supply like anything else stocks or commodities, supplies will temper. that's a place to put your money. >> if interest rates go too high, it is tough for them. >> true. also not balance sheet. >> that was twice he agreed with you. good stuff that does it for us. "power lunch" begins right now scott, thank you so much welcome, everybody, to "power lunch. we begin with two big breaking news stories we are covering this hour, a major sell-off on the street off the lows now, but a trio of fears gripping the markets as we are on the verge of a very, very, some would say critical earnings season. rates are rising, material costs are up, demand from china is plunging how scared should investors be team coverage straight ahead and it is being called the hurricane from hell, one of most powerful storms ever to hit the united states, making landfall in florida right now

catastrophic storm surges, destructive winds, 30 million people are in the danger zone here we're live on the ground in panama city, which is the target "power lunch" starts right now and welcome to "power lunch. i'm melissa lee. straight to the markets. big et storgest story of the dap down for a fifth straight day, breaking key technical levels. also facing its longest losing streak in nearly two years the nasdaq on track to close at its lowest level in about three months rates pushing higher, yields on the two-year treasury note, highest level since june 2008, results of a $23 billion ten-year auction is just moments away and that could be a big market mover. a number of sectors breaking below key levels, transports below the 200 day moving average. retailers also breaking below their 200 day moving average tiffany leading those declines

on pace for its worst day in over a year. and look at utilities and consumer staples bucking the sell-off, both are trading higher right now and industrials and tech meantime, the worst performing sectors. >> i'm contessa brewer with the dow down below another 400 points at this point, let's get to the trading action, bob pisani at the new york stock exchange what is driving the moves here, bob? >> it is two sectors really. it is industrials and technologies we're essentially at the lows for the day. let's look at sectors. this is the problem for last week techs and industrials, banks are flat, consumer staples, upside, utilities also fractionally on the upside why is this happening? it is happening because earnings season is upon us. and earnings are a lot more complicated than six months ago. look at this we didn't have any issues. higher rates now we're dealing with, higher raw material costs, higher wages, weaker foreign currencies, tariff issues, potentially a weaker china

a lot to digest for the markets and a little bit of uncertainty about what is going on here's what's important overall. one thing that might help us, revenue growth is still very strong look at this for the year, doing 7%, 8%, 6%, 7% next year your costs can go up 2%. your revenue goes up 8%, that's a big help for your margins overall. that may be one of the things that stabilizes us in the near future everybody is worried about the drops we're seeing much of the market is already in correction, bear market territory. so, look, 60% of the s&p is 10% or more off its recent 52-week highs. these companies hit. 25% of the s&p is 20% or more. so this is a lot and if you want to see it, it is the tech and industrial names. look at the big tech names off the 52 week highs. micron, facebook, advanced micro, that hit new highs much earlier in the year, in the middle of the year

alphabet, 13% off. same with technology stocks. excuse me, industrial stocks illinois tool works, some of the dow components, 3m, 21% off the recent high. caterpillar, 16% deere is 15% off its 52 week high get the point? the s&p is only 3.5% from its historic highs, just a short while ago, that doesn't mean key parts of the market are not deeply in correction territory back to you. >> thank you very much, bob pisani ten year notes up for auction, rick santelli tracking all the action at the cme. looks like the highest yield since 2011 or so >> yes since it is a seven-year high on the yields, pretty much same with the auction, you're exactly right, april of 2011, last time we had yields higher than this, actually 3.225 is the yield and let me tell you something, on this doubleheader of auctions, there is a lot of similarities today so 3.225, $23 billion and

actually nine-year, ten-month notes adding to an issue already open for the second time the bid to cover, ten auction average is 2.52. this was 2.39, and not horrible because they have been trending down, the lowest since february of this year same as the three-year note yield. but there is a bright spot on this auction 64.5 and indirect since higher than the ten auction average and then 5.4, 5.4 is really light on directs the bottom line, i gave it a c minus. the real issue is that investors didn't jump into this. why would they we're in rising rate environment with the nervousness going on in stocks tomorrow we're going to get 30 year bonds, but all things considered, we did move the paper, and it is going to end up being $74 billion in total back to you. >> mr. santelli, thank you very much for more on the sell-off and where we go from here, let's bring in nancy tangler with hartland financial, and art

hogan, chief market strategist with b. riley. nice to have both of you in studio on set with us. thank you very much for coming we're at session lows now. art, you say you are bullish on stocks even though as bob pisani just pointed out, 60% of the stocks in the s&p are in correction territory. that's good enough for me to call it a correction. >> sure. and corrections are normal that's one thing we have forget. we're going through that right now. i think the drivers are probably being misinterpreted a little bit in terms of what the biggest driver is. what is happening now is we got through nafta 2.0 and made an assumption we would turn to china and start negotiating that and that's not happening we're escalating with china. that is going to show up in -- >> you got two really big items there. you've got the potential for a real economic war, with the number two economy in the world, and rising interest rates, you say, nancy, that the market is

recalibrating right now. how are you recalibrating your holdings >> i see some really attractive valuations that we're taking a look at. we have been adding to some of the consumer discretionary name -- >> like? >> home depot and mcdonald's, those are both stocks that are negatively correlated to rising energy prices. so that's positive for the consumer, you would think the opposite >> mcdonald's gets a nice upgrade today, one of the few stocks that is higher. >> and raise the dividend and are very consistent about it as is home depot. we're finding places to go, but we're cautious this earnings season will be tricky. >> in my own enthusiasm, how, if at all, are you recalibrating what you're advising or doing? >> we think one of most dangerous things happening now is you're seeing this move to defensive. over last week or so, you've seen the reits and utilities and staples catch a bid. i think if you want to get defensive, you want to move to

cash getting into those even at the valuations we're at now is getting ahead of yourself. those will reverse quite quickly when you don't have the natural flow out of markets. that's a dangerous part of this. where we see most value currently is a combination of health care, for sure, energy, and we certainly think you start thinking about technology, which is -- has probably the worst performing group we have seen over the past month. >> what is the market telling us about the economy? and we're hearing the economy is very strong, very strong, you look at what is under the hood in the markets, we saw health care, the best performing secretarier in ty er sector in the third quarter. the average small cap stock according to bespoke is down 20%. these are all telling me that growth is slowing. >> i think this is -- this is what we're trying to figure out. you got a fed pushing forward with -- to fight inflation the elusive inflation, elusive for janet yellen and you got a market that is

growing, but we're not sure how fast and what are the inputs, the price inputs are going to be impacted and then strong dollar, which will hurt the multinationals what we're trying to figure out on a company by company basis is who has the growth and we are overweight in old tech, health care, and some of the industrials have done quite well, like boeing. we see some of that continuing >> you listed some of the areas of concern, trade cold war, the concerns over slowing growth in china, inflation in oil prices, spiking ten year yield, strong u.s. dollar, emerging market weakness, given all the factors how can you be bullish on the market >> that's a great question trade and trade wars and how long -- how big and how long that draws out is the biggest concern we have. i think everything else to a certain extent will be transitory, for sure the dollar will not continue to be strong forever when we're not the only central bank that is normalizing when the ecb or bank of japan starts to normalize first quarter of next year

we'll see some less strength when we stop acting so fuf tougn trade -- >> you mean when, not if >> when. i don't know if that happens in 2018, but when we negotiate, we don't want to be in a long drawn out mutually destructive trade war but we want to act tough and get china to change some behavior watching that happen is like trying to learn how to parallel park in a demolition derby just not fun and that's causing anxiety in the market. >> so final question, to both of you, earnings are going to start next week. what are you looking for and i guess my question is what is more important the rearward looking numbers or what these companies say prospecti prospectively. >> the prospective, for sure i do think -- what will you want to hear? >> i want to hear the top line is still growing and they expect tosee the top line growing i'm less concerned about earnings in the near short-term than about topline growth. that's when i'm going to be paying attention to. >> i think nancy is right, the

two things most concerned about is a, how much you talk about the strong dollar and how much of that will hurt an bring down your guidance going forward. second thing, this is as important as -- this is first quarter where we're coming in, sitting on support versus bumping up against resistance. last three quarters, we were inflated coming in at a lower level stocks look a whole lot more reasonably priced. to a certain extent, some of that will be priced in by the time we hear reports >> good point. the sell-off may be a good -- >> we haven't had that in multiple quarters. >> great to have you both here thank you. to the other big story we're following now, breaking news, hurricane michael has become one of the most powerful storms ever to hit the united states potentially deadly storm surges and destructive wind and it is already being felt in florida's panhandle. we have live team coverage today. courtney reagan in panama city, florida, first to kali dionne

tracking this monster storm. let's start with you >> it is just exploded in the gulf of mexico and now the pressure is down to 919 millibars. i want to start with looking at the radar. you see the outer eyewall, the northern edge of it, now starting to come on shore just to the south and east of panama city beach it will be some of the most destructive winds that you're going to see now moving forward within the next really half hour to an hour we have seen wind gusts, 130 miles per hour, with sustained winds at 100 miles per hour or more in some of those locations. i want to talk about the pressure the lower the pressure goes, that means that hurricane is still intensifying if we look here, it is now the third strongest hurricane ever to hit the united states it is above andrew, above katrina in 2005 as well and the lower the pressure is, the higher the wind speeds, you see by looking at this live camera

here, that the rain is sideways, you can see there is already power lines starting to come down there what does this mean for the oil infrastructure good news about this, maybe one of the only bit of good news is that it is going to steer away from that. started that northeasterly jog that will go to the northeast. most of the oil infrastructure is on the far western edge of the gulf of mexico it is not going to be impacted we'll update you throughout the afternoon on the storm. >> thank you for that. to courtney reagan live on the ground in panama city beach, florida. i understand there are now warnings from forecasters about the wind reaching a similar strength to what you would see in a tornado tell me what you're feeling? >> exactly it is getting really loud here that's for certain you can probably see the ocean behind me is really getting stirred up not a lot of rain right now, but you hear the wind and the sound from the water, tornados are definitely a threat. especially also through georgia. once the storm begins to move

forward, you heard about the pressure lowering, the winds getting faster, power outages believe it or not are fairly well in tact wi we have 30,000 folks without power. the power is going in and out, but as of right now, we haven't lost it completely tourism is a really, really important basically sector in this area. and got news is we're now in the off season panama city beach has already seen their tourism increase by about 10%. because things are getting dangerous here, i think we'll go ahead and move inside. as i promised you i would. >> i've been worried, having been out there just wondering, when you're assessing whereyou are, where a are you in panama city beach right now? as we see often in the storms, there is a wind factor, and the water is always of concern about your immediate safety.

>> exactly, yeah water is a worry we heard estimates between 9 feet and as much as 14 feet potentially in this area in panama city beach. apalachicola, east of us, has seen 5.5 feet of that storm surge come in. that started this morning at about 3.5 feet they started to see the worst of it on that end, right where sort of florida bends that big bend area the water could be dangerous there is a bay on the other side as well. so we got to be careful for those two bodies of water could converge. >> thank you so much and you guys stay safe thanks a big sell-off right now, looking at the stocks dragging us lower there is some green squares on that wall. one of them, mcdonald's, getting an upgrade analysts say it is time to buy a big mac or the stock join us next

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a big sell-off on the street to dominic chu for market flash. >> nearly 70% of the new communications sector in the s&p 500 is in correction levels or worse. that's down 10% or more that's what some traders call it from the recent highs twitter is the worst performing stock, down more than 6% or so since late july. that stock is nearly 40% off the recent highs in june

also worthy of note here, guys, techs meet the losses, mean that the sector overall, by the way, is now the second best performing sector in the s&p 500. best performing sector is now health care. so health care, technology, communications services, all very much on investor minds. back to you. >> thank you the dow hitting session lows this hour, falling 440 points. one bright spot, mcdonald's, higher on the back of a wall street call. guggenheim analyst matt defrisco upgraded the stock today, thinking the fast food chain's technological updates to the restaurants will bring the stock to 200 bucks a share that's his price target. matt joins us now. great to have you with us. >> thank you, melissa. >> the market environment like this -- bless you, contessa -- how defensive is the stock like mcdonald's when you see big market swings and questions about growth >> well, i think you look at the name and people -- the expectations have been lowered a little bit here. they just had a quarter where

they slowed down from sales trends previously. i don't think they were given credit for the self-imposed head winds they put on themselves by doing the remodel campaign i think they will wain off and i think the underlying trends are stronger than what the street is giving it credit for. >> how do they fare a rising wage environment >> there is a 95% franchise model now. you're operating exposures much less than in the past. they have done a good job of derisking the story as far as near term inflationary pressures. >> how big a driver will the digitization efforts be? >> well, i think right now it is an immediate sales impact is what people are looking at it as, initially doing the remodel itself disrupts the store. you get the lift from the new store format i think longer term, it is going to help them to connect with their customer digitally like we have seen with domino's

and starbucks. and i think they're going to be a leader in the fast food category as far as connecting digitally with somebody like a wendy's. that's where your redirect your marketing dollars to get a return and get a response from your consumer. >> order at kiosks, order by telephone, by cell phone. >> i think ordering both by kiosks and mobile app and digit digital. >> what about their menu items, now you can get this fresh beef and pay more for it. have the add on items. what are those menu options doing for the bottom line? >> i think the menu options are key, it marries well with the remodel. so you're elevating the store experience, i think you need a menu also that enables you to serve the person who might have been the lapsed user, looking for the more premium product and produces a halo effect for the franchisees to take greater price in a rising wage environment. >> if we are worried about economic growth, the u.s. economy is in pretty good shape,

but what sort of indicators do you look at? what have mcdonald's sales been most correlated to what is on your dashboard? >> sure, i mean, employment is the number one thing more people in the workforce, they are the lunch pail to the working class american second, other pressures like gas pric prices it has been a little bit of a head wint bd but that is flatteg out. >> how much of automation changing that? i thought with the new digital kiosks coming in the mobile ordering, you were relying less and less on cashiers >> yes, so, that's a great point. that's a catalyst to try and get the investment from the franchisees. a lot of people griped that the franchisees are saying they're not seeing a return yet on the remodels if you say longer term you have less hours in your store, and you can automate things, that will get the fran cheechise base motivated. it is a customer centric

a lot of consumers want that and demand that now. the younger consumers want a form of digital or loyalty program associated with that. >> how does a multiple compared to mcdonald's own multiple historically clearly at a premium to the overall markets at this point. >> right, they have benefited like most with lower tax rate. and so i think looking at historical multiples, everyone is trading at a premium. i compared it today to domino's and yum brands and it traded at respectively at 10 and 20% discount to those stocks now trading at a 30 and 20% discount to those stocks in the context on a relative basis to its large cap peers, while it doesn't have the same amount of growth it should get a discount to its historical levels which puts you at 17 times an enterprise value to ebitda for my target to $200. >> matt, we'll leave it there, thank you. >> thank you >> matt defrisco of guggenheim. the nasdaq sell-off is not just a tech wreck.

>> we're used to seeing biotech stocks being pretty volatile that's what you expect when you see a down day on the markets like this. the ibb down 1.3% in line with what the rest of the market is doing today. if you look at the leading laggards in terms of the biggest point shavers off the ibb, stocks like illumina, they look equipment for sequencing alexion, celgene and blue bird bio, a classic midcap, that is down the most. that's what you expect to characterize this kind of day. however you don't see that divergence in the ibb and the xbi that is equal rated versus the ibb which is very larger cap weighted those two are performing basically the same the xpi is down a little less. that's interesting one reason why you might be seeing the midcaps selling off

in addition to the volatility, less front over e squared that biotech stocks do more poorly. >> we have seen the turn away from growth stocks in general. this is the growthiest part of the market that theory that sold off f.a.n.g. in terms of higher interest rates, that's the same theory >> certain biotechs. they have a ton of cash. >> is this more leveraged ones >> the ones that depend more on capital. they don't all raise debt -- >> that's why higher interest rates hit them you think of interest rate sensitive sectors, home builders, utilities, you don't think of biotechs. >> right and not everybody shares that idea i saw a piece earlier today that was professing the exact opposite and rates don't matter for biotech, there are more important things but interesting perspectives both ways >> meg, thank you. more on this market sell-off with bertha coombs at the

nasdaq >> we are watching here, meg was talking about biotech, bioteches are actually relative outperformers today. they are not down as much as we are seeing in big cap tech the big cap tech is what is leading things, small caps which had been a source of pain for much of the month. and really been big laggards today, not down as much as the large cap nasdaq 100 that's the big drag here at the nasdaq chips are a real source of pain, particular today they are getting hit very hard and they are a bit cyclical as well if you start seeing prices go up, you start seeing some of these tariffs go up, they are among the sectors that are going to be impacted and also concerns, we heard recently, some talk from chipmakers about soft tdemand, we might be in a demand cycle for chips as well one of the things weighing on

amd and nvidia, huawei in china, chinese chipmaker, pushing out new ai chips and it looks like that will be much more of a competitive area you're not going to be down this far on the nasdaq if you don't look at amazon and apple, microsoft, pulling things lower, even on a day when you have normally positive news for amazon on the tape with its new alliance with travelers to link up alexa with home insurance products and discounts, also signing some new $1 billion deals that potentially bring $1 billion in revenue with sap and semantic on the aws side nonetheless. those are moving lower netflix as well, a big drag here we're seeing once again what had looked to go on pause last week,

that big tech sell-off resuming here today with a vengeance. >> bertha, thank you very much bertha coombs at nasdaq. to kali dionne with breaking news on the big hurricane michael. >> officially making landfall right now between tindall air force base and mexico beach, florida. it is a strong category 4 storm. there has been reports from the florida state university panama city campus of 100-mile-per-hour sustained winds, the strongest of the winds on the eyewall are moving into some of those locations. it is going to continue to move to the northeast that is officially made landfall with 145 -- 150-mile-per-hour winds. and strong category 4 that is the top three strongest hurricanes to ever hit the continental u.s. >> how fast is this storm moving some damage from prior storms in recent memory, hitting texas and the carolinas recently, they didn't move very fast. >> this one is moving about 13

miles per hour it is hauling. it is going to continue to haul to the northeast and move in and out quickly. the good with that, it is not going to stay in one spot for a long time. the bad, the hurricane strength and the damage is going to go into south florida and tropical storm damage is going to go all the way to south carolina. so you have to take the good with the bad with this. >> thank you >> just last week the dow soared to a new all time high it lost 700 points since then. so was that the top? mike santoli is comparing our current situation to that last time the markets peaked in 2007. similarities, differences? >> not -- i would say there are more differences than similarities, but in very broad respects, i think the economic field position in some aspects of the market does resemble where we were in the later part of 2007. yesterday was 11 years since the very top of the s&p 500 in 2007 before we got the great recession and the global financial crisis

now, the ways it is similar, low unemployment, economy chugging along for a while, oil prices were on the way up they would go much higher back then in october of 2007. emerging markets had faltered i think that in very general respects, i think you have the snapshot of a well performing u.s. economy, strong consumer confidence, all of that, that was about to kind of hit some cracks now, where is the difference i think things started to erote a lot earlier than october of 2007 you saw some of the signs coming the credit markets were under stress a lot of the leading economic indicators, they had all peaked a few years before as a matter of fact, bond yields were on the way down in october of 2007. here we are, having a little trouble, absorbing increases in treasury bond yields because, of course, we think the economy is

in much better shape unemployment was low, near cycle lows, about 4.5% now at 3.7%. i do think when you get to a stage of an economy where it seems like you're pretty much close to as good as it gets, have to expect it is going to erote over time, but there is no specific timetable the falling apart of the housing market and the credit losses that created accelerated that process. we see nothing of that sort unfolding now. credit markets are fine now. >> stick around a minute as we bring in another friend. let's check on the markets with steve grasso at the nyse steve, take us through the day and why the market fell so precipitously today. >> i think we have been battlin with all the things mike just said if you look at the technical levels, battling with the 50 day, the 100 day in the qs, once we broke through those levels,

it just became an avalanche of sell side for sale and now we're back above it, in the -- sorry, we flirted with the 100 day, back above that and the s&p cash the other two are below the moving averages. it became a technical worry. >> i would reiterate that, we have seen the indexes kind of succumb to the pressure infecting a lot of stocks below the surface for a while. the big question was whether the indexes could resist that gravity of a lot of stocks really coming down in many sectors. what i do notice sometimes is when you have the dow and the s&p off the exact same percentage, right. kind of a happenstance when it really is that close, 1.45%, it shows this is people focus on the indexes, certain level of pressure, people wondering if levels will hold. >> people just feel as if i have a couple of months to go in the year, i want to lock in these high flyers. if you look at it, it is all the high flyers that greating slammed and the value plays that

are somewhat stable for the day at least >> so, steve, are you not concerned about the fundamental picture? you alluded to areas of the market that had given us indications there could be cracks look at the f.a.n.g. stocks, they were tops back in june. the average small cap is is down 20% from its 52-week high. you look at the pockets and they say, maybe we should be questioning growth are you not worried? you think this is technically driven >> i think it is all the things that you had just mentioned are going into the calculus. i think technicals work today where the market fell apart in a precipitous fashion. i don't think the fundamentals are breaking down. that china trade, that needs to be handled this market probably kicks back. earnings into high gear, the market kicks back. daily technicals played into the marketplace. all the names you said were up 150% basically, driven by high growth, momo stocks that i think

that is coming to an end. >> this say volatile day we have been down 450 or thereabouts, 430, now 373, there is a tussle going on mike, pick up on something you said yesterday, we talked with our earlier guests about it, it is the guidance that is going to matter a great deal as we head into earnings season because of the reasons you suggest. and that reason being that people are going to want to know whether this is as good as it gets >> right, exactly. there is a sensitivity among investors to any suggestion that whatever deceleration we see in earnings growth in 2019 is going to be sharper than now anticipated. we're in this unusual period, usually you don't get a 20 or 22% growth in earnings per share in the s&p 500 nine years into an economic cycle, right you had a lot of factors come together to enable that to happen and the market is not paid up for those earnings dollar for dollar, the s&p 500 is up 6% with earnings up 20%

it is a matter of finding the right organic level, and also with interest rates going up, exactly what valuation to place on those that's all going on, think it is this fight happening inside of the market parts of the market overshot, right? large cap growth got too extended, too overowned. u.s. did a little too well relative to the rest of the world for the short-term so those adjusts now are happening and there is no way to fully absorb those -- >> what is funny to mike's point is that i don't see an environment where it would be rates rising for the right reasons. everyone keeps saying, well, if rates rise and it is for the right reasons, the calculus is that the marketplace is based on a valuation where interest rates were low for a long extended period of time, and now they're trying to recalibrate that and they're trying to figure out what that real number should be. >> the law firm of grasso and santoli, thank you appreciate it. the s&p 500 headed for its

longest losing streak in two years. dom chu. >> picking up on some of the points you spoke about, fine tuning happening in the marketplace right now, where we are seeing adjustments for possible overshoots being brought back into where they kind of normally would be, if you look at the s&p 500 and the russell 2000, there is a good span where that orange line was doing pretty darn well versus the s&p 500. and now you can see here, there is a fairly big divergence happening now, small caps really underperforming, the overall large cap market so is that going to get wider? one place you are seeing it like you said is in the value trade versus growth trade. if you look at two of the etfs that track this, one tracks the s&p 500, the russell 1,000 growth, versus the russell 1,000 val y value. the orange line has been the value trade. steady eddie, not sexy at all.

look at what is happening over here there is a huge move lower in the momentum names you were speaking about so is this the beginning of that movement back into value oriented stocks? that's one thing on traders minds now. we don't know yet, we cannot call it a great rotation, but every long journey starts with a single step. traders wonder if this is the step it is for the value trade to come back into focus. back over to you. >> dom, thank you. dom chu. hurricane michael making landfall this hour the storm strengthening overnight to category 4. it could be the most powerful storm ever to hit the florida panhand panhandle. that's where jay gray is for us. panama city beach, florida, jay? >> the conditions really intensifying here at this point. the winds picked up dramatically, sheets of rain falling. i don't know if you see it, but

we want to show you what the surf is doing here it has been growing throughout the morning. some of the waves, that's a big blast there, some waves breaking at 12 to 15 feet it just has been churning, real sign that this storm is moving in we have seen some debris blowing around we know we have a few more hours left of these conditions but, again, if there is anything good about michael, it is the fact this is a mast moving storm, much different than florence as you have been talking about, it is going to continue to be a problem across much of the southeast for the next several days this is going to be a rough go for a lot of people. >> jay gray, hard to talk under those conditions and harder to listen to questions. let me get into what the damage is that we might expect from a hurricane of this magnitude. joining us now is sandra knight, a former fema deputy administrator, responsible for tracking floodplain mapping and hurricane damage it is great of you to join us.

we appreciate it what will you be looking for in terms of impact from hurricane michael? >> yes, thank you for having me. this is going to be a very impactful hurricane as was said and the good news and bad news is that it is a fast moving hurricane. if it were slow, we would be getting more rain, it is faster, this is really going to be about surge. and wind and 150-mile-per-hour winds can be quite damaging. from the numbers i've seen so far, it could be on the order of $30 billion disaster and most of it will be in the coastal areas that -- where it is coming and taper off as it goes inland. compare that to what we're looking at from florence right now, we're looking at $60 billion estimate on damages from florence, which was a rain event, right and then last year, 2017, harvey, irma and maria produced

damages of over $265 million this is adding up. >> some of this has to do with how much is affecting industry you close down major industries or major conduits to move goods and products around, and you see those cost estimates or the damage estimates rise. in this case, because there is going to be a bigger wind factor than we have did in hurricane florence, will this more likely be covered by insurance? >> homeowners will cover some wind i don't know what the coverage will be. these will be huge damages, though these winds, florida has put in building codes since hurricane andrew there is older housing stock out there that is built under older code this level of wind can easily rip roofs off and cause damages. if you have surge, as well as the -- he was talking about the

high -- talking about the high waves, you could still have a lot of flooding impact too that is covered under the national flood insurance program. and if you don't have a flood insurance policy, then you will not be reimbursed for flood damages. and then it gets kind of complicated to figure out what is wind and what is flood. >> where fema is concerned, the new york times had a big article about how fema keeps shelling out billions of dollars to clean up after the storms with very little control over how that money gets spent the local municipalities and states go in and sometimes rebuild a facility in flood prone areas, which then just gets damaged again should taxpayers be concerned about climate change, the role of fema, and how much we're doing to mitigate the damages. >> absolutely. and you're right the money is typically given over to the states in the form of grants, to rebuild. and they have to rebuild

according to the standards and building codes that are in place. if they're in the flood insurance program, they have to build according to the flood standards in place however, the flood standards in most cases, particularly due to climate change, are probably lagging behind what the real risk is. so, yes, there needs to be some tighter policies around where we develop and how we develop and insentivize good behavior and it is going to cost the taxpayer more and more. >> are storms getting worse or does it just seem that way >> well, you keep hearing everything is unprecedented. i'm starting to believe a thousand year precipitation is not a thousand year precipitation, right but we do know for certain on some hurricanes that particularly the warm waters are intensifying them. and so we are seeing even this -- this is october.

this hurricane rapidly turned into a category 4 due to the fuel that it was getting from the warm waters. so not more maybe, but certainly it is affecting the amount of moisture that they pull up into these hurricanes and perhaps the intensity due to the warm waters. >> all right, sandra, thank you for your time today. sandra knight, former fema deputyg me we have got lots more on this big market sell-off and the big hurricane just making landfall taking a check on the markets, down by more than 400 points on the dow. off the session lows. still good for 1.6% decline midday we have much more ahead on "power lunch."

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the markets doth protest loudly that rates are rising and the fed will keep hiking should wall street and corporate america quit complaining doesn't the fed need to keep hiking rates because the economy is incredibly strong and

unemployment is at historic lows steve liesman is here with us, along with jack bruggian is the market trying to have dessert with its dessert all the time when i hear this, they're rising for the right reasons, that feels like a -- la la la reason. >> they're rising because -- >> they're still rising. >> i didn't ask you to use before in the back, but can you put the 210 spread together for me, what you'll find is we were all worried not long ago, about the 210 going down, going flat, inverting, saying, my god, it is an inflation signal. what is happening, it is rising. if you thought that before you better think this now. there is a growth signal in there. i think one of the things that is happening that we lose sight of, we're in the middle, still in the middle, maybe even early days, of an historic transition

from quantitative easing into what we hope is a more normal monetary policy regime and more normal economy no one said it is going to be easy what you have, i think, are alerts like this, the fed is normalizing rates, makes sense to me what i said before, if you have 3.7% unemployment, the lowest since 1969, you have growth running double what the fed believes potential is, inflation up above your forecast or your -- it would be monetary malpractice not to be raising rates. >> jack? >> steve hit it on the head. he's absolutely right. the reality is this, when the market starts to do what it is doing, it is called normalization. this is what normalization feels like you have a lot of price dislocations that take place and, quite frankly, it is probably healthy market pulls back from 5% to 7%. the reality is this is something that would have happened regardless of where we were at this stage whenever you start to see interest rates move as fast as

they have, everybody takes a step back and wants to take a deep breath. having said that, there is something going on underneath the surface here, and that is what i would call the liquidation trade. we're seeing the sell-off with no fear. you don't see a bid in gold, a traditional bid you would see in treasuries, that tells you that somebody is raising money. so the question is who i was always taught to follow the money. so if you see selling in one spot, where do you see the buy it happens to be in one place and one place only that is supporting the yuan. what we are probably seeing is a global chinese margin call, liquidation of assets to go back and repatriate so they can defend their currency and watch their market as it is now down 23, 24% on the year, they're in trouble over there >> i want to underscore this, i want to underscore this, if you're not following closely, you missed an important point you're making. you're saying chinese investors, foreign investors are get iting taps on their shoulders for positions they have in the

united states, liquidating the positions leading to sell-off here and bringing it back to china, which is moving the you juan back toward 7 >> melissa, not only individuals, but think about the sovereign wealth funds you have two of the largest sovereign wealth funds in the world. each one is worth a trillion dollars. they're holding world. they're holding u.s. dollar dominated assets chances are, when i call my spies that are actually in that auction, they'll tell me that chinese participation was very weak there is something going on here and the real question is it related to the tariffs they're now at a multiyear low in their foreign currency reserves let's watch what is happening and especially what is coming out of china. >> is china sitting out the auctions we've seen evidence that they aren't fully participating as they have in the past. >> i don't have spies in the auction. it's possible this is a weapon the chinese would use in this trade war. but what i go back to, you know,

having had the pleasure of sitting next to joe kernen for almost a decade and a half now, he has this concept called strong hands and weak hands. what happens when things change is you need to move stocks from weak handsinto strong hands at the new environment. so what you have is a new environment, it's a 3.75% ten year yield you have money you can make in k cds you couldn't make before who wants to hold stocks what you have is shifting going on it's a hot potato. find the strong hands. take some time we're lurching to try to find what that is. >> thank you very much titans of tech media and business are meeting today in beverly hills. andrew is there at the conference. >> reporter: we're here with john stanke making some news, that you're going to be offering a direct to consumer package

that's going to be led by hbo but have a lot of other content in it in 2019? >> that's correct. fourth quarter, 2019. >> we're responding to what customers want they want to be able to watch their content whenever they can. it's a great opportunity for us to take remarkable strength of hbo, put it out front, and then surround it with not only great warner media content that's been build up over the years, but some select to third party licensed content as well. >> reporter: is this what might be described as an hbo plus program? the reason i say that is you can buy hbo separately, but you won't be able to get this package separately >> this additional offer will be meaningful, you'll have to buy it with other products and services like hbo. >> reporter: this is a reaction to the might and heft of what

netflix has. i imagine what disney is about to do. >> i think it's a reaction to a reality that customers demand they see their content this way. yes, there's other very capable competitors out there putting great vehicles for consuming content in a dynamic fashion we think, you know, when we've got this great portfolio distribution capabilities today from wireless, pay tv, what we're able to do with our virtual over the top products, this is one more tool in the tool box. >> can you give us some sense of pricing? espn plus is $499. netflix at $11 to $14 range. hbo is around the $15 range. this obviously has to be more expensive? >> we're going to do the dance for the next year and i'm going to say we'll tell you right before we launch but i will tell you, obviously, if you're getting hbo plus something you should expect it's going to be selling at a retail price that will be something

more expensive than hbo today. >> let me ask you a different question, branding issue this is not -- i just called it hbo plus and that was not preplanned but why create what i imagine will become a separate brand as opposed to funneling this content through an hbo branded franchise? >> we think brands are important. hbo is a classic case of that. it's a brand that stands for something, people recognize what you're getting when you're on hbo. that portfolio of what the brand stands for fits a broad audience, but it's a particular type of content. one of the things we think is different about our offering is we don't want a warehouse approach to it we want a collection of brands that customers look at and say i know what i'm getting when i go to that -- >> is this the new bundle? >> it's a way to think about a bundle, correct. how do you get the right brands together in an on demand world >> how much of this content is going to be new, meaning you're

going to have additional investment in new content? not just hbo content, but some of these other brands. >> you're going to have a combination of a new library our initial license will be emphasized on library. as we think about the warner media family and the different platforms we have, our investment in content which is substantial every year, will be choosing which platforms we put things on and what new stuff appears well. >> we were just on stage at the "vanity fair" conference i asked you whether cnn was going to be part of this, why not? >> cnn does documentary work that will be part of the on demand library our initial step in this direction is an on demand service. so a switch video on demand type of product that people refer to. do i believe that over time we'll start to see these technologies allow us to do combination of live linear and on demand and they'll morph

together and add more value to the customer, i do that's not our first step at this point. >> how do you measure success, two, three years out, how many new subscribers do you need? >> we're not publicly announcing our subscriber accounts. we want to have a relationship with the vast majority of households in the united states. we expect this product to be a key element to get into households we don't have a relationship with today. the dow is down 3% over the past week. that has many people, including our own jim cramer feeling a little worried >> call me a little cautious i think we can go higher the stocks that are taking us higher are the wrong stocks. they're the right stocks if you believe that right, we could have a fed mandated slowdown i sure hope i'm wrong. on a day like this where we get

dire news from ppg, i'm feeling right as rain. >> that's nothing compared to scott miner. we'll hear from both miner and cramer coming up in the second hour of power lunch. i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions.

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i'm melissa lee. stocks shaken again from rising rates. will earnings season by the catalyst that saves the rally? will it send the bulls into hiding and a big call from scott miner, why he says this market looks eerily like 1987 hurricane michael, strongest to hit the florida panhandle in history. we're live on the ground with the devastation that could be on tap as power lunch starts a very big second hour, right now and welcome, everybody a busy day we have for you we begin with the market sell off which you see boldly presented there. stocks are off their session lows, but just barely. the dow had been down 431 points in earlier trading right now as you see, off about

470. s&p 500, down 1.6%, or 45 points the biggest loser in percentage terms is once again the nasdaq, down more than 2%. check out some of these stats. the s&p 500 is on pace now for its longest losing streak in two years. and the nasdaq on pace for its lowest close in three months since the summer 64 of the 65 tech stocks in the s&p 500 are down for the week. almost a quarter of s&p 500 components are now in a bear market and about 60% of the s&p 500 stocks are in correction territory. bob is on the floor of the nyse ready to take us through the numbers. >> still sitting at our lows for the day. we've been there for several hours. two major sectors, first, tech stocks which have been moving for the last week as rates have moved up

second problem is industrial names. caterpillar, boeing, 3m. all of those moving to the down side you heard from tyler, we did this the last hour 60% of the s&p 500 stocks are at 10% or more off of their 52 week highs. many which hit earlier in the year and about 25% are down 20% or more what we normally would call a bear market. large swaths of the market are already there. i want to point out key sectors that are also 20% or more from their 52 week high we talked about home construction, gaming, and influenced by rising wage. social media stocks, another sector we have talked about as well so key technology stocks have already hit their highs earlier in the year. intel, facebook, google, 13% off

its highs. many key material names. we've been talking about this for a while. concerns about the tariffs associated with lower profits overall. freeport, newmont. vulcan materials, dowdupont. 21% off the highs. i want to emphasize. the s&p is 4% off its historic high that's because we've got leadership groups that are out there, healthcare has been a leader most of the big healthcare names, they're 1% or 2% off their historic highs they're not even close we've have leadership from other sectors as well. real estate. utilities. consumer staples generally had done a little bit better there's plenty of leadership in the market two sectors really getting hit hard. >> thank you for that. corporate earnings has been a big driver of this year's move higher will the earnings season be enough to keep the rally going

or will it bring the bears out of hiding? >> we attack this from a number of different angles. we looked at different parts of wall street and the experts there and what they're looking at we'll take it from the strategist standpoint. this is the head of rbc capital markets. three of the thing she's looking for, impact of a stronger u.s. dollar also, tariffs and trade. of course that's front and center how do companies weigh the benefits and costs there margins, profit margins and pricing, will those cost structures stay in place another look is a certified financial planner, he's looking for these things are we at peak earnings? he doesn't think we're there yet. can technology rebound technology has been a laggard here over the last couple of weeks. the overall impact of rising interest rates on valuations and stocks things he's watching we'll finish it off with a

fidelity portfolio manager, focusing on international and emerging market stocks he's looking for these things, how fast is china decelerating in terms of its economy? will the government response be big? will rising u.s. dollars and rates lead to emerging markets contagion elsewhere besides argentina and turkey those emerging markets, are there companies that are executing better in this environment from a fundamental manager standpoint those are the types of stocks internationally he would want to be invested in. >> thank you very much let's bring in jim cramer, welcome back appreciate seeing you two days in a row i was going to -- let me begin with this. there are an awful a lot of investors who have not been through a rising interest rate environment. certainly not in the last decade. >> that's true. >> talk us through that as they applaud your arrival in the background something's going on mere. >> i think that rates, i agree with jay powell, that we should have another rate hike this year you want to get the rates up

typically what happens is we're supposed to say don't fight the fed. raising rates means you're not supposed to own stocks the tape, obviously, very bad today. now, i think it makes a lot of sense. rates are still relatively low any bit higher and we're starting to see the different shocks to the system you want a fed that says, wow, you know what? this may be a little too fast too much i know the president said that that puts jay powell in a box. the president doesn't -- i wish he didn't comment on it because jay powell says he has to exercise independence. when you have a rate cycle that goes up you hope the rfed does i slowly and deliberately. i don't want the fed to mandate higher stock prices. that's what the chinese do it's disconcerting i get less disconcerted. >> i want to point out we're at fresh session lows with the dow

down by 478 points that's good for a decline of 1 p1 .8%. is damage being done to this tape >> definitely. i think that it's very difficult to have the situation with the feds says we're lwilling to overshoot. i want a longer term, i think you're crazy to do that. there are so many things that are good i understand you have a guest that talks about 1987. i was in cash in 1987. i was in cash for the crash. maybe i have some ability to opine on that. it's nothing like that stocks aren't nearly as expensive. we don't have a policy that's of insuring portfolios so all of a sudden you have this lockstep decline. sure we have efts in the system. they can accelerate the decline. look, the economy is pretty good it's just that i don't think it's as good as jay powell thinks i say that because of things

like ppg i don't see a lot of sectors that are doing well. housing properties are actually coming down. your house is going down in value. many people's houses are going down in value. that's not the time when you slam on the mortgage you don't go to 5% mortgage when your house is losing value it's just going to lose more value. they'll trade lower and when they do, jay powell will say i didn't mean to do that. >> is there any risk that the decline in housing values could do to the market what it did in 2007 >> unfortunately not because the low devalue that people have is much better. i don't want to conflate those two. >> the capital positions is the banks are better. >> we didn't have as much lending because the balance sheets are so good we have to separate the consumer economy. we're a service economy, i admit. but when you look, there's many different categories of

employment when i see liner board, that's like, the basic shipping that's showing genuine weakness. you always hear from the guys who are saying, listen, jim, you got that wrong there's too much capacity. these guys are not knuckleheads they put on a lot of capacity. they're cooling now. the tariff, it's cooling things. the sentiment can change it's always fragile. any sort of economy can be fragile. and when jay powell said what he did, and amazon raised wages amazon suddenly is the minimum wage setter for the united states, i don't think so people are saying i got to get out. i feel it's bad. i don't want to scare people i think it can be reversed >> we're now seeing all three major indices, their worst day since april. what about this is a surprise? inflation? emerging market weakininessweaks

is kneany of this a big surprise >> we got these tax cuts so workers would get more money i think it's a shame that powell thi thinks this is run amuck inflation. i think it's a shame we shouldn't allow people to get jobs i just feel like, listen, it's not as dangerous that's why he's raging what would janet yellen do i think i know what she would do she would listen to programs like this and listen to what's happening in the marketplace and with housing and she would listen to what's happening in industrials. she would listen to what's happening in construction and autos and she said i raised rates and let's see what happens. i really miss janet yellen what she would do is say, you know, i need more input. i'll look at the markets maybe we should make some calls. what is that ppg

where is that going? she was a student. okay she was a student. she wasn't a teacher she was a student. she learned from many people and she had no hubris and she wasn't a rookie. i don't like what happened at the fed, because like ben bernanke in 2005, we've got to put a stop to this. >> if one of the chapters in the lesson book is the economy conference calls during this earnings season -- and we hear more like ppg when there talking about rising costs does it make jay powell less or more likely to raise rates you could look it as this is slowing the economy down, this is a real impact on the stock market and we're going to step back, or you can say it is inflationary >> listen, steel costs have gone up so much it no longer pays to

build. does that stop the economy how about jay powell he should watch the show tonight. janet yellen used tod get every input. you know, you got to listen to barry stern. he's saying the steel is slowing, it's not worth building that's a manmade problem we're trying to take on the chinese. when you take on the chinese, there's casualties, collateral damage i hear many people say peter navarro is not in charge they're fools. those who say he's not in charge do not do enough homework to be in the room. >> he's driving it >> very much in charge because the president has had it with china. he's told me so many times had it with china. now it's only accentuated. some of it is manmade. if we had more oil -- we did the iranian sanctions.

that caused oil to spike now we don't have enough truckers because we changed the rules. you can only drive 50 hours a week if you speak to people, a lot of what's happening in inflation is manmade. so it's not going to stop if jay powell -- he's using a sledgehammer, i think he'd step back and say let's see how we're doing. >> how many interest rate hike gicihikes is the market pricing in for next year? three or four? >> i think the decline will accelerate if jay powell doesn't walk things back. >> doesn't listen to the data? >> let's say i say you have to get out now because he's doing the wrong thing. what happens if he says, you know, i said some things about overshooting and what i meant to say is i don't want to undershoot and i don't want to overshoot. suddenly we have a big rally and people say why did cramer come on and say decelerating? i didn't say that.

you know what? when i went into cash in 1987 because the second weakest week was the week before the crash. i say it's not '87 this is like the beginning of an anna karinina. i love tolstoy you have manmade wage deflation because we lowered taxes you have a tariff, let's call it skirmish like jamie did on friday there's not a lot of first name people in the world. you have all these things and you have panic i always say the same thing, nobody ever made a dime panicking. if you're thinking about your 401(k), maybe do a contribution

now. maybe powell changes his view or oil comes down and you'll say why didn't i think more like warren buffet? why was i looking? this guy is going to come on, the '87 guy. remember we closed down 508 points that day. it's going to ring true except for that wasn't -- 1,400 and -- >> but there's been -- >> it's not like that. >> there's been so much optimism there. it was the best of times, it was the worst of times what are you seeing in terms -- i wanted to get -- >> that was dickens. >> go with dickens >> we'll give you the dickens. >> it was like stephen king. >> i didn't mean mark twain. >> the reports of the bull market, i don't see a lot of optimism i see people who want to scare the bejesus out of people. i've been saying night after

night -- i went out, it's like, hey, listen -- >> i want to know what -- we're looking at the dow down 500 points where is the bright spot >> the bright spot is that we are not racked with inflation, even if powell says we are and also earnings can get better they don't have to get worse we need the raw costs to come down by the way, let's just understand each other. the market has been up a lot okay so it's not like this is the end of the with urlorld let's say we're at 2,600, no we can sell off and maybe things will cool off. by the time we get into earnings season, people may say that stock is down so much, they told a decent story year over year. i'll use the worst example ford >> ford? of all the companies you choose ford >> i picked the worst. i i picked the worst

they're selling at five times earnings ford, i don't think will cut it. they'll have a horrendous quarter. after that i think they will do better micron has an inventory correction after they go through and have two quarters of inventory adjustment, then you'll be saying they're buying back stock. remember they're cash flow positive life the negatives have to happen before the positives. >> let me take you back to 2007, summer >> sure. >> when was the famous rant? 2007 >> yeah. >> she never wore that dress again. >> the giraffe. >> it was the giraffe dress. you were very critical you were early and you were right. >> they made fun of me all that stuff. >> you were right. you were right, right, right it was good to be right. you were very critical of bernanke he's not -- the guys i'm talking to, he doesn't know what he's

doing. they know nothing. right? are you at close to that point now with this fed and fed chair? >> it's very easy for him to take it back they raised 17 times bernanke wasn't talking to any of the brokerages. he wasn't talking to anybody in real estate. >> that was it that was your point. >> plenty of people said it's so overheated he has to raise rates. let's put the blinders on. we were going to a precipice you know, years later when the actual transcript came out, i was a laugh line in the fed. that's okay. look, i spent my time around here you do have to shout it from the rooftops i mean, i had a today show experience where someone said to me are you yelling fire in a crowded theater?

yeah, but you see there's a fire there's no fire here so i'm not going to yell. i am going to say that we will find if jay powell says tomorrow, gives a speech and says what i meant to say was sheatyo know, if it slows down i'm obviously not going to raise forever. people are going to say why the heck didn't i buy surface now? most people don't even know. why didn't i buy the etf you'll feel like you should have you'll feel like, wow, why didn't i buy disney now that they solved their problems and espn is doing better i don't want to be the guy that says, you know what? it's '87 and it is really coming apart. by the way, can we remember in 1987 the economy was quite strong it was just the stock market that fell apart. we have a lot of good things going, we vea fed that's very worried about its shadow and wants to prove its mettle.

we have a war with china that's going to cause a market to decline a little. it would be tragic if people said, you know what? get out now. instead -- >> i'm going to add money to my 529. >> i'm trying to get through to brokers. but, you know y gi got some lat money from my late kids. i kept it on the sidelines s&p. so i today added to -- because i was going to wait till the end of the year. i put it to work >> fascinating conversation. >> i want my wife, frankly, who is in real estate, if you're in new york real estate, get out now. i'm in new york real estate, i can't get out now.

paul manafort's house is for sale he paid $5 million i say bid him $1.5 million real estate is very bad. i wish it weren't, because i love new york real estate. what am i supposed to do my wife said we should sell and then represent i haven't rented since '84. >> good luck trying to find an apartment. >> there you go. a year from now you'll be saying good luck trying to get rid of an apartment >> jim, thank you. >> can i just say, i need to see courtney out of there. i covered it when i was a tallahassee democrat not safe it happens like this there's no heroes. i covered a train wreck about ten miles from there i thought i was a hero and i was blind by the time i finished covering it. so stupid. i wanted a damn pulitzer. >> she's inside right now. >> good. i looked at a house in mexico beach and all 300 of them blew down they were on stilts and then

they weren't there >> thanks so much for your time. >> enjoyable. >> see you tonight on "mad money." >> yeah. >> we'll talk cannabis, we'll talk high. >> sounds good coming up, one of our next guests sees the 10 year going to 4.5% he says that's fair value. the imf says there's an outside chance of an emerging market crisis not seen since the global financial crisis. a look at where things stand and how to trade it. auto stocks hit the brakes what's driving those losses? should you stay clear or could th be isa good entry point power lunch back in two minutes. why would you need to learn every detail about a company? firmness... nine. it's how ibm services helps retailers around the world drive growth and save millions. he's very into this. yeah. is that the standard amount? yes. feels good. when your partners are obsessed with business and technology,

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technology shares tumbling in today's sell off. worst performing sector today. the s&p 500 technology sector is down 2.75% as we move through the day. josh lipton is following it all for us. >> tech is taking it on the chin as you mentioned check out the nasdaq, in the red, on track for its worst day since june on track for its worst month since january 2016 take a look at the tech sector of the s&p 500 as you mentioned there, tyler,

the worst performer today in the index on track for its worst day since april. notable tech names have hit what some traders refer to as bear market levels or worse a drop of 20% or more below their highs. intel, facebook and twitter there are others like alphabet and amazon i caught up with aaron kesler from raymond james he says companies that don't boast those compelling valuations are at risk of a continued sell off and what's interesting is this decline comes during the final quarter of the year which is when tech historically posted the strongest gains of any sector it's been up 80% of the time according to cfra. one wrinkle, remember some of the fastest growing tech stocks aren't tech stocks anymore

netflix and facebook have been moved to the communications sector. >> thanks. let's bring in maryan montain and the chief investment officer at cresset advisors. jeff, you see 4.5% is where the yield will be going. what's that path for the stock market that march to 4.5% since the march from 3% to 3.25% has been rougher. >> we're sensing it right now. i think that, you know, we have to keep in mind that interest rates, thanks to financial repression and central banks, have been artificially low for nearly the last ten years. and so when you consider that tug of war that typically occurs between stock and bonds, stocks have been the only child in that asset class. they've been getting a lot of assets as interest rates move back to fair value, which i argue is

4.5% that's nominal gdp that's going to start garnering more assets in that direction. already, we're seeing the three year nearly at 3%. you know, as the fixed income market becomes more compelling in terms of yield, that's going to put pressure on especially these growth long dated kind of, you know, stocks that have a long duration. >> you know, maryanne a day lik today is tough we're down by 514 points right now. what is the market telling us? is there a question about growth here in the united states? is there a question about raising rates? will rates quash the rally what's the market dealing with do you think >> i think it's a function of ppg talking about pressures on their business whether it be overseas because of the strength of the u.s. dollar or tariffs driving up their cost of materials. but, you know, just a deceleration on the sales side j

deceleration on the earnings side will this carry over to most of the companies that are going to be reporting in a couple of weeks? i don't know we'll have to find out when it does tariffs are still a big question mark with china. we can't extrapolate that at this point what i do know is that the rate of inflation is still under control. i know that the wages are finally coming back after so many years of no wage growth so that's very much under control. i see that unemployment is low and a very good point. so there's a lot of factors, you know, manufacturing, services, indices, they're all very strong at this point. i'm tending to believe that the quarterly reports will be okay we're talking about 20% earnings growth this quarter and probably next quarter as well i would like to back up and talk about powell for just a minute the people who have studied powell who have said that he is

very data dependent much like janet yellen was, i don't think a fourth interest rate hike in december is guaranteed i think he may pull back and look at the data as it comes in in the coming weeks and then make a determination you know, to get interest rates back up to that 4%, 4.5% rate is actually very positive for financials we like some of those. >> jack, how do you change your portfolio? if you do even have -- if you're a believer that the economy is still pretty strong and that earnings growth should come in decently, but there's a question mark because we still have not seen the full impact of the most recent round, the bigger round of tariffs yet on corporate america. how do you invest? >> i mean, first of all, equity investors have been rather skeptical of the 20% earnings growth through the two quarters, we had 26% earnings growth and the s&p was up 10%

there was some of that, you know, we'll call it a skeptical discount that's going on, knowing that we're not going to see 20% earnings growth as far as the eye can see but that said, all other things being equal, you know, i take all of the economic data into consideration. assuming that's just flat, there's fair value of the ten year's 4.5%. 2.5% for real gdp, plus 2% for inflation. that's largely the ecb and the boj that have been keeping -- helping keeping rates artificially low now we see the german ten year move from .3% to point six something in a matter of eight weeks. that's starting to untether the u.s. treasury tenure. >> we're going to leave it there. thank you so much. all right, the white house commenting on the market sell off. >> reporter: the white house is,

in fact, monitoring this market sell off, which was just around 500 points at the time i was talking to the senior administration official who said that the white house is not concerned about the sell off the white house is saying there are reasons for these things we're not concerned when it goes up 500 and we're not concerned when it goes down 500. the white house is much more focused at this moment on the in coming hurricane in florida, saying we're more concerned about the loss of life and the potential for loss of life in the state of florida than the markets. but the white house is monitoring, but not concerned about today's market sell off. >> thank you very much all right. imf is sending a warning signal on emerging markets. here's a look at where things stand. >> a stronger dollar, higher u.s. rates and larger concerns over a trade war has spelled trouble for stocks overseas, specifically in the emerging markets. take a look at how the etfs are trading below their all time

highs. russia is down 54% brazil down 46%. india and china are down over 20% from their respective all time highs the sell off in europe has been notable as well. germany trading 17% off its all time high. the united kingdom and france, also lower this downturn is clearly a global story that we're watching here i'm going to send it to mike santelli at the new york stock exchange. >> thank you very much let's bring in our trading nation team for more on the emerging market and global meltdown today mark tepor, matt maley matt, i guess as a whole, how are they positioned? they've been drastically underperforming the u.s. any signs that might change? >> well, it could. at least on a short term basis we always like to pick up any asset class when it's been

washed out it's over solvent. you look at it's weekly rsi chart. it's getting down to levels where you usually see balances. the problem is it's been seeing a series of lower lows for many months now so it's going to be tough for this thing to really bounce back, especially if we don't get a move on the dollar the inverse correlation with the dollar has been strong for a while. unless the dollar comes down and there aren't signs of that right now, it's going to be tough toorto be overly aggressive china, the one thing, it's down near key support level the chinese, they are known to support their markets. they know if it breaks below that level it could cause a watershed movement, so i think this is an area where they can be supporting the markets. if you want to take a little more aggressive move, it would be in the chinese stock market rather than the others. >> all right yeah, maybe the hardest hit

could be the first to recover. mark, from an investor's perspective, where do emerging markets have a place in a portfolio? >> long-term investors can't afford not to own emerging market stocks. emerging market consumers and the rise of their middle class, and all these economies are transitioning to becoming more consumer driven. you have there strong dollar, trade tensions, debt concerns, that's all working against them. you have to own them if you were to look at a table of all the asset class returns since 2000, there's one thing that really stands out with emerging markets when they are one of the worst performing asset classes in a given calendar year, they're typically one of the two best performing asset classes over the next two years don't bail on them buy them and i absolutely love ali baba you have a company that's growing faster than amazon,

trading at 1/4 the p.e could it go lower? probably this is one of the best five to ten year plays in the stock market right now investors have an opportunity to own amazon at 25% of the price we do think that emerging markets certainly provide us great opportunity over the long run. >> all right that's good context. and a reminder that those indexes are heavily weighted in those big chinese internet stocks for better or worse thank you ver muy much melissa, i'll hand it back to you. thanks let's get back to the big story on wall street the dow is having its worst day since may 29th we're down by 516 points on the line is scott minerd. a few minutes ago he tweeted

just as an iceberg loomed in the darkness to be struck by the titanic, so the strong u.s. economy approaches the distant fetal drug >> i'm glad they're giving me more words these days. >> i know. so are you saying that in part that jay powell could spell the end to this rally? >> absolutely. i think that history shows us that bull markets and economic expansions don't die of old age. they get shot in the head by the central bank and chairman powell and all the key players have indicated they are determined to keep raising rates and are showing what kia . >> what kind of sell off will be looking at if you're comparing anything to the titanic, it can't be good.

you're making the comparison back to 1987 is it that bad jim cramer was just here highlighting dirv highlighting differences between now and 1987 one being that the economy is much stronger than it was back then. >> i don't want to take anything away from jim. he's obviously very insightful but i don't think today's sell off is the harbinger of a crash. this is standard seasonal slough we're going through. so, you know, the oversold readings in the market i think are telling us that we'll see a bottom some time before the end of the month ultimately, this expansion will end. and it's going to end because monetary policy is going to get too tight at the same time that fiscal policy is going to turn

into fiscal drag in 2020 and when we get there, our work is showing us that the stock market will probably pull back 40% from the highs we'll probably see credit spreads widen dramatically corporate america is overlevered. the leverage ratio on corporate balance sheets is the highest on record and we would expect to see high yield rates rise by 8% or more by the time we get to the end of the recession. so it's a good time. i tweeted back in august it might be a good time to take some profits and risk assets i think it's too soon to call the end of the bull market but over the course of the next six to 12 months i think people should probably take their profits and bunker down. >> whether you're calling the end of the bull market or not, you certainly are forecasting a

rather dire set of circumstances come a year from now and into 2020 i guess boiling it down, you think that the likelihood of the fed overshooting by raising interest rates will be the bullet to the head of the market, number two, will overcome the effects of the stimulus and the ongoing stimulus of the tax cuts >> well, it's interesting. you know, i think people get confused sometimes with how fiscal policy works. the stimulus of the tax cut is passing through the economic data this year and probably will continue to move into next year. but, actually, in 2020 the fiscal drag from the waning tax cuts will actually pull down on the economy. we see fiscal drag in 2020 to .5% to 1%

there's a looming risk here of a trade war. if we get into a full scale trade war with china, we think next year that could subtract 1% or more from gdp. >> i absolutely see that but why does the fiscal stimulus wane in 2020 if the tax rates continue to stay where they are? stay low won't you continue to have more money piling into corporate coffers than otherwise would have been the case and more money in the pockets of american workers? >> two things. remember that economic growth is a rate of change and so the big change was the reduction in taxes this year and that added a lot to growth. >> got you >> that rate of change is going to fade next year and the year after. and the other thing is that, you know, as far as cash flows into the coffers of corporate america, our work shows that by

the time we get short term rates up to around 3.5%, the total debt on the balance sheets of corporate america will be eating into free cash flow at a level which would be consistent with a recession. so all this debt we've piled on as a result of qe and easing credit conditions is going to come back to bite us. >> i want to underscore what you said in terms of your forecast for the markets. you see a potential bottom by the end of the month, which is essentially the next few weeks but eventually you see a 40% decline from highs right now we're 4% off of highs. how do you position a portfolio for that outcome is it going to be a short fade >> you know, given how low the vix was, we moved away from a lot of our stockholdings into holding options for the upside

i am a firm adherent to the advice that was given by baron von othschild. we've been taking risk off and we'll slowly continue into the early part of next year and then be hopefully positioned correctly for the next downturn. >> thank you very much scott minerd we appreciate your time and insight. >> thank you coming up one area of the market that could be a safe haven and a rising rate environment. that's next. x1 is here to help.

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shares of altria, a cannabis grower based in canada take a look at the move of aphria, that's up by 13%. the oil market is closing for the day. hurricane michael could end up having an impact on prices. >> i thought it would have more of an impact to be honest with you today with michael hitting as hard as it has. i thought we'd see prices rise today's decline is significant because it shows you that the stock sell off is what's driving things at the moment rising interest rates, equity losses, all signals to the market that there could be a slowing demand ahead and those problems could be issues down the lane the possibility that iran's oil could come off the market, that's keeping support over $70 an hour. stocks are sliding the dow is dropping more than

500 points earlier and now down 551. we're close to a session low somebody might cue me in into what it was. down more than 2% and the nasdaq moving in on 3%. interest rates are rising. where is the money going john miller is head of municipals at mulveeny tell me about how these rising rates will affect, have affected rates? >> rates have been rising since the middle of 2016 even coincidentally with that municipal bond annualized returns have been positive since that time. on a year to date basis, they have risen a bit more on the long end of the curve.

so for high quality municipal bond indices, they're downabou 80 basis points. so it's been a resilient performance to the market overall this year. i think when you think about entry point, you think about cash flows and income tax exempting you can generate going forward. this environment improves those forward looking returns. >> you think this is potentially an entry point as maybe the rise in yields slows a little bit >> yeah, historically when we've seen 100 base points sell offs, a little outflows here in october, how much tax exempt cash flow in comparison to where

inflation is so the core deflater it's up marginally but, again, with rates being up 100 basis points, that creates a better after inflation, after tax return creates a better return profile going forward. >> john, what's the sweet spot when it comes to the credit quality of munis is it, you know, high quality investment grade i don't know what kind of yields you're getting versus say a bbb which is investment grade but, of course, lower on the scale. >> sure. of course, it's varied case by case a lot of revenue bond projects are in the bbb area but have some upside potential when those projects get completed the redevelopment of laguardia airport being one example yielding in the 4.25 area for longer term. high quality municipals at the end of the long curve, bbb, cupping that in the 4.25% and in

some cases 4.5 range, so it depends on your appetite for credit risk. i will say that the economic strength has really accelerated as we know in 2018, and that is benefiting state and local government revenues as well as selected infrastructure projects >> so let's say i want to go into a fund or an etf as opposed to dabbling in the individual bonds. what are the characteristics of -- of the fund that would work best right now? >> sure. well, in terms of -- in terms of funds versus etf, funds have more of a credit selection or security selection bias as opposed to just replicating the market so it depends on what you favored there, and funds have short intermediate and long-term and high yield a lot of investors who we work will have a core of intermediate

high grades, 65% to 75% of the muni portfolio with a 25% to 30% chunk of high yield to tap into non-rated and lower credits. >> how would you expect a portfolio that's administered that way to perform over the next 12 to 24 months >> well, i think as soon as we get a little bit of interest rate stabilization, so all year long interest rates have been the headwind, but municipal-specific characteristics like the tax exemption and improving credit quality, moderation of supply, those have sort of been the tail winds. on a going forward basis, i think as soon as rates stabilize we'll see a bit of a real, and you would earn coupon plus some capital appreciation probably portfolio position the way i described, probably earns total return north of 4% in the next 12 months. >> all right. >> maybe 5% if positive developments occur. >> that's not a bad return in

munis at all john miller, thanks very much. >> let's get to dom chu for a market flash. >> shares of ford lower today, but notably well off their worst levels of the day, up like many other parts of the broader market, ford is hovering right around the lowest that we've seen since 2009. fellow auto giant general motor is playing out in a similar fashion, marginally in positive territory at this point. both these stocks medium to longer term downtrends in part due to rising rates and what it can do to consumer demand and in the long term whether we see the notion of peak automobiles and would consumers look to continue the trend of buying automobiles and these stocks, contessa, a downtrend and perhaps bucking a little to the upside relatively speaking back over to you. >> dom, thank you. staying with autos jim cramer joined us yesterday with harsh words for auto sector. >> auto, as much as i think phil is right in terms of the 17 million, auto is a bad place to

be because you've got mexico auto, china auto, ppg makes the highest end finishing, like the wealthy cars, healthy cars are ppgs, and i don't want to see the luxury side of things get hurt and ppg is synonymous with luxury autos. >> let's bring in michael ward, senior analyst with williams trading. good to talk to you today. michael what, did you think about what jim cramer had to say about autos and the industry as a whole? >> well, i think he's wrong, but that's another issue. >> tell me why >> well, first of all, i think he's focusing on the car sector of the market and the luxury car sector and that side of the market has been slowing pretty dramatically for the last four to five years. i mean, look at trucks trucks are through the roof. trucks are more profitable look at truck sales since twin they have doubled and up 7.3% in the last three months. sticker prices, average expenditure by a consumer is up $10,000 per unit drive around any neighbor, the

family vehicle of choice is a chevy suburban they are $80,000, a luxury car. >> are those cars going to get more expensive because the costs of materials are skyrocketing? >> material cost is definitely a factor i think you have to look at that, but one of the things you've seep historically with raw material costs, particularly steel, because that's what you're focusing on, steel prices, the vehicle manufacturers have several contracts that kind of fold as a natural hedge so you're not going to see a 30% increase in steel costs in one given year. it will be staged in over time, so steel costs, if you look at the raw material component of a vehicle, a steel cost is about $1,500 on an average vehicle in the united states, and so if you're up a couple hundred bucks, yes, you price some with the consumer you eat some, and you also have more favorable contracts with your suppliers. >> if trucks are so hot, why isn't ford >> well, that's the question of the day, right i think the real question is why are the auto stocks not performing as well as they should be given the valuation and given the outlook and the

industry and given what the companies have restructured over -- you know, since the downturn one of the things that i keep pointing to is the stocks have become less relevant if you look at general motors and ford in particular in the '80s and '90s, there were 2% waiting in the s&p 500 or a top five type of stock in today's market when you are looking at their weighting today, it's 35 basis points they are priced out of the market and then you get the question why are people not paying attention to them part of them tech and there's belief that the tech industry will take over the auto industry and certainly detroit is not going to outtech silicon valley, but if the tech industry is going to look to grow revenue through the auto industry, they desperately need the auto manufacturers for production, for regulatory, for distribution which would take decades for any tech company to replicate and as evidenced by the soft bank and general motors cruz, they need

the auto industry. >> even though the stocks are trading absolutely dismally, you're basically saying investors are using that money instead to invest in higher growth or what they perceive to be higher growth areas >> absolutely. i think when you look back in the '80s and '90s, and i've been following the industry since 1982, any portfolio manager you talk to an opinion on the autos. it is an easy sector to understand, but they always had an opinion on the autos because they were relevant to the market when you look at it today, if you miss a move in general motors and, you know, it's .18, 18 bips waiting in the s&p 5 huff you're not getting hurt that bad. you miss a move in amazon or google, you'll get hurt badly. >> michael ward from williams trading. michael, thank you so much for your insight. >> thanks very much. >> thanks very much, michael we're closing in on the final hour of the trading day, and we want to leave with you five staggering statistics that really put this selloff today into context all three of the major averages now down about 2% or more.

64 of 65 s&p 500 tech stocks are down for the week. the dow transports now off 3%, and a quarter of the s&p 500 stocks are now in a bear market. the nasdaq is on pace now for its lowest close in three months >> and sticking with technology, check this out amazon falling into correction territory. now it's off 12% from its 52-week high netflix in a bear market down 21% from its one-year high and take a look at the stock that was seemingly unstoppable at one point, it's now in its own bear market we're watching this very, very closely. got a lot of clues from technology early on. lost the f.a.n.g. stocks back in june and saw semiconductors fall off. very highly cyclical, so maybe the selloff in technology shouldn't be a complete surprise. >> and i was telling you guys yesterday about the impact the rising rates are having on casino stocks. i got an interesting note today from morgan stanley analyst from the gaming conference in las vegas talking about the rising

rates, and the industry insiders are arguing the rates actually could be good for gaming because retirees get more disposable income with the rising rates on their fixed incomes, and they may choose to go to casinos and lay down more money. think about consumer discretionary, and if you have people with a little mohr disposable income at their benefit who might benefit in those cases. >> and the seniors typically carry lower debt, so, in other words, they don't have a lot of big open credit card balances or floating rate debt or whatever. >> yeah. >> i can't -- we did a segment last week, i forget it was the day you were here. we did a segment on cash and did a segment on cds. >> i was here for that. >> probably the first time in ten years we did a segment on cash. >> they were irrelevant for so long. >> and we heard jim cramer say leading into 1987 he was all in cash it's new to me to hear the repeating bell of cash, cash, cash, but something to consider. >> yeah. some key levels that we're watching going into this close

20822 on the s&p 500, the 100-day moving average and a close below that could indicate a break in momentum. we're sticking close to that line and we'll watch that line very, very carefully as we're down more than 2% on that indecks. a tha thanks for watching "power lunch. a very busy hour of "closing bell" starts right now that it does, tyler. good afternoon welcome to "closing bell." i'm wilfred frost. >> and i'm sara eisen in for kelly evans. >> been a wild day on wall street as you all know a look at what the indices are doing. down 2% on the dow in terms of points, down 527, the low of the session. it was down 569. the high was up 11 it feels like a long time ago early this morning s&p is down just over 2% and nasdaq down over 2.5%. >> some were itle declines for