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tv   Squawk Alley  CNBC  January 2, 2019 11:00am-12:00pm EST

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these are the only medicare supplement plans endorsed by aarp. learn more about why you should choose an aarp medicare supplement plan. call today for a free guide. good morning it is 11:00 a.m. in washington, d.c., and 11:00 a.m. here on wall street. "squawk alley" is live ♪
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♪ good wednesday morning i'm jon fortt. with me, morgan brennan and david faber. carl quintanilla is off. we begin with tech stocks mostly in the red again amidst another market sell-off to start 2019, although we're well off the lows major averages were flirting with their worst first day of trading in a new year since 1983 but they have recovered a bit. the nasdaq's four-day win streak still in jeopardy, hovering just above what some call bear market territory, 20% off the recent highs. tech is today's worst performer so far so with faang stocks a mixed bag, which names in tech should investors be looking to for value as we kick off the new year and is today's action a
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buying opportunity to take advantage of anthony and dick are both with us now good morning, guys, happy new year. >> good morning. >> happy new year. >> happy new year. >> anthony, i want to start off and just talk about apple in particular that's a stock, and i want to kind of -- >> i actually don't cover apple, i just want to mention that. >> i know you don't because i don't want to dig in specifically to apple, but i want to say from september 2012 to august 2014, that stock in the midst of the iphone run-up was below $100 a share it dipped down there, stayed down there in retrospect, doesn't make a ton of sense couldn't the same thing happen to faang stocks even if everything is okay if sentiment just doesn't quite turn around entirely >> yeah, i think what you're suggesting is a little bit of sell on the strength, and that's indicative of what we're seeing. so in terms of our checks for
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the fourth quarter, we're seeing strength in terms of e-commerce, the holiday data points were quite strong our advertising checks for google and facebook have been strong for the fourth quarter, but the market is looking forward. the market is always looking forward. so i think there are a lot of investors out there who might be out there waiting for managements to give their outlook for the first quarter and for the full year. and so what's happened is really the stocks have tremendously derated. we haven't seen big earnings misses, we've just seen multiple compression. that's happened massively in 2018 for the likes of spot, snap, amazon and netflix alike but what i would say is let's distinguish between the d ratings that have happened because of cyclical fears versus ones that are coming because you're losing share or because of regulation or because of waning engagement. i'm thinking of snapchat, maybe even spotify or saturation in the otas so i'm looking for names that have value, you mentioned that we certainly see that in
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facebook andgoogle in terms of value relative to free cash flow defensive and competitively positioned quite well, netflix is one of those. and then ones that might be counter yclical, so aws and amazon, people underappreciate how sticky those cloud revenues are and that's one of the reasons we like amazon. >> brett, what's your read to start the year does sentiment still have ahold of the market? >> you've had a 25% sell-off in all these names sense september so we think a lot of the bad news is already reflected in the stocks as anthony said, i think most investors are looking for q4 earnings and the outlook for '19. we don't think it's going to be as bad so we think this is a good opportunity to selectively be buying, again, given the sell-off we've already had the multiples. now, when you look to rolling forward 2020 numbers, you're starting to look at facebook at eight times ebitda
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these are really impacted multiples that reflect a lot of bad news so our belief is these big platform stories like google, facebook, amazon, are still going to weather the storm better even if we go into a slowdown we are seeing a pretty material pullback in terms of numbers, mid-20% growth for the industry going to mid-teens in '19. so the stocks have obviously sold off pretty materially so we think it's an interesting opportunity. >> i agree -- >> anthony, what about snap? >> i would also add let's look at the reasons we've had sell-offs in the market. you've had trade and tariffs, rising rates these companies don't have debt, they have tremendous amounts of free cash flow so rising rates doesn't apply for them they also mainly don't operate in china so a trade war doesn't apply there. i agree that it's going to be more about stock selection going
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forward. the other thing to note that will be interesting about the year ahead would be the new ipo. so many of your viewers might be tired of hearing us talk about the faang names but we're going to have uber, we're going to have lyft. it's going to be interesting to see how those ipos do and how they get off the ground in 2019. >> but netflix is spending tens of billions of dollars on original content we've seen those shares under pressure because of a rising rate environment you think that's a myth, that that's not going to be the case? >> well, netflix, yes, is a little different because they have to access the fixed income markets. i still think on a relative basis, their need for capital is not something to worry about you see those bonds trade fairly tight. with netflix it's more about how are subs trending. there's a little concern some of the data is coming in maybe mixed, and so it's a little bit of a referendum on that. i also think netflix was a victim of hedge fund unwinds in the fourth quarter
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yeah, netflix is a clear market leader the valuation has always been challenge for me so we're in line on the rating but i think if you could get netflix in the 230s, that would be your floor, a really incredible entry point there. >> i get valuation, it seems compelling when you talk about eight times ebitda on facebook, but when you look at these names, i just think momentum, really the momentum finally changed for what was a great trade for a long time. i don't quite understand what's going to get it moving the other way. >> i think the numbers coming through, if google can sustain, for example, 20% top line and margins start to slow and you start to see things like wamo a a -- and others kick in, the
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moats around these franchises are so material, everyone has talked about more regulation coming to the united states similar to what we saw in europe with gdpr. if that happens, these bigger platforms are way better positioned there are ceos of companies in small tech, there's no way they can sustain that type of overhappeniove overhang and the cost to deal with that. we think these big platforms are still in a great position. and we're talking about these have already reflected a lot of this bad news. so we're not calling for doubles on these big platforms, our belief is that there's nice upside again, i don't think anyone is saying that this is the tail end of the market. no one is suggesting that we're going to have doubles from current levels >> okay. well, it's the start of the year, we'll see what we get. anthony, brent, thanks. >> thanks. >> thank you. the government shutdown now in it's 12th day
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ylan. >> reporter: congressional leadership will be heading to the white house for a briefing on border security that will happen at 3:00 p.m. and include lawmakers from both parties, republicans and democrats. it will not include the press or any tv cameras, so we'll see if they are able to make any progress behind closed doors democrats say they have a plan to open the government and plan to vote on it tomorrow that would fund the department of homeland security through february 8th it would fund the rest of the affected agencies through the end of the fiscal year nancy pelosi tweeted this about the shutdown on new year's day she said that trump has given democrats an opportunity to show how we will govern responsibly and quickly pass our plan to end the irresponsible trump shutdown now, the white house says that this democratic plan is a nonstarter because it doesn't include any money for the border wall but there is some sign here in washington that the pressure is
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growing on lawmakers to find a solution as the shutdown really begins to bite federal agencies are starting to close in greater numbers the fcc said that it will close its doors tomorrow unless a compromise is reached. the irs could be forced to delay its tax filing season. guys, the smithsonian museums are closed today, which means the national zoo is closed, which also means the panda cam the panda cam is now shut down so we won't be able to see that for now. back over to you. >> david is disappointed. >> that is very disappointing. nothing better than a panda, especially when it snows they're really cute. ylan, thank you. still to come here on "squawk alley," tech is breaking a nine-year win streak posting its first loss since the financial crisis of course the big question we asked of those two analysts, can the sector stage a turn-around
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in 2019. next, one sector not disappointing in 2018 was health care it was up more than 4%, leading all sectors, so what is ahead this year? fred hassan will sit down with us right after the break on a day where the s&p has made a big comeback from what had been a significant sell-off at the beginning of trading we're now downnly o0.81% on the broader market back after this. alerts -- wouldn't you like one from the market when it might be time to buy or sell?
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an interesting first hour and a half for trading you can see the nasdaq has turned positive. as for what we're going to be talking about this year, certainly growth, tax cuts, trump tweets we got the last jobs report for last year coming up on friday. steve liesman is back at our headquarters he's got a look at more of those factors that are going to influence the federal reserve as we kick off the new year steve. >> david, happy new year let's take a look at two scenarios for 2019, the optimistic one and one that's not quite so optimistic here i'm focusing on two forecasters out there, morgan stanley and action economics here's where we think we'll ending 2018 at 3.2%. big slowdown here forecast by morgan stanley down to 1.7, shave 1.5 points off gdp action is 2.6%
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what happens to the consumer and what happens to business spending take a look at the consumer. a much bigger slowdown for the consumer they don't see a lot of extra help to the economy coming via the tax cuts or the better jobs and wages we've had so they have the consumer going down to 2%. action economics 2.6 look at this big difference right here in the outlook for business investment, which again linked very closely to the tax cuts we think we're going to the 7 this year more or less, give or take 1.8, all the way down for morgan stanley, whereas action sees the tax cuts continuing to give off. here's a quote from morgan stanley's latest report. though a growth correction does not mean recession for the economy, financial markets march to a different drummer and may respond like they are in recession. another big difference between the two scenarios, morgan looking for a much bigger dropoff in government spending than action. action thinks the market has
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this wrong, that government spending will continue to help growth through the first half of 2019 other factors we're looking for are those tweets, the trade war, and the government shutdown along with oil prices. all of those, morgan, have the ability to affect gdp as we go on we'll have to measure that we started one place and we'll see what the ending is for the year, morgan. >> oh, we certainly will from one morgan to another morgan. >> you like the optimistic one better, right? >> i do. i'm always glass half full steve liesman, thank you. health care stocks were among the 2018 bright spots. the sector up around 4% for the year while nine out of 11 sectors closed in negative territory. so how will health care names look in 2019 joining us now, fred hassan. fred, happy new year. >> happy new year. >> >> taking a look at the health care stocks, the fact that they outperformed the broader markets last year, do you expect that to continue in 2019 and if so, why
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>> so 2018 you saw that health care was up 5% while overall the indices were down in mid-single digits that was not a surprise. it is a defensive sector but beyond that, there is a secular trend under way which is innovation in every part of health care there was innovation, even in data management, there was a lot of innovation. especially in pharmaceuticals. merck and pfizer really were the outstanding stars. they are at the top of the dow and that's in the case of merck driven by a very, very important drug, keytruda which grew and grew very nicely in cancer, and pfizer had a very good drug for breast cancer and autoimmune diseases so invanovation is the story gon forward as well. in 2018 the script for the pharmacy was written in that fda
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approved 59 new molecular entities that is double the average over the last ten years it's a fantastic run rate. this innovation is going to show itself in a very special way in 2019 so in spite of the volatility that you're seeing in a lot of other sectors, the pharmaceutical sector, besides being a defensive sector, is going to benefit from this innovation flow. >> of course one of the big questions will be how you price that innovation, right, fred you had the story in "the wall street journal" today dozens of drug makers raising prices on hundreds of medicines to start off the new year what happened to all these freezes and moves to reduce drug prices has that just gone away? >> yeah, these list prices can create a lot of headlines, but the reality is a little different. so if you look at the time when the average list price across the portfolios were, let's say,
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8%, the real prices that were going up were more like 2 because the rebates and discounts keep growing year after year in fact the drug makers are exercising a lot of self-control and self-discipline in terms of prices what used to be two price increases a year are now rapidly becoming a single price increase at the beginning of the year it is true that these don't look like very good headlines, but overall i would just say that the real price increases for the industry are close to zero and the growth in the future is going to be from innovation. that's really the story going forward. and fortunately, that's a very good story >> hey, fred, it's jon fortt, happy new year i'm curious, one of the things that you say about why you're bullish on health care is that the economy is good, consumer confidence is high what are the data points that you're looking for as the year gets going to point you to whether things stay good or whether there are danger spots
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does it have to do with trade? does it have to do with this government shutdown at all does it just have to do with the way earnings actually turn out >> yeah, that's a very good question because right now the consumer confidence is the best it's been in years the overall economy is growing 3% a year. it's really a very, very special time for our economy, we're doing very well. i would look for a couple of things first, i would look for the rise in the interest rates. presently there are some signs occurring. if those interest rates start to go up, that's going to create multiple compression we always know that, that that's the inverse of the rates that you pay. if that happens, then you're going to see some multiple compression. also that's going to start affecting the job situation and consumer confidence situation.
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i don't think it's going to happen in the first half the second half you might start to see some volatility i would personally not worry too much about the trade issues. i think it's not a large part of the economy. and i think they will work it out. there's a lot of posturing going on as far as the shutdown is concerned, sincerely hope it goes away very soon. it's going to start hurting. even the fda is not going to be able to approve new drugs. i think we need to get over it fast, as soon as possible. >> fred hassan, always great to get your thoughts. thanks for joining us. >> my pleasure as we head to break, take a look at the major indices, staging a little comeback here a lot of green after a major sell-off at the open stocks well off the session lows you can see the dow about flat, s&p up about 3 points, the nasdaq a third of a percent. we'll see if this turn-around can hold much more "squawk alley" still ahead.
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european markets closing in a few moments. seema mody joins us now with action that looks similar to what we've seen here the last hour and a half. >> that's exactly right, check it out a notable intraday reversal with germany, spain and the ftse ending in positive territory it's not just china. in fact let's highlight some of the european pmi data that came out this morning italy, europe's third largest economy, reported a contraction in its manufacturing sector for the third straight month france was weak due in part to the protests and sweden, while a much smaller economy, saw a sharp drop in its
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pmi number to 52 from 55.4, so that data underscores a trend of a slowdown in the global economy. it also raises questions as to whether the ecb can embark on a rate hike later this year. if growth continues to stall, that brexit uncertainty certainly has not gone away. similar to what we've seen here in the u.s., it's sectors in europe and stocks in europe that have exposure to china that traded down. here are the two banks, standard chartered and hsbc underperforming the global market global miners of also trading down you're looking at them all down by around 1% to 2% and european currencies, the dollar index may be lower right now but the european currencies, the pound and the euro, you can see significant weakness as well we have some more data coming out of europe in the next couple of days so that will be watched closely by investors guys, back to you.
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>> thank you, seema. now let's get to sue herera for a news update. sue. >> good morning, jon good morning, everyone here's what's happening at this hour six people were killed and more than a dozen others were injured after a high-speed train on a bridge connecting islands in denmark was hit by parts from a freight train which was moving in the opposite direction. if quitting smoking is one of your new year's resolutions, a new study says you may want to begin by cutting back on alcohol. researchers from oregon state university studied 22 adults who smoked daily and were also heavy drinkers as the men in the group cut back on their drinking, they ended up smoking less there was no change in the women, but researchers say their rate of drinking started low and stayed low. 22 bodies have now been recovered from the rubble of an apartment building collapse following an explosion in russia the blast is thought to have been caused by a gas leak. and go, get set, on your mark that of course is backwards,
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which is exactly how racer tracy mccullen says he is planning to compete in the wrightsville beach marathon in march. that's in an attempt to raise $100,000 for the local boys and girls club in wilmington we wish him the very best of luck that's the news update this hour, guys i'll send it back downtown to you. morgan. >> we do wish him luck sue herera, thank you. when we return, a new year but worries for investors. china trade tensions, interest rate hikes, slowing earnings growth as we kick off 2019 what about all the volatility? we'll take a look at the caution signs for wall street's 2019 road map right after this break. meantime the dow is only down 59 points, the s&p near t ft hela line and the nasdaq is higher. stay with us work, would you want the one the experts at rootmetrics say is number one in the nation? sure, they probably know what they're talking about. or the one that j.d. power says is highest in network quality by people who use it every day?
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welcome back to "squawk alley. a mix of the fed, china and earnings driving stocks lower in 2018 do the same caution signs from last year hold true for this one? dom chu is back at hq taking a look at the wall street road map for 2019 and those caution signs that investors should be watching at the beginning of this new year. dom. >> all right
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so there are a lot of potential catalysts for what could drive markets and they fall into general themes they're the same themes that have been playing out since 2018 let's put some dates on them for you so you know as traders and investors what to watch for. first of all, later on this week we've got a big jobs report as well as jay powell speaking and making public remarks. next week we've got trade talks possibly starting up with china. the week after that, january 14th, is the fourth quarter reporting season start, so watch those stocks there at the end of the month, january 30th, a big fed meeting with a press conference and look what you'll watch for in march the beginning of march will show that trade deadline with china and the trade and tariff discussion march 1st and then march 19-20 another fed meeting with this associated press conference so overall, guys, a lot of dates to keep an eye on and ones that
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could be potential trading catalysts. back over to you. >> dom chu, thank you. joining us now to discuss the technical levels investors need to be watching as we begin 2019, tom mcclellan, editor of mcclellan market report and a long-time top ranked market timer. tom, happy new year to you. >> good morning, morgan. >> you came armed with reports again today. let's start first with your thought on what the technicals are telling us in terms of whether we're in a bear market or this has just been a steep correction. >> a bear market is a long process. it's not just something that happens over three months. it's definitely not this rather silly idea about 10% or 20%. everybody needs to let that go it doesn't really help you know what the future will hold. but when people get worried about a bear market, that can be very useful. we just saw this morning that the bears are exceeding bulls in
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the -- the sentiment indicator i shared a chart with you about the number of google searches and google trends data for people looking at bear market on google it's head and shoulders above everything else we've ever seen in all of the history of searches so right now the worry about a bear market is at a huge maximum, which means that we're not likely to proceed downward from here. we're seeing the climax of that worry all arising right in december >> you also came with a chart that suggests that the 2018 stock market price drop was roughly on schedule according to the ten-year leading indication given by crude oil prices. that sounds like a very long lead time. explain this one. >> it's a fascinating leading indication, something i discovered a few years ago and it's been working since the dow jones industrial average was created in the 1890s if you take the price plot of
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crude oil, shift it forward ten years on the chart, you find that the same movements in crude oil show up ten years later in the movements of the dow so if everybody remembers ten years ago, we had a huge collapse in crude oil prices as part of the collapse in 2008, that bottomed in january of 2009, so the echo point for that is right now in january of 2019. crude oil rebounded y eed very y from that big sell-off and so we should expect to have a few good years for the stock market as the echo of what crude oil has already done. >> tom, it's the third year of a presidential election cycle. you see that that has some significance the market major indices have done pretty well in the third year why is that? >> well, usually, especially when you have a new president, they try to get everything done
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that might be a problem during the first two years. that way during the final two years they can go around the country declaring victory and saying look how wonderful everything is. >> so this is based on what presidents usually do? is that still going to hold? >> that is right on point because we have definitely a different kind of president now. but the third year has always been an up year except one time. that was in 1939 when we were on the brink of world war in that case the s&p 500 was down 2%. even in the crash of 1987, which was the third year, the market was still up from november to november, which is the way that we measure the presidential years. so i expect to that tendency is still going to work this time. especially when we've got such a nice oversold condition right now. >> tom, bond yields, the treasury, the 10-year yields, it moved back towards its lowest level in almost a year earlier in the session today when you look at that, do we go higher or lower from here based
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on what you look at in the charts >> here again, crude oil is a tell for the direction of yields, much like it's a tell for stock market with a ten-year leading indication in this case bond yields tend to follow crude oil prices with a three-week trailing lag time, so the big drop in crude oil has been the author of the big drop in bond yields we have one more drop to go after a little bit of pause for a few more days. we have one more drop to go to echo that final drop down to $42 a barrel the more that crude oil prices rebound as they seem to be doing again this morning, that means that once bond yields have that final drop, we should expect higher bond yields, lower bond prices as january unfolds. >> why that relationship between the two? is that because they both signal future economic growth or lack thereof? >> it's a fascinating question you don't really have to answer
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the question to use it it's been going on for years whether or not anybody knows why it works is not important as much as observing that it does work it's not so much that i think crude oil is causing the changes in bond yields, it's just that it is indicating what is about to happen. it's the same phenomenon that just happens to show up in crude oil prices first it's like when you have a big rainstorm in iowa, eventually you'll have flooding in new orleans but it takes a while for that lag time for the water to flow downstream. there's a river of liquidity that flows through the financial markets. it flows first through crude oil and then through other things, so it's great when we can get the answers ahead of time. >> tom, when we had you on back in november, you said that apple is the most important stock in the whole market, and that it could be signaling the way the market is headed apple has not been doing great as a stock since november. is it still the most important what is it signaling to you?
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>> well, more precisely what i was saying is when you have a disagreement between the price of apple and the dow or the s&p 500, usually apple is right about the direction that both are going to head. apple was weak and it did foretell all the weakness that we saw going down in december. it has rebounded a little bit since then with the market we don't yet have a nice divergence, a nice disagreement between them to say, oh, we should listen to one or the other, they're both doing the same thing right now the key is when you see apple and the s&p 500 doing something different from each other, that's when you get the important information. right now stock prices are all rebounding generally in a nice way and i expect that to be the story for a few more days. remember that january has some seasonal weakness from about january 4th to the 7th, down to about january 23rd, so that's still going to be part of the texture of this uptrend. not something that's going to interrupt the uptrend. we'll get everybody talking about how we'll have to retest the december lows and it's going
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to be a bear market all over again. when you hear that webeing the prevailing sentiment, you'll know the work is about done and we can start trending upward again. >> tom mcclellan, always great to get your thoughts thanks all right. we'll take a look at the leaders and laggards driving today's action next. you see the dow is down about 93 points first, rick santelli what are you watching today? >> you know, i'm watching how low treasury yields are compared to where they were just a few months ago we're going to talk about the global implications and the reoi touthat we' gnghrgh all after the break.
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i'm scott wapner here's what's coming up at the top of the hour. volatile start to the new year, but what will the next several months hold for stocks we're debating whether things get better or worse. plus, big slice to netflix' price target is this now a faang to forget? and john najarian has a stock that could make a big move we'll discuss that at the top of the hour, about 15 away. >> looking forward to it, scott, thank you. let's get over to rick santelli for the santelli exchange. hi, rick. >> good morning. the theme coming in this year is obviously some of the funk that's been in the markets that started basically in the fourth quarter, although we did have a bout of it not that long ago in february of last year. the issue is, is that the globe
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is slowing, and that could be the worst possible group of circumstances for any of the individual economies whose fundamentals look better than the rest, whether it's germany to some extent, the u.s. to a larger extent. domestic policies just lack global reach and the difficulty here is, is that the outcry of many of the conventional economic wisdoms force policy makers to either do more of the wrong thing or less of the right thing just think jay powell. what a no-win situation he is in we had peter bookvar on today and we think of where rates are. we probably all prefer it were higher it's such an ironic situation. i remember exactly a year ago we came in at a 240 yield in 10s and proceeded to add a lot of basis points on in the month of january. the topic was, oh, my god, the fed is going to continue to tighten, rates are going to continue to go up and that's it.
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but the stock market didn't seem to mind it as a matter of fact, the stock market seemed much more enlightened by higher rates with regard to its upside than it now seems with lower rates so obviously the conventional wisdom of how we feel from a retail individual perspectives, whether you're the president and you were a developer or you're out there and want to buy a house or you're looking to finance or take out a loan, everything seems to be associated with the notion that less in terms of rates is better but what we're all forgetting is that the market has a say-so, and market-driven rates higher are because the market censsenss that things are better now we have conclusions that we have problems with tariff, problems with trade, problems with politics, a hangover from stimulus in the u.s. based on tax reform, and individually they're all true but if we could magically fix many of those issues would we be left with a significantly better
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economy? that's the question. i'm not sure exactly how to answer it. and should the fed take heed of some of the pressures being placed upon it in this global setting, would it really fix the market if they paused? we're going to find out a lot more with regard to the arnsnsws to these questions in 2019 i just hope we're not shocked at how it all turns out jon, back to you. >> some of us will be shocked. thank you, rick santelli. after a down year, the bears perhaps coming out of hibernation. is a turn-around ahead for stocks in 2019 we'll discuss next first, take a look at some of today's laggards on the nasdaq 100. tesla, henry schein, netease among them "squawk alley" continues after a quick break. trade after the market closes. it's true. so all... evening long. ooh, so close. yes, but also all... night through its entirety. come on, all... the time from sunset to sunrise.
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i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools
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that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. major indices about flat this morning, dipping in and out of negative territory after closing out their worst year in a decade is another down year ahead and what will determine the path of stocks in 2019? mike santoli is on set with us with a closer look. >> you know, jon, there's a lot of factors to consider whether last year has anything to say about this year. you mentioned it's the first down year in ten, but it was a modestly down year the total return for the s&p 500 was a negative 4.4% last year. i looked at other years the past four times you had a less than 10% annual decline in the stock market it doesn't give you too much help in terms of saying what comes next 2000 was the last one. you did have a further decline
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through 2001 so that was one of the rare back-to-back negative calendar years it actually doesn't happen that often that you get consecutive bad years, but some of those other years had some nastiness before you got to that annual return so the beginning of that followin here is what i think is going to help us read what happens in the coming year. the market is still really oversold we built up so much fear and pessimism and negativity the bounce in the last four days is still with us you saw the resilience you can still burn some of that off in the form of a further bounce i do think that our earnings cuts are priced in we're looking at this consensus for 7.8% this year the multiple is at 14. is the market already pricing in something worse than 8%, or is the process of reducing earnings estimates going to be painful enough that stocks don't take it well what's the cost? the cost of an idle fed, the bond market is attempting to raise rates all year
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how much -- how bad do things have to get in the real economy, the global economy, the financial markets for investors to be correct about that fed being on hold? i think that's a big one we talked last hour about the credit markets they've really been the beacon they have maybe made a gesture at firming up in january so all that stuff is in the mix right now as we have, by the way, 6% down year in price in terms of the s&p last year but up 6% in four trading days so you tell us which matters more >> this is not a potential trend in the making but interesting to note so many of last year's big losers are having nice days whether it's ge or facebook or goldman sachs. i notice all are up. >> and that was -- that is kind of the traditional january effect, so to speak, the losers get lost it was one of the more active years we've had in a long time for that activity. also people are saying people would have sold out of active
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mutual funds and bought etfs if you wanted to take the tax loss. all of that activity will be reflected today which kind of tells you that one day, the first trading day, isn't indicative ge, boy, poster child for beaten down, getting a bounce >> above $8% 6% >> we saw a lot of firsts last year common, historical trends didn't hold true. how important do you think the january barometer will be? >> it's unclear to me. we didn't see the january barometer work last time i do think one key you might watch is does december's low hold in january or the first part of the year that's a more obscure one. we are about 6% off the december low. you did break the december 2017 low in the first part of 2018. there's this sense if you can't call the end of last year some kind of a base, that's a problem. perhaps more so than january one final point on that, morgan,
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the last time you had a really nasty slide in january was 2016. right? you were continuing weakness from 2015. the worst three weeks of the year to start a year january 2016, that was the beginning of a pretty important low in the market. >> that's if you don't count -- last year february was crazy >> absolutely. >> you missed it by a couple weeks. how does that factor in the beginning of the year volatility if we artificially say january is its own universe and we don't count february >> last year the market was like in complete melt down mode for three or four weeks to start the year it didn't really help to you anchor to that activity and say this will be indicative of what happens this year. that's why i feel like one of the benefits in my view of last year was you did wipe away a lot of these rules of thumb and kind of seasonal things that always are supposed to be in the background but just didn't help you very much. >> mike, thank you
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>> see you soon. as we head to break, take a look at shares of tesla. why the stock is getting crushed this morning it's down 6.5% biggest drag on the nasdaq 100 that's next. more "squawk alley" in less than three minutes.
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welcome back shares of tesla hitting the brakes as q4 deliveries came in below estimates. the stock is trading down more than 6.5%. phil lebeau is in chicago with more on the morning's move lower. >> reporter: it's not only deliveries coming in shy of expectations but a price cut as well as production less than they forecast it it ended up that they produced 86,555 that was shy of what many people were expecting when you look in terms of their deliveries they have been steadily growing and the model 3 deliveries picking up steam going up to 63,150. the total number in the fourth quarter was shy of the expectation of 92,000.
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tesla said we're cutting our price. as of january 1st tesla has officially crossed over the threshold where it can no longer offer the $7,500 federal tax credit to buyers that goes down in the first half of this year you take a look at shares of tesla, a note from rbc capital it is cutting down to 290 in part because you have the $2,000 price cut going into these vehicles which raises questions about gross margins as well as demand this is something we'll see a lot of analysts and investors in the first we're. >> what's concerning about these production numbers the fact you did have the tax credit you
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would presume to see, maybe some of those moved forward and aren't suggesting that >> reporter: sure. elon musk was tweeting even on new year's eve, the stores are open until midnight. go in there, buy a model 3, a model s, whatever it might be. buy that vehicle and qualify for the $7,500 federal tax credit, and there was thought perhaps we could see a pull forward people who thought i'll do it early next year, let's do it in 2018 what will we see in the first quarter in terms of deliveries and sales. >> phil lebeau from chicago, thank you. as we head toward noon all the major indices in the red right now. not nearly as far down as they were earlier in the session. the dow down about 105 points. s&p down about a third of a percent.
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nasdaq down fractionally semiconductor stocks are doing well >> the dow was down almost 400 points earlier we saw the losses paired when crude turned positive. wti is now about 4%. there seems to be once again today that correlation between equities and oil >> indeed. david, thanks for sticking around that will do it for "squawk alley. let's toss it to "the half." jon, thanks. i'm scott wapner will a new year bring new relief for your money stocks fighting back this hour is the worst over? it is 12:00, noon. this is "the halftime report." and we're off. trading is under way in 2019 with a lot of questions, concerns, and angst from 2018. washington, the fed, but, most of all today china as activity contracts for the first time in 19 months. what it means for the big caps we're talking about caterpillar,

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