>> j.p. morgan, it's our greatest holdings, i think it leads us out of the substantials >> you think it has staying power. >> banks, where is that one located again in minnesota, record numbers yesterday you said that you started in target >> we got to go. thank you. "power lunch" starts right now >> scott, gentleman, thank you very much. welcome to "power lunch," everybody, i'm timer mathieson a major sell-off down 92 points, what's driving it? fear of rising rates though, they are trumping so strong earnings that have been coming out how to play the cross currents we'll give you a road map coming right up. and coming out of europe, and drama, secretary mnuchin pulling out of that high stakes gathering over in the kingdom in a week or so's time. we'll talk about the fallout coming up. and the great wall of worry.

chinese stocks tumbling to four-year lows the main market there plunged 30% since january. we are hours away from the most important read from china's economy. is more pain coming? we're watching and power lunch is tracking it right now. >> welcome to "power lunch." i'm melissa lee, the nasdaq again feeling the brunt of the paper. that index is down by 1.7% the dow has been down almost 400 points at its low. it is now down by 285. today's slide puts the s&p and dow below the most recent record highs. the russell index transports, dipping into correction territory, down 10% or more from recent highs oil, that's sliding. group prices touching their lowest level in just about a month.

contessa >> here's what else is happening right now. watch out, spotify and pandora, sirius xm is eaming up with amazon to bring its satellite radio service to amazon's echo devices. activision topping half a billion in world wide sales in the first three days more on what this means for activision and rival gaming stocks ahead. one of the most secretive companies in silicon valley is going public talent is considering an ipo if 2019, valuing the data mining company, that's a little more than $40 million bucks much more just ahead tyler. >> we are all over, contessa, this sell-off, bob , risks in europe steve leishman in chicago with his exclusive interview with former trump economic adviser gary cohen and eamon javers has

the latest on the saudi scandal. >> thank you, tyler, the markets are dealing with issues, some are old, some are on the new side at least four or five are a lot to digest every day. right now, number one is the china slowdown, 25% declines in china, some cases 30% declines how much are they slowing down we have industrials reporting earnings and commenting along with that. then at the same time we have a limited follow-on from the tech report not much follow through i don't have all, of course, mr. draeg warned italy not to bust the budget then we had saudi arabia's isolation with mnuchin pulling out. is there a knock on for tech stocks tech did stop, so names like netflix, facebook, google, all dropped right at the time of those headlineles. then we got the margin pressures

on industrials sealed air, textron, sealed air citing unfavorable currency, textron missed on the top and bottom line. we heard grangeer comment, bottom line is this, folks, margin pressure. overall from a group -- a series of individual influences, weaker foreign currencies, tariffs, higher raw la bo costs as well as pockets of demand, weakness in autos in china for for example and europe as well a lot for the markets to deal with >> bob, thank you for. that you mentioned those dplents ecb head mario draghi contributing today in the trough dylan marks has more. >> reporter: what we heard people should stick to the budget if they don't, it seems to be

clear, to the italians, they submitted a draft budget plan earlier this week. the commission immediately said they have concerns about it. in just the last hour the commissioner of affairs in europe he has been talking in rome, specifying what is the problem with this expansery spending plan i want to bring you his comment. it's higher than the mar joan, anything they've seen before a failure of half to the 130 debt gdp ratio. that's to fund things like a universal based income something very close to the heart of the italian go. saying he has had constructive conversations, three with the economy minister, he, in italy, very, very keen, to stress, this is all about boosting growth it's been very, very sluggish. for the market reaction. you've seen the yield on the italian just here over the last few weeks. that seems to be continuing on the back of some of these

comments >> thank you a major news-making event interview, in fact, right here on cnbc in the fast hour, gary cohn, adviser to the president, speaking ability a host of hot topics, including president trump now targeting the feds steve. >> mellissa, thank you very much a wide ranging interesting interview with gary cohn, former head of the nec, entrepreneur when it comes to blockchain. i began asking him about the federal reserve. he believes in gradual rate hikes. >> that means he disagrees with the president. here's what he said about the president commenting on fed policy >> the president's powers and the executive power is to appoint and confirm his individuals that he wants to serve on those committees or those boards once the president does that, he can put anyone up he wants as long as he gets them confirmed by the senate.

it's his job to leave those committees alone to do their job. i don't think he should comments on any independent agency. >> so the other part about his comments on fed policy is that he's not all that concerned with the fed raising interest rates in fact, gary cohn is a pretty bullish outlook. he sees the fed funds judge, the ten year going up. he thinks it's a pretty bullish environment for stocks >> we have a 3% fed rate, funds rate and we have a you know 3.5 plus ten-year rate it's called 3-and-a-half we have a 50-point spread in there. and we continue to see the economy grow we continue to see earnings grow we continue to see companies invest in the labor force. we continue to see wages grow. i think that's a great environment. >> a big risk that he does see down the road, guys is trade and he doesn't agree with the president's policies when it comes to china he says the president should not be raising consumer prices with

tariffs because we're a service commitment he's concerned with how all that works out ultimately, he is bullish on the economy and stocks, even despite what he sees as rising interest rates. guys >> thanks. and we do have another big interview coming up on cnbc, david solomon, goldman sachs ceo. >> that happens 3:00 on "closing bell." today. secretary of state steve mnuchin cancelled a trip to saudi arabia eamon javers joins us, there have been speculation whether the markets in some way or shape or form reacted to that news. >> reporter: exactly the secretary treasury said recently mount with president trump and secretary of state pompeo and decided i will not be participating in the future initiative summit in saudi arabia the white house not offering any explanation for why the treasury secretary is not going it does come amid all this

tension surrounding the disappearance of jamal khashoggi, the saudi op-ed writer for the washington post who have disappeared the saudis are accused of murdering him the president willing to give it seems the saudis a little time to off an explanation of what happened there the secretary of state mike pompeo is just back from saudi arabia and turkey. he was here at the white house today as he offered up the white house' explanation of what it's going to do over the coming days here's what he says. >> i told president trump this morning we ought to give them a few more days to complete that so that we, too, have a complete understanding of the facts surrounding that, at which point we could make decision how or if the united states should respond. >> reporter: that's the secretary of state frthere sayig the united states is willing to give the saudis a few more days. the trick here is the saudis are essentially investigating

themselves, whether mohammed bin shall man, defact o, mbs ordered the murder of jamal khashoggi. >> that is an atenable position for the white house critics. the white house seemingly content to allow that to play out over the next few days i asked him straight up is jamal cash oak alive or dead he did not respond to that question >> thank you doctors selling off on fears about europe on rising rates on seized tensions in the middle east earlier on ""squawkon the street,"" former fed vice chair stanley fisher added another brick in the wall of worry with our sarah eisen. >> there is one big threat on the horizon anded that the trade war which we may or may not have with china it's not something in the president said trade wars are great. you can win them easily. >> you disagree? >> i don't think he knows what a big trade war is about

>> joining us now, steve grasso, who is the director of institutional sales, a fast.trader, rich weiss, chief investment officer at multi-asset strategies at american century investments it's good to see both of you guys today let me begin with you. what did you think of mr. fisher's comments? did you think trade wars is one of the biggest driving factors >> i think it has been all the investor polls as of lately have said it's now more about rates and the feds by about a 2-1 concern ratio. so coin taking a step back, feds taking a step up but i still think that both of them are vying for a lot of attention in the marketplace, at least on a day like today. >> we seen a big slide in asia and european stocks. rich, when you are watching what is opening overseas. how much are you factoring that into your own investment strategy >> oh, that's a large part of this this bull market

this economic recovery has been very narrowly perched here in the u.s. and within the corporate sector and within that the text sector for the most part overseas, they're still in a slowdown, their equity markets are all in the red so i think once you look outside the u.s. tech sector, it's a blood bath out there >> that has a dramatic effect on the economy. there will be no fuel for our recovery or corporate earnings coming from the international arena. we're solely dependent on what's going on in the u.s. unless the administration has another rabbit to pull out of the hat in terms of more tax cuts, we have rising rates, you november the outlook is not as rosie as it was a few years ago. >> so, is this, when you say blood bath, i have to ask, is the bull market dying or just stumbling and how would you ever know except in retrospect? >> you know, its been nine, ten years since we've seen it, so it's hard to recognize, but the economic cycle is coming back.

so, you, this could very well be the canary in the coal mine. it could be the end of this recovery right here. you have all the classic signs, corporate earnings decelerating, they're not negative, economic growth decelerating. rising rates the short and high end of the kufbl again a painfully narrow bull market in certain sectors and primarily certain stocks so cash is still in the running to be king, if not this year certainly next >> steve, how are you get -- how are you feeling ability the markets at this point, steve as you know, richard alluded to, tech is really having a hard day, it's been having a hard year for that matter then you look at today's a, industrials are feeling a lot of pain today and so we're seeing some of these not just the growth sectors, but also the value sectors really haveing difficulty >> right, value cannot lift this market i said the other night on "fast money" netflix was the most

important earnings of the cycle. i still believe that if you look at a chart of in the felix at s&p it's undeniable the correlation we've seen growth stocks are leading the market they're fading now growth stocks continue to fade the way they have been fading recently >> steve grass so. thank you very much. and rick weiss with american century investments. >> what a busy day, we're watching here. another big sell-off for the dow. still it's only off 5% since it hit an all time high you remember two weeks ago. compare that to shanghai composite it is down 25% so far this year. we have a lot of canaries and comb mines, that may be one of them a crucial report from gdp is coming tonight is chinaing a sell rating and what impact ulwod that have on u.s. markets that and more coming up as we continue with "power lunch." them highest in investor satisfaction

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. stocks sliding today the dow down 300 points. market is a concern. chinese stocks, in fact, hitting four-year lows the shanghai composite is down 25%, actually 30% from its january highs and president trump's economic adviser larry kudlow speaking to detroit at this hour about the american economy. and in that speech, he says china has not responded positively to any of the trump administration's requests about trade talks. joining us is the manager

director of asset management, a long-time china watcher. great to have you with us. >> great to be here with you. >> is there a possibility what is going on in china will affect the markets here in the u.s. >> it's a concern, it's not a new concern. it's something that tensions over a possible trade war have refocused investors' attention on it's refocused the attention of domestic investors in china as well that's why you see the domestic stockmarket in china these are over investment, over diplomacy on credit expansion, they went away or seem to have gone away a year ago, because china because of the party congress and xi jinping consolidating power, they've pumped a lot of money into the economy. they've boosted the economy a while. >> sure. >> they've dug deeper, now we're

seeing the after effect. >> i guess my question is, on a relative basis how much are you concerned at this point the more you see the shanghai composite go own, the yuan weaken agains the dollar and it isn't able to to do much to prop up its market as a national buying team or to employ measures that will juice growth we've seen in the recent pmi numbers there? >> they've kept digging deeper it's become a larger concern as the time goes on the prospect of a trade war is one more straw on that camel's back >> i read a really shocking statistic. maybe it's probably old to you as a china watcher, but 11% of china's marketization is put up for collateral loans, which is where people may be forced to sell so how much nmore of a downward pressure do you think that could be on the market there >> there has been a debt explosion in china over the past

decade after the 2008 financial crisis and the stimulus they use to respond to that which never really ended so that has continued to be an issue. the thing that's weighed against it has been the willingness of the government to step in and essentially guarantee the socialized debt. so if something even hinted at being a systemic risk, then the government would step in and backstop it. and you know whether or not the government can continue to play whack a mole is a big question >> so patrick, we get numbers later today, friday shanghai or beijing time that suggest that the forecast is that the economic growth will slow from 6.7 to 6.6%. will that number, whatever the number turns out to be, will that number tell the story or will it mask what's really going on behind the curtain? >> i wouldn't really look at that number as a true indicator of what will be portrayed as a

gradual, you know, decline in the growth rate. in fact, what i would look towards is things like what kind of pressure do we see for capital flights from china and it's reflected in the downward pressure on the euan what kind of investment growth rates though public and private? because the boom that we saw yesterday that got everybody's hopes up that china was back on track really came from injecting this credit and in boosting those investment numbers now that that stimulus has gone away, we are probably likely to see that investment driver recede again >> is any of this enough of an impetus to get the chinese to come to the table and negotiate in good faith to achieve some of the goals of the trump administration >> ironically, my concern is they're do the opposite. the threat of trade sanctions will actually cause the chinese to hunker down and try to double down on the structure of the economy that they've got,

putting more credit in, and saying we're just going to try to outlast this our way. and that this is not the time to engage in reforms that could destabilize the chinese commitment because it's never the time to engage in those reforms. that's why we haven't seen them move forward over the past several years, that is my concern that the reaction is they are pushed in the exact opposite of the direction that we need them to go in. >> how much farther lower can the shanghai xolsz composites g without impacting the market if you say they're 30% down if from highs this year and the market is where it is now, you have to think is there a point the u.s. can go much higher without china turning around in. >> it will rattle people the last the couple times we seen china take a dip, back in 2015, 2016, it rattle u.s. markets having said that, i don't think u.s. growth is dependent on the

rate of chinese growth you know, china needs to slow down its growth. it needs to be creating less over capacity and, in fact, that would be a relief in many ways for the u.s. economy, you know, chinese demand is not driving the u.s. economy it's driving certain industries around the world it's not driving i don't have all economic growth globally it's the rebalancing we need to see. unfortunately that rebalancing can be constructive through reform or it can be deinstructive throughco -- deinstructive through collapse and slower growth. >> that does raise a concern the big question that i have that would affect the u.s. economy is the chinese respond to either trade sanctions or a slowing economy by devaluing the yaun significantly >> that will create serious head winds for the economy. it's something they have been avoiding so far. it's something that could be in the cards. >> i guess that's why a lot of people are watching that 7

level. thank you so much. investors are taking a bite out of the stocks today. coming up a closer look at facebook's mounting issues

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marks. the dow is down. the nasdaq the big loser down 2% now. we should note the dow and s&p 500 at these levels are below their 200 day averages >> one of the big losers today and in the past several months, has been one of the great winners. >> that would be facebook among those selling off. a rough stretch down 25% in just the past three months. the company is facing a number of issues, including trying to prevent the service to manipulate the upcoming mid-term elections. julia bores sten has more on the company's new war room julia. >> reporter: that's right, tyler the war room brings together every corner of the company to track trends on facebook and app and monitors it has posted around the war rooms so the teemts can include efforts at voter suppression, fake accounts and fake news.

>> so we've essentially done much scenario planning and like war games internally within the war room in order to plan out different types of problems that we may see and we practiced and we've done drills to see how he can detect that, how he can come to quick decisions and how he can take quick action. >> reporter: the room is now staffed for 20 hours a day they will be ramping up to 24/7 next week with representatives from 20 teams, from what's happening in instagram to public policy in data science they say they identified voter suppressionests, false news that brazilian election day was delayed and quickly pulled down the post before they can go vipir. facebook says its current systems and war room would have prevented the elections in 2016 and say it's an arms length to stay ahead of new threats. >> the company faces a lot of issues there are privacy issues there are questions how they count video views and shares

that information with advertisers. even a push to push out mark zuckerberg as chairman, this has got to all be a distraction, certainly, right >> reporter: yeah, there is certainly a lot going on in the company right now f. you look, these are attacked at all sides, you have advertisers frustrated with the fact that back two years ago the company misreported some key video metrics saying there has not been enough transparency, so the issues of the accuracy of facebook's advertisinging metric is still a concern for advertisers. on the other hand, you have funds that have invested in facebook who are concerned that mark zuckerberg has too much power. the thing, though, he owner owns 60% of the shares in facebook. even though there are outside forces pushing for change, he still controls the company you are unlikely to see change unless zuckerberg, himself,ts to

enact it >> thank you shares of home builders are under raesh in today's sell-off. it has been a rough run, of course, the ishare's home builder etf is down about 2%, down about 17% for this year if you take a look at individual stocks, we have names like pulte down and d.r. horton down 1% diana joins us on set how this is hurting this industry >> higher rates are hurting buyers and builders alike. first for the buyers, you look at interest rates a full percent higher than a year ago and continuing to head higher the 30 fed rate follows the yield on the ten year treasury. we saw mortgage applications drop and they are barely higher than a year ago. if the buyers are there, the builders will pull back. lennar says they are seeing a softening in demand. so they won't be aggressive having starts in september fell and came in slightly higher than

a year ago, still well below regular historic norms it makes it harder for them to get the capital. it hits the smaller local builders who by the way build the bulk of the homes. tomorrow we get existing home sales. these will be closing in september. so before the rates really shot up if we see weakness there again, we only know it will get worse going forward. >> thank you coming up, much more today's market slide, checking the sectors here, can you see tech services are fearing the worst, investors looking for consumer stables, meantime the only two groups that are not lower, we have much more on the sell-off on power lunch they're all lower now across the board. much more ahead on "power lunch.

hi, everybody, welcome back to "power lunch." here's what's happening at this hour the ongoing ebola epidemic in the congo is an increasing

concern for that region. the world health association says it is not a global threat however, it says the risks remain high for neighboring companies. >> the emergency committee had the consensus that this outbreak certainly is not an outbreak of global importance, but there are very concern -- they are very concerned for the region >> russian president vladimir putin says president trump listened to him during their last meeting and it's only because of internal politics in the u.s. that prevents them from having stronger ties he was answering a question about trumped a an event in sochi. and the mega millions jackpot continuing to climb, it's now $970 million. this makes it the largest in the game's history and second largest in u.s. jackpot history the drawing takes place friday

night at 11:00 p.m. eastern time your odds aren't good, but somebody will win eventuallily, so buy eventually so buy a ticket >> we are so far below the session today, two sectors are technology and communications services as you can see behind me here, technology com services are leading the declines, no surprise the internet and media names are the ones seeing the downside momentum. they saw some upside when the marks did bounce i also want to call your attention to what's happening with the dow jones temperatures index. it is now on pace for its fifth straight week of losses and the reason why that's important, guys, timer, is because if we finish this week five straight losses, it would be the longest losing street for the dow jones

transportation index for october 2008 during the financial crisis certainly something we are watching right now back over to you >> thank you very much with stocks extippeding their loss right now, let's get more insight from cnbc senior analyst and commentator, principle and senior strategist with bessemer trust. guys, happy to have with you us. what is the market of the day and over the past ten days >> well, i think it's mixed tyler, i think have you omany different worries coalescing at once, from the rising rates in the federal reserve and the possibility they go to a restrictive and normalized monetary policy a weakness in china. the chinese currency hit a two-year low, weakness in the european economy and a slow down in domestic home sales i think there is so many of those factors offsetting what would have been actually pretty good corporate earnings, although, not as strong as some would have liked in terms of

organic growth i think you have a confluence of factors driving the market down, after hitting all time highs a couple weeks ago, the spectre of a double top in the market from january through last week or two weeks ago may, in fact, be in play. >> joe, has the mood changed if so, how much and what does it say about the future for equities >> i don't think that the mood has necessarily changed. what markets are dealing with right now are a lot of the same macrohead winds we have been grappling with for some time as ron pointed out, you are seeing the end of the cycle type of stuff coming through in the economic data. what's important for investors to remember is all this is happening. we're dealing with external factors and stresses on the market some of the underlying fundamental also and corporate profits in particular, we're trying to touch on still look quite strong we have under 20% having reported so far. they still look encouraging.

>> same head winds they have been the same ones we have been deeming with for months now with the exception of khashoggi matter, but why has the -- why has the market reaction been so different >> i think markets needed some consolidation after the rally we seen over the past few months. let's be clear, we have been talking act italy putting forward the european union for some time. we expected there will be some pushback this is all happening at a time where global central bankers are becoming slightly less accommodative in the margin or talking about becoming less accommodative certainly in the quarters and years to come this has ultimately manifested itself in higher levels of volatility it's something we all have been expecting to see in the markets. while it's never pleasant, this is something we were kind of expecting. >> ron, do you feel like a lot of market strategists, chief investment officer types, were too complacent about what's

happening in the markets i ask this because so many say you know what the volatility is to be expected we got all these worries going on, yet you take a look at the market action, we've lost our leadership group a lot of same stocks talked back over the summer for that matter. we're losing industrials we're losing transports. we lost the russell 2,000 earlier this month what the internals are telling me is that there is real concern here about the economy >> i think that's a great point. i was hoping to bring up is we've seen technical deteriorations in the stockmarket. to dom chu's point, this has not been entirely reliable in a recent pass of a dow theory sell signal as the dow industrials made a new all time high, what they call a non-confirmation error. it's begun to roll of. the number of new highs continuously exceeds the number of new lows on the new york stock exchange so those are some warning signs

as the russell has been shown earlier in correction territory. you see the a loss of leadership and that technical deterioration. >> that happens typically before you see fundamental am deterioration. the market usually gives you a pretty good heads up we could see some change in the composition of the economy down the road. >> what is your investment strategy given the volatility? >> well, i can tell you that today we stand neutral equities, risk assets in light of both the positive fundamental amounts and a lot of these headlines and risks we are grappling with. we continue heavily towards the u.s., it's really for two reasons, one we think the u.s. objects more opportunity and i think can you see that simply in looking at the economic data and two the u.s. tends to exhibit a lot more stability in times of market stress. as we near the end of this cycle, it's important we are well prepared for what we believe we are at heightened levels of newt treatment what are you overweight then

>> well, for instance, if you have a strategic allocation, if the clientt's portfolio for the long term would lead you to be 70% equities and perhaps over the past few years, you'd have an overly equities whereas today we would recommend the clients have that 70% equity exposure being neutral equities doesn't mean you don't have a view on the marks. from a regional perspective, there are a number of opportunities. the u.s. certainly being one of them >> thanks, guys. >> i'm just overweight >> nauchg vethank you very much. have you always wanted to invest in biotech but were afraid because a big swing it wouldn't turn out plus a check of stocks, including why gap shares are selling at as the count and gap is not the only heading lower. consumer discretionary, one of

the worst performing groups, mattel, michael kohrs, leading e way there. "power lunch" will be right "power lunch" will be right back ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ . trade 24/5, with td ameritrade. ♪

all right. let's check on some of the market movers on this busy day, gap down 6%. j.p. morgan downgrading that stuff to neutral cut the price target to $24 citing weakness and margin pressure the packing warping on earnings, blaming higher costs and a negative impact on currencies, and an end joe, cyte novartis is getting its hands on a cancer drug. for many investors, biotech is too risky betting on the success of one key drug. but there is a way to play a biotech boom mech tirell.

>> how about alexander real estate counts the biggest 500 tenants from ely and meyer and tech companies uber spread and pinterest. cambridge massachusetts is the hot spot, alexandria is expanding here in new york announcing today it as far ased a third power at the life sciences site along the east riff it's down about 6% versus a gain of about that much for the biotech etf. >> joining us now the executive chairman the founder of real estate equities, joel marcus thank you for joining us why do you think your stock is not more correlated to biotech >> in one sense it's good it's not. historically, it has been much more volatile than the real estate sector. as you know, interest rates are a fear i think it's a story of two worlds, etfs and trading have hurt real estate companies this

year, because of the interest rates, fears, the rising rates the reality is real estate is one of the best hedges again inflation. >> sure. >> our leases, literally, all of them have a minimum of 3%. some go more in the haydays of interest rate fluctuation. we had max 3 and 6 so we more than make up for you know creeping inflation and i think the one other thing that is out there is, we don't have much exposure to variable rate yet. so companies are generally traded as a sector rather than individual in this mindset of interest rates >> coming back to program trading and ets. so your stock, real set the etf. you say program trading when the ten-year yield goesz up to this, computers are programmed to sell etfs and interest rate proxies >> literally every day when you look at the ten year, when it is up, real estate is down and when

it drops, the real estate stocks take highly korltd but what happens is, after the tight coe companies tend to then break out and be driven by what they should be is earnings and valuation metrics and cash flow. >> as i understand it, your company's strategy has often been to go into neighborhoods where other developers might not necessarily go is that right? >> well, i would say they hadn't been before. now everybody wants to be in the neighborhoods we're in >> so let me ask you something i heard about and probably should have known about before. i heard about the other night, called opportunity zones and it's a big part of the task last year and there are a lot of tax advantages for investing in these designating opportunity zones. is that a part of -- it allows to you defer and ultimately pay no tax on some investments made in these zones is that a part of something you are looking at in. >> no.

>> why >> we have never been driven to tax enhanced kind of locations or just grants so we're focused really as a real estate company in the best aaa locations in the country, lake union in seattle. mission bay in san francisco the heart of san diego university town center in torrey pines, as meg said clearly the east side med col corridor >> torrey pines is not particularly a distressed area >> exactly and cambridge where everybody wants to be is where the talent is that's the key >> that's what drives it >> people are flooding, companies, both tech and life sciences companies are flooding and companies like ge flooding into these carries because transportation hubs, amenities, and great facilities are the way to hire and retain people. >> i want to ask you about biotech as well. >> certainly >> being the biggest landlord, it's not doing amazing liamson

up 6% for the idb. over time it's climbing back to that peak we saw in 2016 >> exactly >> your terms are off the charts in occupancy, more broadly, all going gang busters do you think we're in a bubble in. >> no the we've had about 50 ipos plus this year premoney valuations have creeped up a bit and capital flows into the sector have been there. but i think if you look big cap, biotech has done particularly well but mid-cap have been steady and small cap have in a sense underperformed if the you look historically, the valuations seem pretty reasonable these days. and i think that's why if you look at 2019, people are looking at good valuations, good earnings, and strong capital flows. so looking for, again, continued strong performance, solid performance, and maybe continuing good ipo window into 2019. >> maybe ama will start coming

back to the space too. >> we'll be watching joel, thank you. >> real pleasure >> contessa. on to another big selloff on the street the dow dropping more than 400 points, now off 426. the tech-heavy nasdaq getting slammed the most look at these numbers. off by 2 1/3%. silicon's company may be going public and apple in with a big announcement we'll let you in on those secrets next on "power lunch." i am an independent financial advisor. it's our name on the door.

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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back, everybody. another big selloff on the street today the nasdaq again feeling the brunt of the pain, down more than 2% today. now down more than 7% this month

alone. big tech may soon get a boost in the form of a big ipo. and josh lipton is live with the details. josh. >> pal tier is talking with morgan stanley about a possible ipo in the second half of 2018 they're saying the company's evaluation depending on the timing could be as high as $41 billion. revenue expected to reach around $750 million this year that could be higher, though, the source telling me because q4 is typically the company's strongest. company could turn a protest in dwaet. revenue by way of comparison, 600 million last year according to sauce alex talked to me about the company's financials back in february take a listen. >> when we do this, i think people will be very surprised at what they see. and i think they will be positively surprised because we've been quote unquote

secretive, people assume we're different than what they expect. maybe sometimes positive, maybe sometimes negative what they will be surprised at is how a creative company can create margins that are significantly better than what people normally see. >> founded by carp, peter teal and joe, palantir is best known to providing agencies with cia and fbi and department of defense. but half its business does come from the private sector including unite and fiat chrysler 2019 shaping up to have a bunch of tech ipos back to you. >> we shall see about that given what the market conditions may or may not be. two quick questions. one, what kind offer is zroiss they deliver to people like the cia and the u.s. government and others >> the ease weiest way to think about it is they deliver software to customers, allows

them to pull in all kinds of data, spreadsheets for example, in a database where it can be analyzed and interpreted with maps and charts. >> thank you very much sea of red today, my favorite cliché the major average dropping 1% or more rising rates, fears about europe, fears about china, do not go anywhere. there is the red, there are probably what is it? maybe 40 stocks in the green right now. the 2:00 p.m. hour is usually the crazy time when we head into co hr perg bell sendouofow begins right after this very quick break with the dow down 450.

. i'm melissa lee. here's what's on the menu. a big selloff on wall street today, what's the triefg force, what's next and how do you play it in digging through the commentary, what are companies are saying about the impact of tariffs. not playing around the new call of duty game bringing in half a billion dollars in three days. the stocks falling big is this a buying opportunity in and bb&t shares jump we'll talk to the ceo about that, rising rates, and why banks in general are nund performin -- underperforming. "power lunch" starts right now >> and welcome to "power lunch,"

everybody. i'm tyler imagineson bad, worse, ugly a selloff on wall street today as global tensions weigh on sentiment right now. s&p down right now for the ninth time in 11 days while the dow is losing ground as you see for the eighth time in 11 session dollars. if you were 3 for 11 in baseball you're good. but if you're just 3 for 11 in the dow it's pretty bad. the dow and nasdaq falling very sharply right now. here's a stat that shows how volatile the markets have been the s&p and the nasdaq have not had back to back rising sessions all month in october we're almost 1/3s done since october 3rd, today's move puts russell 2000 and the transports back in territory let's head back to bob on the floor of the new york stock exchange. >> a whole slew of the factors weighing on the markets, late in the day right now, it's a little bit technical here

let me show you the s&p 500. we dropped below the lows of earlier in the day and when that happened, we saw a little bit of a volume spike some people playing technicals were going towards the close of the day and a lot of people coming to the cop collusinclusil have a notable rally we're really looking at the fundamentals at this point there's a lot of things to talk about and think about. we have that china slowdown story. morgan stanley was talking about the effects of auto sales slowing down in china. we've had margin pressures in the industrials in their earnings commentary. the head of the ecb warning italy not to bust their budget and a lot of debate about mr. mnuchin pulling out of the saudi conference a number of traders pointed out to me the saudis very involved in tech funds and raising funds for technology through soft bank and other funds. if you look at the other tech yorent oriented sectors, they did move

more than the market once we had that announcement of mnuchin pulling out. that's call that he had some effect on the technology areas overall. the down movers in general, right across the board down day for everything from the industrials to tech to the aerospace, and even your consumer names pfizer, one of the star performers of the year down goldman has had a couple great days on their earnings but not today. down across the board today, but tech is the real loser back to you. >> thank you for that. 69 of the sepp p&p 500 comps have reported earnings so far. there's been a recurring theme tariffs and trade. dominic which you joi dominic chu joins with us that story. >> he was mentioning those batting averages, let's call it about a third. because a third of the s&p 500 companies that have reported earnings so far this season have mentioned the word tariffs explicitly during their

conference call or in their earning transcripts or releases. so, again, about a third of companies so far it's still early in the season, but here is some of the at least things that they're saying about what's happening with tariffs overall. we'll start with a big one this morning, one of the outside is losers in the s&p 500 today is textron. they're saying we don't see tariff related stuff going on. there's some pressure on raw materials and pricing, we have contracts across the company mitigating most of that. in this case here they're saying that they've hedged that we'll see that's near medium or longer tem for them. those shares down big today. officer granger, office supplies, workplace, saying they're going to work with suppliers to minimize the cost of the tariffs and identify alternative supply change. and evaluating prices. could that mean they pass those prices ton consumers and one with fastenal, that was about a week or a week and a

half ago when they said we would move some stuff out of china to another source, so in an environment where there's economic variability, it makes it challenging to plan for of course, this is only with a small portion of the s&p reporting. we'll see if these themes continue when we get a third, a half, three quarters of the s&p if those hold. >> thank you for that. the trade tensions beginning to show up in earning results rising rates are showing up in these earnings calls as well, but president trump's former economic adviser speaking exclusively to cnbc earlier said this is a great time for u.s. companies. >> we have a 3% fed rate and funds rate and we have a 3 1/2 plus ten-year rate let's call it tlooef3 1/2. we have a 50 opinion point spread and we continue to see the economy grow, earnings grow, companies invest in the labor

force and we continue to see wages grow i think that's a great environment. >> well, is he right let's bring in margaret, clear bridge large cap growth portfolio and the chief investment officer and manage director it's good to see both of you today. jp morgan just called this a temporary correction in an ongoing bull market. do you see a lot of room for optimism here? >> i think that's the same way of saying the volatility's going to continue, right i mean, look, i think that what both of, you know, the speakers have just said was that the economy's fine we know the economy is fine. earning season is fine i would expect revenue growth in the third quarter to be fine i would also expect most companies to say the same thing that we've heard so far, which is that there are rising risks we have tariff kpooeexposure revenue growth is going to be fine, earnings growth is going to slow over the next few months we know we've been benefitting from stimulus and that's going

to fade. >> what is causing the selloff here in terms of these rising risk factors >> i think it's the environment that we've come out of where we've been accustomed for the last year and a half to low volatility environments. when you see risks start creeping into the picture, the selling becomes exacerbate and we move all over the place across foreign markets that's difficult to ignore because our story here in the u.s. is better at the margin because of stimulus. >> are you saying we're soft >> we should look back historically and think about regular levels of volatility and not expect the complacency to exist that much forward into the future with a reserve rate that is approaching a more neutral level here in the u.s. >> let's say we harden our resolve, margaret, it sounds like you're saying the pes have to come down to reflect the new reality over the next 12 mondays? >> ye-- months. >> i think the thing we haven't talked about is the risk of china has gotten higher. if you asked me at the beginning of the year what are you worried about, frankly i would have had

trouble coming up with much. i would have said we've had a long cycle but now china has increased adds -- as a risk and that seems to be inching higher. >> is that because of this looming trade war and there doesn't seem to be i grea great prospect of resolving it it? >> it was probably 18 points, now it's liar because of tariffs. but another step up in january, that's material. >> michael, you say that the next few weeks are an open tune ti -- opportune time for people to rebalance their portfolios tell me what that means in realtime in the world and where bonds fit. you seem to be favorly disposed towards bonds. >> we never would advocate for ignoring the fixed side of your portfolio because in markets like this you're glad you have that buffer too. >> butter in going down bid.

>> but for us the problem that i think bond investors have become accustomed is thinking that they're going to be ka llamaious. it's thoughtful and nimble exposures at various carts of the curve. we've been selling into strength against higher corporate credit because as we think about the prospect for future rates of return on portfolios, you are better off in a rising rate skbliernt let's get back to the first half of my notorious compound question, that's about rebalancing your portfolio what's that mean >> in environments where even in today's selloff you still have if you look back to the start of the year and where we've gravitated towards, emerging market's under credible pressure capital declines in those segments of your portfolio while valuations are declining, yet the u.s. market, even though we're reasonably priced, investors need to think about selling in areas of strength that could exhibit across a

growth strategy at various points in the cycle. because you're finding yourself across the cycle we've had a valuations with a three to five year valuation, we still favor the u.s. in large cap space that it's in instances like this where people have cooler heads and can redely capital efficiently and make a difference. >> your fund is up, you're beating the s&p anderson the dow. amazon and visa. how are you rebalancing your portfolio to account for the volatility >> we're thinking about defense. i think we talked a quarter or so ago about how we'd gone a little more defensive in tech. underweight tech and in tech we own defensive things like oracle which is holding up well on a day like today but furthermore now we're thinking about we own a reach in a growth fund, which sounds

strange, but they have some nice characteristics. you can get good growth and still have some good downside. >> how worried are you about amazon given the price action that we saw on netflix on the back of its strong earnings, i understand they're different kinds of businesses, but they're the same kinds of stocks, they're momentum stocks, growth stocks, they've got valuations that are extremely high in this market environment. >> the way we think abouta am z -- amazon is manage your position size and risk we trimmed it on the day that it topped out we trimmed another 40 basis points or so manage your position size because we believe in the long-term vision with amazon you can't argue it's cheap are so it's going to have a volatile season like the rest of the market. >> growth or value, michael? >> stay balanced. >> balanced. >> and move toward and think about value positioning. banks had reasonable earnings and they haven't been rewarded >> they performed horribly. >> for any period of time. and at various points you start seeing rising rates, net interest margins increase thing, that's a positive there. but i don't think enough has

moved in the markets ultimately to be shifting positions dramatically. >> sounds like you're in capital preservation mode. >> to a large degree. >> is that your view in general or is that your view now with the increased volatility >> in general, but it doesn't mean that there isn't continued upside across equity markets, it just means that you need to stay balanced i think the message on a day like today and the environment that we're in, if you're finding your portfolio declines larger than what your anticipation is, it's never all or nothing, it's never 100% equities, that's where most investors aren't positioned but if you're finding them to be discomforting, the likely move is you need to be finding out where your position is and where your risk is >> thank you both. we should note that the markets have come off of their low substantially. the dow had been down at his lowest 470 points and right now we are looking at a decline of 360 on the dow so this is something of course we'll keep monitoring for you. >> let's get to rick santelli,

the two-year treasury note closing it on a ten-year high. what are you seeing for action in chicago. well, the stock market finally captured the attention of the fixed income market look at it of tens, doesn't look good, does it? little perspective please. two-day, we gave up what yesterday was finally outrunning this really tight closing range the entire curve has been in basically for five, six trading days if you look at one week you can clearly see it 'the yes, today looks bad, but this puts us back at 315, three 16 but if you look at a two-day ten-year note yields overlay with the s&p you see something whether it's the collateral being reversed in china melissa talked about earlier, just basically a global margin call, the fact of the matter is outside of the u.s. equity markets are paying attention outside of the u.s. there's much more movement on interest rates. think italy with comments by

mario, rich comments from our perspective, meaning the trading floor. you know, he packed all essential banks in europe with paper that certainly isn't worth the advertised price and now he's going to throw that back at the italians who are trying to get their economy to grow. there's two sides to every story. and finally, i'll tell you what, the strength in the dow isn't making things better globally and it is strong look at that chart in june of last year. if it wasn't for several sessions in august of emerging market volatility, the dollar index would be at highs going all the way back to the summer of '17 tyler, back to you >> rick, tell me a little bit about the italy situation and how that -- how that plays out between drogy and the people in brussels and the people in roam? >> the best way to answer that is easy, brexit. listen, the uk -- >> you mean --

>> yeah, i mean -- >> italy leaving is what you're talking about? >> no, i'm just talking about the reasons of brexit. >> okay. >> you know, brussels wants to have the he'dedics and they wert into it. the point of the matter is that mario doesn't understand it's hard to impart brussels will will on countries that be aren't deliver though their people. so the politics change the coalitions change, and those coalitions are going to be much braver on -- going up against mario in brussels. will it end well for italy maybe not. it might not end well for the uk but the point of the matter is, is that the politics of what's going on in europe are mixed up with the central bank and all the positions and ultimately what's bad for the market is not necessarily good for the political class either that's what you're seeing all over europe. think bavarian elections in

germany last weekend. >> fascinating stuff thank you very much, rick santelli the move in yields as the president continues to let go on the federal reserve. this morning on the squawk box former fed chairman alan greenspan weighed in on the tussle. >> everybody president has an insight into how the markets work and where interest rates ought to be, which is always superior to that of the federal market committee. >> so they think. >> and the best thing that you can do if you're in the fed is put earmuffs on and just don't listen >> all right let's talk about that and where rates could go from here with the senior portfolio manager with vanguard's fixed income group. she comanages four funds with a total of $44 billion in assets, a new face to cnbc welcome. good to have you with us >> thank you for having me. >> all right thank you so much. it's been hard in your funds and in bonds generally, no

reflection on your funds, to make money in fixed income this year do you see that changing >> no, we don't. i mean, i think the federal reserve is responding to a very good economy, right? so the chair indicated last week to the markets that he sees upside risk to growth and so the fed is reevaluating publicly what they would see would be their neutral fed funds rate that might not be their terminal fed funds rate when they have pegged at around 3 1/2%. but 3% is what they had set the market up for as this nult treul rate they're having a public discussion as to whether or not that's appropriate or not. and if they do come out on the upside of growth being stronger than expected, we would expect the fed to continue moving beyond 3%, which is what the market has priced in in june. >> so funds have basically performed this year, it seems to me, bond funds that is, the way you would expect them to, the shorter the bond fund in

duration, the lesser the loss, the longer the bond fund's duration the greater the lotion. -- loss. as we move into 2019, where should investors be concentrating their fixed income dollars? is it at the shorter end >> if it's solely a fixed income investor we definitely advocate going up in credit quality however, bonds act as a diversifier to a broader portfolio. and so we think there's a place for bonds of all durations depending on the underlying portfolio. but if you're just a fixed income investor, we have seen them shorten up duration money market funds are yielding over 2%, 2 1/4% if the we wouldn't expect the trond continue. >> what have the monies been like as the stock's out of the

equation >> you know, vanguard's flows year-to-date continue to be relatively good, although down from the previous year active management and fixed income at vanguard is about 50% of the overall assets. and so our flows tend to be -- continue to be positive. what we see in my funds, i see investors moving around, shifting their allocation in the duration exposure to wherever they're comfortable. we have investors who are between cash and the long end, intermediates and short interest rates. and so we expect investors to continue to respond to the federal reserve move our forecast is 3% before they pause and assess but if we're wrong it's because inflation is running faster. and the in-flows into the protected securities funds across the industry continue to reflect investors buying inflation protection. >> do you see, there's been a lot of talk about the so-called neutral rate for the fed and seeking that neutral rate.

do i -- do i infer from what you just said that you think 3% is roughly that nooeutral rate? >> yeah, we do long term funds rate nominal rate less inflation, that has proven to be a very restrictive level. we don't forecast core inflation measures to be much about 2.3% so right around 3%, 3 1/4 we think the fed is starting to hit neutral and is becoming restrictive. >> so let's talk about another thing that's been in my head for some days now and my friends on the panel here have heard me mention it before, that is that so many commentators talk about the rates are going up, but they're going up for the right reasons. i guess i should take comfort in that >> yeah, you should. i mean, growth is fantastic, the consumer is in good shape, corporate and household balance sheets are in good shape, the unemployment rate continues to decline. we're looking for further improvement in the labor market which raises all boats we're looking for average hourly

earnings to get up around 3 point phi% per annum from 2.9% by the end of next year. it's a good story and the fed is raising rates because they no longer need an emergency level of 0. >> and yet they're still going up which has its down sides as it shows up in my bond portfolio value, it shows newspaper higher borrowing costs in if i'm in the market for a mortgage, for my student loans. so right rneason or not, those rates are going up what is the wrong reasons? >> rates would go up, obviously, if inflation was unchecked, right? so if you have a lot of inflation and the fed is behind the curve, you know, then that would be eroding your returns both in equities and in bonds. we don't have that situation right now. we see global core inflation pressures relatively contained it would be a risk, we think, to the pace of the future rate hikes out of the fed if global

inflati inflation pressures were to materialized so it's sort of steady as you go. >> you taught me something there. i didn't know what the bad reasons would be but runaway inflation would be one of them thank you so much. >> thank you. and for more on what ex-fed chief alan greenspan had to say, you can head to cnbc.com. well tech is getting crushed today, bank stocks down 2.5% our next guest initiating coverage with an out perform rating of 1350 price target. we have michael here with us >> thank you, melissa. >> how are you feeling about the timing of your initiation given that the bank stocks in general have had a rough go of it? >> i figured if i can be wrong on, you know, the sda and the n, i might as well be wrong on the g as well, why not. >> take it in stride why do you think alphabet the be

the ad king? why not facebook i thought facebook was going to be the ad king and that's why the cambridge analytica shouldn't hurt ad pickup at facebook >> it's clearly a different model, so, you know, google is penetrating mobile search faster than facebook's penetrating mobile social. and i think things like youtube advertising are growing phenomenally well and they have this ancillary tiny little business called google play that's growing at about 2 or 3 billion a year they've just got so many different irons in the fire as well as cloud, obviously, that i see google growing for quite a while. i recognize they're not going to grow as fast, maybe top line as facebook but facebook's coming off a much lower base but google's margins are healthy and think you're getting a repeat of what we saw with amazon, where the company is not going to be able to redeploy all the profits that it generates

each year in higher opex. google, i think, is not going to spend faster that be they grow revenue, which is the amazon playbook, and i think google will track amazon quite well. >> you mentioned all these irons in the fire as these companies branch out in new emerging technologies is there a danger that what is the strength that they have right now also becomes an achilles heel? >> wow i think for facebook in particular if they overspend on things like okay cue lous, yes i think if google overspends on things like self-driving cars, maybe. i mean, those might be the wave of the future but they might be 20 or 30 years too early so we'll find out but the core businesses are absolutely fine. they're cash cows. and as long as we have prudent management spending rationally, you probably don't get too far ahead. they don't get out in front of their skis and they don't

collapse i think that's what we have at google i think that management understand what's they're doing. they're spending prudently and they're growing gross profit dollars by about 14 billion a year that leaves a lot of room to make a billion year and a billion there investments in new technology. >> how economic sensitive is google in its ad business? >> the ad business doesn't crater, it's not like it's going to drop 25% in a recession it will drop 2% or 3% in a recession, and, yes, it's literally about 90% of google's revenues so it's going to hit them hard but it's not going to bankrupt them so if they see a decline, that actually means a slowing in growth you're still going to have penetration of mobile devices. you're getting new consumers every day with phones and we're using our phones more to commence search. so i'd say it densed the rate of growth as opposed to causing a downturn in profitability.

>> how do you weigh regulatory risk in this company whether from the u.s. or eu? >> the eu settlement, that's about as bad as it gets. google was accused of forcing preinstalls of dproem chrome and giving aweigh the an destroyed operating system for free. that's pretty much the line that they crossed that they can't cross again. but it really just comes down to whether an destroyed as an operating system is going to be successful going forward it is. there's only two real meaningful participants in mobile phones, apple isn't going to license its technology to other manufacturers so they're kind of stuck with google. so i think by default they're going to dominate mobile phone installs and they're going to dominate mobile search so, again, i don't see regulation stopping that i do see privacy concerns. you know, read the book everybody lies, it kind of tells you everything that google does with your information.

they don't sell it individually, they sell it in the aggregate. and so your preferences follow you around on the internet i don't think -- i'm sorry, consumers are offended by that i think consumers like that that they're reminded of their last search i built a porsche years ago and i loved that. >> you know what's kind of creepy, michael, and i don't worry about that stuff as my friends know maybe as much as i should or some people do but at the end of the month i received a notification from google that basically told me all the places i'd been over the past week or two. >> really? >> on my google maps. >> is your location services on or off >> should i say that on television >> whether it's on or off? i guess if i'm getting that kind of notification it's on. >> it's on. >> and what you're noticing is that you're getting opt in and

opt out messages far more frequently so i just got a new iphone and as i powered up grub hub and uber the first time, it asked me if i wanted to turn those on so they defaulted to off, which i think is great and of course if i want to be picked up by an uber i click opt in i want them to know. it depends if you're not using it, you don't want them to know where you are. but if you want a meal delivered to your home, they better know where you are or it's not going to get there. >> in your coverage cover u universe, what's the most defensive stock in your view. >> defensive >> defensive on a day like today i have to ask about defense. >> movie theaters, i think amc. i think amc and sinna mark are the movie lineup is great and think those guys continue to thrive you know, it's stuff activision are kind of dragging along. they're still tech so movie theaters probably the most defensive. >> your most vulnerable stocks

>> gosh, i mean, i don't see competition for the f.a.n.g., but you know what i'm going to say. netflix. i think disney will compete. i think disney and fox pulled content and netflix has competition that they never dreamed of before. >> great speaking with you thank you. >> my pleasure. i learned so much in that, including what tyler's settings are. >> i wanted to ask him whether he's seen "a star is born" what he thought of it. >> it's supposedly a good one. the director of the national economic counsel larry kudlow weighed in on china and trades a short while ago. >> reporter: white house officials are monitoring this stock market selloff no particular comment from the white house on the dow as it moves through the afternoon but they do have their screens up and they're aware of what's going on in the stock market

today. meanwhile, we had larry kudlow out in detroit at the detroit economic club making remarks today. he continued his tough criticism of china in the wake of all these tensions between china and the united states. here's what he said. >> unfortunately china has not responded positively to any of our asks they are unfair traders, they are illegal traders, they have stolen our intellectual property. >> so that sort of squares from larry kudlow what we've heard from other officials about the talks of the chinese being sort of in a stalemate or frozen at the moment so no indication of what is going to break that, but larry kudlow continuing with the tough rhetoric on china. this administration continuing to want some response from the chinese andthey're just not getting it, guys. >> are you getting a sense about whether they keep going back to the table? i mean, is this a persistent

conversation because just a number -- a couple months ago we heard there were no high-level talks going on with china where the trade war is concerned >> it depends on what level you're talking about, right? because when you talk to white house officials they say there are conversations going on between the united states and chinese every day at various levels and it percolates up and down to the elevel of officials who are involved but as of right now we're not hearing about any major high-level talks between the united states and the chinese. it might be that the chinese want to wait to see how the midterm elections go before they go all in on some kind of negotiating strategy they will want to see just how strong politically that this president is in the wake of those elections if the republicans lose the house, maybe you're dealing with a president trump who's a little bit less powerful, little bit less in charge here in washington than he would have been otherwise so there is some incentive for the chinese side to stall a little bit ahead of those elections. >> the secretary of state has returned now from the middle

east what's the white house reaction to this ongoing drama with the disappearance and presumed death of the journalist khashoggi? >> reporter: what we saw from mike pompeo is he came out from the driveway, delivered a short statement after meting with the president and said the wants to gift saudi side more time, a few more days at least to investigate what happened here the trick is that critics of this white house say that the white house is simply allowing the saudis to investigate themselves, to find out whether or not they actually murdered this journalist. that's been the allegation from the turks and others is that jamal khashoggi was killed in the saudi consulate in turkey and how can you have the saudis investigating that what mike pompeo said to that question was, you know, the american public will be able to determine how serious they think this investigation is once they see the results of that investigation. it's not -- and u.s. officials caution that they are not going to rely entirely on the saudi's side of all of this. but they're not taking -- go

ahead. >> in terms of of the headline that really seemed to impact the markets was treasury secretary mnuchin tweeting he will not be attending the devos summit in the desert but it left a lot of unanswered questions about why he is not going and whether there would be a stop at all in saudi arabia. >> look at that as a very diplomatically finessed tweet. he says he's not going to what they call the devos in the desert in saudi arabia, but doesn't say he's not going because of saudi arabia's behavior, doesn't say he's doing this as a rebuke of saudi arabia in any way so the united states wanting to sort of rebuke saudi arabia without officially saying that they're doing it or saying what exactly they're rebuking them for. and of kortion course it could e awkward to have mnuchin in country in saudi arabia right when the resolution of this is happening if the united states decides it needs to take more punitive action. they don't want to have the

treasury secretary on the ground in saudi arabia at that time, sort of gland handing with saudi officials at the moment, they're trying to say something stern to the saudi government but they're finessing it a little bit by not saying why they're pulling him out. >> the saudi ambassador to the united states has gone home, am i correct on that? >> there have been reports to that effect. but we haven't seen the united states do things like we've seen other diplomatic zipincidents. there are a number of things diplomatically that countries do when they in a dispute to signal they're in that dispute. none of those are happening right now and you saw that tweet from mnuchin saying he's not going but not linking explicitly that to the disappearance of the "washington post" writer. >> thank you well, those trade concerns of china starting toly the that country's stock market, including chinese internet stocks let's go to mike for a look at that sector. >> no doubt about it those trade

concerns, currency conony, maybe thing. but the stock market there getting crushed today. all down at least 3% as the shanghai composite hits a multiyear low. we're here with craig johnson, stacey gilbert is with us as well to talk about -- try to handicap where these markets might go craig, how does that shanghai market look to you. >> which we look at the shanghai composite, the first thing i would point out is there's been a very long-term uptrend that's been intact since 1996 and the recent price action on the shanghai composite is now violating this shanghai composite is down over 35% on a year -- from its 52-week highs. we're breaking in longer term uptrend. i'd point out from a technical perspective, the next area of support that would come into play object shanghai composite would be around 2,000. that's about 20% lower from here still significant downside left

to go. question i've been asking institutions as i've been in new york this week, is the u.s. continue to do it on its own or are we going to continue to see the shanghai composite go down some will that ultimately affect u.s. equities? i think the answer is ultimately, yes, it will. >> ultimately yes, the u.s. market will have to come down more >> that is correct, ultimately, yes. >> and just, stacey, one of the at least perceived paradoxes of this whole thing is we've been talking about trade fears and exports from china and tariffs and yet it's those big fanning-like chinese internet stocks that have not outperformed, they've gotten hit harder than the rest are there any of those that you think you can make a fundamental case for here? >> absolutely, mike. baba would be the name i would highlight. our internet analysts cufovers with a positive rating if we wore look at what it represents, china has a huge and growing ecommerce and we believe

this will be the winner, baba will win, there's no doubt about that valuationwise, the market has overshot to the down site. if we look at the ecommerce, it's trading below, which just rationally doesn't make sense. to craig's point, the markets can be erational for much long, he were he don't know that we've hit a bottom, but this ask a name that we love long term. two years out we expect it to be higher we think there are two ways you could play it. you could buy the stock outright, set it and forget it, don't look at it again, we may not be at the bottom but we think two years later we are higher the alternative is buying calls. so while the volatility is elevated relative to itself, it's not elevated relative to other etfs that include baba so you can could look at in the money calls within baba, get that upside exposure while limiting your downside risk, looking at where that downside should be in the shanghai, we do

think longer term this is the name to own. >> craig, i know you have a technical look at alley baba as well what's that telling you? >> if we look at the chart of alley baba, these, again, just like the shanghai composite look week and this heart say distributional looking chart that's just starting to roll over when i look at the big long trend uptrend that's breaking away, it seems like there's a much longer downside to go similar to the shanghai, i'd tell you you can see this down 20% from here and just come back to an identifiable area of support. it's too early based upon the charts to step up and buy some of these names like alley baba in our opinion based upon the charts. >> all right looking pretty dicey we'll see how it plays out thank you very much craig and thanks to stacey gilbert as well we'll go over to steve herrera for a news update. >> hello, everyone here's what's happening at this hour as you know, steve mnuchin says he will not be attend thing the

investment conference in saudi arabia this following the controversy and outcry over the disappearance of saudi journalist jamal khashoggi he says he made the decision after meeting with president trump. the u.s. downgrading the status of its main diplomatic mission to the palestinians by placing it under the authority of the u.s. embassy to israel. the move which was immediately denounced by the palestinians and hailed by israel is the latest trump administration decision to align itself with israeli government views flush meat is recalling more than a million flushing systems because they can burst and shatter the tank they were sold at lowe's and home depot there have been 1400 reports of the units bursting and prince harry and his wife meghan markle continuing their royal tour of australia with a stop in melbourne they met with school kids and lifeguards at the south melbourne beach. they are on day three of their 16-day tour of australia and the

south pacific. you're up to date. that's the news update this hour back to you. >> stocks are down today but regional back bb&t is buck the trend after reporting better than expected earns today. the bank seen record revenues and strong loan growth in its third quarter. joining us now is kelly king chairman and ceo of bb&t great to have you with us. >> thanks. >> i want to focus in on loan growth because it was interesting to me that when you lowered your four-year guidance last quarter it was because of softness that you saw in the mortgage business. what are you seeing? is there a difference in terms of feel and your pipeline between last quarter and this quarter? >> yes so the long growth this whole year really in particular last couple of quarters has been varying because really of payoffs not so much production and so what happens is when the long rate goes up, as you know, the ten year's gone up a good bit recently, then people that

have loans that can go to the permanent market on bank's balance sheets, they try to judge whether rates are going up and if they think they're going up then they move the loans out. so we've seen in the last couple of quarters a lot of volatility around unusual payoffs which has made long growth be hard to predict. and so, you know, this year, this quarter we did have relatively higher payoffs, but we had very strong seasonal growth and a lot of our other diversified businesses with bb&t differently than some institutions, we've been working hard in the last decade in building diverse fa occasion into our loan books so when you have this situation where c&i loans are being jerked around by interest rates, many of our other loan categories are not because they're not as dependent on long-term rates so for us this was a very strong quarter loans up 5.8%. our production is solid. and we expect to see solid growth as we head into the forth

quarter, not as strong as the third because again seasonally the thety. >> as we seeing higher volatility and rates going into this fourth quarter, you expect commercial and industrial loans might be a little up and down, volatile, but on the other side of the ledger the consumer won't be as impacted because it looks like mortgage originations are slowing a little bit. >> well, you got two categories of consumer. mortgages is kind of a case by itself it, a bit like c&i, varies a lot based on what's happening with rates. when rates go up, you know, we receive refinance volumes go down immediately purchases not so much. but some mortgage varies with rate varies like c&i other consumer activities like

auto financing, recreational vehicle financing, you know, small ticket items and like loan care, that kind of thing, they don't vary as much because people that are going to buy a boat or a car are not nearly as impacted in terms of the decision as someone buying a house. if you're buying a house, a 30-year decision and rates go up a quarter, that's a big impact on whether you do it or not. if you're going to buy an auto, rates go up a quarter it's not as big of a deal two different categories in retail. >> do you see any volatility in loan demand who you see volatility like wee have in the stock market. >> we don't see that based on the stock market the stock market, at least my view, is very emotional, very fickle in the short-term, and generally speaking most people don't make decisions, you know, based on the short-term, fickle

nature of the stock market if you did you'd wake up getting ready to buy a car and by 3:00 the stock market is down you change your mind people don't behave that way we get excited about it on tv because of what's going on but it's not that much in the real world. >> we like to get people excited. what do you see in the economy in the regions where you all do business what are you seeing? >> the economy is solid. we've had a little bit of unusual activity recently because we've had all these storms coming through. fortunately and thankfully not many people have been hurt in the north carolina, south carolina area. been a lot more down in the panhandle. but generally the economy is solid. small business is growing. larger businesses are continuing to improve so we see a solid, pretty robust economy. and frankly, i think that will tipt

continue to occur. frankly when i talk to business people today, the prevalent response is my business is great. the only challenge they have is getting enough qualified skilled workers to be able to fill the jobs they have. >> all right pleasure speaking with you thank you. >> thank you have a great day. >> you too kelly king, chairman and ceo of bb&t for more on the rising environment and why former chair fischer says trump's attack on the fed could back fire with higher rates you can head over to cnbc.com and check out this interview with 3:00 with david solomon, gold man sack's ceo. >> and don't miss that exclusive interview with mr. solomon since he has just taken over a little more than an hour until closing bell let's get a check on the selloff. the dow was down 470 points earlier. the dow right now is still off in a big way let's check out the steel stocks at this point, taking a big hit as well. the etf that tracks them near session lows and on pace for the worst day in over a week

dom chu has more on what's dragging the market lower now. >> some of those earnings related stories, united rentals, textron, you can see behind me four of the worse if the not the worst stocks in the s&p 500 today on the heels of their earnings reports a lot of those details and they're not sitting well with investors and certainly not some of the forecast elements there as well. watch these particular stocks, they are weighing the most on the s&p. also want to call your attention right now to the home building side of things because we've been hitting this very hard. these home building stocks in general have been taking a huge hit for months now and we just want to call your attention to the i shares, the itb. because not only is it down again today, but if you look to the past 22 trading days that we've seen, will there have only been three positive days for this particular etf during that 22-day span. so the momentum certainly still to the downside for these stocks homebuilders and home construction stocks very much a key many this market

back over to you. the oil market is closing for the day. let's go to jackie at the cnbc kmid did i desk. jackie. >> crude price is down alongside the markets again. rising rates and a slower stock market suggesting weak demand for crude. then yesterday a big inventory build here in the u.s. plenty of supply and possibly shrinking demand taking these prices lower by more than 1.5% today. the news that treasury secretary mnuchin will not be attending the saudi conference hurt stocks a bit. energy stocks while negative on the session are outperforming other sectors right now. session low for wbi today, 68.7. 6750 is the next critical support level, guys. >> thank you for that. let's talk more about the commodity complex in selloff in oil. we have the chief investment officer with fsg alternatives. talk to me about these crude stockpiles and how that's sort

of -- we got different kinds of reports coming in about how much stockpile we actually have. >> yeah, you know, let's keep in mind the last two weeks crude stocks have built much greater than consensus today's an options expiration that adds insult to injury to the market, but really it's really more about the $12 rally between middle of august and beginning of october and an unwinding of that market momentum we went from 64 to 76 in eight weeks based on nothing but momentum, in my view keep in mind iran sanctions have been in the news for a long time but it wasn't until late spring, early summer when we started to see exports drop, production drop coming out of iran. news took over, momentum took over, all the while, all the while this is what's stunning, is that saudi arabia, iraq, united emirates, united arab emirates, russia, et cetera,

they were adding almost 1.2 million barrels a day but the market didn't take notice, didn't care at all right now i think it's an unwind of all of that realizing that spare capacity, sure, we're in the deficit by half a million barrels a day fourth quarter historically that's not crazy considering the fact 2013 and 2017 stocks were much higher than average on a historical level. i'm not very concerned and hope it continues to go lower. >> how much of you factoring in tension with saudi arabia on the heels of the khashoggi drama and also now we've just heard from the treasury secretary pulling out of the conference in saudi arabia >> yeah, well both sides have a lot to lose. considering that saudi arabia produces 10 million barrels a day, exports 7 million barrels a day. you know, wee need tha need that relationship the military contracts, the hundreds of thousands of jobs it produces in the united states. they're a great trade partner.

we have an enormous trade surplus with them, which is a rarity i think and i hope this is just a lot of talk and it will be resolved sooner than later. >> all right great to talk to you today. >> thank you well, you. gaming stocks are glitching out today, declines down 7% or even more despite the successful release of a big game black ops 4. is the pull back justified or temporary? joining us now is tim. good to have you with us >> thank you for having me it's a great day to be here. video games are on sale. >> let's explore why if any movie producer did $500 million worth of box office in the first weekend we would be saying how great it is that is exactly what activision

just did people are saying it wasn't enough why? >> here is what we know. this game is shaping up. the launch was successful. it was the biggest digital launch of all time they had double every year on pc sales. it was number one on twitch. it had the highest count and user engagement. so by any metric it has been a very successful launch the important thing is it is also into next year. >> why isn't wall street loving it why aren't they lapping it up? >> headline numbers said this game did over $500 million of sales in the first weekend i think it was a little underwhelming. they left a little wiggle room

we don't know if it did 500 million or 700 million >> it has performance. take 2 will launch redemption 2 if i have that right i'm wondering how that is. are we going to see the same reaction given and a lot of high growth top performing stocks. we want to own this stock.

if you sell the news on day one when this day launches you're missing out on the whole point of this game it is transforming until more recuring and more profitable revenue model. we like this it feels great this is a game that's coming from a developer called rock star this is a team behind grand theft auto 5 it is the biggest selling entertainment release of all time accounted for over 40% of revenue. it is 40% of revenue over five years after launch sit a highly anticipated game. >> talk to me about whether fortnite is helping or taking money and players away from these games. >> it is a great question. we have been arguing that

fortnite has expanded the market this base is energized they are all setting records to asa asassins creed while fortnite is still 140 million downloads and appears to be on track there's room for other games. we'll be watching it closely the early read is that all of the holiday titles are coming out appear to be performing very well >> it is a free game and will have a different audience. it cost $60. >> my son wants to grow up and be you, tim. >> thanks a lot. >> okay. thanks >> that was a telling sign >> thank you >> thank you all right. we are just over an hour away

from closing bell. major averages down 1% or more the dow had been down as much as -- as many as 470 points in the past hour. rising rating a fear factor. add in a little china and what do investors do? let's bring in jack here, founding partner and cio good to see you. i'll start off with jack what do you do here? >> i think you sit tight the fact is that we do have higher rates ahead of us it will be a head wind for the next 12 to 18 months or so it's some what of a longer term game

so i would say stay with us. i think cheaper prices and companier entry points are ahead. >> same question to you. >> i think we are going through a bit of a storm here as investors. it's a storm of reevaluation we have seen for the past couple of weeks markets really get rocked we had broken another 200 day moving average today this is finding a new level. you really don't want to try to throw yourself out on the deck when the ship is rolling and pitching this is when a long-term investor i think does what jack was just saying. you keep your powder dry could it be the beginning of a

significant pull back? >> yes >> the economic data or two strong underneath. we don't have the banking crisis we have ridiculously low unemployment we have low interest rates we have a lot of good stuff going on >> agreed completely was that pricing in what we have in the economy right now >> it is hard to know if it is priced in. things get a little overdone one way or another i think if we look at just credit conditions, okay normally i would -- if i started to see lenders started to maybe close their pocketbooks i would

say it's a cause for concern this to me sounds like a simple correction the fact is that interest rates are too low. i don't believe the fed is low i believe the ten year treasury should be 4.5% we have to get there it will take 12 to 18 months and those are the headwinds. >> so which particular rough spots are you paying attention to >> you know, i think one of the things they say is that the market in the short term is a pricing mechanism. in the long term it's a weighing mechanism. we still see pretty pristine kroet quality. we are seeing a market that suddenly seemed to have --

>> as fewer people apply are you going to start to see that change >> yes so those rates are going up. we have real headwinds these rising rates are headwinds. are those sufficient to shove us back into recession. it is to endure headwinds. we are going to see the president saying we can afford to do tariffs now and have these conversations now because our economy is so strong the whole key on 2018 is interest rates >> the guy remembers what he said on january 3rd. >> because i remember. >> that's very good. >> i don't even know where i was on january 3rd

>> thank you >> one last point on video games. it's a technology investment that's taking away from productivity >> thanks. >> got to run. thank you. thank you for watching power lunch. >> you don't want to go any where. closing bell starts right now. it is time for the closing bell a midday slump sending stocks tumbling headlines from china and europe. we'll break down all of the market information you need to know >> the builders and innovators conference coming up live and exclusive, an interview with the new ceo. we'll discuss his vision for the bank and the current market volatility txdot is getting