into something more pretty >> yeah. yeah potentially could be -- it could be that. it could be a number of things i think some of the reasons for today are twofold. two main issues. one, we've gone a very long time, about a year and a half, where markets were just eerily quiet. but really before february and the market and investors got used to something that really has not been the real, you know, the real market of the last several decades. this is more normal volatility and the second thing, i think, that's causing this is for so many months, we had a lot of commentary wondering when is

this going to end. you know, we've gone almost ten years in this expansion,this is a really long in the tooth expansion, this has to end at some time and you have people starting to doubt and ask these questions. so i think it could be any number of things it could be the fact that, you know, things don't -- there's not a horrible news item that comes out in the next several quarters, that things just keep going along and companies continue to increase their profits and we have good news. that's likely, i think, to be what turns the tide. but this is more healthy it's not normal for markets to go up like they did in late '16 and '17 with none of these days of 2% moves. >> we've noticed that. there were zero 2% moves last year, tim. and now it feels like they happen all the time. but when we -- we pretty much have been stuck here for, like, 50 days. when this is -- when we break out of whatever's going on here, is it going to be the upside or to the downside, tim >> my guess would be it's to the

upside my guess would be that for it to go to the downside, we would have to probably go into something like a recession and as you've been talking about, over the last several minutes, the odds of recession just don't look good we have relatively strong u.s. growth relatively strong foreign growth and really synchronized growth the odds look low. so i would they when we break out, it's likely to be to the upside and likely to be on just theabsence of a lot of the bad news that maybe markets are fearing right now. >> got it. thanks, art. thanks, jim. good to have you on. >> thank you >> here's what else is coming occuup on "power lunch. how likely is a 5% mortgage? and boeing shares are getting crushed this year. they are now in a correction as well tomorrow's earnings, they're going to turn things around for that stock we discuss coming up and as we head to break, here's a look at the dow 30 heat map. verizon, one of the big dividend payers at the top of the list. at the very bottom, 3m and

caterpillar, the two industrials that reported earnings earlier today and investors clearly disappointed wel rhtac 'lbeig b many small businesses, from kitchens to factories to contractors, rely on their equipment to serve customers every day. when equipment is broken, it means lost revenue. trusted choice independent insurance agents offer special protection that could help replace or repair damaged equipment and provide lost business income.

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this session today amazon and alphabet leading the nasdaq lower alaska air and kansas city southern, they are pulling down the transports >> brutal reaction to earnings also major milestone that we've been talking about for the markets today, yields on the benchmark ten year treasury note hitting 3% for the first time in four years one area where that is certainly playing out and being felt is housing. mortgage rates moving higher, getting closer to that psychologically important 5% mark so what does that all mean for the american housing market? let's bring in the chief economist at lending tree where he focuses on housing and mortgage market trends welcome to "power lunch. so, what, 4.5% is the rate right now? are we going to get to 5%? >> yeah, i think certainly if we continue to see increases in the treasury towards 3.5% then, you know, you tend to see the mortgage rates let's call that spread about 1.5 points that would take us towards 5%. >> and is that going to impact

the housing market and whether consumers are going to take out mortgages. >> yeah, so, certainly when the rates rise, of course the cost of getting a mortgage increases, and it makes its more difficult for some folks to qualify on thing like debt to income ratios >> is this going to change not only the eagerness for people to take out mortgages but the kinds of mortgages they take out in other words, are they going to be more prone now to take out a variable rate mortgage >> yeah, i think we will see an increase in a.r.m. mortgages but just to note, they are very different than the ones that got us in trouble ten years ago. >> how >> just the underwriting standards are much, much more stringent. the challenges that we had with the mortgage crisis is that there was a lot of layering of risk so, folks would have, you know, a high dti, a low fico and so on a higher l tv. today with understood writiwrit, you get less of that problem >> how much do home buyers pay

attention to the market? when we talk about 600, 700 point moves on a daily basis, does that hurt the demand for housing or does the average american look through that and still go out and buy, trying to get in sooner. >> i think everything that affects sentiment would affect the housing market things that affect consumer confidence would affect home buyer confidence i don't think a single day drop in the dow, for example, is going change the decision of somebody who's decided to buy a home i always counsel folks that you want to make a home buying decision that's a lifestyle decision you don't necessarily want to make a home buying decision that's a financial decision. >> sara started out the conversation ask about what happens if we get to 4.5% or 5% and you said that will happen but you didn't see whether or not you think that what do you think is going to happen to the ten year yield where do you think mortgage rates are going.

>> i think we could possibly get a quarter point rise from here i don't think we quite get to 5% this year. you know, the reason being i think, we're definitely seeing some strength in the economy i think there's an kmptation that we're going to get stronger inflation numbers and that's going to put some upward pressure on the ten year rate and on mortgage rates. but they've already come pretty far since last fall. we were around 3.8% for mortgage rates in september, october, and now we're at 4.5% so we've had a pretty far run, pretty fast. >> you've had some concerns about the health of the mortgage industry what are you predicting there? >> so what we've seen with the increase in rates is that there's been a decrease in refinance volumes. so essentially, mortgage lenders have more capacity than the volume of mortgage that they're bringing in. that increases your average cost per mortgage and that reduces the margins in the mortgage industry so some folks who are making less money than they were making before, you know, would probably need to consider should they be in this business at all. i think we will see some

consolida consolida consolidation in the industry. >> what does this mean for bonds? is this going to cap prices in any way or not >> i think it's probably going to put a slight damper on prices but i think what happens with rates and house prices is the reaction of the house price happens with a significant lag so we won't see a reaction right away today's house price data was pretty strong. >> and you've also got an inventory crisis so that, you know, all things being equal, that means people will pay more because there are fewer houses to buy, supply and demand >> the inventory crisis is very acute and very concerning, particularly at the lower end of the housing market so a lot of lower priced homes, after the crisis, a lot of investors bought those homes and turned them into rentals the rental population has increased by about 8 million since the crisis so there's a lack of supply at the low end, which is pushing up prices you're actually finding prices are going up faster at the lower end than they are at the high end.

>> we'll keep an eye on those rising mortgage rates. thank you very much for coming by to talk about it. faang stocks getting defanged today as equities fall. what is behind the selloff and do you buy in? do you nibble with your fangs? do you get out your fangs? ow lchisacinwo minutes.

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welcome back to "power lunch," everybody. let's go for a look at the decline in technology. >> so, tyler, some of the biggest stocks in the market are acting as the biggest drags in the price action so far today and we're talking specifically about what's happening within mega cap technology, the four biggest tech stocks out there by market value in the s&p are understood performi underperforming the broader index. alphabet 5% at this point, microsoft down by 2% and then facebook off by around 4% at this point now, that broader tech weakness also playing out in pockets of the semiconductor industry, which has been hot as of late where shares of nvidia, broad com, so michelle, as we focus on some of the industrial weakness, important to point out that some of it's very much being outweighed by what's happening in technology. >> got it, dom tllet's talk about what's

driving the f.a.n.g. and tech selloff. hey, gene, good to have you on why do you think f.a.n.g. is falling along with the rest of the market today i know alphabet had numbers out and people were concerned but this weakness is much broader than just that stock >> it is and i think investors who have had a good run in these large cap tech names are probably taking a step back and saying that the upside, the amount of upside in some of these names is a little bit less or at least when you look at the quarterly earnings, so let's zero in on google for a second. is the results were effectively inline and i think the buy side, the investors are stepping back and saying, let's think about the upcoming earnings that are coming from these large cap tech names in the next couple weeks and probably anticipating a similar type of price action so i think that plays into why we're seeing part of this selloff today. >> so, similarity to when we talk about what's happening with, perhaps, caterpillar and 3m is this as good as it gets?

>> exactly and i think investors do a great job of watching the second hand when it comes to the trading around these, and in other words, i think they're actually too focused on the near term in this concept is this as good as it can get and i want to quickly go through why that i think that they should take a slightly different perspective and this comes from me living through two big downturns with the internet and then 2008, so i've seen things come at the peak and then sell off but i think these large cap tech names are really well positioned and can get better because essentially, in the next decade, next five years, they're going to be stealing market share from other industries, like, for example, tesla's going to take share from the automotive industry, things like that similar to what amazon did in retail so, our perspective is that even though this is a very concerning price action, near term, that things can get better longer term >> when it comes to f.a.n.g.,

facebook, alphabet, apple, i'll throw in there, their multiples are stretched but they're not like netflix you've lived through that rising rate environment that helped crush the '98 bubble that we saw. netflix in particular with its mass massive multiple, have you calculated, when you do your modeling, what happens if interest rates start to rise what does that do to that stock? >> i don't know what it does but not all f.a.n.g. stocks are created equal. there are f.a.n.g. stocks that we generally are favorable towards. the ones that we're less favorable to is netflix, in part, partly because of the evaluation and also facebook because just underlying belief that the world doesn't need facebook the world needs google but need facebook to answer your question in a slightly different way, we talk about this big opportunity about stealing market share from other industries netflix can gain share from a lot of traditional media but i

think more broadly, that's one that's going to be more challenged over the next few years. >> gene, thanks for calling in on this big selloff of a day appreciate it. >> thank you so, industrials are the biggest losing sector in the s&p 500 today. they're down nearly 3% we're going to take a closer look at what's behind all those losses but you know what's up? not just utilities and telecom, but also bitcoin the crypto currency surging to its highest level in over a month, back above $9,300 per bitcoin. posting back-to-back weekly gains. the currency is up almost 20% in the past week. stay with us

welcome back to "power lunch. stocks are selling off oil markets closing for the day with a loss. dom at the cnbc commodity desk >> we've got prices for west texas intermediary down by a percent or so. crude futures $73.98

in the grander scheme of things, maybe not as bad as what's happening with the stock market but those prices are seeing some weakness on the heels of president trump's remarks that the u.s. and france might reach a deal to preserve the iran nuclear accord, perhaps defusing some of that tension in the oil markets, especially in the middle east. gasoline prices sit near a three-year high but the futures off by about a percent or so today. oil futures guys will be watching for that often market moving data from the american petroleum institute showing private sector reads on oil inventories, all of that in anticipation of wednesday's official government data on those inventory as well. back to you. >> dom, thank you very much. stocks are deep in the red the dow losing a 130-point gain that it had earlier, and for more on this market selloff, let's bring in cnbc contributor gordon of rosenblatt securities. the dow now down 537 points. we haven't had a dow or really a

market go down and stay down on the canvas this length of time, and i'm going back to early february, in quite some time does it tell you anything, the duration of this correction? >> it's been an interesting change without a doubt look, there are a lot of things in play here first off, obviously, interest rates two year at 3% what does that mean? are we going to continue to see interest rates increase? are we fighting inflation? i'm not so sure so i don't think that in and of itself isgoing to be enough to make a major selloff in stocks, but on the other side, you look at what's happening, a lot of analysts use the capital asset pricing model to value their stocks. and long duration stocks like the f.a.n.g. stocks are judged that way so they're going to be particularly susceptible to interest rate fluctuations now, we came into the earnings season here and earnings have

been good, but that's actually been a sell signal for a lot of these stocks people are selling into that news so then what becomes the catalyst for us to regain our footing for the bulls to start to reassert themselves and i would have to say right now i don't know what that is and this trend seems to be the order of the day right now. >> so, gordon, we thought earnings season was supposed to be the thing that righted the ship, right? and as you just highlighted, it's not what is that telling us about the broader market >> well, that's the thing. now we have to look at some of the technical spots. i mean, we're talking about 26.02 as being an important point of support and if people aren't getting excited behind the earnings, what is going to be the catalyst to support this thing, so i agree with you, right now, we're starting to get into that area where we're looking for something that's going to support this thing and there aren't a lot of answers in front of us. >> thanks, gordon.

>> pleasure. another company that reported this morning, coca-cola and the stock is down about 2.5% despite what was better than expected earnings. becoming a theme here on wall street today i spoke to the ceo of coke earlier, asked him why the market was reacting negatively to what was pretty much better news and better sales. will be. >> look, i think the market is pricing in the good news clearly, i'd love the stock to have gone up rather than down and that's what we're focused on, making it go up for our shareholders but if you look across the last few wieeeks or h last year, we're up, the coke company stock's up and most other consumer staples companies are down so i think part of this is the market's changing and the pressure's coming on, on the stocks from the treasury yield we're outperforming the sector but hey, our long-term goal is to make the stock go up and that will have to be driven by better dollar earnings. >> david quincy is talking about the ten year treasury note yield hitting 3% which hurts consumer

staples because they pay dividends. i did also ask him about one of the big drivers in the quarter, this is diet coke returning to growth in north america for the first time in years. listen >> you know, we've been trying a few things on diet coke. it's been a while since it grew. we've been learning and we've been learning what will engage existing or lapsed diet coke drinkers and what will engage the millennials and i think the team have done a great job in findi finding something that's really got people's attention, whether it be the packaging, the marketing or the new flavors which i think are more millennial relevant but what's really interesting this quarter in north america is not only is diet coke growing but coke zero sugar is also growing double digits so i think there's a big play coming back on some of the low calorie sparkling beverages so i hope the trend continues. >> i'm not a millennial but i really do like the new flavors mango blood orange

>> ginger. >> feisty cherry >> a variation of lime >> they're still artificial sweeteners, which is -- >> i wouldn't have it any other way. >> which is going against it >> and i am also old school. my mother used to have a 6 1/2 ounce bottle of coke twice a day. >> little pick me up >> do you continue that tradition? >> i don't do it every day but i like full sugar coke if i'm going to do it, i do it >> i like the real sugar >> i'm a bottled water gal topo chico they're distributing now. let's bring in beverage analyst with consumer edge research and what stands out is the price action here. the dow is down a few hundred points, but this was a pretty negative reaction to what i thought was a pretty decent report for coke. what's driving it? >> agreed. it was a positive report i think, you know, what we've seen early on in consumer staples earnings world is people looking for something negative in stocks so far have tended to sell off more on the news of the day than we've seen go up.

certainly early in the season, but that's what we've seen and i think there's been a bit of concern and a bit of confusion on the shift to a more volume-led growth versus pricing mix. >> right well, quincy did say that was temporary. and that it would turn around. just on the staples selloff in general, bob was noting that a number of the companies like kimberly clark and p skpg were talking about higher input costs and that's what the market is afraid of right now, rising inflation. did you get that from coke and do you expect that to have a material impact for all of these food and beverage companies? >> we have shifted from, i guess, a neutral or deflationary environment to an inflationary one. and we believe that coke has the power to offset. we'll see pricing come back on a global basis they are the ones that benefit from having less exposure to commodity, inflation tend to be

more at the volatile level we think them offset that and the cost savings program can drive the growth we expect to see in 2018 so what do you do? >> what if yields continue to rise we saw that 3% level hit on the ten year what if that continues and people ditch the consumer staples that have been so en vogue over the last few years on low interest rates do you stick with a coke on the turn around or do you have to beware of those rising rates >> i mean, consumer staples still trade at a premium versus their historical average, and fundamentals for the group aren't particularly great. and i think in general, there are risks. and so within that universe we would rather be in a stock like coke for the turn around, for improvements in organic sales growth and profits that come along with it. >> all right, we'll leave it there. thank you for joining us certainly they've been underperforming lately brett cooper of consumer edge. he's a beverages analyst there but interesting point that they're still above their

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welcome back to "power lunch. industrials in focus today following earnings from heavy

weight caterpillar, united technologies and 3m. 3m taking down the down by about 10 100 points big mover is caterpillar as well after posting a blowout carat. that stock initially had a more than 4% gain, lost all of it and then some saying a quarter was a high water mark for the year and it expects costs to rise the stock now is on pace for its worst day since back in 2015 >> we've got robert mccarthy on the phone to take a deeper look at the sector. robert, what do you think of caterpillar and what it said >> yeah, that was caterpillar on the call today basically called out the fact that they would see in the near term probably peak margins, at least for this quarter for the rest of the year and i think that raised the specter of, you know, a stagflation or peaking environment. you're seeing the prospects of perhaps slower growth than

people were expecting, rising raw material costs and perhaps an environment where you could see a peak in underlying operating margins. i'm not saying that's ultimately how it's going to play out but i think that's what's in investors' minds obviously what's not helping as well is the pullback in oil today so from that standpoint, i think it creates a situation where you could see the credit gets along with the yield curve basically more of a risk of a stagflation or mid cycle pause environment which, you know, can cause investors to be concerned. >> so, unpack it a little bit here as i look at one of the slides we just had there, it looks like caterpillar beat on revenues by almost $1 billion. they're their eps was higher and it says they raised their 2018 profit forecast by $2 a share you say those aren't the telling numbers. the telling part is what they said about operating margins in the future, right? >> yeah, that's precisely the

point is basically, you know, to quote the jack anicholson movie, is this as good as it gets >> do you worry that it is not just for caterpillar but for other industrials, not necessarily that are directly competitive with caterpillar but for industrials broadly. >> look at the price action on 3m today, the stocks down materially on the basis of weaker organic growth and you know, some softness in margins you know, exacerbated by the rolloff of some currency hedges, because we've had a weaker dollar so from that perspective, yeah, you are seeing a broad environment where you're seeing stocks pull back here on the basis of concerns around growth, concerns around margin, and perhaps, you know, a stagflation thesis kind of coming to the front. >> and robert, i always think of 3m as early cycle. like what they do, they do before everybody else. should we look at 3m and see

that they are a harbinger for what else is to come within the industrials? >> well, they also -- the short cycle and orientation because of the nature of what they sell but they're also high quality defensive, to be clear, so typically, it's a name people gravitate towards as being a high quality defensive in this market so i think you're seeing, actually, an interesting phenomenon today you're see, ge outperform, because they put up a quarter that was probably better than the last couple quarters they put out and didn't put a death knell on the stock people are shifting out of a quality name like 3m into ge and then also you have probably hedge fund positioning working in your favor as well because you're probably seeing an unwind with this price action >> okay, robert, thank you robert mccarthy, weighing in on the big move in the industrials today. speaking of boeing shares back at correction levels. will the down trend continue or will tomorrow's earnings turn

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4%, falling back into correction for the second time this year after the massive run for the stock in 2017 so will tomorrow's earnings get the stock back on track? let's bring in our trading nation team, stacey, matt, and, matt, what do you see in the chart for boeing and broader industrials now, looking ugly in today's trade. >> well, yeah, we have to keep things in perspective. what happened with boeing, you mentioned, there was a massive rally last year, and that took it to an incredibly overbought level. look at the relative strength index, it's the most overbought ever i went back to the mid 1970s and couldn't find a time like this you look at the 200 moving day average, well over 100%, again, another extreme. so, you know -- also, it shows the changes in sentiment with the market pullback, oh, it doesn't matter, it always comes back well, this time, it did not.

people are nervous i need to sell the stock this earnings season is becoming a bits concerning because people are saying, geez, they looked at every single negative piece of news and found a silver lining, but now we find the exact opposite so tomorrow's announcement for beau they got a high bar, stacey, they have to set. it's filling up more than 10% for the year, but getting slammed recently >> right >> yeah, absolutely. one of the things i say about boeing, heading into earnings tomorrow, keep in mind, boeing pulled off, after the lockheed comments, that was a negative for the broader dpefs sect eer , since 2016, 4 billion inflows, a sector well-liked as you have comments that don't seem to be as positive, heading into the earnings, they have started to increase risk that investors are anticipating around earnings,

expecting a 6% move, greater than what we see over the last eight quarters of 4% that's an increase today following lockheed's comments. profit taking today, names that performed well, and it's in an environment earnings are priece to perfection. >> follows with the theme a lot is priced in guys, thank you, matt, stacey. >> thank you >> for more, go to tradingnation.cnbc.com check, please, is coming up next and now, the latest from tradingnation.cnbc.com and a word from our sponsor. >> volatile markets are a good time for longer term investors to review asset allocation plans on core holdings ocorou are concentrated in a stk sector, volatility does more damage to your portfolio. diversified accounts do better when volatility increases.

we are watching the market sell off, dow down 500 points, nasdaq down 2% guys, reception to what is good earnings, decent earnings, at least look at google, parent company, alphabet, 24% revenue growth, a big thumbs down, worries about margins or guidance, investors are looking at the glass half empty. >> sales, as you say, sales, harder thing to manipulate --

not the right word, but manipulate the number in a lot of ways. >> massage >> position it, sales are harder to do that with, and sales have been very good, even in stocks suffering today. >> a market vulnerable, right? >> yeah. >> earnings had to come in very, very strong to offset what everyone's concern eabout, risin interest rates >> common threat is higher inflation rates, input costs, and that's in part what's driven the ten year to 3% >> there's a few people whispering stagflation >> yes >> not as much growth. >> which would be -- >> not there yet >> we have to ask every ceo who comes on, are you raising prices and are you raising wages? >> and selling higher materials. >> let's talk about congratulations to scott on his

book "when the wolves bite," we had a party at our house last night with a cake, and there's scott and his lovely wife nancy. we'll see them later, the collision of bill ackman and carl icahn, congratulations, scot, book drops today >> already no. 1 in its category thank you for watching "power lunch. >> "closing bell" starts right now. dow down more than 490 points, session lows, bringing it down more than 1% >> final hour of trading, anything can happen. welcome. i'm kelly evans at the new york stock exchange you're watching the "closing bell." >> before we get to the big stories, was it a cake party or alcohol party, w w