upside obviously you get an incredible dividend to swell. that is the last thing i'm looking at i think they're positioned well right now to go higher. >> stock is up 1.5%. interesting market so far. >> volatile. >> a little volatile, it's trying to figure out where rates are going to go. >> watch oil. >> in the days ahead, the headwind of oil, the dollar, all of that. i know "power lunch" is talking about that it starts right now. welcome everybody to "power lunch. rising rates and risks to the record breaking rally. wall street's trying to figure out as we are, what the big moves in bond yields mean for stocks, from banking to tech, we will drill down on that sector by sector. one area where rising rates are already playing out is real estate, the 30-year mortgage rate now topping 5% on average nationally is this going to hammer housing? is this going to quell those bidding wars that have been taking place in hot arkets >> and bracing now for another major storm, a cat 2 hurricane bearing down on florida's panhandle setting up to be the

strongest storm to slam into that area in more than a decade. the latest on its path, the emergency preparations ahead of it as "power lunch" begins right now. ♪ and welcome to "power lunch," i'm melissa lee. investors taking a bit of a breather today, the dow is modestly lower the s&p 500 and nasdaq trying to snap three-day losing streaks. interest rate fears front skr center as tyler had mentioned. yields on the ten-year treasury hitting seven-year highs before pulling back, and of course housing, that's also in focus. the etf attracts those stocks. the itb sliding into bear market territory. they're down more than 20% mohawk leading those decarolinas. and ppg industries the worst performing stock the company warning higher raw material costs and lower demand in china will impact profits

ahead. c i'm con ses is a brewer. nikki haley resigning as u.n. ambassador. google unveils its next generation pixel phone will it make people hang up on apple and smu apple and samsung. the imf cuts its global growth forecast. the trade war between the u.s. and china is taking a toll emerging markets are struggling now with tighter liquidity and capital outflows. investors are steadying their nerves a little bit today. it has been as you certainly know, a wild few days for the markets. the battle between the bond market and stock market causing lots of jitters, both moving down in price in recent days check out the big moves over the past week. yields on the ten-year bond sur surging 4.5% in percentage

terms. the s&p is down more than 1% in that time. the the dy vur jens more pronounced trading above 3.25%. rick santelli tracking the action from the bond pits in chicago. first we go to bob pisani. >> bond yields are a little quieter today. as a result the stock market is a little bit quieter with one or two exceptions let's take a look at the sectors. we've got tech doing better, energy stocks generally doing a little better. reits holding up a little better industrials and materials are the exception here pp and g, which makes coatings for autos, for boats, for the whole area of aerospace, with that warning you heard there earlier, sherman williams, everything associated with

packaging generally to the downside i think this ppg warning is a little significant, a little sour note to the earnings season overall here they talked about rising material costs weaker demand from china as well as the automotive sector and currency sectors this is a perfect trifecta of things to worry about. you might talk about stagflation a little bit here. a lot of people debating what this means for fourth quarter guidance part of this is that automotive weakness we've seen, johnson, and also caterpillar and illinois tool works. lingering concerns about china tariff issues continuing to stick around the new low list is not expanding. once again we see all those housing-related stocks melissa mentioned, dr horton, kb home in housing, masco, all 52-week lows they have been on the 52-week low list for a couple of weeks now. just keep slowly drifting lower. guys, back to you. thank you very much, now to

rick santelli at the cme where it's going to be a very big week of auctions. >> reporter: absolutely. as a matter of fact, we have two tomorrow in the form of 3s and 10s, of course due to the columbus day closure yesterday if you look at yields we're down one and twos, down two and ten if you look at -- yes, we're drifting, but do remember, we're drifting from that 323 area that was friday's high yield close going back basically seven years, and the trade is very methodic as a matter of fact, if you look at the credit side of the equation, let's look at a one month of barkley's high yield, from a real security's standpoint, yes, the spreads have turned up, but from very low levels had iswhich is a goo thing. capital on the cheap side, maybe more interest rate and credit differentiation, but it really does exaggerate the following. orderly on barkleys. the etf side, this is one week

of hyg, the etf is getting pummelled it's close to making lows going back not only this year but maybe an extra year, and that really does underscore trying to equate the equity side with the fixed income side is never easy three calibrations always rough historically but as i said, very orderly, and i don't see this threatening big seller emerging on the global stage with treasury securities. finally, in order to understand the dollar index, let's go back a long way let's go back to january 15. you see the left side of your chart in '15 and '16, how much work we did between 95 and 97. just like in june and july of this year, between 94 and 95 look for the dollar to stay plant but firm. morgan stanley making a new call on the become of these rising rates saying the stock market is now at a tipping point because of those rising yields and to dump growth names is it the right call, and can stocks and bond yields rise

together joining us paul christopher, head global market strategist, wells far, and cnbc commentator mike santoli how much more important the earnings results have become in light of rising yields >> yeah, the earnings are going to be very important because investors want to see just how quickly if second quarter was the peak, how quickly earnings growth will tail off from here we think you're going to get pretty good earnings, 20% plus on average for this particular third quarter. still looking good for the stock market but some hesitation here. >> mike, let me get your perspective on this. if the earnings season disappoints, can the stock market continue to hold in, or could it start to turn even uglier than it's been over the past few days? >> i think we have to maybe define what disappointing would be i would imagine we are set up for what has become a pretty traditional rate of companies

beating estimates. maybe we'll be a little bit short of the second quarter and the first quarter, where about 80% forecast i do think a majority will likely beat. uptown seen a lot of downward revisions to earnings or guidance warnings or anything like that, but i do think the forward guidance becomes pretty important. 2019 i think is being set up as a year of some suspense out there. how much growth might deceler e decelerate, whether interest rates will continue to go up in the face of decelerating growth, and exactly what the proper valuation for the market is in that context >> and keying off that point, paul, i mean, do you think that we've seen the full impact of tariffs? we just got this warning from ppg last night about rising input costs. this feels like the tip of the iceberg, and if we haven't heard the full impact of tariffs, doesn't 2019 set up to be sort of a -- i don't want to say kitchen sink year -- but a year where companies may pull back on their exuberance when it comes to their expectations for growth >> that's a good question. overall we should think of tariffs as being a headwind for

investors but not the most important driver of returns or earnings next year yes, you're probably going to see tariffs get worse before they get better because nobody's negotiating yet. you have to negotiate the offramps for things like tariffs. we might even see a full tariff blanket across all chinese imports next year. does that matter for earnings? yes, but probably not as important as economic growth and profit margins and low inflation that still remain favorable. >> if that ranks lower in terms of what will drive earnings, what do you think are the big indicators here, paul? >> the most important indicators here are the growth of the economy, the fact that inflation's going to be low, and we don't think we agree with rick that this is really a pretty orderly move here, and we're not seeing a big selloff in treasuries. we don't think yields move a lot higher from here that will continue to help boost the stock market not only in terms of borrowing costs but also in terms of attractiveness of current multiples.

>> talk a little more, mike, if you would, about the point you made a moment ago. that is that it may be less important in this earnings season is what happened looking backwards retrospectively and more important is what companies say prospectively about 2019 >> yeah, tyler, it seems like the very premise of where the market is right now in terms of the s&p 500 being a couple percent from its high is that earnings have grown at about a 20% rate from the first quarter of this year it shows you that the market either got a lot of the good news out of the way before this year started with the great returns last year or is bracing for a little bit of a lower growth rate going out ahead. i do think because global markets have been a little bit more sloppy and global economies outside the u.s. have had a little bit more of a slowdown in the last few months, it's going to be very important in terms of the earnings flow from all those factors and what we know about going into 2019 i think is going to matter quite a bit. that's why it seems like we're

losing some of the stimulus. and of course the fed this month has seemed a little bit intent on raising the market's expectations of how many rate increases we might get in 2019 i think all of that is going to be crystalized in how the message from companies is taken by investors. >> it gets back to that thing we've been talking about here. it's fine if rates are rising for the right reasons, but if that right reason, which is economic growth and corporate profit growth begins to slow down a bit, that right reason goes away. paul christopher, mike santoli, thanks. another major departure in the trump administration this time it's nikki haley, the u.s. ambassador to the united nations resooing todigning toda eamon javers is at the white house. >> reporter: we are seeing some fallout. the president moving quickly to hold an impromptu session with nikki haley in the oval office the two of them sitting side by side in chairs it's official now. the news breaking a little bit by surprise earlier today.

here's the resignation letter from nikki haley to the president that the white house has put out. now the question is what happens next the president was full of praise for nikki haley during that session in the oval office he went out of his way to suggest that she might come become to the administration at some point in the future, perhaps in a higher role, and for her part, nikki haley doused some speculation about her own political future here's what she said. >> i will say this, for all of you that are going to ask about 2020, no, i am not running for 2020 i can promise you what i'll be doing is campaigning for this one. i look forward to supporting the president in the next election. >> i can tell you that despite the president's words of praise there for nikki haley in that televised session in the oval, there is a strain of criticism of nikki haley here inside the white house. there are officials here who were frustrated with her over the past several months for getting out ahead of the president on several issues, particularly an iran-related

meeting at the u.n. and on russia sanctions and some other things there's some sense among some of her critics here that this might be as much about her own political ambitions despite what you heard her say right there, which is that she's not running in 2020. >> so she's not -- she says she's not running. does she say why she's deciding to leave this very important post >> reporter: what she said was she believes in term limits. she said it's just time for her to go. we don't have a very specific reason of why this is happening and why it's happening now traditionally you'd wait until after the midterm elections as a white house official to announce a departure like this. the president said he was told by nikki haley about six months ago that she intended to leave, and if you back the clock up about six months, what happened around that time was when mike pompeo got the job as secretary of state a lot of eyebrows being raised about that comment as well it might be that nikki haley -- >> she may not be running in 2020, but she might be running in 2024. >> she's only 46 years old

she could run in 2024, 2034 and maybe 2044. >> how old will i be in -- no, let's forget that. >> don't do the math. we want to bring your attention to shares of starbucks popping up at last check by more than 4%. bill akman has revealed at a conference that his firm has taken a stake in starbucks let's get to leslie picker with more details on this. >> that's right, bill akman speaking at grants investor conference today, closed to the press, but according to a person in the room, bill ackman speaking about starbucks and revealing about a $900 million stake in the company that's 15.2 million shares i'm not sure if he has other exposure through options or derivatives or something like that, but in terms of a stake i'm told it's about 15.2 million shares also unclear at this stage of the game whether it's an active position or a passive position,

something that we would learn from a filing perhaps later on, but anyway, we're doing some more digging you can see starbucks up 3.75% we have put in a call to starbucks for their reaction have yet to hear back. >> this is not his first foray into quick serve, correct? he took a very vocal stake in chipotle and actually tweeted himself about purchasing a chipotle bowl at a location a while back. >> that's right. his restaurant brands is another consumer oriented company. earlier this year he announced a stake in lowes that stake so far has been passive. he hasn't been too vocal on specific changes he'd like to see from that company. we've also heard in the past a variety of consumer brands he really likes to invest in predictable companies, predictable cash flows larger cap companies with businesses that can kind of

withstand various cycles in the market. >> and his returns of late have improved >> they have improved, up about 16% year-to-date that follows three yoeears of losses due largely to valiant was a tough position for him as well as urban life which he has since exited he's really kind of focused more on the long side of his book and these bread and butter investments. hasn't really been too vocal on any of his positions rattling the cages for changes and agitating, you know, with big proxy fights and things like that who knows if that may change with starbucks, but we will see. >> leslie, thank you if you're just joining us, 15.2 million shares of starbucks purchased by bill ackman's pershing square. china's latest weapon in the trade war cutting oil in the u.s. down to zero. how is that going to affect producers? plus the impact of rising

rates on housing the 30-year mor gj rate hitting 5% that hasn't happened since 2011 when this song was topping the chart. "power lunch" will be right back ♪ six in the morning. she thought it was a fire. it was worse. a sinkhole opened up under our museum. eight priceless corvettes had plunged into it. chubb was there within hours. they helped make sure it was safe. we had everyone we needed to get our museum back up and running, and we opened the next day. whai tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term?

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3.5%. >> first of all thank you for having me on this show i love meeting you guys. >> thanks for joining us. >> of course, of course. >> the stock has been going up straight since 52, 53 when the company said, listen, we're going to get everything right maybe by the fourth quarter, u.s. is still weak, but we are going to buy back a huge amount of stock they've been buying back stock, which has put a floor on it. i don't think that there is much that ackman can do i want torelate this to when i had chipotle on last week. this is not necessarily one of those positions where he's going to go in front of kevin johnson, and say you know what, i want you guys to do x, y, z i think it's more along for the ride, and i'm concerned about this quarter not the fourth necessarily, but this quarter because there is so much influx. i think china's better i think they've solved some

problems since jack ma got involved i think the u.s. is still going to be tepid. if you come in at this level you may end up being disappointed. >> what about the u.s. position concerns you >> i think there's still traffic issues this is something starbucks might disagree with. i think there's price differential issues. i know howard schultz has not liked it when i compare dun kin doughnuts to starbucks, but dunkin' donuts is on fire. the thing that most concerns about starbucks is a bit of the price point, and i think that that's something that is going to be difficult. now, kevin is solving a lot of the throughput praoblems they are getting better and better chipotle now they have the two lines. they have the throughput lines, and i see lots of things kevin's doing. the affinity program has skyrocketed under kevin. kevin donned the apron when he went to tennessee, just literally boots on the ground, not unlike, by the way, what ron

shake did with pa nanera this morning i said, jeez this thing's on fire. i just think that if you come in now expecting that ackman's going to demand certain things, well, sure ackman's a happy camper a lot of things have been right. there's no need to chase if this quarter's not going to be brilliant, and i don't think this quarter's going to be brilliant. they do have a lot of cash from that nestle's big infusion. >> not every stake that ackman takes is an active stake if you could say hey, bill, there's a lot of wood you could chop at this company, instead of starbucks, what do you think that would be? >> i have a novel approach to this how about if ackman comes in and says, listen, i want all the trappings of howard removed because howard's not involved, you know what? there's -- it's not like steve jobs and apple, but you could argue that there are ways that i'm getting to the roastery here

that maybe ackman thinks that the roastery doesn't give you an instant rate of return i'm with howard. i think it's a fabulous investment, particularly because i think boutique coffee is where the holy grail is. the milan opening at the beginning of september went incredibly well. they've been budweiser to craft beers, right and i don't know what more you can change i think kevin is doing a remarkable job he's doing many things right can they lower price i guess you could always. >> let's talk about trion and what they may be doing. >> i don't know. you come in and people are saying it ties in well with wendy's. wendy's was always a winner in the segment. papa john's as well as, by the way, pizza hut have been losers versus domino's, and papa john's has terrible numbers versus what domino's has i could see trion coming in and

saying, listen, a year from now no one's going to remember exactly what drove it down, and there's a lot of low-hang fruit to fix at this outfit because papa johns has been undermanaged for several years. so one thing i would say about trion is that they like to go with the best not with the worst. you can say wait a second, they did ge, that was the worst. >> procter & gamble. >> procter & gamble is a high end company, but does it make sense that they would do it? it doesn't make sense that the stock is up big and they haven't told you these guys are real honest, and i would think that they would have to be out there saying here's what we're doing. that is not nelson's style his style is to tell the truth here's full disclosure that's been his game, and i think that if he was really going to make some sort of move, it would have been out there in the press. that's my view of the way nelson works. >> can we turn to the markets today, industrials down a percent. look at ppg. is that a canary in the coal mine >> canary dead. >> dead canary in the coal mine.

>> this was an interesting discussion i had with becky this morning. if you go through ppg, if you go back over the july conference call, what did michael -- what did he say he said autos were surprisingly very strong, surprisingly they're holding up boom, a couple months later and they're not holding up in china. there's european issues. there's american issues. phil did say something that heartened me which is that american consumer confidence is good ppg's got a big plant near me in mexico, which is where so many cars are made, they're made in pueblo, not just on the border, and if there's a stack of european cars waiting to comet the united states, that's obviously negative there's going to be some price pressure against that terrific consumer confidence. look, i think what people are saying, hey, you know what truth or consequences here truth that maybe aerospace is good consequences if you have anything auto, anything

auto-related is just incredible. can i just say -- i think they can bounce now they're down so much liner board is the most sensitive commodity to an economic expansion the bulls will say, jim, they have so many product -- they put a lot of plants online you're just looking at the supply side. they're not idiots they put plants online because they're expecting a big demand and they're not getting it how can that be in a year when we have fedex and ups and amazon my problem is ppg killed the canary now it's somebody else in a coal mine, like the coal miners i don't want that. if it has auto, as much as i think phil's right in terms of the 17 million, auto is a bad place to be because you have mexico auto. you got china auto, ppg makes the highest end finishing. they're the ones you really want they're the wealthy cars, the healthy cars are ppgs, and i don't want to see lux, the luxury side of things get hurt

and ppg is synonymous with luxury autos. >> uh-oh. >> fascinating. >> you're saying ppg -- i thought that was the sound the canary makes, ppg. >> boy, are they ever into -- they lost lowes in february for their -- for a paint line, which really was terrible. people want to say, hey, listen, sell sherwin williams. take a look at black and decker. everyone is stanley works. they're all extrapolating that ppg is bad for housing, bad for autos. t they're playing a truth or consequences game. i was just with my executive producer i got a book on this you talk about starbucks, got to come out and talk starbucks. >> thanks. >> i have no idea what you just said >> i gave you what's known as the cramer on the floor of the stock exchange you can get the cramer, and you will be awake for three days it's like -- >> clearly jim cramer. >> he could be awake all the way through the eagles game on

thursd thursday. china going cold turkey on u.s. oil importing zero barrels in august. what will this mean for oil prices plus, hurricane michael heading towards florida. i know jim is watching it. we are, too. we'll vehe lesha tatt forecast and show you what people are doing to get ready when "power lunch" returns

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checking out the home building stocks, the itb in a

bear market down more than 20% from its recent high mortgage rates crossing the emotional barrier of 5% for the first time in about eight years. will it mean a cold winter for housing. dia dia diana olick joins us. >> some of us remember when mortgage rates were three times what they are today. the last time the average rate on the 30-year fixed crossed 5% was almost eight years ago, and that was only briefly. it hasn't really been sustained over 5% for at least a decade. a year ago it was just below 4 and two years ago it hit a low of 3.5%. what does that mean to borrowers? for example on a $300,000 loan you're paying about 200 bucks more per month than you would have a year ago, but it's not just the payment it's qualifying for the loan and also feeling good about buying at that rate consumers and investors have felt very good for a while but robert shiller says that's not always a good thing. >> the economy seems to be coasting upward, but this kind

of complacency, this kind of confidence i think is volatile. >> the only good news for this winter's buyers is that higher rates could mean sellers finally set their sights closer to earth and cut the red hot prices we're seeing today much more on cnbc.com. for more on the impact of a 30 year fixed mortgage rate hitting 5%, let's bring in matt graham chief of operations with mortgage news daily.com. great to have you with us. 5% is still historically low does this actually take buyers out of the market? does this cause them to rethink what they can actually afford, especially when the labor market is so strong >> yeah, i think it does cause certain buyers to rethink what they can afford, but in the paradox cal sense, that could be good for the first time home buyers they can still afford to buy a home

even if it was all cash investors that would buy with cash and refinance into an actual mortgage loan might not see as much cash flow, and that could open the door for first time home buyers to get a loan, assuming they can find a house with the inventory situation being what it is. >> when we see the rate increases that we have seen in recent days in recent weeks, does this take a particular kind of buyer out of the market, low end let's say? high end where does it impact the most? >> yeah, there's always going to be a few buyers, a certain percentage of buyers that are on the edge of being able to qualify. when rates go up as much as they have, then that can push them out of being able to qualify for a home because of the debt to income guidelines that are associated with loan qualifications so yeah, it does take a toll it's not the beall end all of morgan qualification rates. >> millennials that started to get into the housing market for the first time, does this chill them even though -- and keep them out even though 5% is

cheap? what do they think about 5% mortgage rates >> i can't speak for all of them because it depends what their income might be, but i know when i was the age of a millennial, which i'm on the verge of being one anyway, that the 100 bucks that diana just talked about, that could make a difference for some people. it will depend on what rental rates they're going to be looking at compared to their mortgage costs so if renting is much cheaper, it could just be a monthly payment decision as it is for a lot of part-time. >> -- people. >> thank you. one firm, binco out with a new note that said even industries like oil, which isn't being hit with tariffs could actually be avgtffected by the trade turmoil. joining us is peter sham, i understand that we are now seeing exports to china at zero. can you explain that, peter? >> thanks for having me.

it's very interesting development that we are seeing the chinese have completely grind the imports to a halt in august we expect also very low imports of u.s. crude oil into china next month and rumors has it now that potentially october will be a resuming month for china tog back to u.s. for crude oil imports. >> last year we know that chinese imports accounted for 23% of total u.s. crude exports. why have we seen the imports into china fall off so dramatically >> i think what we're seeing right now is increased trade tensions you mentioned yourself the imf have just downgraded global economic activity for 2018 and 2019 to 3.7% that is not good for global economy, and that's not good for trade and shipping in itself

i think china is affecting their models right now, and they do have alternatives for the u.s. crude oil characteristics, so they turn increasingly to west africa to source their needs >> so there are other suppliers for oil that they -- does that mean that u.s. could get replaced entirely? >> what we have seen from west africa over the past, say, three years has been that u.s. have basically ceased their imports from western africa. they have sought new destinations for their crude oil exports, and they found plenty of homes for it in the asian regions. what we've seen right now is that china that have definitely been taking the lion's share of u.s. crude oil sea born exports in the past couple of years to the extent of 22 and 23% of all

that has been exported out of the u.s. have now ground to a complete stop. they are sourcing now from west africa increasingly, and as the characteristics of the crude oil is more or less the same they can do so. it is of course hurtful to the shipping industries as it cuts sailing distances by some margin. >> are you also seeing a similar trend on dry bulk shipping, say soybeans >> soybeans, of course, being a key agricultural commodity also taking place in the entire trade war, and what we have seen in terms of most recent numbers from china is that if you compare august imports with august imports of 2017, chinese have taken 95% less soybeans from the u.s. as compared to 2017 so it's a significant downgrade. >> incredible. peter sand with bimco. thank you for your insight

we appreciate that. ahead on "power lunch," the best of the best one of the top ranked internet analysts on the streets sees a jump up of more than 30% in one of the tech stocks in the market

more breaking news here on starbucks, let's get right to leslie picker. >> that's right. starbucks is responding to news that bill ackman has taken a $900 million stake in the company. starbucks saying today throughout our 26 years as a public company we have maintained a transparent relationship with our shareholders they have helped us fulfill our aspirations as a growth company that contributes to society on multiple dimensions. we view the active engaged dialogue that we have with our shareholders as critical input into our strategic approach, and we value constructive feedback on delivering long-term shareholder value. we look forward to maintaining a productive dialogue with mr. ackman as we do with all of our shareholders and just a reminder that ackman is speaking at an investment conference currently that is

closed to the press. his presentation should be made available later today so we'll have a better idea of exactly what his plans are with this investment, but for now, as you can see there are shares of starbucks up about 2.6%. back over to you. thank you very much. now let's get to don c. >> a huge surge in vool yulume is on the heels of bloomberg headlines citing sources saying the game maker could be drawing potential takeover interests from other gaming rivals those particular headlines have seen a surge in trading for zynga shares just to give you some perspective on average on a full day, only about 10 million shares trade what's curious about this is many of the game franchises that happen like words with friends and farmville have perhaps not been the growth engines they used to be but certainly something we're watching for sure we have calls out to all the parties involved

we'll bring in more details as we learn more on our side. let's get over to sue herera nikki haley announcing her resignation as u.s. ambassador to the united nations effective at the end of the year president trump heaping praise on her during their joint announcement at the white house. >> i wanted to do this because nikki haley, ambassador to the united nations, has been very special to me. she's done an incredible job she's a fantastic person, very importantly, but she also is somebody that gets it. one person was injured when a bridge collapsed on to the transsiberian ralway ilway in russia's far east. the reason for that collapse not immediately clear. an australian won the coveted title of the world's best bartenderer orlando marzo beat 10,000

bartenders from all over the world in the competition that spanned five continents over six months. it is the tenth year diaggios world class has hosted that competition. that's the news update this hour now let's go over to meteorologist caylee dionne. we are just minutes away from another update from the national hurricane center coming up at 2:00 here's what you need to know as we move forward. everybo even tropical storm force winds could begin tonight for many locations along the florida panhandle. then as we go into the morning hours, then eventually late morning, hurricane force winds begin for those of you along the florida panhandle. storm surge up to 12 feet in some locations this is very life-threatening storm surge that can be expected with hurricane michael, and also flash flooding as well as tornados expected as early as

later on this evening as the outer bands start to make their way closer to the florida panhandle and the far western edge of florida. let's go ahead and look at some of the watches and warnings that are out at this point, and you can see them right behind me right here, and i want to talk about those for a second you can see all the different colors there, hurricane warning stretching from really the florida/alabama border all the way back over to this cedar area, so then you can see all of that purple stretching up into southern georgia at this point the storm is really going to haul, though if we look at the track, it's going to move over and make landfall tomorrow about 24 hours from right now we're of course going to continue to keep you up to date on the latest with hurricane michael. >> thank you tech stocks are rebounding slightly but the faang stocks are still a long ways from their all-time highs earlier this year let's bring in the managing director of morgan stanley who was just named the number two internet analyst in

institutional investor's all american research team ranking congratulations. >> thank you so much it's humbling, i'm grateful to the team and we try to work every day and we're grateful that it's helpful to investors. >> i think investors need your help right now we saw faang stocks start to roll over back in june what can you tell investors about how they perform on growth stocks like the faang stocks perform in a rising interest rate environment >> we focus a lot on fundamental revisions and really drivers of upside in the case of amazon, we remain bullish on amazon because of the company's rapidly growing high margin revenue streams their advertising business, amazon web services and also prime subscription revenue, which is essentially enabling amazon to continue to invest harder than they ever have while also delivering higher profitability. we also focus on alphabet. we're still bullish on alphabet. we think that the punch line is through the combination of mobile search, youtube and desktop search top line will remain strong, and we also think

it will lead to bottom line revisions as well. >> when it comes to netflix, there is a concern that rising interest rates impacts its balance sheet: when i take a look at any credit metric, take total debt to equity, 182% for netflix. should investors be concerned about the debt on the balance sheet and the company's ability to access capital? >> i don't primarily cover netflix. it's covered by our media team, so i don't have any official comment on it. i think i'd probably defer to the media team for any official view on netflix. >> all right it sounds like you're telling investors that you can't put in rising interest rates into your fundamental models >> do you acknowledge that the environment has an impact on the trade? the trade has been rolled over for the past couple of months. >> we acknowledge that it does impact the long-term discounted cash flow valuations around these companies, but fundamentally, the companies are not expensive on a lot of mrick

right now. alphabet is currently trading at nine times 2020 free cash flow for mid-20s free cash flow growth rising interest rates may have some impact on the way investors think about the overall market a lot of these megatech names are still not that expensive. >> do you worry about regulatory issues, especially with alphabet and were they in any way materially affected or will they be by the disclosure yesterday that they hadn't disclosed some potential security weaknesses? >> so what we've written about regulatory is we do expect the regulatory drum beat to remain loud through the 2020 presidential election, the 2020 presidential season. we expect that to continue as a result we do think it's going to hold back the investor's willingness to put multiples with the multiples they pay for these names it's part of the reason why we think alphabet trades at the current multiple it does with that focus, this is why we really are paying attention to upward revisions

regulatory is going to hold back the multiple as long as the actual estimates are bigger than expected, we do think the companies will be able to outperform their peers in other sectors. >> and that's what happened with facebook i say that sort of sarcastically. it's not what happened with facebook there is something holding back the multiple, and it probably is regulatory concerns. >> yeah, i would argue on facebook it's a combination of regulatory concerns as well as uncertainty around forward earnings power and fundamentals. i think there are real question marks around facebook's ability to monetize the stories engagement, which is the fastest growing source of engagement on the platform that puts investor uncertainty around revenue growth. forward operating expenditure, how much facebook is going to invest regulatory is playing a role in facebook, but there are other sort of idiosyncratic factors around revenue and forward operate expenditure that are holding back the multiple temporarily until we get into 2019. >> brian, thanks so much for your time. >> thank you so much.

>> bryan nowak from morgan stanley. >> a closer look at the impact of rising interest rates on your investments. first, on sports, is it going to be harder to shell out a couple of billion dollars to buy a team or build a new stadium. ands are suffering in part because their debt is more expensive to carry that is not the only issues affecting those stocks should you gamble an casinos we'll take a look when "power lunch" returns i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. sports the rockets were bought for $2.2 billion david tenner bought the carolina panthers and this spring ufc rights worth $1.5 billion as interest rates rise, could we see the megarights deals and recent team values pause a bit we have a sports investment firm joining us from the "vanity fair" conference mr. pine, good to have you with us >> it's great to be here i'm at the sports capital of the united states. the rams are in the first place. dodgers are in the pennant

it's great to be in l.a. >> the bruins aren't working, ucla isn't doing so well let's turn to the rise in interest rates which might well affect or slow the increase in franchise values do you see it that way or not really >> i don't see it that way the restrictions that are put on debt that you can put on a team are so significant i don't see the interest rates impacting team valuations at all. >> so if you had to choose one of the four major sports to buy a franchise in today, which would it be for future growth in value? >> well, i think they're all good investments it's hard to argue the nba right now. year over year growth is fantastic. there's a global platform and the future is bright without question >> what do you make of the resurgence so much as a narrow

sample of it in nfl ratings? to what do you attribute it? >> i think the focus on the product on the field, they have four young quarterbacks that are dynamic. 18 teams have quarterbacks that can throw for 4,000 yards. they've had overtime games the nfl ratings are so strong. last year 72 of the top 100 programs on tv were nfl games. and they're off to a strong start. it's good for the nfl and sports the nfl is such a big part of the sports eco system in the united states. >> it's con tes have a, there's been so much attention paid to the legalization of sports gambling the and the prosects for it in states where it's not yet legal. what will it mean for major league franchises to be part of this new resurgence in sports gambling >> well, sports gambling, you're 19 more times to watch a sporting event if you bet on it. it's going to increase the connection with the avid fan

it's going to be sticky and drive interest and drive revenue for the league and the teams just by building a better connection with the fan, not to mention the revenue that will be generated for gambling it's going to be a big boost to sports teams and franchises in the future, no question. >> you used to be the coo of nascar what's going on with that business >> they've had some challenges of late. they're in transition. they've lost some of their established stars. and i think they have a young stable of stars. hopefully things will turn here in the future. >> all right george, thank you for your time today. we appreciate it enjoy the nice weather in beverly hills. >> thanks for having me. coming up in the second hour of "power lunch," the number one rated retail analyst on the streets gives us his picks and if markets are freaking out over higher rates now, what's going to happen if and when the fed raises the rates three or four more times over the nextea yr? is there more trouble ahead?

we'll be right back.

we have a big hour of "power lunch. a look at rising rates and your money across different sectors as the path for fed hikes

changed course can casinos deal with their debt levels and could higher borrowing costs put a dent in retail sales this we'll tackle that as the second hour of "power lunch" begins right now welcome to "power lunch. averaging moving between gains and losses right now flat the s&p 500 and nasdaq trying to break a three-day losing streak. rising continues continue to be the story. the 10-year the highest since 2011 news breaking in the past hour that hedge fund titan bill ackman is taking a 90 $0 million stake in the company ppg leading the sector lower following a profit warning it was a good day for energy stocks as oil rallies.

chesapeake and national oil well leading. and as rates rise, housing related stocks hitting 52-week lows mohawk, whirlpool, big losers. >> welcome rising rates and your money, that's where we begin. and what all of it means for the fed and the outlooks steve liesman is here with more. >> thank you interest rates rising and the question wall street wants to know, are they rising for the right or wrong reason? is it because growth is going up or because of inflation without the growth a recent report rising u.s. bond yields are a symptom of u.s. strength and should not be feared the trouble for stock investors that until now they've been able to have their cake and eat it too. better growth and higher earnings while interest rates stayed unusually low the list of things pushing up rates is better growth, inflation. higher rates could put a crimp

in housing and autos one modest up side could be that higher rates will help jerome powell and others put a manageable growth rates. maybe pushing it 1 percent from here that's if rates are rising for the right reason which is growth and not just inflation without the growth >> we're saying if rising rates naturally slow the economy ever so slightly, then it lets powell off the hook if markets start anticipating that, they'll go back to their old ways of low rates forever? >> it could be, but what am i to think about this i think about imagine the reverse. imagine the fed is tightening and markets are giving the fed the brushoff that would mean the fed would have to push harder if it thought that the economy was way too hot. this idea, look, it's simple

the fed only works through one method, and that is the market if the market doesn't help, that's a problem for the fed if it does, it means it could be doing less >> the next question i have is how firmly baked in are the rate hikes? we had bti on last night on fast money. he says we hear more warnings like ppg warning of the inflationary impacts of tariffs and other reasons. and the fed does not hike in december >> i saw that. i saw your eyebrows raise up to the point of -- >> wouldn't your eyebrows be raised up? >> i think it was an interesting call i think nobody is less on auto pilot over -- of all the past chairmen than jerome powell. he talks with a disdain for forecasts. i think he's playing it as a come that's a potential problem if the forecast is wrong and

he's on the wrong side, but he's going to wait until he sees the whites of the eyes gradually raising rates. if the economy shifts and if the market shifts, i think he will change it. i don't think they're baked in i think they're planned but not baked in >> what did the fed say at the last press conference in the last statement about where they might ultimately take their foot off this pedal >> the fed is saying it's going above neutral and then coming back down. so by a quarter or half a point. let's talk about the mag tuesday we're talking about. you and i remember a time of double digit fed hikes, fed interest rates and even economic interest rates. even after that time period, 5, 6% on the ten-year was not crazy. >> no. for a long time. >> and now we're shaking in our boots -- >> but the world and corporate balance sheets are geared on low interest rates we've reset the world to lower interest rates

>> i don't think everybody is stupid i think that some people were anticipating this idea that -- and i know a lot of corporate cfos have baked in the idea that rates were going to go up. that's been the abiding fear for the last several years i think there are some people who have been dumb and they're going to get caught short. from a systemic risk and growth standpoint, you're going to have some slowing i think the fed does not believe the economy can cruise at 3% to 4 %. if we settle into 2.5% to 3%, i think they'll be comfortable you go up to a 3, 3.25 and coast from there there's a percentage rate to do, it doesn't mean the fed has to clamp down on the economy. >> from the fed to the showroom, how could rising rates impact the auto industry? phillip got that side of the story. >> the concern in the auto industry is that higher interest rates will pump the brakes on demand for new vehicles.

where's the industry right now data shows the average price for a new vehicle just under $36,000. that means the average monthly payment right now, 525, and on average if you're taking out an auto loan, the interest rate is going to be 5.76%. by the way, that's considerably higher than where we were just five years ago that has not slowed down demand for new vehicles we're on pace this year for the fourth straight year with auto sales topping 17 million that would be the four best years ever for auto sales in the u.s. here's the reason why. look at consumer confidence. when you track auto sales, you've got to watch consumer confidence they tend to move in lock step with each over and as consumer confidence moves higher, it kept auto sales moving higher as well two stocks to show you general electric and ford. i call this the chart of the day. i think when you look at shares of ford, you'll say wait a second how low is ford? ford is now trading under $9 a

share. you have to go back to august of 2012 the last time it closed at $9 you got to go back to 2009 to find the last time the shares of ford closed you should $9. investors while they're seeing strong sales, investors are not looking favorably at the big three auto stocks right now. >> they haven't for a long time. phil, thank you. how has all of this played out in wall street let's check with bob >> a quieter bond market means somewhat quieter stock market. less volatile. look at the dow movers reflective of what's going on in the overall market strength in technology coming back after a rough three days. a little strength in energy as oil moves up toward $75. you still have problems in two sectors. number one, linering concerns about china and tariffs and slower global growth that's impacting the industrials like united tech and caterpil r

caterpillar. then material stocks down. dow and dupont, in the warning from ppg about slower growth in china and the automotive area. all the material stocks are down on that. what has the rate hike cost us since about thursday morning the answer is about 1.5 %. the s&p 500 down about 1 .5% since the close on wednesday and the opening on thursday. the russell is down a little bit more than that down to about 3% the s&p 500 mid cap down 2 % the nasdaq 100 has been hurt the most, the tech stocks. we're transitioning out. look at the fang names, most of them down about 3% some of them down a little more. there you see netflix down 6.5%. this is because we're transitioning from the low growth low yield environment that we've seen in the last ten years to a somewhat higher growth, higher yield environment here in the bottom line is when you have that kind of situation, you don't buy tech and low growth when you have better

growth, you start buying other things that's when this whole value debate is coming in about whether we should be buying value stocks over growth stocks. haven't figured that out entirely the market debating that airlines weak today. you can see the issue here overall for them, airlines down because american making comments about hurricane affects on their business overall new low there for american airlines back to you. >> bob, thank you. jim cramer throwing a warning sign to investors in a tweet this morning he says i speak to more than a dozen ceos every single week. they all had high hopes. no longer. the earnings growth will not be there. what will be the market impact let's bring in jason hunter and michael gibbs. thank you to you both for joining us we appreciate it i will start with jason. in terms of what investors should expect when it comes to yields, are we settled into a range or should we see even

higher yield from here >> we came in from the summer into the autumn thinking the yields at the back end of the curve were set to release cheaper. we favored steepening curve trades now that the move unfolded, we think it's largely behind us the long bond overshot levels where we thought that would get. the 30-year bond, 335 to 338 was the area where we thought the market would establish the cheap end of a new range it got closer to 345 that said, like i said earlier, this is an area where we think the market establishes the cheap end of a range the move largely behind us the steepening autumn, we exited the trades and are fading the yield curve. >> let me get this straight. you said the steepening bias with which we entered the autumn it's barely the first week of october. october 9th or so and we've seen the steepening for the season

that you anticipated >> that's right. and what we had highlighted in our 2018 outlook, we expected this bare market in bonds to play out in a similar way to the last fed tightening cycling. what you saw at the back end was the fed slowly raised rates at the front end. the back end was stair step. there were sharp acute moves, the higher yields at the long end. short term periods yields rose we ultimately think that move is already behind us? >> michael, what sectors do well in this sort of rate environment that we have now i don't know if you concur with jason in terms of seeing the bulk of the steepening already but what do the charts show given where we are right now >> i do agree with him i think the way this probably plays out is that the fed might move the short end more rapidly than the long end goes up. that means your yield curve

stays flat sort of like it was in the 90s in that environment, then you've got rates gradually turning higher don't get pulled into this trade recently where people moved to utilities and staples and sensitives i don't think that's the right trade. i think yields will move higher. the flattening yield curve that draws into the center -- your center of attention is the financials the financials have had a big run. if you look at the financials they've had no correlation to the two ten-year spread. this year the correlation jumped to 93% with an 86% r squared they're tied at the hip. we jumped and the financials have responded jason is correct, and i agree with him i would be reluctant to chase the move in the financials i think we get to a more flattening type trend to the yield curve because the fed raises the short end faster than the long end goes up >> michael, you see the worse

case scenario as another 3 to 4% down from here for equity prices what is the possibility of that as opposed to other scenarios that you might handicap? >> i think it's kind of low. when i put this worse case scenario, i'm looking at obviously the sentiment, the strong economic growth, the earnings growth. i'm also looking at the atta technicals the 3%, 4% down move, we need good technical support, and 4% downside, a total decline of about 5.8 % which is normal for an equity day market is a 200 -moving average. we held the 20 0 day moving average in january we retested it in march and april. i feel comfortable in the current environment that that's as bad as it would get i don't think we get there i like the way the market is trading. a full work force back from the columbus day holiday the markets are rallying the yield curve flattened a little bit tech stocks are bouncing back.

people are seeing value in coming back to the area. i kind of like the way it's transpiring at the moment. but there again, we're in a seasonal pattern we have the trade issues and the market refocussed on italy and the markets refocussed on bonds. it's good that people are worried. in that environment you could have some quick sell offs in a resumption downside. i think we old 200-day in a worse scenario >> gentlemen, thank you. jason hunter and michael gibbs coming up, more on rising rates and your money casino stocks rebounding some today but getting slammed this month because of that rate picture. is there more pain ahead plus as borrowing gets more expensive will consumers spend less on retail the newly crowned number one retail analyst will tell us the impact on his sector and who could forget the high-tech closet from the movie clueless one company is bringing a

version of it to life so you too can live like cher this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. we're looking at one high he leveraged sector, the casinos. stocks are getting slams as concerns about the rising rates impact on the debt load.

wynn is down most of their debt at a fixed rate penn national down 6%. it got regulatory approval to buy pinnacle entertain both carry debt ratios north of 5% golden entertainment is down 5% week to date golden's debt to ratio earnings, 7 .78 %. the most exposed here may be caesar's with a debt to earnings ratio of 11.44%. that's more than double and three-quarter of it is debt balance is floating rate debt. had a steep dive last week the share price is climbing back somewhat this week as well but more than double the rate that some of the biggest competitors have for more on the impact of rising rates on casinos and resorts, a

panel. who is getting hit hardest by the threat of rising rates and what it means for the leverage >> for the most part it's companies that have leverage ratios over five times but i think what we have to do is look ahead 12 to 24 months to see whether or not their cash flows can support this even in a more difficult economic environment >> take a look, especially like penn and pinnacle. they're making this deal it will make penn a stronger regional player. do you see opportunities for these regional casinos >> we do we think that penn's leverage ratio is going to be declining because of their higher cash flows, free cash flows as well from a leverage ratio of about 5 times to 4 times by the end of next year. >> there's also this issue that wages are rising we saw amazon throwing down the gauntlet casinos have a lot of low-wage workers inside they just have a new union

contract in las vegas with the culinary worker's union. what does it mean for the return on investment? >> most of the investment world believes that labor costs are about -- should rise about 3% per year, and that really hasn't changed, and with the newest contracts it's fairly consistent looking ahead several years. >> okay. when you see rising rates and take a look at the debt to equity ratios, does the rate environment now and how it's changed, does it make you change the way you think about these companies or is this not even sort of at the incremental margins, an impact in your view? >> it really is less of an impact than the markets seem to be worried about in my view. and the reason is because most of these companies have swapped out much of their floating rate debt >> refinanced and locked in. >> to fixed. very few companies have floating rate debt that's more than 30 %

of their total debt structure. >> is the sector really hit by china? >> some of it. wynn's underperformance and las vegas sands, for example, i think that could be more related to the worries about trade >> talk to us about china and how much this sector and investors in it ought to worry about a slowing chinese economy, a chinese regime that is more belligerent with respect to corruption issues, more belligerent with respect to the united states, and u.s.-owned companies potentially. >> i think it's the last point that's the most interesting one, because a company like wynn and les own 73% of the equity. which is unheard of in china and so they have concessions that will get renegotiated in roughly five years and our sense is that that ownership will come down as beijing encourages that to come

down, but it will still be probably over 50%. the trade war is an interesting issue. folks worry about that, again, probably more at this point than is reflected in the numbers. just year to date, for example, visitation from the mainland is up 14 %. >> when you take a look at how far these casino stocks have fallen year to date, wynn resorts is down 30%. mgm off 18%. is this a buying opportunity >> i think so. i think that, for example, in las vegas investors are worried about next year's room pricing i think it's an opportunity this year in vegas. group meeting and visitations down 3%. next year we think it's going to be higher. in macau, we think the growth rate is going down

we're estimating 9%. if it's just 5% the stocks are undervalued because they're trading at the low level both on cash flow and on free cash flow that should get returned to investors. >> in terms of the trade war and c what china is doing with capital outflows in past they've limited the amount you can withdraw from atms it's impacted macau businesses do you see that as a possibility? you say investors are paying too much attention to this trade war, but i mean, tomorrow they can come out with this and bam, you got an impact. >> i think that the capital outflows certainly have been an issue, but they were a much larger issue in 2014 and 2015. that's when you had elicit capital outflows those were, i think, regulated and when you think about the level of regulation, not only in

vegas but now also in macau, it's probably the second most heavily regulated jurisdiction that we look at. >> wow interesting stuff. harry, thank you >> you're welcome. >> harry curtis. shares of starbucks getting a nice pick me up rallying more than 16% in the last three months this as bill ackman announces today his company is taking a stake in starbucks trading nation is next so what else is new? how's your mother? umm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.

welcome back to "power lunch. this is trading nation starbucks getting a jolt today as bill ackman reveals a $900 million stake in the coffee giant. the stock hitting the highest level since may is up 17% in the last three months. that's a comeback. it's in positive territory for the year after plunging 15% initially in 2018. so is an even bigger rally brewing in the stock or is it time to take profits

jc, as we describe this stock has run hot and cold even just this year. how does the chart look from a broader perspective? >> we love the 17% move, but when you take the short term and you put it in context of the longer term chart, our positive enthusiasm starts to fade a little bit we could see this chart has been range bound for the last few years. if you see 63 has been a level of resistance that's been tested and failed and 2015, it tested and failed in 2017. on that same token we have positive support down at 53 where price tested and rallied tested and rallied again now, this recent rally brought price right into the midpoint of that 63, $53 longer term range what that means is managers who are long-term holders of the chart are now even so now they're going to start

reevaluating whether i want to own a stock that i'm back to break even longer term as the market moved higher, i'm owning a relative loser. we really think that selling pressures are going to start to pick up. again, we like the short term momentum but longer term plenty of resistance and selling pressure now as managers re-evaluate their longer term holding positions. >> maybe still a show me stock on a technical basis boris, you now have a hedge fund manager known to potentially be an activist, a relatively new ceo. wall street is lukewarm on the stock. what do you make of it all >> so hard to say what ackman is going to do. i'm going to assume it's going to be a passive investment because the size growth of the market cap is not large. if he gets active, it's probably going to be negative starbucks is a tremendous corporate culture of being good to employees when you get an active investor, they want to cost cut. that could up end the stock. assuming it's a passive position, i think what you're

seeing here is that starbucks is range bound. it's a mature business same store sales up 1% year to year there is potential growth in china, but it's still yet to be seen the jury is out. however, having said all this, somebody said today, i thought it was the perfect example they say it's the phillip morris of our time. starbucks is basically gotten most of the population to habitua habituate to their product it's slow and steady i think as a long term, it's a tremendous hold. short term,i would rather be selling 50 all day long. finally the last positive component is they have a $25 billion buyback program. and that's going to be very positive for them. it's a third of their capitalizations. a major bid underneath the stock. >> all right guys, you pretty much hit it from all angles. i appreciate it. head to our website or follow us

on twitter here's what's happening at this sour. speaking at the white house mike pompeo professing optimism over his recent visit to pyongyang and his meeting with north careen leader kim jong-un. >> i returned late last night from north korea from a trip where we made real progress. while there's a long way to go and much work to do, we can now see a path to where we'll achieve the ultimate goal which is the full and final verified denuclearization of north korea. >> zero thunderstorsevere thundd out powers for thousands in oklahoma the line of strong thunderstorms prompting the national weather service to issue tornado and also flood warnings. and israeli archaeologists unveiling an inscription believed to be the first

complete hebrew spelling of jerusalem. it will go on display to the public beginning tomorrow. you're up to date. that's the news update this hour sue, thank you coming up on "power lunch. rising rates could lift borrowing costs for lots of consumers. will they tighten their pursestri pursestrin pursestrings we ask an analyst what he says ahead. that's next. >> a trailing stop order is an order type that automatly moves your stock loss higher when it starts moving down, the stop order is at the highest level it was dragged to keeping you in control of your trade

let's a check on the markets on this volatile day the dow right now is down almost 20 points on the day the nasdaq as you can see is off just by .03% and the s&p 500 in the same territory today transports

lagging and on pace for their fourth straight down day airlines leading the move lower. airline and united hitting two-year lows. as american says it will see a revenue drop because of hurricane cancellations. there you see it down more than 5.5% general motors reported the first quarterly drop in china sales in more than a year. that stock hit the lowest level since may of 2017 and on pace now for its worst day since july the oil market is closing for the day. let's get to don at the commodity desk >> big figures they are higher. west texas intermediate up around a percent the 75 handle. ice brent crude. the trading action today focussed a bit more on the supply side of things as evidence continues to build that oil coming from iran is taking a

hit with exports showing signs of decline ahead of u.s. sanctions on the country that go into place on november 4th ed a add to that the effects of the hurricane in gulf coast. employees are being evacuated. eyes focussed on how much gulf refining capacity could be impacted the current forecast have the storm not hitting oil producing areas at all if the storm changes, that forecast could change and so does the impact. let's turn back to rising rates and your money from autos to housing to credit cards rising interest rates can mean higher borrowing costs and could it lead to a slowdown in discretionary spend. if so, what does it mean for retailers? with us is matt boss of jpmorgan he was named the number one retail and department store analyst on institutional investors retail team ranking. this is his fifth time at number one in the past six years.

you can retire the trophy. we'll call it boss trophy. forget about it. yes. let's look at -- let me ask you a general question and then specifics. you have higher labor costs, higher interest costs, higher cost of goods potentially coming in from overseas and higher fuel costs that might effect consumers' propensity to spend how is that going to ripple through the retail system? >> i think two things you missed you didn't cite unemployment at a 50-year low and wages starting to rise. and you have three years now of minimum wage increases 20 states next year set to raise the minimum wage again that's leading to consumer confidence at a 35-year high we think it's been a pretty good back to school we set up for another nice holiday, 2018. and i actually think the consumer narrative of strength will continue into 2019. >> you think -- and i was going to say, actually, but didn't,

that in truth it is stacking up like a very good holiday season for most of these retailers because of the factors you cite, and so you think that those countervailing pressures will push the retailers forward what's your favorite stock you follow >> i think what you want to focus on and so i think there's a very big difference between the consumer and retail. meaning the consumer i think is in a great place retail still has a lot of those cross hairs that you mentioned that also continue to consolidation of brick and mortar retail. if you can find ways to own the low to middle end consumer and benefit from disruption, that's where you want to play that's discount retailers. and off price. >> name them >> t.j. max and burlington as well as ollie's, at discount retail we like dollar general and five below you own that low to middle income consumer and benefit from store closures and brick and

mortar consolidation these are the market share winners in that scenario >> i don't understand the discounters. you have the consumer in better shape but you those retailers which are also facing the pressure to raise their own wages for their workers with a very raiser thin margin. why do you think they'll well positioned >> the number one factor in the models is the fixed cost leverage if sales are rising, meaning you look at a dollar general, they can leverage the fix cost expenses at 2 to 2.5% same store sales. they've been driving 3% same store sales. if they do that, they're at 10 to 15% earnings grower 5 below is a 20 % earnings grower they've been driving close to 3 to 4 % same store sales. the wages are rising, but if

there's any trickle down impact to the consumer, which i think you started to see last year in the back half of the year last year's holiday, i think we're going to lap this holiday with another strong holiday, meaning two-year stacks i think are going to accelerate. i think you head into 2019 looks to us like tax refunds could actually be a tail wind to start the year i think 2019 starts off on the right start. i think if factors like employment and wages continue in the right direction, then i think the consumer backdrop remains favorable for potentially the balance of next year as well >> you don't see any problem if, say, what people are paying on their credit card interest fees rises dramatically you don't see that as being an obstacle to shopping? >> i think it's major shocks that's the more important factor i think the consumer budgets and i do think they think ahead. i think the key here is more the moderate pace of the interest rates' rise. i think media attention around it as well

meaning, i mean, the ten-year at 3.2, pre 3.2 -- if you think about low to middle income consumer, i think the biggest thing in their lives is potentially they feel better about their job and they potentially are seeing more money in their biweekly paycheck i they potentially trumps some of the head winds that we're talking about that maybe multiple years from now interest rates in a completely different level, but i think as long as the pace is slow and gradual, i think that's the most important factor >> matt boss, thank you. >> thanks for having me. we have a market flash on super micro. let's head to josh >> we received a statement from super mike crow regarding the new bloomberg report that a major unnamed telecommunications company received manipulated

hardware with respect to the recent media reports we have seen no evidence of unauthorized components in our products no government has said there are unauthorized components on our boards and no customer has reported finding any such unauthorized components. they were at a center of a story that malicious chips went into servers assembled by super micro. that made their way today a centers operated by companies like amazon and apple. the companies all denied the report back to you. >> all right josh, thank you for that coming up, women only wear a fraction of the fashion they own. why? because closets often look well, like this when you first get them, and then especially if you live in manhattan, you start to get crowded out. and trying to find an outfit in this mess is like trying to find a needle in a hay stack. our next guest created a company to make life easier.

the ceo this company joins us next for decades banks have been getting away with it. charging you excess fees. making you wait in line. keeping billions of dollars of your interest. they've been treating you like you're lucky to have them. that's not right. it's time to show them who's the boss of your money.

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for some people the biggest problem for their wardrobe isn't whether they have enough clothing but whether they have too much finery helps manage the wardrobe virtually and acts as a personal stylist. the company was just listed in the upstart 100 list of promising young startups joining us is the ceo whitney casey. how does it work >> finery is a digital wardrobe. we find all your purchases from your browser history and attaching your accounts and then we instantly upload all the items into a virtual closet. >> number one, that does not put the owness on the user to go in and take pictures of everything that's in the closet how do you manage the gaps for people who have acquired their receipts not electronically? >> we have a bunch of tools. you google anything, you find the image, bush the browser

button and it uploads. >> it sounds great about purchases from this moment on, but what about the clothes in my closet it feels like a mountain of work to put this in that database >> that's our tech we go back ten years into your purchase history to find and cull all the receipts and put it there into this closet for you but the bigger picture of this is really about data and that's the ethos that this company is built off of. >> how do you learn all of the purchases that melissa made over the last ten years >> i mean, there are a lot >> is it by credit card receipts or what? >> e receipts and your browser history, and we let you also take your account and upload your account if you have a neiman marcus account or target account. but the data is really important. when we talk about data, we tell women that we really think that your data should be working for you. it should not be working for

facebook and women consume -- they're the consumers. 85% of the consumer goods are purchased by women yet women would tell you 91% of them say they don't feel like advertisers or anyone really understands them >> when you have cataloged, somehow, all of the things that are in the closet, what happens next how do i use this tool what do i do with it >> well, what's great is we style you. so a woman will spend eight years of her life shopping and two getting dressed. we're shaving the time off that. we give you return receipts. think about this you buy something and you have 7 days left until you can no longer return it you need to know that. we ping you. hey, it's raining outside. here are five things you can wear from your closet. hey, it's sunday you have four interviews this week here are five outfits for you from your closet >> how many users do you have right now? >> hundreds of thousands >> where do you think you'll go? >> we have a big vision.

it's around data we feel women need to have their data working for them. it's hard to get data from women because they don't want the same purple boot following them around the internet like it does for two years that they bought instead, they want their why does it do you any good to log in with your facebook account? they can then advertise you. we want to create a log in from your finery account so that all of your data can come with you and it could make your purchasing way easier. >> how do you make money >> we were calling it a knowledge tax. >> what does that mean >> that the companies would pay us to basically make this woman's -- to give them a personalization lifeline when you go to retailers you

sift through all of these -- >> so it's -- i could be a finery customer and have you track and all of this my wardrobe but never purchase anything so you don't make a dime off of me >> exactly if you think about it the fly wheel of giving this woman some y utility and she gives us more access to ourselves. >> very quickly will you tell me what in my closet i haven't worn in a year or two years so i could donate it? >> 80% of the clothes you aren't wearing. it's a half trillion dollars hanging there. >> if we would put rfid we would know when you're wearing them and break down costs >> you should automatically transfer it to the consignment site >> right so you can tap on any item in your wardrobe and sell it. it all starts in your wardrobe,

rentals, it all has to start with the clothes that you own. >> and it's a lot less awkward than having someone pulling through your stuff >> yes >> all right thanks w for the full list of upstart 100 visit cnbc.com/upstart hedge funds have been hit hard, a closer look at the recent carnage next.

welcome back to power lunch. >> investors that are able to pull their capital at of hedge fends. most recently turbian is reportedly shutting down amid rnd performance it is no secret that this industry is struggling

years has caused investors to lose their patience and many had to lower their fees and industry has the lowest fees on average since they began collecting that data a decade ago. competition has never been more force. it is a record 3.2 trillion and 148 new funds launched in the second quarter the average is nearly two new hedge funds each day one hedge fund manager texted me it shifted from someone is closing to someone is closing and i wish i was done too. >> wow thanyok u. >> uh-huh. and check please is next

it's not what champions do. it's what champions don't do. they don't back down. they don't settle. and they don't quit... except for cable. cable? oh you can quit cable. because we are cougars and we don't quit!!

unless what?!?!?! [team in unison] unless it's cable! quit cable and switch to directv and get the most live sports in4k more for your thing. that's our thing. 1-800-directv jim cramer said it is a dead canary in the coal mine. >> a lot of talk about how important this earnings season is specifically in light of rising interest rates. if it is the peak and we start to rollover? 2019 what could it mean for the markets? the wind is picking up hurricane michael is suppose today make land fall in about 24 hours. don't forget that the path of this storm could go up and rehit

areas that were hit by hurricane florence a couple of weeks ago we'll be keeping a close eye on that and what the impact will be on these financially >> absolutely. in the green right now thanks for watching power lunch. closing bell starts right now. it's time for the closing bell hitting a seven year high. we have wall street's top analysts to join us to talk the impacted rates on his sector plus comcast closing acquisition. the 21st century tells us what deals could come next. billionaire making a big new bet in the food and beverage space. we'll tell you about his new position coming up and ceo of adidas weighing