day. >> markets are closed tomorrow obviously, you got if t jobs report on thursday >> what are you watching >> liquidity maybe watch the market out before the end of the year >> thank you >> thanks, so much for watching. "power lunch" begins now >> thank you, scott, i'm mellissa lee stock growing down between the u.s. and china why we stand at this hour. and something just happened in this market that is sounding this alarm whenever this event occurred it is followed by a recession pretty much 100% of the time. apple stock is getting downgraded, now it's doing something it rarely does, another supplier is slashing its outlook. the fallout straight ahead. it's a jolly time for the transport. the group is getting slammed today on brexit. fedex near bear market territory.

buckle up. a big edition of "power lunch" starts right now [ music playing all right, welcome to "power lunch. it's a sell-off on the street. stocks are gaining, getting back yesterday's gain and more. the dow is at its lowest point the s&p longer-term trend line the nasdaq back in correction territory as well, joining the small cap russell 2,000. cater pill lpillar caterpillar, boeing, responsible for half of the dow's losses the 30-year treasury note falling below it's 100-day average on yields. they are driving the financials as well. they are the worst performing sector, down 20% territory what some traders refer to as a bear market.

phil >> dom, thank you. i'm gil grififfords. we are breaking key technical levels seema mody is live for us on the floor of the stock exchange. >> reporter: how quickly it can change bam the dow is down by 600 they were lower than 6 twiefr at the -- 6-25 at the lows. yes, technicals is a big part of the function trade a big comment here investors are still concerned as to whether this trade agreement between the united states and china will lead to a substantive deal and also increased focus on the bond market with a yield curve inverting. here's what wall street is saying about that bespoke says while flat yield curves aren't necessarily signs of economic weakness, they don't suggest a

whole lot of confidence either >> reporter: so where do we seem weakness in the economy? it's the housing sector, following results from toll brothers which reported its first fall in quarterly orders in four years. it comes after dl horton last month forecasted first quarter home sales to come in below wall street expectations. those stocks are trading lower here's where we stand, if you look at the respective high, the s&p 3500 is down 7%. the dow is lower by 6% from its recent high, nasdaq with today's losses is in corrections territory. sectors, where we're seeing the weakness, financials moving on the move in bond yields. technology is getting back yesterday's gains. what is working is utilities certainly a defensive tone to today's market >> seema, let's look at those

numbers you were talking about and those trend lines. we are seeing the s&p 500 drop below the longer term trend. you can see down by two and a quarter percent. 2762 was that 200-day average price. that's what we're watching there. so as we look at the overall stockmarket, that was a key many traders are watching check out the yield kuvl some are looking at three month to ten year. two-to-five years. three-to-five years. whatever it is, what you are seeing trend wise is a falling or a flatping of that curve. if you go all the way to where we are right now >> that 210 spread about ten basis points, you got to go all the way back to around 2007 for when we saw levels like this in terms of a flat yield kuvl that's something else as well. like seema mentioned, the regional banks are getting hit especially hard with there many of them make their operations and their money off traditional lending activities

borrowing at lower rates short, lending at longer term rates that are higher than they are there. >> that plays out the regional bank etf down by 6% so far today that trend line moving as well for more on that yield curve flattening and what it means, let's go over to rick santelli in chicago, rick, it's got to be catching a lot of attention from traders out in chicago >> it absolutely is. the dynamic, you've expressed it well we don't know if there is a recession imminent based on the yield curve. there is historical significant -- significance to it. it doesn't matter. it's what investors do in the marketplace that counts. psychologically it's hard not to see that that was a trigger for more skittishness in the equities in general. look at a one-week chart of the s&p 500 and 30-yield bond notes, what's of note, wince we violate

three and a quarter, things sped up now, let's go to the charts for early october the 30-year bond 5s and 30s share something, dom. the 5s have been the most point yield, hence the flattening. the 30s have been stubborn as well once they quit down below three and a quarter, they have sped up now, if we want to pay attention to 5s minus 2s on the next chart. >> that takes us back to '09 you have to go back to a further couple of years. it's only minus a couple basis points the point of the matter is, the 5s have been the darling of the intermediate part of the curve where much of the buying has occurred finally the dollar ndex, after coming under big pressure, especially after what's going on with the dollar versus the euan. look at the pound versus the dollar wilfred was talking about the brexit news and whathas to be shared with the public may not

be in teresa may's favor but no matter how you slice it, it seems though brexit will be an ongoing force in the foreign exchange markets back to you. >> rick, thank you very much now, besides the inverted yield curves a couple warnings, j.p. morgan saying cash is king right now and socgen warns the longest bull run is on its last legs and a deep and prolonged correction is coming. here to weigh in on what's going on today the chief investment officer with ubs global wealth management he has 2.4 trillion in assets under management thanks for joining us. >> thank you. >> a lot of hand winging going on today are you winging yours as well? >> well, 2004 certainly paying close attention. i really like that you went to rick and what he said about this being a bond story, that's what we were looking at right before we came over here. we saw a lot of hedge funds

coming into this week, very short the long end of the bond and we think we need to see some of this lower oil prices, some of these inflation expectations flow through and then weigh what's going on in the bond market against some of the earnings and point views on economic growth that we are getting in some of the leading indicators >> when you put all that together, what does it say to you. are we going to see a slow down or not do you think >> we don't think that a slow down for the global economy or the u.s. economy is coming in the next six months. we do think this is a period where we would want to be overweight in global equities, because the u.s. is a little bit more expensive than the rest of the world. but we want some other positions around that. so we also are overweight in u.s. dollar, sovereign, emerging market bonds and we have some hedges in there, so we have been long, the u.s. ten year and are

pleased to see that no longer expectations of this thing is going straight to 4% we're actually below 4%. >> when you talk about the hedge fund being short the long run of the yield kuvl what you are seeing then is a short recover real, the longer end of the-year-old curve lower. therefore, do you expect that to snap back any time soon? some of the trades in the market we are seeing put on, on an inverted yield curve that is flattening, is that short lived? >> well, i think that's the question, how short lived it is, whether it's one day or something like that. but that is exactly what we're watching next. this view that the rates will continue to rise >> that is rolling off and people need to reposition. >> so mark, let's talk about this repositioning we've mentioned it a lot you mentioned it a lot is it positioning in the

treasury market. >> -- market? >> is it elsewhere how should they be positioned? are they risk on at this point or are we feeling this will be more tractionary going forward >> look. the one thing about having clients all around the world the views are different. i think that's particularly important at this time because remember the investors in europe and in asia, they started feeling pain in the market much earlier. so we got valuation in some of the asian markets where they're trading about 20% above where they traded in the crisis on a book value basis that's why we see better valuations elsewhere outside of the united states and we are seeing some people who respond to that and say, okay, maybe things can get a little better now because we've had such a sell-off. >> j.p. morgan says cash is king

obviously, you disagree with them they're looking at trade head winds. not just a trade dispute with china. slow downs among our trading partners, including germany and china and japan. they're looking at other variables causing some sectors to show signs of wear and tear here in what has been the longest bull market on record here so putting that into perspective, how do you justify your positioning right now >> well, i think what is right to do, if you look at last week, if you look at this month, if you look at the big theme for next year, there is a tremendous am of uncertainty around federal reserve policy -- remember, we were supposed to get away from the fed driving everything then also the trade policy those are two key factors which the market is having a lot of difficulty pricing in right now. remember, a lot of the sell-off in the united states started in october when chairman powell really established his bonifieds

being more hawkish than the market thought i think we took a little comfort in last week and this week in that it looks like the fed and the president are not just dogmatically following a policy without any regard to what's going on in the markets and the economy. programs they are a little data dependent. but, you know, with this back and forth on the trade today and what actually was said, i think that is contributing to what we see in the sell-off today. >> back to bill's question, though, mark in terms of where cash is in your portfolio, part of j. pchp. morgan's call is a measure of an asset performance against the volatility of that particular asset when you take a look at cash and how it has performed so far this year, it's actually only behind u.s. equities. it's outperformed world stocks it's out performed seven to ten-year treasuries, investment

bond, high yield bonds you name it. so at this point with this volatility, what are you telling investors who may be based you mentioned the view in asia what do you tell investors here in the united states does cash look for instance better than u.s. equities? which you are already waiting away from? >> well, one of the things we've seed e said is we moved from the city na market to the tiara market there was no alternative to equity, now there is a real alternative to equities. certainly, that is cash because these shorter-term yields have risen and in the united states, you do have these other alternatives certainly, that is a factor in why the market is not shooting higher from here you have fewer of those opportunities abroad in many cases, say in europe or in japan where rates still remain very low. so i do think that depends a little bit on where you are in the world. but certainly for investors

looking to the united states, those cash yields have attracted investors from overseas. the interest rate differentials have impacted the strength of the dollars, which has been very strong against currencies and absolutely investors are taking advantage of that, so far. >> all right >> that tiara is getting heavier every day. thank you for joining us today. another factor in today's pullback a slightly different take on trade talks with china than was thought yesterday eamon javers is live at the white house to explain it was 24 hours ago we seen the cracks in what the white house was saying and the president was saying and larry can you do lie w -- kudlow was saying later on. >> reporter: we had a bit of a difficulty tracking down in buenes aires this morning wilbur ross was on nbc emphasizing there will be a

lot of work needed between now and this 90-day period, which we now know expires in january, in a couple of months from now. the congress secretary suggesting that this is really just the beginning of in process. here's what he said. >> when presidents get together, you're at a very, very high level, very broad principles of understanding. now comes the hard part, which is translating that into a definitive agreement >> so you heard wilbur ross getting his take that this will require a lot more work going forward to make it into a definitive agreement, just in the past couple of mon minutes the president put out a statement suggesting they will be that at those auto workers to meet with staff. we haven't confirmed they will meet with the president, the spokesperson saying the president will meet with

executives, including those from vocation wagon, daimler -- volkswagon, daimler and the possibility of eu tariffs hanging in the balance there so you can hear what they have to say, if anything, after that meeting with the president >> it's all about communication right now. the markets are not getting everything they want out of eamon javers thank you sore that. apple is tumbling, one of the big loss concerns once again about slowing iphone sales possibly and what apple may have to do about it josh lipton joins us now with more on that story josh. >> reporter: dom, more fuel added to the fire concerns surrounding iphone demands, when it comes to the marketing strategy, bloomberg reports apple moved marketing staff from other projects to work on bolsters sales from the latest and greatest, fire drill, apple defining a comment

it's not just moving staff around, though apple is offering new trade-in offers like this one, for the iphone 10r $449 or $300 less than the official price if customers trade in an iphone 7plus. does that mean apple has to boost demand for the 10r because it's so weak or there is a big base customers and they're targeting them for refreshes it's interesting last week apple exec told cnet the 10r has actually been the company's top seller since its launch in october. laying on apple a down grade from hsbc and more bad news, sirius logic in the past, remember, tim cook said his supply chain is big it's complex his point, it's hard for investors to extrapolate trends, apple stock down 20% in the last three months, back to you. >> thank you, josh lipton.

apple is one of the biggest strategists on the dow joining us is dan ives. >> great to be here. >> since apple changed the way it wants us to look at the revenue model, there have been a lot of questions surrounding this how should we think about apple? should we think about it, let's say, on an installed base level? on the hsbc it says the installed base looks stable, there are few catalysts for further penetration. how should we think about these ins in apple's business now? >> yeah. it's a good question it's been a perfect storm ever since cook pulled the iphone houdini act. the way we view it is in an install base perspective right now he has 350 million iphones coming up for on upgrade over the next 12-to-18 months. part of why there is a fire drill in cupertino is to

stipulate demand which has lagged on 10r, specifically out of china it's right now going into holiday season this is definitely a pivotal fork in the road time for apple to make sure that this demand starts to hit, which so far has been soft. >> if we are to think, if you say we should think about it in terms of installed base. we do think of it in terms of install base does it matter on that metric if customers are buying a 10r or are sticking to their iphone 7, let's say, which is one of the choices in terms of trade in your 7, we'll give you a good price for the 10r? does that matter that person is in the ecosystem. if we change the way we think about it, will we need to change the way wily the about that as well >> i think that's the bull thought here is that you have to think about how you are changing to the ecosystem it's about 750 active iphones to

date nonetheless a part of why the stock has continued to have bad news is because the demand thus far looks like we're tracking about 210 million units versus the 220. >> the next follow up to that is if that's the way bulls should think about the stock, why isn't the company thinking about it in that way, into why is there reportedly this fire drill going on in cupertino to boost the sales of the 10r, we should be looking at an install base it only matters two has an active device in their hand, no no matter what the device is >> i think to that point it's caught apple off guard in terms of demand on 10r specifically out of china i think if they are looking towards the december and march quarter, they're getting nervous in terms of the tea leaves they're seeing i think that's why you see accelerated price cuts and the issues we see in the field that's what really has been the

main overhang on the stock the fear is you look into the december and march quarters, numbers continue to get cut. so does the stock. that's why at this point the new york city cab drivers are bearish on apple. >> so we're talking about a stock that trades at maybe less than 15 times earnings on a trailing basis it's got a dividend yield of over 1.5% as yields keep falling. it represents an attractive company. why are investors not buying into it? >> well, look, i think at this point tech investors are viewing that the iphone growth story and the d-cel is going to continue and i think they're starting to look at a re-read, which ultimately we think will be near term we need to get through this period the stock rereads higher. right now in the near term the worry is you are looking at $13 in eps, a d-cel thay act sell rates from the fiscal 20

i think that's what's causing the stock to move down especially with transparency, in our opinion, it is the white knuckle period we look through. we think this is a stock that ultimately had the 2 in front of it six months from now >> is that dan's reading in. >> this is 275 it's a white knuckle time for dan i think. >> we have a white knuckle 275 are you going to pull that back a little bit >> look, in our opinion, this is a -- even though it's might knuckle, if i look through the valuation and the install base, where we see this in nine-to-12 months, we stand by that price target in our opinion, this is what i view as more of a golden buying opportunity rather than a time to throw up the white flag on apple >> all right >> dan, thank you. always great to speak with you dan ives, managing director at web bush. the chip stocks are getting what kind. joining us is the managing

director romit shaw great to have you with us. >> thanks, mellissa. >> what do you think is driving this trade at this point 23 had various chip companies come out and warn, including nvidia and apple suppliers is the thinking that semi conductors are somehow a canary in the coal mine when it comes to fears about global growth >> yes, semi conductors underpin almost every sector of the economy. the tweakness we are seeing is not just apple iphones i think every single ends market is flowing with you know maybe the one exception being cs then you have too much inventory across the supply chain. we saw most semi conductor companies cut numbers across the board in october i think you will see that again in january then have you this u.s.-china thing which is, you know a layer of uncertainty on top of the weak fundamental backdrop. >> romit, i want to ask you.

i was going to ask dan this question, i'll ask you as well how much of the sell-off not just for chips, the fang stocks the technology stocks has to do with the multiples wall street had a sign of these companies. they're starting to reign it in, obviously, expecting slower growth the breath of the sell-off suggests that maybe they were getting too optimistic about this group as a whole. what do you think? >> with the fang stocks, the multiples might have been an issue. i think with semis, the lasted few years we didn't have a cycle. and a lot of investors got wealth in believing semi conductors weren't cyclical any more as we've seen over the last three months, that's not the case you know, when the economy takes a pause or starts to slow down, semi conductor companies get hit really hard. >> so romit. there has been what can only be characterized as a blood bath in many of the semi conductor's

face take us through the thinking where are the opportunities the most compelling? is it in flash memory in in video and gravths graphics chips? in analog semi conductors? which do you see the most upside potential given everything we seen over the course of arguably six-to-nine months >> well, i've seen a number of my competitors you know pound the table or upgrade nvidia. i think it's too early there the name that i like the most ironically is an apple supplier. that's broadcom. they closed the acquisition of a company called ca technologies, a software business, lasers their margins, lowers their apple exposure to less than 15%. broadcom should grow next year, which i think will be a rarity in the semi conductor space. the other thing it does is boost

the cash flow by over a billion dollars. so you will see broadcom on thursday when they report i think raise their dividends to a level that would imply about a 4% yield and next year we think the dividend could go as high as $12 plus so broadcom is a low multiple stock. it's under performed this year you get revenue growth next year broadcom is our top pick >> do you think there could be mna in this space. it has been revived. given what you have talked about in terms of oversupply in the industry and stocks are down and china says they will rebuke it and come back with a more open mind, do you think perhaps mna is back on >> it's a good question, mellissa i think there is another wave of mna that happened in space but, you know, the executives, you know, among all these

companies need to have a better sense of what their business is going to look like next year are we are going into a recession? if not, you know, how many of our business will decline? that's an important question for any buyer. then for the sellers, their stocks in many cases have been cut in half. the last thing they want to be doing is selling at a 10 or 20% premium. so i think the market needs to stabilize. i think we need to get better visibility into what 2019 looks like and then once that happens, i think you are absolutely right, you will see another rate. >> romit, great to speak with you. thank you. >> thank you. well, trade worries, once again, playing the markets caterpillar, dupont, apple, they are the biggest decliners. they are the usual suspects when it comes to trade talks with china. when we come back, much more o the market move. speaking of trade, we will get a

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2.75%. the nasdaq is suffering a loss of 2500 points or three full percentage points. a part of this decline concerns about trade as well as concerns about the inversion of the yield curve. western talking about that for a bit. but the inversion we are seeing on a 3.5 yield curve this is the first time that that has been negative since 2007 >> nel limellissa on a sector bs the carnage is widespread. if you look at the s&p financials right now we're talking down 4.5% on a sector basis many people will say that is tied very directly to what's happening with the yield kuvl. the inversion in certain parts of it or very least flattening to multi--year lows. 2007-2006 levels at this point >> if 23 see a slow down on the economy or the expectation of one. who leads the charge usually, the u.s. the

intersensitives. the transports the auto makers. home builders, toll brothers today with a very disappointing report >> those industrials down 4% as well so speaking of those industrials. german auto makers today to meet with cabinet officials at the white house with more on what this could mean for tariffs, trade an everything else overall, we join our own phil lebeau, welcome here >> it's good to be here. >> that meeting between the white house and the german auto ceos and members of the trump administration, it's not completely wrapped up. we expect to wrap it up relatively shortly here's what's at take, they sell strictly in terms of what's imports into this company from germany, just under a half million vehicles the trade deficit. you look at completed auto parts, engines, above there are 30 billion that's how big the trade deficit strictly is on it with germany

we are talking the highest of the high end, not the entry level. that's what's driving this as well as the engines and the components as well we had a chance today, we caught up with the german auto maker on the left you see herbert deiss, he runs volkswagon on the right. they hope to come to an agreement. why do they need an agreement? because the u.s. is the largest exports from germany in terms of what they build in this country i get this question a lot. why aren't they building in south carolina in this is a percentages the overwhelming majority of the vehicles are imports mainly from germany a few from down south of the border down in mexico as well. so when you look at the german auto stocks, all of them under pressure today in part because the concern is, not necessarily in terms of tariffs, because i think people are looking at this and saying, look, if you make a tariff, bring it so that it's

zero across the board, which is what the german auto makers would love they would say, that's great they're more concerned that the trump administration could get punitive and say, let's put 25%. >> that would really hurt their sales. obviously, they do not want to see a drop in sales not only for business but also remember the german unions have those plants running at near capacity. >> the trump administration wants them to build more here. what itself likelihood in. >> unlikely a final assembly plant, more likely in terms of the assembly engines for vehicles maybe a battery plant. though that's a little bit more of a reach than at least engine. right now all of the engines that go into the vehicles built in alabama, south carolina and as well in chattanooga, they're all imported that's a sizable chunk of the trade deficit. not all of it a decent chunk of it >> it's interesting it's the german auto execs going to the

white house. it doesn't seem the talks between the white house and european union officials are heating up when it comes to this issue of tariffs it almost seems that president trump thinks he can get more leeway done. >> autos are the hammer. >> forcing it. >> i will not be surprised once he is finished with this, he will use autos like he did with nafta and turn and and use wit japan as well. the playbook is already laid out for us >> this is so high stakes right now, because if we do understand that the u.s. economy, one of the biggest markets for autos in the world is humming along the son seouler is presumably very healthy right now, still buying big ticket items. >> right. >> this is the time auto makers domestic or foreign want to capitalize, why tax them even more so how high are these stakes for everybody out there? >> they're huge. you will hear the white house frame this in terms of, well, look the tariff charged on us is 10% if we export into europe if we bring one in, it's only at

2.5% even if you brought that down, we're not going to export more vehicles over there. you haven't to europe. you know the european consumer is not going to buy the vehicles the u.s. auto makers are building here. a few suvs it's 8-to-1 in terms of sales how they go back and forth in terms of what we export there or import >> phil lebeau, obviously a hot button topic. >> they are coming out shortly i bet within the hour. well, market watchers are pointing a finger at the bond market and the flattening yield curve behind today's big sell-off so more on bonds and this market, let's head down to the gold man sax u.s. -- goldman sachs financial conference wilfred frost is standing by >> reporter: thank you very much i am joined by the founder and chairman of and ceo. the former president of

institutional securities at morgan stanley, starting off with the market as it is today, it's down some 3% as we speak. coming off a week where we had a good news a dovish fed, oils stabilizing in a trade truce do you feel like markets are overreacting to the down side of the moment a bit overly bearish or not >> i think we are in a period of volatility we need to understand that's the new normal for now we've had periods of littrelatiy low trade agreements in china, that will hang over the market whether or not the fed is going to tighten, how often, how quickly we are also looking at some economic signals which suggest that maybe the economy is slowing a little bit so all of this as it goes through in its process, it will create swings in the market and we're coming off periods of inroads that will be tranquil in price movements. i think this is closer to a more normal environment than we've

experienced previously >> we had big bank ceos on earlier today. they have been speaking at the conference they're remarkably relaxed on the state of the economy the own stock price is down 4 or 5% today do you get reminded in times of 2006, 2007, when money managers and banks didn't quite see around what was to come? >> look. right now, everything we see in our engagement with ceos, boards of drenirectors, they're lean income they're not leaning away they're continuing their initiatives, objectives, they're not afraid to have significant levels of confidence and willingness to transact remains the same as it was previously. having said that, we are long in the tooth of this bull market. it's inevitable we will hit a slowing at some point. the fed is seeing certain signs to cause them to suggest they may go slower with the rate hikes. so like everything, you need to be cautious, but we're very

constructive in the current level of activity. >> and so, let's talk about that then your core business with mna. does this market volatility worry that you the levels will drop off we've had a pretty good run for mna particularly since the 2016 election would you pull back because of market volatility or other practice >> i think you need to deconstruct it into a couple parts. first of all the long-term outlook is quite positive. we're dealing in a world that is speeding up, not slowing down. there is more technological dislocation, increasingly, companies need to be proactive in how they manage their portfolio. that's not going to change so all else equal, we see higher highs, lower lows for mna. having said that, we have a business cycle not being repealed there will be ups, downs and pullbacks. volatility does have a muting effect on mna. it's harder to agree on price terms when you deal with currency movements, prices to acquire the bidder

so it's difficult to sometimes bring these deals to fruition, but ultimately, most deals find a way to get done once you sort of wade through the volatility short term, it's an issue, longer term, not particularly concerning. >> you should act knowledge it goes down over 750 points as we speak and continue this interview. paul, a lot of people assume that trade wars are bad for economic activity and therefore bad for mna. some is saying it's not true it can drive cross border activity. what your stake on that? >> look the issue with the trade discussions today is no 21 knows where we're headed and no one knows how this uncertainty affects the behavior and potentially accelerates an economic slow down so once we have clarity on what the rules of the game are and the markets have and the understand to adjust, we see mna continuing to move forward, but in this period of uncertainty,

it's difficult to commit as companies are trying to figure out their supply chain, their commercial relationships there is too much uncertainty. uncertainty is never the end in e friend of getting deals done >> you left morgan stanley after 2012, after years there. you have been operating a small independent firm for the last four or five years over the last 20 we seen about 20 percentage points of market share and mna shift, why has that shift happened? have you found it easy to operate as an independent or perhaps post-talent from former employers and their rivals >> we added an important number of senior talented individuals to their platform. >> that really is what all of this is about. if you can get the best people that want to operate on smaller platforms and clients are exbracing smaller independent firms. because they can get the personal service the absence of conflicts, the freedom to confide in and

divulgege you know their inner most concerns, and you have capabilities that are equivalent to a big bank, then that's the sweet spot what we are seeing is more and more clients are responding to this type of platform, that, inturn, creates more opportunities to express to hire from larger firms. it feeds on itself we received significant growth in headcount and client mandates our reputation is benefits from the play of those two. >> oh, thanks, so much for joining us >> a pleasure to speak to you. >> i will send it pack in studio. >> wilbur ross, thank you so much for that. we will continue to monitor, we are continuing to sell-off right now. we are seeing the dow currently down about 755 points. we were pushing down about 767, 770. not just that long ago investors still concerned about the unknown details of the trade agreement, the trade truce from the g20 summit in argentina.

our next guest felt the outcome provided temporary relief to global growth. let's bring in peter laz rov with planned corps as we talk about the idea that the markets are moving the way they are right now, peter, is there any sense right now that there is a panic developing in the stockmarket or is this just the normal course of a pullback we would see in any kind of a market situation regardless of where we are in the cycle? >> well, it certainly feels more like a panic it might be a little bit because the run we had, particularly in the s&p 500 has been historic in the sense -- not just with the returns but the complete lack of volatility so i think what you are seeing particularly with today, valuations are already high. there is a lot of uncertainty out there. i think everyone wants to know, are we near the end of a bull market but this is the type of market you get compensated for as an equity owner with higher

returns. you have to be able to sit through them in order to learn something over the long term. >> what are the higher valuations in. >> i think in the u.s., you can look at it two ways. it has been more than a standard deviation for a long time. >> that would suggest to me that returns over the next ten years have a very high probability of trailing historic am averages. none of these valuationss, whether it's the pe or sick electrical adjust ones, some refer to as is schiller pe they're not indicators but the way we look at plan corps, we allocate money, new money has been going to non-u.s. stocks in part because the weren't of this cycle has undoubtedly been large u.s. stocks. you know, when you don't go into international, not necessarily as a market call, you have a long-term plan, you have to allocate to the places where it feels less comfortable for people that may be happy doing that, they may be happy.

now the u.s. is falling more, you may see the benefits of the global diversification >> where are you going where are the non-areas you are investing in >> the new dollars are fleeing towards emerging markets and we have core international exposure it covers the spectrum of it when i look at the -- these are moves at plan corps we talk to clients about and feel uncomfortable when the s&p 500 has been absolutely blowing everything out of the water for all of this expansion and you have to go back to not that far the last decade the s&p 500 had a cumulative return. the developing markets had the high teens, the merging markets were in the 19% cumulative returns in that decade so you have to remember to dediversify you have to hate a part of your portfolio the key is to understand you will own the winners and the losers while we have been going into international stocks for the

past several months, it wasn't so much a market call as trying to remain disciplined to the plan and when the markets are down in the u.s., the 220 down months since the 1970s, you seen the global diversification has helped to produce those losses everyone wants to be diversified in some sense. the math behind it is your compound returns compound better at lower volatility. diversification is key times in the markets are down. it's important to stay the course this is why are you paid more to be an investor >> it sounds like the location is in the works for the u.s. versus global markets. peter lazrov we want to thank you we are currently down 720 points on the dow jones industrial average. >> was it 210? >> can you imagine we were two days ago at basis points >> yesterday, we were there. not a couple days ago. there is a remarkable turn in

the bond market. which investors are digesting right now. >> yesterday, rick santelli mentioned it could be a trade unwind, a technical reason why that is playing out. >> you also had a good point in commercial break him tomorrow is the national day of mourning markets will be closed some people will not want to be long going into a day off tomorrow >> well, ups and fedex heading sharply lower bringing down the dow transports since brexit back in june 2016 what is driving the ocosstks lower? "power lunch" will be right back.

welcome back if you are just joining us the dow near session lows. it was down 800 points, tech getting racked in the sell-off all the major averages are down roughly 3% before that coombs has a run

down of where the minus signs are there today. bertha >> you plan across the board the nasdaq having one of its worst days on the percentage decline since that okay 24 sell-off that we saw in terms of low we pretty much all of the major averages here, the large cap, small cap, back into correction as well technology and chips as well back in correction chips have been the big drag all around i wanted takeo take a look at te nasdaq 100 heat board if we can. we've had a handful of stocks today that have been in the green. among them earlier in the day, workday hit a new high, some of the cloud management software company for benefits did very well we also saw companies like pepsi were higher. a lot of that is falling by the wayside as we are watching the nasdaq 100 dip into the low. one of the areas that is a big

drag is the ap ple, the latest downgrade from hsbc on concerns of slowing sales also one of the latest apple suppliers, cirrus logic, although it has come well off the lows free market said that it would see lower revenue, lower demand, but some of the other apple suppliers today are also moving lower. the faang names of course are lower as well. and as i check here, it looked like amazon very much in correction territory, down about 17%. apple now in bear market territory off more than 20% from its high so those are continuing to fall lower. among the biggest losers today is a concern about the economic cycle if you start getting a lot of these companies pulling back on forward spending, whether

some of these economic cycle areas that are like chip equipment makers, applied materials, whether they are going to see a fall jooff in orr as a lot start to see fewer orders from their customers like apple. so we are seeing the ripple effect here all across the board. >> all right bertha coombs, thank you let's get the trader's take. matt, how does it feel down there? >> well, you can see that it really turned around noon. we just lost buy side really what it was. you can take a look at many different reasons for it, whether the inverted bond curve or what we're expecting out of china rkt a china, but if there is for buy side, the sell side takes advantage. and that is why you are seeing the massive moves, 200 in really a minute or two. a 100 point rally that happened just before we got on air.

so the market right now is very thin >> are we feeling anything like we are close to capitulation that is a lot of what technical an analysts have been saying, that we have not yet seen a day of capitulation even though we have seen volatility >> what a difference a day makes. last wednesday we were up 600 and we were talking about things were good and we couldn't find a seller in the building now suddenly around noon today we see all sellers and talking maybe capitulation it doesn't feel like we're gotten to that point we're just seeing lack of buyers right now. so i think everyone is confused on where the fed could go from here, where the white house will go based on china, what the economy looks like going forward, what are companies going to spend going forward, how quickly are they going to spend. so right now buyers are just getting are their prices if they are in the market. >> matt, thanks for your take. the transports as we have mentioned getting whacked on a downgrade.

morgan brennan is joining us the price target dropped and robby, great to have you with us. let's start with you you are saying that amazon is hurting these guys >> yeah, so for the last two or three years, we have seen amazon build their own intern am logistics network that is basically a global network from end to end we believe take thhat amazon har own trucks, planes, trains, their own face forwarding operations so essentially they are building an entire network and are focused on the air portion of that network which they kicked off in august of 2016. and we've seen that ramp up since then >> and morgan, you're watching this kind of fallout happen from robby's note play out elsewhere in the market as well. take us through what you are seeing right now with some of the industrial transportation

specifically related stocks and how it plays into the broader market selloff story so far today. >> i think it is important to note that when you look at the dow jones transportation average, we haven't seen the same sort of rally over the past week before the move we saw today as we saw with the broader markets. now with today's move, they are on track to be down about 2.6% for the year so far. u.p.s., fedex leading the way lower, but every component in the transport is lower today i think again the focus here is what is happening between the u.s. and china longer term, i think you have a concern about a partially inverted yield curve and then of course you have the technical side of this which is the fact that the dow transports broke below the 200 intra day moving average as well and i think you'll start hearing more about the potential for dow theory and what this is signaling moving forward for the broader markets. >> robby, the transports will be

among the leading indicators that we are going to get a slowdown in the economy. is that what we're seeing here with this kind of a selloff as it leads the market lower today? >> i think that is certainly what the fears are we downgraded the transportation sector as a whole to cautious in october because we were seeing multiple data points that pointed to slowing demand in the back half of 2018 and into 2019. in fact peak season kind of showed up late and is not as strong as we thought and we could be setting up for a potential destock in 2019. so i think that there certainly are fears that at best we may see a 2015/16 like scenario where the freight transportation complex was in a recession while the broader economy seemed okay. or worse case scenario, we just go into recession overall. >> we'll leave it there. thank you both, morgan and robby. we're off session lows here.

>> we are. we are down 650, we were down 800 at one point so there is that but this is oftentimes we mention it and it sounds cliché but the 2:00 hour has been for the past few months a possible turning point as well. so -- >> a tricky hour >> take a look at the treasuries the two year yield higher than five year yield. so inversion, why it will happening and how worried should you be, that is coming up next plus sharing of toll brothers falling and the ceo is blaming diana olick kind of. we'll explain. and we are all over this huge selloff, the dow down 800 points at the lows today so far, big things happen in this 2:00 p.m. hour sticarndk ou, "power lunch" second hour coming up.

welcome back i'm kelly evans. we begin with the big selloff on wall street, moves in the bond market the dow falling more than 800 points at the lows >> and we have all of the market action covered seema mody is at the nyse, steve liesman with a look at the bond.

and we got the trade on apple, that stock weighing on the dow and diana olick is tracking housing as toll brothers is sinking. let's get straight to the action >> and a dramatic reversal from yesterday's rally. the s&p 500 breaking through a key technical level and that is its 200 day moving average as did the dow transports breaking below its key technical level, 200 day for the s&p 500, 2700 is the next level to watch there. we are about 17 points away from breaking that level. and in terms of the ten year, 2.8% is another level that we have bounced off of it n. prior market down turns, so another level to watch when looking at the bond market. and that inverted yield curve, investors are trying to interpret what it means for the equity market, the late comments, the treasury curve inversion signals that the economy is poised to weaken, but

still trying to understand what exactly that means and where we will see the weakness first. we're seeing signs of that in the housing market which tie di will speak to. and the other big topic is fedex and u.p.s. morgan stanley saying that the market is missing. and one of the reasons dow transport index is lagging the broader market the topic of travel, the u.s. travel association came out with an interesting report just an hour ago saying that international inbound travel expanded just 2.4% year over year in october which is slower than last month. and experts there say foreign travel to the u.s. is expected to continue to decelerate due to market volatility and trade tensions and on that topic, delta air issuing underwhelming guidance and even dollar general cut its full year forecast this morning

due to hurricane florence. lastly, in terms of what is working for this are mmarket, yr seeing some utility stocks moving to the up side, even some consumer names like mcdonald's, j and j and coca-cola. that kind of tells you how investors are placing their bets >> dividends yield is what they are looking for. thank you. and everyone seems to be talking about it, an inverted yield curve and why it could spell tribl f trouble for the u.s. xheconomy. what is it >> and this is simple for people who may be just tuning in and more complicated for those who are wondering exactly what is going on the question is why do you fear the yield curve because it is a very good recession indicator. what is it it is the difference between the yield on the 10 year bochbd aea the 2 year bond. that is the yield curve over time and those white lines are the recessions we'll put some circles on there and we'll show you what happened every time before we get a

recession, and it ranges from 13 to 17 months in this case, these are the past three, but you can go back urt if and it does a pretty good job. if you look if in tn the middlea false indicator. and when that happens, you tend to get a recession within a year or a little bit longer after that take a look at how we got here here is the math what you see is we are rotating more around the two year spread dehe klein by 25 basis points and now just nine basis points between them. the two year is down by seven basis points and the ten year is down by 18 basis points in yields seema mentioned it, but here are some gathering clouds. nobody really knows quite what happened between the u.s. and china and whether or not we're just 90 days away from another go round right on the brink. we do have some weakening in the u.s. expected, we already have

weakening in global economies. there is the flatter yield curve among the gathering clouds and then the question becomes whether the fed in all of this pricing in less fed as in pricing out more fed in that case so we're looking at a hike in december, one in june, and then we're going to discuss it. >> and let's discuss it right now. stick around, let's bring in john augustine and also paul christopher. and bob pisani is right onset with us. welcome to everybody john first to you. people are going back to last night when even the president was saying the point person for me on trade is going to be bob lighthizer are more of a hard liner, maybe indicating a tougher stance on the tariffs. and then overlay the growth concerns so which is most important to you? is it the fed stuff steve was discussing, is it that maybe the tariffs aren't totally out of the picture? >> so we think that the start of the big selloff is skepticism,

skepticism coming out of the bond market as talked about yesterday. the belly of the curve inversion. that skepticism came through the trade discussion today, the fed to our knowledge really hasn't come into the discussion today what we do think, what we would say is the yields curve inversion and the belly of the kefsh is somewh curve is a we've had a ceasefire, sort of a warning shot to the fed to see what they will do on the 19 ths to follths -- 19th to follow the dovest langua -- dovish language. >> and i want to know what happens to the stock market. i've heard six months the markets can still go hire after an inversion and what do we consider an inversion? >> the studies are with twos an tens

but a flat yield curve does not bring a lower stock market we saw it in the 90s tat'90s, ie 2000s, and 2010s i'm personally not that worried about it steve, why is it remarkable that the bond market is signaling some kind of a recession when we've had nine years of economic expansion? wouldn't we statistically expect that and is the market ov overreacting at this point wouldn't you expect some kind of economic slowdown that borders on a recession by 2020 which is what this has been saying? >> i don't think forecasting a recession in 2020 is worth anybody's time i don't think that the market forecasts it i'm trying to figure out where i'm going to be tonight rather than what the market or -- we'll have a good old time but the issue here is it is a signal that you have to take seriously. i will say that there are some technicals involved here there are pension funds that came in, some big asian buyers

came in as well. it is year end stuff it seems like every year i have to remind people that at the end of the year, you have the year end. >> by the way, this week everyone saying that we would have a down year >> and so i don't think that it will be quite as bad as it seems right here i would watch it carefully the reason why it happens is unclear to people, but it does a very good job and bob knows better >> and i think that if you look at the three things the market cares about, raising rates number two is tariffs and trade war. to the extent that the president's team has indicated that they want to negotiate, i would say that is a little bit lesser but still on the table. third thing is global growth and the u.s. growth. and i think that is what they are saying right now that is the clear issue. they are concerned about slower growth >> and going back to the point that the yields curve is flattening and so we're talking

about a slowdown in some period of years ahead if people are worried about a 20% market selloff and we rally 25% before that happens, what are people supposed to do? >> people are supposed to realize go back it bob's point, this is still a pretty 234r59 yields curve to get a really significant inversion, we found our research you need to have a sustained at least four weeks inversion and we like tens to twos and we also watch tens to ones we find that to be a very good pre-ddictor too and we think this is a flat yields curve there is an incipient emerging slowdown in the economy and did you know there has been 24 corrections in the made are ket in t since 1959 and in almost all of them, there was already a slowdown in place. we think what you are seeing is a slowdown the market has already picked it up in october. >> growth slowdown >> a growth slow he dodown and e bond market too.

>> and we've talked about china slowing, different emerging economies. but on the u.s. front, are we actually speeding up what is the jobs report going to look like? when you try ask for help around the house, there are no workers out there. no one can get anything done the backlog is insane. is this not an economy that is actually running at peak instead of one that is slowing down? >> it is true that the slowdown is essentially -- >> a matter of months between peak and slowing down. >> but the slowdown is the forecast right now, and i'm very interested in what happens on friday if we print a lower unemployment rate and we have strong wage growth is this a situation where the bond 2r5id traders are going to neck braces because they will whip back the other way so quickly. the idea that the economy is going to slow is pretty well conventional wisdom. where it slows too is where the debate comes from. the fed has dialed in at 2.5

a lot of people see the economy coming back down to potential and it gets to this whole debate, can d. tdebat debate, did the dna remain the same >> and what we're really complaining about is the fact that the ten year is not going up come menti up so to what extent does the global demand for u.s. bonds, 0% yield on the japanese, 0.3 on german, to what extent does that global demand for u.s. bonds play a factor. >> and one of the theories out there is that when xi and trump made a deal, it cleared the way for some of the asian buyers to come back in and buy because they might have been of a fwrad that xi was going to frown on those purchases and now you have some big blouyers are coming ba

in but the spread has been historically high. and that has limits. >> and ubs was saying going into this week a lot of hedge funds were positioned to be short treasuries so how do you invest? >> we would say to -- >> all trade related >> back to february, one march, and then october as well the fed was in february. but in general, we'll fade days like this in stock and bond uni loser, home depot, there are home connections there but we'll fade the short term. we're looking at our buy list of stocks, we're looking more at our trims of bonds, we're

looking at our allocations for our customers in general >> you want to sell in. >> no, i want to buy i want to get my buy list ready. >> you just have to find the right stock level for the economy such as it is going to be i mean i think -- >> but stock level we with grew slowly, we've grown more quickly the stock market is just doing its own thing throughout the course of that >> i think the market rallied in anticipation correctly of better growth this year and i think that it stopped somewhere in the middle or early on this year and said wait a second, what is growth next year and what is the right level for the pe, what is the right level of the market. and i don't think that it knows it we didn't have a lot on't have f visibility into the tax cut and large deficit spending into a full employment economy. we don't have visibility into how the fed should react >> and how do you plug in a

model. you have a model based on a certain amount of tariffs happening or not happening a certain amount of rate hikes and economic growth. all those three are up in the air. is it 10% growth in the s&p next year or 4% >> and we haven't gotten guidance yet >> but they have been coming down the earnings. into the single digits >> 10% and now at 8% >> still close to 10%. and if the market can deal with these uncertainties over the coming months, and by the way all those 600 point down days, that is the market pricing in the very uncertainties that you are mentioning >> one more worth mentioning, you have 20% earnings growth in year of which some unknown percentage was the tax cuts. and then when we back out the tax uts, we don't know what th right number is going to be. they are estimates >> we have 23% growth this year,

probably 10% -- ten percentage points is due to the tax cuts. >> and so your advice to investors. >> we agree. we would be making the buy list right now. we agree that earnings will probably be close to 10% that organic growth, take out the tax reform, organic growth probably around 2.5% to 2.75% next year. that should sustain earnings and with a lot of theseties alr discounted, we would be fading utilities and energy >> what is on the buy list >> what has gone down where we still see decent earnings growth, tech we just went overweight tech >> same with you >> we went underweight tech august, september and we'll look to build that back up. >> and we would also like the deep cyclicals, consumer d discreti discretion >> tech is no longer the darling. health care now is

there are the new darlings and they are the ones that everybody owns you look at the momentum etf funds, they suddenly own health care >> but we'll get news on the trade discussions, so it may come back to the cyclicals too >> so some areas there for people to look at. guys, thank you all very much. luxury home builder toll brothers out with earnings this morning and showing more evidence that the housing market is slowing down. diana olick is live in washington with all the details. >> yeah, that's right. and all the builders are down on the latest bout of bad news from toll brothers. this even as mortgage rates are dropping today because they follow the yield on the ten year treasury toll reported new orders down 13% from a year ago and the value of those new orders down 15%. it also gave lower expect tapg s -- expectations citing higher mortgage rates their ceo shared the blame

saying in november we saw the market soften further which we attribute to the cumulative impact of rising interest rates and the effect of buyer sentiment of well publicized reports of a housing slowdown. >> we've been seeing a slow down all year, but this is the first time that toll brothers really acknowledged it in a press release. unto this point they felt like they were somewhat immune being on the upper end of the market where people are less sensitive to changes in mortgage rates >> reports from the home builders, u.s. census, realtors, fannie mae have all seen weakness in home sales and pointed squarely to higher interest rates pushing affordability to the weakest level in a decade. toll's average sales price is about three times higher than the national average toll cited weakest demand in california where home prices are highest. so really it is justjust buyerse hit the wall of what they are willing to pay the reports are on cnbc.com and

along with which local markets are hit hardest. back to you. >> and plenty of people are asking today what is the mix of reasons why we're talking about housing market weakness with toll is it because in the northeast you have some property tax issues, the roloss of the -- ors it economy wide? >> it is economy wide. toll brothers gets most of its revenue from california where you are looking at the highest prices in the nation and you are not seeing those prices come down very much and it is also you have high end home buyers who are perhaps in the stock market looking at volatility, looking at growth in the economy, all weighing done on them. and they look at this being an incredibly large investment. so is it a bad investment. >> a tricky enough question to answer diana, thank you very much let's get back to the markets and the massive selloff. we want to welcome in guy who

will be with us the rest of the hour >> i was walking around outside, said what are you doing? come on in, get on the show. okay, here i am. >> what do you make of the selloff? >> last night on our show i said i think that you will see a continuation of the rally into year end, maybe fits and starts. but i thought that the market, given that the fed is now somewhat dovish and president trump had his moment in soit americ south america, i thought we'd rally. so you never know. what do i make of this the president's tweet didn't help mr. bolton's comment about intellectual property didn't help all of a sudden the market seems to be concerned about flattening yield curve and inverted yield curve. and i will tell you, and this is what i've said the last couple years, there are problems with deutsche bank and now the market is starting to pick up on the problems and the real question,

is it systemic or is it deutsche bank specific. >> we're going back a decade here >> going back a decade and now the market is talking about it so why has citibank sort of lagged citibank at 63, 64 dollars is effectively trading tangible book when a jpmorgan for example is probably closer to 1 p.8 tims maybe citi has more exposure in europe >> i just wonder if we are talking about the u.s. banks being down 20% from their recent highs, do people say people are panicking too much, they are hating on the banks, they will lose mean. -- money or are they good institutions where you will ride it out, they will fluctuate a bit, but ownable for the long haul. >> let's talk about that and i've tried to defend for example goldman sachs on valuation in terms of being a trade for months within the last month or so, i

said at a certain point, you are just flat out wrong. and now this malaysia situation is not good. i think that gets worse before it gets better on top of which the new ceo david solomon is doing a complete 180 what goldman sachs was as what it wants to be you don't just change on a dime like that without having some growing or market pains. >> fair enough we have news, german auto ceos are speaking at the white house. ylan mui, tell us what is going on >> reporter: we heard from two ceos after they came from that meeting at the white house they were scheduled to meet with senior members of the administration, president trump decided to drop in on that meeting as well. so they got a chance to make their case directly to president trump himself. and this is really an opportunity for the automakers to talk about the investments they are making right here in the u.s. as they try to head off

this threat of potential auto tariffs. vw's ceo said that they are planning a joint investment with ford as a sort of global auto alliance more details about this will be released in january or february. but 23e ththey are looking at me capacity to build domestically and they are in advanced talks for a potential investment in chattanooga, however other locations may be under consideration as well. meanwhile daimler's ceo said that their planned investments here in the u.s. are contingent on conditions remaining the same in other words, no new tariffs he said that the tariffs were not an exclusive point of discussion, but that it was implicit sort of understand wlil of the discussions and he felt the threat of future tariffs has been reduced >> all right thank you. and phil lebeau, any surprises here we're sort of expecting the vw

qvc to make so ceo to make some sort of a gesture. >> yeah, they really haven't put the effort in that they need to do be a true player in the united states. i'm not surprised by any of these comments people say why don't the german automakers build are more cars in the u.s. instead of importing them from germany. think about it from the german perspective. who owns stakes in these companies? the german government owns stakes they need to keep their capacity utilized to the fillest in germany. so if you were to say okay, well, let's start building bmw cars here, not just suvs, where are you going to take that capacity from? are you going to shut down a plant in germany no you've already moved some from south africa to mexico so there is no easy outs here for the german automakers which is why you've heard them all along say drop tariffs all together we will no longer charge 10% for the u.s. to export and bring it into germany, a vehicle birlt

here and we won't pay 2.5% to come into the united states these investments that they are making, they are not insignificant, but they won't move the needle a lot. and whether or not ford could use its excess capacity, ford has a lot of excess capacity and so this will make sense that at some point that might happen. but i don't think that it will so that up a lot of capacity here >> is it going to turn into gm using its excess capacity trying to come up with something to make the u.s. happy and maybe tie up again with the -- >> i don't think so. i think gm has decided that we will be a smaller company, we are not going to be building sedans and cars. mine we'll bui i mean the corvette will never go away, but you won't see them make the mass market model they made that decision here >> and i wonder too if the bigger concern, and you hear some of the d.c. folks watching this, the potential for the u.s./eu trade talks, if those talks don't go well and all of a

sudden we get a tweet that says you know what, there will be more tariffs on the eu cars as a result -- >> and that's what i said earlier. this is the hammer that the trump administration uses with all of their trade talks they did it with canada and mexico they did it with china still doing it with china. i think that we are likely to see this chatter, this potential use of a 25% tariff, i think that it will be out there for a while. >> we got that tweet in 2017 which sparked the worry. >> all right phil, thank you. let's bring in nin michael pharr now. speaking of the view from washington, a lot of this going back to the trade discussion saying maybe things weren't as rosy as they first looked over the weekend. maybe there is still more tariff talk to come as a negotiating chip and maybe this is just about whether there is a growth slowdown what are you focused on?

>> kelly, welcome back first i'm focused on you being back which is greater. and second, you know, yeah, maybe we just need to focus more on the art of the sale you don't overpromise and then underdeliver we've basically come through a 36 hour news cycle here where we're saying things haven't changed that much. we're three months out from any real details on trade. we still have bolton saying the same sort of combative things. so we haven't changed that much. and we're about a week and a half closer to another fed meeting. and we have a yield curve inverted so there is a lot having the markets step back. but i think what steve liesman said is really important which is at the beginning of 2018, we had really good earnings and we saw economic growth ahead i think that the market is really trying to reprice future

expect tagtss of not necessarily recession, but certainly slower growth, 2%, 2.5% gdp growth. >> that is a process, right? we've certainly been living through process as we are today. so how far along in the process are we in your view? >> i would say that we are in probably the fourth inning of that process it feels like we have a good deal more to go. and a lot of the more to go isn't like straight done or anything it is just that there is a lot of back and forth as markets find the right level >> and michael, what do you think about the financials guy was talking about earlier? take a step back and say we're talking when u.s. banks down 20% that i'm sure they would argue has never been in better shape >> and i would argue too and i'm arguing my own book here because i own -- i'm underweighted in these, but i own a number of them so i own a enough to where this is painful and frustrating because i can't understand why

with the balance sheets, why with the liquidity, why with the spreads that they are gaining on now, they are now making money on money market funds again. so banks i think are in a really good position. you have to worry about the credit cycle a little bit. we did hear the fed say that they are kind of concerned about the level of corporate debt. so we want to pay attention to some of the assets on some of the banks' balance sheets. but overall, i think it is frustrating and i think they are getting overly beat up and i'd probably be a better buyer than a seller >> are they losing money though on a flatter yield curve full stop >> i think they are making less money. i think with higher rates, they are making less money. but i don't think that they are losing money i think it is really the credit cycle meaning are you going to have defaults and that sort of thing. it could be troughing now and maybe those future expectations are getting priced in. but i think at these levels, these things look really attractive >> michael, thank you.

and if you are just joining us, it has been a very volatile day and at one point the dow was down by about 800 points right now we're looking at a lot of almost 700. on the s&p 500, we're down by 74 and the nasdaq composite down 3% or 223 points. no surprise financials with the flatter yield curve inversion in parts of the yield curve we're seeing that sector really taking on the chin down 4.25% and technology also hard hit right now, apple among those names. it itself is down about 4% that stock is in a bear market josh lipton has more on this stock. a lot of stuff going on with apple today. >> sure is and a triple whammy really hitting apple. you can see that stock getting whacked here it is now down more than 20% in just the past three months so among the reasons for worry

today, you've got hsbc cutting apple to hold as well as reducing their price target. they say bullish on u.s. demand. but bearish on emerging markets. also more bad news from an apple supplier too this time cirrus logic and it follows other disappointing news from other aphim suppliers. so gorilla glass, japan display. and bloomberg reporting that marketing staff has been moved to bolster sales of the latest and greatest hand sets in what they are calling a fire drill. so how do bulls respond? they will argue the is selloff is overdone, they will say suppliers are not always a reliable indicator when it comes to actual iphone demand. and they will mention possible tail winds like certain visits, gross margins ticking higher and buy backs. apple trying to stay positive here, up about 5% so far this year >> and we'll keep an eye on it

of course. let's get the trade on apple though mike santoli is at the nyse. >> and down here can you believe apple is a few bucks below the last time we were on tv together getting crushed for all the reasons that josh ways just talking about. there are peak iphone concerns and of course the logic news and let's talk to our advisers about where it goes from here. mark, are the major trends broken the stockstill is a little bit above the late november lows in >> the major trends have not really been broke. as you mentioned, it has been down about 20% over the last three months we did have a pretty serious break. but we did see a pretty good level of stabilization in the last week and the stock actually has risen almost 8.5% off the lows so that was a real positive that

helped momentum turn positive. today however is a negative. we are breaking this minor up trend. stock rose about 15 points since last week. this could lead to about two to three days of weakness my thinking is 170 is the key level near term. max down side to 160 but three reasons are important as to why you should be positive on apple first is that momentum on a short term basis is still positive so despite the 4% drop, things like mcdonald's still positive and the weekly chart is oversold so rsi down to nearly a 30 the third is that sentiment has turned very rapidly against apple. it became not only the trade war stock and we're seeing downgrades and people are saying revenues and everything are going down, we're seeing guidance being shifted lower, i'm going to avoid it, my thinking is it is right after a 20% pull back to buy at the risk/reward to me seems favorable to buy into this

weakness >> michael, what about the longer term story? >> we're bullish long term fwra first of all, the loyalty. customers are so loyal to apple. they will continue to own those devices. they are loyal to the ecosystem and that is not going anywhere but let's focus on fundamentals. it is trading at 13 times earnings plus they have a boat load of cash they are also still up for 4% to 5% for the year. but let's look at the earnings growth rate. they are scheduled to grow 12% next year and 11% the following year there may be a rotation going out of so many devices being sold but their services business is growing at 25% and that is a $40 billion number that will grow at 25% in the future we think it is very overdone and remember, in these markets when you buy, that creates outperformance so we're going long.

>> all right yeah, once again, people can talk about apple being a lot cheaper. thanks, appreciate your time also getting cheaper today, retail stocks. courtn courtney ragan here with a look at some of the damage. >> and we were done about 4.2% or so, came back a little bit. but the spdr is down more than 3% not really a jolly feeling and the tariff truce relief really didn't last for retail. even items like hats, purses, those will stay at that 10% tariff level rate after january 1, at least for the beginning of the year for a while dollar general though reporting stronger than expected results today. they did lower guidance. shares down around 7%. though at least a handful of analysts say the early downwards selloff was way overdone based on the fundamentals. and that was before it

accelerated further. so watch that name we may see the snap back tomorrow and still it may be part of the drag on other discounters. big lots down more than 4.5%, target down more than 4% that has come back kept stores too, males city's, nordstrom, lower and these are key names. specialty retailers are selling offer more than the broader market lululemon, items rarely go on sale, but the stock is today and dsw, boot barn, steven madden, all down between 5% and 7% and some of those names would get hit hard by the tariffs if they were going to increase to 25%. and at home maybe where the heart is, investors are not buying into the home today williams sonoma, bed bath &

beyond, they are down really big. therewhere there are a dooumt glecouple gr. rh exploring potential for convertible notes. and movado resulting that investors are cheering some beat but they had strong fundamentals with strong revenue and good market share. >> boot barn down 7% >> that is a big one >> and we talk about it in relation to the oil market believe it or not. >> it does correlate to the point the indiscriminate selling. >> and if there are concerns about consumer strength going into next year, and then there is still the looming threat of tariffs because we've only got two months into next year, there

is a lot of factors. >> and so this is something that i -- i don't know the answer i think i know the answer. but does a recession cause a are market selloff or does a market selloff cause the recession. and i ask that because if 70% or so of the u.s. economy is driven by the consumer, to me -- and steve liesman will argue against this, but i think consumer confidence, all it is is an overlay of the s&p 500 market goes higher where the people have a dollar in the stock market or not, they feel richer they spend but if the evening news tonight leads with stock market down 650 points, and if this continues for a period of time, maybe people are not as optimistic >> but shouldn't the discounters ironically be doing better >> you said something speak interesting. indiscriminate selling is true, but we never talk about indiscriminate buying on the up side which is exactly the same because when the market goes higher, everybody feels good >> i talked to best buy ceo a

couple weeks ago now and i said some people are starting to worry that we're seeing cracks in the consumer. are you. and he said at some point cycles end and if you start to believe that it is happening, eventually it might happen. so he at least acknowledged the discussion that is happening but didn't give us any fundamental reasons why he thinks that it is actually happening in his business >> and this is what melissa was saying earlier if you talk to people, if you need workers, we're at peak, peak, peak how do you know when that is turning into a slowdown. is it time to sell retail stocks because you think that is coming up or is there any evidence? anyway, thanks very much and we want to bring you a headline from the treasury secretary commenting about the market selloff secretary mnuchove say mnuchin there are some question marks surrounding the tariff deal.

a lot offlicting headlines and we're still trying to figure it out >> and even this morning wilbur ross made the animalogy to the w nafta process saying it took 18 months which is quick for a deal like that, but had people thinking is 90 days a realistic period of time to actually expect that there will be a resolution for the u.s./china issues and how many more tweets and tariff threats and all of that may be to come if testimony play out. >> and if they had stuck to 90 days starting january 1, maybe the odds would be higher but they started it as of the dinner is so cutting themselves short a month. >> and oil market is closing the day, jackie d has more on that >> and good to see you on a day where stocks are getting crushed basically. oil is bouncing a little bit it doesn't send to see as strong of a correlation when we're a couple days out of an opec meeting. and now they expect a cut of

roughly a million barrels, but remember, the saudis ramped up protection before the iran sanctions went into effect so how many barrels would really be coming off? it is tough to say still the move that we saw yesterday, there was some optimism on the china trade talks that you referenced. and opec today is the catalyst today. but we didn't see enough of a bump up to help the energy stocks >> and i'm just going back to the gasoline price we talked about the consumer it has plunged and now the good news is that the oil is rebounding >> well, you always have to balance out what is happening with the consumer, the savings that they get, whatever it is, on a gallon of regular, and what the lower price is doing to the producers. it starts to crush them at a certain point. so if a consumer is saving $5 every time they fill up, that is a boon and it will add up. but some people say what is going on with exxon's balance sheet and that is more important. >> and lower down to the supply chain in terms of the lower

quality oil companies. >> right, they suffer first. >> if this opec meeting comes through and oil prices still go lower, there could be a world of hurt in the high yield market when it comes to oil. >> we had a conversation about that couple weeks ago. oil has gone from $72 down to current levels that is a pretty significant move in a short period of time people will hurt and next quarter's earnings, it will be interesting to see what exxonmobil says next quarter given their valuationvaluations i think these stocks are very expensive. >> two years ago when we went down to that $25 level, we had the same risks in the market nobody thought that we were going to see that again here, that we would find some bottom at a more comfortable place. it is not necessarily true that that is not going to happen again. so it is something to watch for because remember, the production right now is out of control. everybody is pumping

and you have gi auitqatar sayin don't want to be part of opec anymore. >> it is the u.s., saudi and russia >> the u.s. has turned it into the wild west. and if you see other people coming out of opec right now, other countries right now that have bigger production numbers, you will start to see every man for himself just pumping away and the price could crash again. >> there was a barclays note highlighting texas and the record in texas, that texas is as big an oil producer as iraq >> and it is not everyone fully ramped up yet. >> and what is happening with shale won't stop >> the best case scenario is that we get the low oil price and everything is fine on the economy. the worst case scenario is the slowdown is for real, everybody is talking about recession and the oil price questigoes up. >> all right, jackie, thank you. biggest names in banking weighing in on the markets at the goldman sachs financial services conference in new york. wohlford frost is there with

more >> the tone here at the conference has been fairly relaxed. here is the chairman and ceo of bank of america brian moynihan >> we feel very good about the u.s. economy the prediction is that it will slow a bit, but there is a strong growth rate unemployment, wage growth, all of the factors are very strong including small business enthusiasm >> the ceo of wells fargo tim sloan struck a similar note and here is jamie dimon from jpmorg jpmorgan >> if you look at the immediate economy, it is actually doing fine and so is the global economy the imf warned about slowing growth, but they still predict 3 aboutme3.5% which is really goo. america looks like 2.5%. households are in good shape debt service rak i don'ts are

low. confidence is high i know tim sloan said business confidence, consumer confidence at all time highs. so it looks like we're doing fine obviously something will disrupt it and something will one day change that. it may not be 2019 i think people should get in their heads that it may not be 2020 >> i should point out that this positive tone by moynihan, sloan and dimon was struck when the market was only down about 200 points this morning, not down 700 or 800 as we are now but the key takeaway from all of them is this, that there very bearish sentiment we're see management committee market is disconnected from the underlying fundamentals that they are seeing in the economy. >> did they comment about the yields curve in there is so much talk about the inversion and the flattening of the yield curve. and that has been an ongoing theme with the financials.

have they addressed that >> they have addressed it. and i'd say of those ceos, the one i spoke about that topic with the most is brian moynihan and he pointed to technical factors like the german ten year being very low and the impact that has on the shape of the yield curve as opposed to the fundamental outlook for the economy which of course would be one of recession if you look purely at the shape of the yield curve. so he tried to offset that kind of shape in the yields curve as to what they are seeing. some people say that is not focusing enough on the signs that that is showing, others will understand that there are other technical factors. so they are ignoring that at the moment >> all right thank you very much. we'll see you soon dow down about 641, at the lows we were down more than 800. steve mnuchin weighing in on this market. it eamon javers with that breaking news. >> reporter: that's right, he offered his thoughts here on the market activity. he has been speaking at a "wall street journal" event here in town here's what he had to say.

>> i think the market is now in a wait and see and the market is trying to figure out is there going to be a real deal at the end of 90 days or not. and i will tell you that there are very, very specific issues that the president agreed on, but now have to be dealt with on specific wording for the first time china agreed to a concept of specific time frame, specific deliverables and penalties if they don't respond. now, whether we can get that to a real agreement or at least make a lot of progress over the 90 day period or not, time will tell >> so the treasury secretary suggesting that the president and the chinese leader on saturday agreed to specific issues, but that they are still working on specific wording are regarding those specific you issues so perhaps an indication that there might be more to come from the session that we saw at the

g-20 in buenos aires, perhaps there is more to the announcement than the white house has rolled out so far because of some of the disagreement over the specific wording. we'll have to press them for more indication on what he is exactly referring to here. but saying ultimately that he believes that the market is in a wait and see mode and ultimately time will tell in terms of whether or not the united states and china can get to a deal here >> and still trying to figure it out. and i was going to ask if you are getting indication that there is less to this agreement than initially met the eye >> well, i asked mnuchin yesterday morning whether the white house was going to put out a document which laid out all the different specifics of the agreement. and he said no so from early monday morning, you got the sense that they were not going to put out specific, you know, black and white details of what this agreement was. and the white house was struggling to sort of explain the president's tweet on sunday night about chinese's agreements

to lower the auto tariffs to zero so there has been an inability of the white house to explain what exactly was agreed to here and what it all means. ultimately they are saying that there will be some effort to get to a brirg dedigger deal. >> and the clock is ticking. thank you very much. more on the market selloff on the news line, ceo of cresset wealth advisers. and we've seen quite a rise, now down 572 so a turnaround going into the close. but at this point as we string together more and more of these volatile days, does it make you more inclined to become more defensive? >> yeah, i think collectively it does i'm not a believer that for example the yield curve inversion this time around will be sending us the same message that it would have prior to all the central bank intervention

that has been occurring over the last ten years, but the fact remains when you get the largest economy in the world going to trade war with the second largest economy in the world, there is going to be fallout and we're seeing kind of these expectations for global growth slowing going into next year >> jack, if it is the strongest economy in the history of our republic, why are ten year yields -- why such a dramatic move back down what is the bond market if it is different this time, why is it different? what is the bond market telling you? >> sure, well, keep in mind that the federal reserve generally doesn't control the ten year unless of course it embarks in quantitative easing. and this time around it is actually selling its balance sheet. however we have to keep in mind if you are an investor in europe and you are looking for a ten year note, you are faced with a german bullishness around 0.6 so i think having interest rates

that are probably two full percentage rates below where they need to be in europe and maybe one full percentage in the u.s., european investors are willing to take that >> the dollar has been so strong there's no reason ten year yields decided it wanted to start dropping what happens when we may get stroc strong jobs report >> it will continue to move higher i thought the yield curve would flatten out at 3.5%. it is probably close tore 295 or something. again, it is always different this time. it is never different this time. it is telling you something. going back to the fed, i think it is doing everything exactly right. i think the mistakes were made the last seven years

>> if fog else they not buying the way they should be buying. they have not buying and people start to talk about it it is not the effect you would expect they are not buying anymore and yet this rally is happening. >> it is telling it -- listen, i'm not an economist i say this all of the time, i'm not smart enough to be one test never different this time around >> so it's not something you want to pay attention to then what are you looking at as a good indicator for this market >> sure. one of the things i'm watching are credit conditions. the fact remains no matter where the yield is the yield premium that lenders require to extend credit to lower quality borrowers has broken down. it does suggest that liquidity conditions are turning negative. we have to keep in mind this is a very early warning indicator that same metric broke down in

the fourth quarter of 2007 that would be four quarters before we had real problems in the equity market. nonetheless between october and november credit conditions, the way we measure them did break down i think it's a big negative for us of course evaluation here at home, the fact that equity markets have been the only child of thes asset allocation world, you know, needs to rebalance i think over the next, you know, four or six quarters interest rates do tend to move back to fair value and that's going to be a huge head wind for risk taking >> thank you for joining us ton selloff today. we keep an eye on the dow it is down nearly 600 points s&p down nearly 4% as we speak

maybe you can help us understand why it is so damaging. >> yeah. good afternoon ultimately banks are in the business of boar reing short to lend long. when the curve flattens it's typically not good for their business kind of longer term there's a lot of moving parts. they are not actually lending it to your ten year i think there's some movement around it. it's hard to argue that a flattening-year-old curve is good for bank stocks we are seeing a tough market the s&p is down 2 or 3%. the bank declines have been really profound. you're talking down 5 or 6%. rates are the worst you have to look at. it is what they are getting concerned about. >> so don't be too concerned about the flattening yield curve? it is a factor the bank stocks have been trading along with it? what are you hearing in terms of

why there's such a doubt when it comes to banks when they are priced to book values looks prettydecent it is more your generalists across the board that's more where you're seeing people say the rate environment is getting worse do i really want to be ov overweight or long the group that's most exposed to it. we see a lot of it come back out again. >> in terms of investors who only look at bank stocks the special focus are these long or

short? trying to get a sense of whether they are conditioned to be long banks and you're sort of getting a point of view. >> i think the real question they are asking is what a bank is going to do there's a lot of good things going on right now fundamentally. eventually credit has to turn. it hasn't turned yet we have said it has to turn for a number of years. the bad news is every day it doesn't turn you get closer to the day where it does. i think investors are looking forward to say what are you going to do for a kind of earnings growth. that's what pushes me more to looking still especially after today's selloff is some of the larger cap banks i think the boa's, citi's, wells fargos, i think you see better opportunities for more efficiencies there they have all got investment banks in them and a decent

economic environment you want to be owning capital markets first. >> thanks. with the dow down less than 600 points the lows were off more than 800 points today kenny joins us now to talk about today's selloff. congratulations. we'll be seeing you but certainly you have seen many days we have seen a number of days like this all year >> we have seen them early in october and november i remember when the market really broke and we started to break it is a continuation the rallies that we see, these spurts up they don't have any real strength to them. you can feel there's no real commitment to them i'm not super surprised. it has rallied back since it showed up. >> yeah. no correlation to be drawn there.

>> you talk about why the levels are important. we have seen this play out a lot. is there a fundamental reason why people need to look at this and say the facts have changed >> i'm not so sure you will say that certainly the bond market is telling us that. i think it is only 10. ten basis points so there is real concern building about the inversion of that-year-old curve. we have been talking about it. it is getting very very close. i think this is actually spooking investors because that is really kind of an indication of what's to come. it could be four to six months >> we are going to be heading into a unique final hour we have a day of mourning tomorrow all of the stock markets are close. what are we looking at what are some of the key levels? >> this is just my opinion it is sort of a line in the sand as it has been i think we got close to that we

would bounce and see if that hangs in there you know, i heard parks comment about the banks. gold pl listen, again, i have try today play -- >> wait, who said it is a great bank >> i'm paraphrasing. >> right >> a lot of people try to make a bulk case for banks. maybe there is no bulk case. >> it will get more difficult for that sector. you have to be very careful as we approach it >> and one thing we mentioned he will say it's not so much the treasury yield curve that matters. that's where banks inves mor --t more is all of that for people going i'm nervous what this happen for the next couple of years >> i also think it moves like this one of our guests, there is

opportunity if you look at the right names. this is active management comes into play. >> talking here. >> i'm not going to do that but i think that the passive will come under real pressure >> what will it be to think there's some opportunity for people that look at the big selloffs we have seen? >> you have to kind of go through the portfolios you have to look at some of these that have gotten beaten up you were talking about am a little bit ago apple is not going any where you to look at some of these names that are beaten up those will be where you'll find that >> we want to bring in the guys at the closing bell with what could be a wild final hour of trade. >> yes indeed. we are up 200 points it feels like a pretty grueling day. welcome to the closing bell. i'm mike santoli

>> we'll take a look at the mark right now. you stocks plunging on fears of slowing economic growth. the dow was down about 805 points it is trading down about 640 points or about 2.5% lower >> for a little per specific ifr the lows of the day the major index has given up about half of the six-day rally that we got. we'll see where we end up. coming up we'll talk to john waldron and what he says is behind today's selloff and talk to chris ailman, how he is reacting to this market volatility >> let's look at what's driving the