biotech space, beaten for a long time. >> metlife, unusual call activity. >> 75 cent dividend, 125 of earnings, moving on. >> columbia broadcast system, cbs. >> buying a little gold is not a bad thing. >> thanks for sticking around. clemson. >> nice. >> that does it for us "power lunch" starts now >> i'm melissa lee apple firing off a major warning shot to investors around the world. cutting its revenue outlook for the first time in years. ceo tim cook speaking exclusively to cnbc, blaming china and the trade war. but do apple's problems go far beyond that? stocks tanking on this apple news, weak manufacturing data adding to the sell-off, but job growth is soaring. what do you do with your money from here? we have some answers and a blockbuster deal in biotech bristol-myers buying celgene for $75 billion, both stocks are moving big time right now. what this means for the health care space and who could be the next takeover target "power lunch" starts right now

hi, everybody. welcome to "power lunch. i'm kelly evans. we have a major market sell-off this hour. the losses accelerated after we got weak manufacturing data this morning. we're off the session lows now the dow is down 675 points earlier down 423 now 100 points of that is apple. the nasdaq is back in a bear market it is down more than 20% from its recent highs small cap russells, dow transports are even deeper into bear territory and within the transports, airlines are causing the most damage today check out delta, american, alaska, united continental, all taking big hits. delta down more than 8%. we'll tell you what is going on with all the stocks coming up. good day, everyone welcome. i'm tyler mathisen we're all over the major market sell-off at this hour. seema mody is following the money from the floor of the new york stock exchange. josh lipton on the ripple effects of apple's warning to the world and the -- one of the

president's top economic advisers will weigh in on the impact of the trade war on apple. let's begin with seema at the nyse hey, seema. >> good afternoon, tyler we started the day down about 300 points on the dow and losses intensified once we got that ism manufacturing report it certainly did inspire market confidence the lowest reading since november of 2016 i'll add to that, apple and china concerns those are the three factors the market is paying attention to today. no surprise, the broader tech index down 4%, followed by materials and industrials. companies with notable china exposure, many of which are housed in the cnbc china index we made. caterpillar, boeing trading to the downside these china concerns are not confined to just stocks. look at copper, that's getting a lot of attention here on the floor of the new york stock exchange a nearly two-year low, that's weighing on the global minors. and the australian dollar, seen as a good china proxy, has come under pressure

the china story playing out in different sectors, in different assets in terms of what is working for this market, about four stocks on the dow trading to the upside, png, walmart, coca-cola, stocks that have a certain defensive tone to them look at gold it is approaching $1300. and the japanese yen, kelly, now gained 7% in the last five trading sessions that tells you how investors are positioning themselves back to you. >> a surprise to see that big move in reaction to the apple news too, seema. thank you. seema mody for us. more on the big stock story of the day, which is apple. shares on pace for their worst day in nearly six years after cutting guidance josh lipton joins us from san francisco with more on this and his exclusive interview with apple ceo tim cook, josh >> kelly, a very rare move here from apple the last time it issued a guidance warning was in 2002 i sat down and did speak with tim cook in an exclusive interview where i asked him about the decision to slash

guidance he pinned it on the iphone and primarily problems in china. take a listen. >> as we look at what's going on in china, the -- it is clear that the economy begins to slow there for the second half. and what i believe to be the case is the trade tensions between the united states and china put additional pressure on their economy. and so we saw as the quarter went on a things like traffic in our retail stores, traffic in our channel partner stores, the reports of the smartphone industry contracting, particularly bad in november, i haven't seen the december number yet. i would guess that that would not be good either and so that's what we have seen. >> today the street reacting, a wave of analysts slashing their price targets, 12 and counting here from morgan stanley to citi, from jeffrey's to goldman

sachs, goldman even comparing apple to nokia in a note to clients. the one upgrade we can mention too, news street to neutral saying they don't see reasons for apple to underperform further this year, dow jones, the average target is at a nine-month low back to you. >> josh, it is interesting what tim cook said in november about china, not falling into the category of slowing sales like other emerging markets like brazil, for instance and then in your interview, clear china was slowing in the second half of the year. was there a huge element of surprise -- did things material -- materially deteriorate in that basically month and a half since tim cook said china didn't fall into that category, and it seems like he's sort of contradicting himself when he also says that it was clear that china started slowing the second half of the year. i don't know what to believe >> so, yes, so when you give that last conference call, he did call out the emerging markets. emerging markets, they included

turkey and russia and brazil at that point, he had said china, greater china looked very strong clearly, listen, cook and company, apple were surprised by these trends and you heard that the -- the trends he was talking about there, they were caught off guard, clearly by the weakening economy there, they were caught off guard by these rising trade tensions, which is he says is impacting talk to analysts too, they'll say there are other things going on in china as well. they'll say pricing is an issue. they'll say replacement cycles are lengthening in china people are holding on to their phones longer. they'll say local competition is getting stronger there are a wave of challenges that cook is dealing with there. >> josh, thanks, great interview. josh lipton in san francisco josh mentioned tim cook blaming slowing sales in china and the ongoing trade war for the outlook. but do apple's products go deeper than that let's bring in amitt darwani and tech investor paul meeks,

beating the drum on apple's problems for a while now great to have you with us. amitt, you're among many analysts on the street who slashed the target cuts. do you believe what apple is telling you about china? the fact that tim cook came out and said china is falling into the category of other emerging markets in november and take the guidance and pin it on china now, are you getting a good sense of what the company is seeing in china? >> i'd say what they're seeing in china clearly, you know, happened last 30, 45 days and i argue if you look at other data points, auto sales in china, they all are showing a deceleration directionally i get the logic on what he's doing and what he's saying i think there is a second half of the problem which is that they raise prices too far, too much, with not enough innovation and that's perhaps forcing people to hold off on buying the phones, especially the iphone 10

r. i get what they're saying. i think the element of less innovation, higher pricing that is driving some of the head winds as well for them. >> apple had been pursuing a strategy of raising the average selling price almost religiously, paul. and in a market like china, they had already been losing market share. i think that's what people sort of forgot more broadly that is the local players have been gaining on apple as well as samsung. do you think that this is an apple specific problem or do you think apple is using china hardly as an excuse for the revenue cut? >> i think that apple's problems are much more serious and more apple specific than macro economic if i was to roughly calibrate it, i would say 30% macro economic, china, u.s., tariffs and trade war, and the 70% apple specific so i believe that ceo tim cook's remarks last night as far as the

underinnings to lower revenue gi guidance were a bit disingenuous. >> what makes up 70% of their serious problems >> well, first of all, the smartphone market is maturing. very much like the pc market, we went from the '80s and '90s to the internet era of the 2000s. >> you say that, do you mean that the old model, where everybody felt eager and compelled to upgrade every two years, is passe? >> yes, sir. i believe we'll stretch out to these upgrade cycles and also just as the other contributor mentioned, we have a situation where at some point there will be a pushback on price and we know that the iphone, at least last quarter, had zero growth with units year to year so going forward, all the growth must come from continued increases in average selling price. and at some point, unless that phone is also going to polish your shoes, particularly in the

emerging markets where folks aren't that wealthy, you can't charge over a grand for a cell phone. i think that is a very big issue. >> does apple have a second act beyond this smartphone, paul >> well, everybody talks about the services business and i give them kudos for building that but it is going to have to get a lot bigger and feature within the services sleeve more proprietary content. and they crow about cloud revenues, but the bulk of the revenues are passed through from the app store. at some point those revenues could be at risk they need proprietary content. i think what they should do is make a fairly large game changing acquisition to get there. >> amitt, you also cover some of the suppliers and they're getting shellshelliced on the bo apple's warning.

do you think there is more downside ahead for some of these suppliers? >> yeah, i'll say broadly for apple for the supply chain, i think the question and the risk you have now is there another leg in estimates it is unclear what is happening. but i would think, i would imagine the supply chain would have to deal with a sizable -- >> it is unclear what schaaping when it comes to the march guide? it seems like you're unsure whether or not they'll be able to stick with march guidance that seems like a long runway for potential underperformance versus the broader markets >> on the supply chain side i think the question is how much inventory will the supply chain have to contend with that will be a supply chain

issue. for apple, the stock dropped around ten times earnings. that today would take the downside at 120. stock sat 145. the upside on 15 or 16 multiple is $200. risk/reward it is attractive >> paul, real quickly, you mentioned the game changing acquisition for apple. what would that look like? >> one of the high position candidates i've always liked and their prices have come down too is netflix and apple, with such a powerhouse balance sheet, could pull it off, where other companies wouldn't have the balance sheet strength to do that. >> wow that would be game changing. guys, thank you, both. >> amitt, and paul. one of president trump's top economic advisers is weighing in on apple hans nichols joins us live from the white house with more on that >> you heard from the white house today, they're looking at this apple warning and they're

seeing it as evidence that their policy on china, putting pressure on china is really working. they're not overly concerned with the day to day movement of equities they think that china is really starting to feel the pain and especially on the consumer side. and that gives them some optimism that the chinese will sue for peace in the broader trade war. i mean, they're fighting so -- against so many fronts here at the white house, you talk about the government shutdown as well, they're already teasing out what a two-week furlough, two-week shutdown would do to the overall gdp number listen to how kevin described that >> our estimate is that gdp could go down by a tenth. >> how long is that? what is factored into that what is priced in, a two-week shutdown, a two-month shutdown >> that's a tenth gets to if it resolves by next week. >> okay. if it goes into february, how much more would we see in gdp drop >> i would guess it is going to be something like a rule of

thumb, every two weeks is a tenth. >> they are prepared to endure quite a bit of pain to achieve their political goals. whether or not with the shutdown and forcing democrats to pay for border security, the wall, as the president says, or as it has to do as it relates to china and the overall trade war. that delegation is heading over there. this is a white house willing to endure some short-term discomfort kelly? >> thank you, hans hans nichols for us. kevin has et will join us live tomorrow on "power lunch." we'll have much more on the impact of the trade war with china on american companies and business men and travelers that will be at 2:00 p.m. eastern time right here tomorrow >> we look forward to that we have a big warning from apple. weak manufacturing data. also adding to this sell-off, which is now at 467 points on the dow. flip side, we have a glblowout d jobs number. how do investors balance all the news that's the art of the deal today. lisa ericsson is senior vp and head of the traditional

investments group at u.s. bank kevin mon, president and cio of hennian and walsh asset management welcome to both of you kevin, i see in my notes you think 2019, hard to believe it right now, today, at this moment, is going to be a better year for equities than 2018 was. why do you say that? >> it should be. if you look at the strength of the underlying economy, once again, we have -- we're at an academic definition of full employment a confident consumer that spent pretty aggressively during the holiday shopping season. >> the economy is slowing. growing but slowing. >> that's the theme for the new year earnings growth rate will slow economic growth rates will slow. but they're still growing and if we get a more dovish fed as the result of that slowing, that could be constructive for stocks in the new year. >> do you see it that way, do you see it as maybe stacking up as a better year than 2018 was

>> we're constructive on the u.s. economy for many of the same reasons that kevin talked about. that should be positive for equities as we look at our economic dashboard, the majority are actually still in positive territory, indicating continued growth while that rate of change is slowing, again, when we look at the overall picture, it is a solid one. in addition, you got a nice number on corporate earnings, again, while it is not going to be at the same pace as it was in 2018, it is still at a very healthy 7.8% projected for the s&p in 2019. which is very good, given that the fact that the tax cuts have run off. and on top of that, now you have some valuations that are more compelling so factoring in as of the end of yesterday, around 16 times, trailing 12 month earnings, versus a historical 25 year average of around 19.2 so you've got some nice conditions in store for equities that being said, we are keeping

an eye on some of the ongoing issues as you do note there are some indicators that are decelerating so we're continuing to watch that pace in the first quarter as the economic data continues to come out. and as first quarter corporate earnings report. >> how do you think about earnings wasn't apple the rude awakening to wall street, signaling earnings estimates might have to really come down and come down, you know, magnitude, magnitude that people weren't expecting. how do you think about earnings estimates and how they should be -- >> there say lot of companies beyond apple that do a lot of business caterpillar, general motors, boeing they all sell into that market big time. >> and i think some of the issues are apple specific as the previous guest alluded to, but i think it does highlight three of the major head winds facing the markets now. tariffs in and u.s. and china trade negotiations as we spoke about, a strengthening u.s. dollar, which could be affected by what the fed does or doesn't do in 2019 and the pace of

global economic growth however, i think apple's warning in addition to the last two data reports we have got out of china and the u.s. today may bring those two parties together, and perhaps we'll see some form of a trade agreement in the first quarter of 2019 and that could certainly help propel the stock. >> do i want to -- if i'm a buyer of individual companies, i do want to lean towards individual companies that do most of their business here in the united states and stay away from the big multinationals that might be exposed either to trade tensions or global slowdown? >> well, in the longer term, we continue to believe actually that the best place to focus your equity assets is really in terms of the technology industry, notwithstanding some of the apple profit warnings and also an area like consumer discretionary. the reason for that is if you move past some of the risk off sentiment, favoring more defensive sectors, these two

sectors actually have a number of nice topdown trends that are supporting them. you've got this switch to cloud computing, anywhere, anytime spending, increased use of technology those kinds of things. so those companies that are able to shift on to those bigger picture themes really have a tailwind at their back in addition, you have a number of individual industries and companies within that that are known as disrupters and able to take advantage of change and earn very nice returns on capital. again, for the longer term, we would see those as areas to park your money >> all right, lisa ericsson of u.s. bank. kevin mon of hennian and walsh, thank you very much. we have a huge deal in the pharma space today bristol-myers buying celgene for $74 billion, the biggest health care deal of all time. much more on this megamerger coming up with big moves in those shares and big moves in the total market now the dow is down 568 potsin right now, "power lunch" will be right back

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i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools 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. welcome back the deal rocking the biotech world today, it could make the combined company the fourth biggest u.s. pharma company. bristol-myers announcing plans to buy celgene for $74 billion in cash and stock, paying a 50% premium to yesterday's closing price. shares of celgene surging at the open by 32%, up 22% now. bristol-myers stock going the other way to its lowest level in about five years that's affecting celgene because

of the price of the deal what could this mean for the future of deal-making in biotech? let's bring in ronnie gow at bernstein. welcome, ronnie. >> hi, everybody >> what is your first thought about this particular pairin and what else may follow in its wake >> so i cover celgene and for them this say really good deal they were facing a big risk on their own from the patent expire on the biggest drug revlemade. this takes the risk off the table. we were thinking that deal will settle now this is sitting in bristol's corner this e corner bristol is essentially assuming significant risk here. their share holders were asking why are they doing this, why are they not waiting >> why do you not like it? you cover celgene, but if both of them face maturing businesses and this is a combination to try to get at the future of pharma, why do you think shareholders are so upset

>> so the reason bristol-myers likes this deal, it offers them two things first, they're very focused on oncology, lung cancer, largest drug, and what celgene brings is diversification into the very adjacent area of hematology. so bristol's oncology, celgene hematology and they fit together quite well very good overlap in the logic and organizations. they like it for that reason also diversify them to a set of other issues the biggest problem for bristol shareholders was the neither patent decision on revlemade 40% of evaluation difference makes the shareholders of bristol very, very nervous they specifically did not buy celgene for that very reason. >> is there a buyer for gilead is there somebody who can buy an

$85 billion company in today's current market rate? it is trading higher as if perhaps this deal makes it more likely it will be taken over as well. >> yeah, i find that hard. there is no good -- no good match for them it will have to be like a pure financial transaction. and i guess most boards and pharma would ask what are we bringing to the table that the good people of gilead did not have on their hands to make that deal >> i assume that what bmy is buying here is a pipeline from celgene, particularly in the car t area it seems like they paid a very, very rich price and they need some home runs what if they don't get them? >> the stock is telling you that, right? so the issue here is that they have paid a nice price for the pipeline with some assumptions around revlemade if it breaks their way, great. if someone overtakes celgene,

they would have made the wrong decision here. this has two or three years to play out there are a lot of smart people in both the companies that know something about oncology and hematology and they can produce more than the two companies separately this is -- what will take time to play out. >> thank you for joining us today. 25% gain on celgene today helping boost the beards town ladies and our stock draft they have apple as well, down 12% since the draft. their standings tightened up a little bit but the kicker has a lead over the beards town ladies with a month to go before we crown the ultimate champion. nick lowery, i don't know, up 10% at this point. >> i'm surprised >> only a month left it seemed like yesterday that we did that, right? >> i know. time flies when you're having fun. >> crazy coming up on "power lunch," much more on the sell-off, which is steepening as you see there

the dow now back below a 500 point loss down 541 apple, having the biggest impact on the dow not in a good way. the usual suspects when you talk about weakness in china also dragging down the dow. that would be boeing and caterpillar, which we mentioned before, 3m is along for that downward slide and the app warning, having a big impact on chip stocks. they are lower but apple not the only warning we're watching delta also out with weak guidance that is hurting the airlines much more t mke aonheartss "power lunch" returns for a thursday

hello, everyone. i'm sue herera a new congress is getting to work today their first order of business, electing a new speaker of the house. that's a live picture of that vote, which nancy pelosi is expected to win, making her one of the few to be elected to the speakership twice. >> mike pompeo is warning iran to reconsider several planned space launches that technology is virtually identical to the technology used for launching ballistic missiles and would defy a u.n. security council resolution, something

iran's foreign minister denies workers at spain's biggest amazon warehouse walked off the job this morning ahead of that country's biggest gift giving holiday. three kings day, on sunday workers were demanding better pay and labor contracts. and here at home, the national parks are starting to really feel the effects of the partial government shutdown. rangers at yosemite are being forced to close certain areas due to the pileup of trash and human waste along high traffic areas. the parks are losing $400,000 per day in visitors fees you are up to date that's the news update at this hour ty, back to you. >> thank you very much. let's check in on the sell-off at this hour. stocks tumble on apple's warning and weak manufacturing data out today. the dow was down more than 675 points at its low. right now down 528 as you see there.r

apple, that's 90% of the dow's loss kelly, over to you. let's get to the bond market where the ten-year yield has been plunging. rick santelli tracking the action for us from the cme >> deja vu of january of 2018. but going the wrong way, if you look at an intraday chart of two year note yields, you see what all maturities look like, down five basis points no yield bounces. the two-year is only comp to mid-2018, june if you look at 5s, 10s 30s, one year as you see on this ten-year chart. and all maturities are down roughly five basis points. no curve implications today. the real action continues to be in foreign exchange, you can see the dollar yen there, we're comping back to april of last year and other relationships with that carry currency, all

the shorts had to cover so quickly are in a bit worse shape, whether the euro versus the yen or the pound versus the yen. finally, the dollar index itself has been the antagonist to many of the multinationals. although it is the volatility that really should get you as you look at this chart, back to june of 2017, the last two and a half months we have been in a range between 96 and 97 1/2 and that range is really been choppy, but very contained so you can see we can all talk about the dollar being a negative factor for multinationals but hasn't gone anywhere since about the end of october. melissa lee, back to you. >> great context, thank you. rick santelli. here's what's coming up, auto sales falling in december despite a strong 2018. is the industry about to hit a speed bump congress is back to work with democrats now in control of the house. can a deal be reached to reopen the government 2018 was the worst year for

manhattan real estate since the financial crisis l ishe"pereak that story down. alth wn ow lunch" returns.

december auto sales are out, phil's got the numbers phil lebeau. >> tyler, the numbers are not going to be real strong compared to december of 2017. that's why we need to look at fiat chrysler, toyota and ford don't get caught up in whether or not they're up or down relative to december of 2017 take a look at the overall strength of auto sales for all of last year, we're going to get the official number in the next couple of hours, it is likely going to be just a smidge higher than 17.2 million for 2017 fourth straight year over 27 million. should be good news, right look at shares of general motors not a good day if you're a gm investor stock down more than 3% today. why? doesn't matter that their u.s. sales dropped 2.7% the concern is gm's biggest market, china. when you look at general motors, people are saying, wait a second, if apple is a slowdown in the consumer demand in china, does gm see the same thing the sales were down 15%.

we'll get the q 4 sales numbers from gm china sometime likely in the next seven to ten days and for adam jonas, the analyst at morgan stanley who covers the auto industry, he says what we're seeing in china should be a real concern for auto investors. >> the run-up to the detroit auto show in a couple of weeks, very sobering, and we think that the detroit show is going to be kind of an all you can eat buffet of potential profit warnings from suppliers and oems alike. focused on china >> that last part is the important part on china remember, china is the engine, drives a lot of the world's economy, it drives the auto industry, largest market, more than a third in terms of sales and production come out of china. and that's the concern, what might we see from general motors and other automakers in terms of a slowdown in sales in china >> all right, phil, thank you. phil lebeau in chicago. apple cutting its revenue forecast on weak china sales

let's bring in david riddle, president and founder of riddle research group and nathan resnik of sourceify you've been a long time china watcher. we have seen the data deteriorate out of china and getting the corporate warnings when it comes to what they're seeing on the ground there how concerned are we should we believe there is much of a downside to go given what u.s. corporations are telling us or vice versa, say that -- believe the worst is behind and u.s. corporations are only feeling it now in a delayed fashion? >> well, china has a lot of a arrows in its quiver it has $4 trillion of reserves, a very malleable and compliant citizenry, the ability to control over 50% of gdp is in state control or government linked companies they do have a lot of levers we are seeing the pain of the

kind of blunt force trade moves that the republican administration has put on. it hurts everybody and that's the pain that apple and as we heard gm are going to start to suffer. >> what are you seeing on the ground, nathan you go to china very often and a state department put out a warning for citizens traveling to china it is shocking to think all u.s. citizens should heed this warning. chinese authorities have asserted broad authority to prohibit u.s. citizens from leaving china by using exit bans, sometimes keeping u.s. citizens in china for years. this is going to make it a lot harder to do business in china >> a bit i think right now it is more of a cautionary warning i think you always have to be cautious when traveling internationally. i think right now especially kind of with the trade tensions going on, and what happened with huawei's cfo in canada, our u.s. government is putting out this travel warning to forewarn business travelers to china. i was in beijing last week, with

all business travelers, i think it is fine but definitely be cautious on the road. >> how much of apple's woes are attributable to the macro slowing, trade related issues we talked about how much of it is that apple outpriced the market, the consumer market there, and how much of it is that maybe, just maybe chinese consumers, amidst this trade tussle, are feeling a little less comfortable sporting an american icon product >> i think you hit the nail on the head with the last comment there is a real wave of nationalism taking place under president xi jinping, one of his real mantles for growth and for solidifying his power in the country. they have shown an incredible ability to enflame nationalist tensions against japan, over disputed islands against south korea, over disputes of missile systems, and american brands really do need to be aware of that once that national switch

gets flipped, it can have a huge impact on brands like starbucks, like apple, like gm, as chinese consumers can turn to home grown alternatives, that they feel are just as good if not better. >> and nathan what does it mean for travelers with the u.s. saying we should be cautious about traveling to china >> i think with business travelers you have to watch out and be on your feet. from being in beijing last week, you see a lot of chinese consumers now trying to support more local brands like huawei or showme >> david, you mentioned the chaedz government has a lot of arrows in its quiver when it comes to fighting this sort of slowdown don't you think they have been implementing, using some of the arrows so far and maybe we haven't seen the impact maybe it is a deeper problem than just

rolling out more stimulus at this point >> they have been pretty cautious so far in terms of their stimulus there have been strong calls this week for them to focus on the neither need for additional liquidity, fiscal measures, things like that a lot of things they can do to pay import duties on behalf of their companies and consumers. they can support the economy and the stock market and property market in a variety of different ways so we really haven't seen too much of their policy options in play quite yet. >> all right, we'll leave it there, thank you for your insights david and nathan the trade war with china now hurting major american companies like apple does that put pressure on the president to get a deal? even an inferior one moments ago, a new congress was sworn in first order of business, the government shutdown with the house now in the hands of the democrats, will the president have to compromise on the border wall too "power lunch" will be right back what do you look for when you trade? i want free access to research. yep, td ameritrade's got that.

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the government shutdown now in its 13th day. but today, congress is back and the democrats have fresh control of the house of representatives. what does that mean for finally getting this matter resolved ylon mui joins us now from washington >> the vote appears to be ongoing, but the title could be hers within just moments she took to the house floor with her kids there, all nine of her grandchildren attended, she had some celebrity guests there with her. a real celebratory mood in the house for the democrats at least. but we will see how long this festive mood lasts mitch mcconnell is already girding for battle with the new congress just two hours into the new session. he said he's going to stand his ground on the shutdown >> i've made it clear on several

occasions, let me say it again, the senate will not take up any proposal that does not have a real chance of passing this chamber and getting a presidential signature so let's not waste the time. >> mcconnell saying there he's not going to bring up to the senate floor any democratic plan to reopen the government that vote is scheduled to happen in the house later on this evening. and i also want to point out one other important vote that the house intends to take, investors should watch this closely because the house intends to pass a rule that would automatically raise the debt ceiling once they pass a budget. this is important, because it would remove the debt limit as a bargaining chip in future spending and future budget negotiations so democrats here trying to sort of move past all of the nuts and bolts of legislating, they say they want to get on with their big agenda

back over to you. >> who are the celebrities >> tony bennett is there, tim gunn, you may remember from "project runway" and mickey hart of the grateful dead is in attendance >> tim gunn. >> okay. >> fame is not just for washington. >> that's range. >> thank you, ylon mui on capitol hill for us. apple warning about sales in china, may be a possible sign of fallout from the trade war let's get more from tom frado, and jeanne cummings at "the wall street journal." welcome to you both. >> thank you for having me. >> tony, let's start with you. how big a deal do you think this apple warning is in context of our relationship with china? you think it will make it more likely we try to come to some kind of agreement with them or they have the pressure from a slowing economy, maybe they have to come to a deal with us. >> i the pressure is on both

sides. hearing to people refer to what is going on as unintended consequences may have been unintended, but not unexpected everybody who said if you take these actions with tariffs and cause maybe potential slowing down in both economies, it will impact the kind of firms, i don't think there is a real great realization in the united states of just how important a market is to china for a lot of globally active u.s. firms see it with gm, gm makes more cars in china and sells more cars in china than they do in the united states. it is an incredibly important market it does put pressure on both sides. >> apple is probably trying to say, hey, it is not just us, it is a relationship between the two countries. we have more from ylon. >> nancy pelosi has officially received the votes she needs to become the speaker of the house. she will reclaim thatgavel onc again. one of the only lawmakers to be speaker of the house twice

one of the few women to hold that seat. nancy pelosi, speaker of the house. back to you. >> it is official. thank you. what does this mean as democrats take control of the house, switching gears here to talk about the government shutdown, which is still going on. how does this complicate the ability to get things back up and running? >> it is already complicated and now it is going to get worse there is going to have to be a negotiated agreement and it was always the case because of the need for 60 votes in the senate that this had to be a compromise. but now democrats have the opportunity to drive the agenda and to put forth their own proposals. and that's why nancy pelosi is not backing down on the vote later tonight. the democrats are going to vote on a version of a bill, these spending bill, that they deem acceptable and the strategy also is to put pressure on the president and the senate because these bills

already passed the senate. and it was the president who then stood in the way of the deal. >> and that remains the case, jeanne mcconnell is saying he will not put up anything for vote that the president won't sign. >> absolutely. mcconnell's not going to make -- put his senators at risk again they got blind sided by the white house once he's not going to do that again. but the problem that we have right now is that there is no pressure point that would force them to take action. oftentimes shutdowns are associated with a debt ceiling increase and that puts a ton of pressure on the white house and congress to end a stalemate we don't have that here. and so this could linger for some time. >> so, tony, jeanne says this could linger for some time a lot of people are coming around to that thought usually a stalemate like this, one side has to get something, the other side has to get something. what could the president get that might satisfy him, what could the democrats get that might satisfy them >> i can imagine at the end of

the day, you get to the point of enough tales of woe from the shutdown building up that both sides can say, we have fought the good fight and now it is that time to either capitulate or to come to some negotiated agreement. i could imagine that includes some money for some wall activity, whether fence or wall, border security, however way they package it. but if i'm the democrats, i expect they will probably ask for additional work on other areas in immigration because straight up funding for the wall has exactly zero votes. >> maybe there is some support somewhere for the idea of funding that will enhance existing barriers, right >> that's right. that's something icould see, but not until the very end democrats if they get to that point where they are going to give in any any funding for the wall, they have other problems on immigration, first is the -- taking care of the dreamers and second is the administration is

also severely cut down on legal immigration into the united states and democrats want to see that halted. they have some asks on the immigration front as well. >> all right, guys, thank you both tony and jeanne joining us this afternoon. coming up, manhattan real estate has been seen as a good investment but now prices are falling fast just breaking through a big milestone. and much more on the market as apple's warning triggers a tech tumble take a look at all that red on the screen celgene, of course, being bought out by bristol, leading the s&p 500. "power lunch" will be right back there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪ we don't bake. ♪ opportunity.

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that's why we have 2-hour appointment windows, including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. major milestone for manhattan real estate. not good news. robert frank joins us with the sobering stat. >> the fifth straight quarter of declines in manhattan real estate, capping the worst year since the housing crisis of 2009 new report shows average prices down 4%, but total sales down 14%. the median price for a new york apartment fell below 1 million bucks, but the average still pretty pricey, just under 2 million. and it is not likely to get better anytime soon.

oversupply, especially at the high end, combined with a lack of foreign buyers, tax changes that make it more expensive to live in high tech cities like new york and these volatile stock markets are keeping buyers on the sidelines but the most expensive sale in manhattan last year was by vacuum cleaner mogul james dyson, he bought the penthouse at 520 park avenue for $74 million. >> thank you very much >> thank you. coming up, we have all got angles, all the angles of apple's warning covered. first, what other companies are doing business in china and are saying about the impact of the trade war and the affect on them and is it really all china's fault? does apple have other issues, especially with respect to iphones? and we'll tell you which big investors are getting hit the hardest in the apple sell-off. the second hour of "power" starts right now with the dow down 567 air velocity is reading at fifteen fpm. why would you need to learn every detail about a company?

firmness... nine. it's how ibm services helps retailers around the world drive growth and save millions. he's very into this. yeah. is that the standard amount? yes. feels good. when your partners are obsessed with business and technology, you can put smart to work.

good afternoon, everybody. i'm tyler mathisen welcome to hour number two of "power lunch." apple, the big warning to the world last night, the tech giant slashing revenue outlook, the stock, boom, down on pace for its worst day in about six years. we'll talk about where apple goes from here and which other

companies might feel the pinch as apple has apparently from trade tensions weak u.s. manufacturing data adding to the sell-off today and despite that, one top market watcher said this could still be a good year for stocks and thinks apple could outperform the other f.a.n.g. names and airline stocks getting slammed today, following a warning from dell to the sector struggling down more than 20% over the past year is this another sign today that is of a bigger slowdown? second hour of "power" begins right now. >> and welcome to "power lunch." i'm melissa lee. stocks plunging on weak manufacturing data and apple's revenue warning. the dow was down at one point in the session 675 points apple down 568 points or 2.5% decline. apple by itself is about 90 points off the dow the nasdaq meantime dipping in and out of bear market territory, down by 172 points,

2.6% we have seen no surprise of flight to safety gold prices hitting six month highs and tech, the worst performing sector, led by apple, its supplier sky works and amd. >> let's get straight to what's driving the sell-off this hour and that remains apple leslie picker is taking a deeper dive into the company's biggest shareholders morgan brennan looking at the other companies blaming china for the weak outlook we begin with seema mody with more >> today's action illustrates how expansive apple's reach is asian markets overnight underperformed, tech giants, samsung, electronics, traded to the downside europe closed lower. major european suppliers coming under pressure on the apple news today's market story goes beyond apple, the china growth concerns and activity in the u.s. manufacturing sector expanding at a much slower pace than expected last month. now we await tomorrow's jobs report, will that confirm a

slowdown in the economy and if so, how will that be read by the market, bad new, good news earnings estimates for the fourth quarter have come down, analysts still expecting profit growth, a 15.8% year over year leading the dow right now is apple, intel, and some names with exposure like boeing and united technologies, down 3% to 4% even copper is trading down on china worries, that's weighing on the miners as well as emerging markets bright spots today, within consumer staples, a number of stocks, hormel, tyson foods, as yields tick lower, look at the outperformance in utilities and real estate, moving to the upside as is gold, creeping closer to $1300. >> thank you very much apple joins a growing list of big american companies, blaming china and the trade war for their weaker outlooks. morgan brennan takes a closer look >> so apple, by far, the biggest u.s. company to do this so far not alone here

last month, fedex fueled fears about slowing global growth citing europe and also china u.s. automakers like ford seeing auto sales plunge. tiffany's highlighted strong pattern of chinese consumers pulling back on overseas purchases. so did european name lvnh. and starbucks, despite a big expansion, now says same store sales growth in that country could be as low as 1% in the longer term. all that said, quite a number of large u.s. multinationals that have expo sure sure to china, we has not yet sounded the alarm. 3m was still forecasting growth broadly in china on "mad money" recently, boeing shrugged off the concerns, citing the strong demand for aircraft longer term in that

country. investors are waiting for the upcoming earnings season to get a better sense of the damage i think that is why you're seeing some of these big multinational names like united technologies, like 3m, like intel, like cisco trading lower today. even though at least so far based on what we know, so far, there hasn't been a major impact yet from the slowdown in china we'll see what happens. >> you cited the companies that said everything was fine and dandy as late as november. apple also said -- >> fine and dandy. >> until the end of november. >> one of the big key questions here, as we get closer to earnings season, some of the companies come out of the quiet periods, is just how much the slowdown in china, just how much that deceleration has happened, how quickly it has happened. right. so semiconductors you could argue have been sounding the alarm in recent weeks. we'll see. >> feels like it snuck up on apple. that's the way they're playing it. >> that's the way they're

playing it >> that's the way they're playing it. >> morgan, thank you very much morgan brennan we're seeing wall street react in a big way to apple lowering the guidance all the analysts lowering their price targets on the stock today. the average price target has been slashed to a nine-month low. you could say they're catching up so what's next joining us is tim o'shea, one of those who downgraded the stock ina frida as well. welcome to you both. tim, i'll start with you what do you think the story is here can they blame china are they trying to blame china is this a smartphone problem for apple? >> the question we have been getting from investors today is how much of this revenue miss was driven by simply soft macro economics situation in china and how much is being driven by market share losses to competit competitors. and both of these, you know, we think there say healthy misk of bo both that is happening

if this $7 billion revenue short fall is driven by a softer macro environment in china, it raises significant questions about apple's price hike strategy. and what happens to apple in demand for iphone in an environment where the macro economy may be weaker across the globe in 2019. and if they're raising -- if they're losing market share to competitors, i think that there is clearly some of that going on thi i think there is a lot of nationalism at play, it is cheer the chinese consumer is referring -- opting for chinese domestic made brands like huawei over iphone in this type of reputational hit cannot be repaired by signing a trade deal with china, it will take some time i think there is significant questions about iphone and apple's business in china right now. >> ina, we know that in china in particular, people use messaging apps and not necessarily

carrying about ecarry ing about i message. what happens now are people in d.c. taking this as evidence that the trade war itself is a problem or not >> i think the trade war is a problem. one of the interesting ways we're seeing this, what tim started to get at in terms of the iphone used to be popular in china as a status symbol, it was super expensive for them, compared to their relative income but it was the way to show you made it. well, that's changed with an anti-u.s. attitude and more of a pro china and the chinese competition has gotten better. huawei makes a nice phone that has a great camera and is every bit the status symbol at the moment in china. i think -- i think the trade war has that impact in addition to all the more tangible economic challenges and also we're going to see, this is going to spread throughout the tech sector, china and the u.s. are super inner dependent now. as they have this rivalry, there is nonetheless this inner

dependence that neither side can get themselves out of. china needs u.s. software, u.s. chips, u.s. needs chinese manufacturing. for all the tension, they still need each other very much. >> china has been in terms of growth a driver for apple, but in recent quarters it hasn't done as well as maybe many people had expected. i'm wondering because, you know, there are two scenarios here, this is the brunt of what caused the revenue guidance lowering is because of china macro, or perhaps apple's phones don't appeal to the chinese market anymore and that may underscore the point that a lot of bears have, and that is that apple has been very slow to innovate or they haven't had a really innovative phone before. so in order to separate the two and which one is at fault for the lowering of the guidance, you have to wait right? are you confident that the bulk of it is china or do you think perhaps part of it is -- gets to the core of apple, which is that

they simply haven't innovated as much as they should have been doing in recent quarters and years. >> i think the bulk of it right now is coming from macro we have seen last fiscal year and september 30, china revenue grew 18% for apple so this revenue miss where they have the $7 billion short fall in our view is a stunning reversal of fortune and underscores how quickly these type of hardware businesses can turn i think it just given the strength of china and just in the past four quarters, it does seem to be the demand was strong, but, boy, has that quickly changed. i do think it is more of a macro -- >> apple and china, one thing i do know is i think people are holding on to their phones longer, they are happy with what they got, and they are disinclined, to trade in a new

phone, they're looking at $800 to $900 item and say, hey, what i got is fine. >> yeah. and this is going to be many quarter issues the china stuff might be limited to the length of whatever china's macro issues are this iphone issue, this smartphone issue is a big one. and it is what we see and it is typically for apple, a challenging time when innovation slows in the industry, it is not that apple isn't putting out good smart fobs, it is that the smartphone industry as a whole is mature. you don't replace your tv every two years, you don't replace most things every two years. the reason people are willing to do it with phones is one, it was being subsidized and, two, the pace of innovation, the difference between one year and the next was pretty dramatic and then throw in a third factor, the battery really only lasted two or three years. now they had cheaper battery replacements, that was one factor apple cited, and this smartphone change, which has been coming for a while now. a lot of people are saying apple should have seen this coming

others have been noting for a long time that the smartphone market is maturing apple did see this coming, it is why they're pushing services rather than hardware numbers. >> thank you very much coming up, apple is one of the most widely held stocks in the world. a closer look at the biggest holders and what the guidance reset means for investors going forward. our next two guests both own the stock and say they still believe in the company they tell us why and what they see in store for the overall market airlines getting crushed today a look at what is behind the drop and whether the sector could be gearing up for a slowdown as we head to break, look at the markets now. we have the dow off the session lows, we had been down as many as 675 points. now down by 530. naaq500 down by almost 50. the sd down by 2%. "power lunch" is back in two i am a family man.

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at comcast, it's my job to develop, apps and tools 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. welcome back it is a sell-off on wall street, led by apple, down more than 14 points it is among the most widely held stocks in the world. if you got a mutual fund or etf, you probably own a little bit of it a drop of price isn't just impacting big investors like warren buffett, but individual investors like you as well leslie picker joins us with more you're looking not just at the individual, but the big hedge guys. >> the totality of the investing universe, apple has long been among the most popular stocks in

america, even if you don't own the shares outright, you are probably exposed to their moves, during etf, index fund, mutual fund, that is why today's declines both in am shares as well as the indexes that they compromise are critical to all types of investors vanguard is the largest shareholder mostly through its index funds and etfs black rock and state street among apple's top holders, though passive products too. those three firms combined with looking at paper losses of about $10 billion today. active investors were feeling the pain today as well, warren buffett's berkshire hathaway looking at paper losses of $3.5 billion on its apple stake according to fact set, apple is held by 2300 investment advisers, 915 wealth management firms and about 200 mutual funds and hedge funds and worth noting that timing of apple's release, on the last trading day of the -- the first trading day of the year, that means today's

declines won't be booked in each manager's 2018 performance, which is important for all of these professional managers as they calculate the returns for the end of the year. >> they're hoping it will turn around. >> time to turn around, exactly. so many investors expose, how should they navigate the massive sell-off let's bring in problbob pavlik d david sullinger. good to have you both. david, i'll start with you are you buying into this dip >> i'm not a seller. i think the market is -- >> is that a no. >> it is more of a yes to be frank. the market on a valuation basis is quite appealing earnings are likely to decelerate we removed a pretty good risk today in a sense that i think the fed will be more likely to be on pause in 2019. and we won't have the double whammy of higher interest rates and reduction in the fed balance

sheet and i think that removes a lot of risk for investors in spite of concern on earnings with apple's news. >> i asked the question, are you buying on the stip does what apple say about china, does that change the way you view the stock in particular and the way you view tech earnings, maybe earnings more broadly. if a big company like apple can be caught so off guard between the end of november and yesterday night, with what they're seeing on the ground in china, shouldn't we be more broadly concerned about tech and the markets? >> i think on a short-term basis you have to be concerned as a long-term investor, i think you have to see it from a more broad standpoint is apple still a disrupter company? i still believe it is. the stock has gotten cheaper i've owned it for many years both professionally and personally i think the stock has only gotten cheaper

i think if -- as a long-term investor, you want to be looking at these types of moves as an opportunity. not a reason to sell into weakness i think what you're seeing today is probably a lot of short sellers, also lumping onto the pressure on the stock. so you have people that are short-term traders that are moving out and short sellers just lumping on to the pressure. i did a little buying of apple today. i didn't start a full position i added to a new account that had a -- no exposure i added a partial position i think if the stock goes down, which it may go over the next few weeks, i'll add to it again. >> david, you look at the valuation of apple, do you take into consideration how much they reduced their share count over the past -- i'll pin it to a year more than a year, but last year, they reduced their share count by 4%. spent a lot of money, more than $60 billion buying back their own stock, lost $9 billion on that investment. if you took away that buyback power from apple and saw the

$130 billion in cash that they could still use to buyback stock, this pe would look even -- well, it would be more expensive. >> i think we're going to quickly find out with apple, are they a good and superior capital allocator of cash. >> are they? >> still generating a fair amount of cash today if you look at the free cash flow yield, it is over 9%. that's quite attractive to the overall market the free cash flow margin is more than two times what the s&p 500 is if you looked at when am has lagged the s&p 500, it has a really good track record of getting right back on the treadmill and outperforming, whether it was 2006, 2008. >> we see this is relative performance that line you see is apple stock relative to the s&p 500, the orange straight line. and we're seeing what you pointed out, david, that is whenever it underperforms that blue line goes down, you see a

period of outperformance, when you see that green line ticking higher so at this point, that's -- is that a buy signal to you >> it is more of a buy signal, certainly not a capitulation and sell on the pain when you factor that it has been a long-term wealth creator it is free cash flow and cash flow generation and margins are still quite superior to the overall market they're growing their dividend at 13% and in my case, i own about 40 stocks in a portfolio, it meets the objectives of cash flow and dividend growth and valuation and those are always going to be a long-term success rate and that's why i'm going to keep apple. if new money comes in, i'll buy it. >> great to get your perspectives, bob and david, we appreciate it. >> my pleasure >> thank you coming up, the last time oil did this, it rallied 80% we'll tell you what has one trader all excited and whether at nt.really is bottoming ou t. th'sex

crude oil could be on the verge of a big comeback. the commodity kicking off the new year in the green, up 3% so

far this week, coming off its first yearly drop since 2015 one of our next guests says it just bounced off a critical level. so tell us what was that critical level and why does it matter >> ell, it got down to the 42, 53 level to be exact that was the low it saw back 18 months ago in june of 2017 now, after that, we saw that low, the crude oil rallied 80% off the lows now it came back, it got right exactly to the level on christmas eve and bounced 10% since then we're not out of the woods yet we need to see more upside follow through we want to see it get above $50. that's not just a round number in november and december, it bounced off the level a dozen times before it broke down that old support becomes new resistance break above that and hold, that

will show that we got a real nice double bottom, like we got in 2016. should give us a nice upside rally. may not be 80%, but a good ra y rally. >> look agating may not be 80%, but a good ra y rally. >> look agating t that chart, it appeared the chart was different, wasn't as far below its trend in all the rest. >> exactly you get, again, other things like it is certain long-term mac d charts, that's positive too. we got to be careful, if it lows and breaks below the double bottom low, we have big problems double bottom is one of the best formations you want to see when you're making something of concrete substance. >> sure. michael, so do you think this potential comeback is something worth playing, and if so, how would you do it? >> let's go back to econ 1 01. supply and demand issue. you saw opec cut production by the most in two years, and it is

starting to work this month. the u.s. oil production also is much lower than people expected. and you see the technicals bouncing into the positive scenario and one name in the space, eog, they outperformed the commodity between 50 and 20% over the past 12 to 18 months. and we think they'll continue to outperform, we believe oil is going to roar higher here, just on a simple supply and demand issue. >> all right, a big switch from last year. thank you very much. michael and matt for more trading nation, head to our website or follow us on twitter at trading nation. tyler, back to you. thank you very much, coming up, shares of delta lower, following weak guidance and taking the rest of the airline stocks down with it. a look at what is ahead for the airline sector next. . volatile markets are a good time for long-term investors to review their plans on their core

holdings if you're overly concentrated in a specific stock or sector, volatility will probably do more damage to your portfolio diversified cotsacun generally fare far better when volatility increases. hey, darryl! hey, thomas. if you were choosing a network, 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? this is a tough one. well, not really, because verizon won both. so you don't even have to choose. why didn't you just lead with that? it's like a fun thing. (vo) chosen by experts. chosen by you.

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just 90 minutes until the closing bell rings let's get a check of the sell-off the dow off the session lows, down 452 points. s&p 500 down by 38 points. 1.5% the nasdaq is down by two full percentage points. now to sue herera for our cnbc news update. she's on set. >> i am. here's what's happening at this hour russia's news agency says american paul whelan has been charged with espionage and faces 20 years in prison if convicted. family members say whelan was in the country to attend a wedding. he's being held in a moscow prison gatwick airport is adding military grade anti-drone equipment. actually, that's the nfl, our next story that is not drones why don't we come back to me as you know, just before christmas, several unmanned devices were flown too close to the runways and that forced the

uk's second busiest airport to close for several days just before christmas heathrow is also adding a drone defense system and as you just saw, people are tuning in to watch the nfl, the league says tv viewership rose 5% from last year to an average of 15.8 million per game digital streaming of games soared 86% and the reason that many older americans may be putting off retirement is health insurance. a new poll of adults in their 50s and 60s found nearly half felt they would not be able to afford health care if they stopped working. yikes. that is the news update this hour you're up to date. back to you. >> sue, thank you very much. nice to have you here with the -- >> lovely to be here >> nice change. >> can i ask you to stick around for a second, if you don't mind. >> i don't mind. >> today is a special day. we celebrate sue's 30th anniversary with cnbc. >> that's what the cake is for >> thank you, guys

>> she's one of the originals. and we went to the archives to find this gem, march '99, announcing and defining what cnbc was going to look like. >> have you ever wondered how the ups and downs of wall street affect your everyday life? or why events in the middle east could be hurting your wallet well, now there is a channel to answer these questions and this is it. this is a new home of cnbc, now under construction we're building more than just a studio this is a broadcasting first, a network designed to help you cope with your life. >> wow >> there she is. >> well -- >> congratulations. >> thank you so much, guys i'm very touched all right. you're going to make me cry. >> look at the newsroom. really, rarely does this happen, sue. >> so sweet. but, you know, it is also very rare, in any business, but especially i think in the

broadcast business, where you get to work with so many lovely people >> there is no one better, there is no one nicer, what the viewers see, the viewer gets you are a gem. and the pastry chef has arrived. >> did somebody order a cake as we all know, there are child actors out there, well, sue clearly was a child anchor >> thank you >> when she started at cnbc. >> that means you were too we went to college together. >> yes, we did that was before that anyway, from everybody here, we do wish you a happy anniversary. >> thank you so much >> and thank you to the viewers for sticking with us, you know, for all of those years and to the wonderful everybody that is here. >> one more time >> any pearls of wisdom about 30 >> it is all about your hair >> some things never change. some things never change >> actually only five haircuts

in the entire world. >> you had them all? >> i have. >> i'm grateful it is not all about the hair but we do love you all and -- >> what is behind your ear there? >> this is my -- in case anybody was ordering a cake. i can make more of those we'll be cutting it and handing it out to everybody in the newsroom there >> thank you so much i really appreciate it, thank you. >> 30 amazing years. >> i think my eyelashes are going to lift. >> makeup emergency. >> makeup emergency. which is the most important room in the building. >> absolutely. >> thank you thank you all out there. love you >> i love the apron, bill. >> thank you >> he wears it well. >> he wears it well. the best anchor partners i ever had. >> likewise. >> hard to move on from that airlines getting hit after a major carrier warns on revenue growth, those details and whether the sector is poised for a slowdown apple on pace for the biggest

single day loss. the technician joins us with why he's a buyer right now and, again, one check of the markets here, well off the session loews, we'll see how they fare into the final hour of trade with the dow down by 511 points "power lunch" back in two.

welcome back look at the airline stocks, they're plunging today after delta warned on lower revenue growth, phil lebeau has all the details for us >> it is not just that delta is warning about revenue growth, it is that this is the third time in the last several month naz we have seen them bring down their quarter. we expect growth of 3% to 5% in early december, they said 3 to 5%. well, today, they're saying we expect unigrowth of 5% is that going to hurt revenue in the first quarter? jamie beaker with jpmorgan out with a note saying we believe that both business and higher end leisure travel tend to

decelerate when one screen is a wash in red and the financial headlines portend doom and gloom. that was enough for a lot of people to say, hmm, what is the future hold for the airline stocks you talked about it in the intro. all of airline stocks lower with delta and american leading the pack with declines of 7% and 8%. guys, the bottom line is this, even though the airlines have said, look, we still see strong demand out there, are they seeing pressure both in terms of airfares and unit revenues and will we see that in the fourth quarter and then carry in to the first half of this year? >> phil, stick around. we want to bring in jim corridor at crfa research we showed the sell-off across the board in the airline stocks. how would you characterize the sell-off >> i would characterize it as a total overreaction i think delta had a little misfortune on the day they announced we have the apple news, the production numbers and we have yesterday's china slowdown i think there are a little bit

of a victim of overall market volatility what they said in their release today is not all bad they're taking guidance up on earnings, they're taking guidance up on cost growth and the numbers look good to us. demand remains strong and airlines face a significant tale there are a lot of positives to take from this note. >> why are all the stocks down so much as you point out while jet fuel prices are coming down? >> as phil correctly pointed out, investors are worried about unit revenues. delta did reduce their guidance a couple of times, they may be a victim of their own overly optimistic forecasting i would like to seem them be more conservative. 3% growth, 7% topline growth overall, above the consensus view, these are not terrible numbers. they are a little bit less than what the street was expecting. >> jim, why have the stocks been hit so hard? is it -- are they getting

carried out with every trade that says there is a recession coming or -- are the fundamentals to the airline sector otherwise okay and with fuel prices down, you think this would be a great time for them, but it is not >> we think investors have not gotten around to the story, they're laooking at historical patterns even though earnings are maintained for most of the group and going to rise in 2019 versus 2018, valuations are as low as they have been in a decade and the earnings numbers look pretty strong to us investors are worried about the economy, worried about demand, but those are not born out in what is seen in the fundamentals now. >> in the delta release, the pace of the average fare increases abated in late december and that is also a concern do you think it is different this time around i feel like when airline analysts are bullish, they say it is different this time around

>> well, look, jim is correct in terms of saying it is different this time with regards to how the airlines run their businesses and ancillary revenue, the ability to generate other revenue streams separate from airfares. in regards to your question about the deceleration if you will in terms of airfare growth, keep in mind historically as jet fuel prices move lower, airfares tend to move lower as well while this is good news on the cost side for the airlines, lower jet fuel costs typically means that you see the lower end of the market, they start to beef up in terms of their supply, seats in the market and that holds down the overall growth of airfares >> isn't that acting the way they have been acting then once they have some sort of savings and they increase. >> melissa, one thing that is different, they have better segmention of the aircraft now than they did five, ten years ago. it is much easier to find somebody who says, sure, i'll take a basic fare, i don't want

basic fare, i want to pick my seat, therefore i'll tack on another 10, $15. that's the difference compared to five years ago. >> all right gentlemen, thank you apple tanking on its first quarter warning. it came out yesterday. so should you buy the stock on this dip that is next and apple shaving 90 points off the dow. the dow now down about 535 we'll go live to the for olof the new york stock exchange for a traders view that's coming up the engine management systems coordinate with autonomous vehicles. financial data, so now we can predict the future. our new flexible propeller design. by collaborating with public schools on a program called p-tech, ibm is helping students build the skills they'll need for tomorrow. revolutionizing. aerospace industry. it's an entirely sustainable approach. any questions? when you rethink education, everyone can put smart to work.

china, apple and the health of the u.s. economy, the dow plummeting 700 points at the lows of the session. let's break down the market action for the technical take. we're joined by rich ross, head of technical analysis. and for the view from the trading floor, we have art cashin rich, we'll start with you in terps ms of the apple sell-o you say history is on apple's side what are you looking at, rich? >> thank you, melissa. history is on your side. we have a 40% pullback to a level which is held for the last 15 years, outside of only 5

months during the depths of the financial crisis that's the 200 week moving average, it comes in around 142. absent a meaningful sustained break below that level, the percentages are on your side if you can look past the panic of the day. i would be a buyer here. this is the time to be less bearish of apple, not more. >> what is is the sustained meaningful break below that 200 week moving average level 142. >> that's a great question moving averages are as much art as science we could use a big round number like 140, occasionally we get false breaks below the levels. so i don't want to profess a false sense of precision here. but i would say anything below 140 for over a week. we have to call into question this longer term structural bull trend that has been in tact for over 15 years here absent that, 40% decline to that level i think creates a nice tactical entry point. >> we're seeing the impact of apple's declines on the broader markets and it has been a tough

go for equity investors on the long side. what does it show you at this point? >> it is a great point there is a lot of symmetry here not surprisingly the 200 week moving average, which defined support for this multiyear secular bull market held to the penny on the pullback, going into christmas day. that comes in around 2350. we had a nice bounce off that level. and similar to apple, absent a break below the 2350, the secular bull is still in tact. the cyclical bear off the top is also in tact clearly the macro continues to erode. but i think there is tactical upside here to the 50 day moving average, around 2650, using 2400 stop on that, and below 2350, again, we call into question the validity of that longer term uptrend. >> in terms of the break of the moving average, i'm curious what is the risk reward here on the -- looking at a possible check to the 200 week line, what is a possible upside off of that

line are we in a channel? >> i think we are set up this year for a very wide ranging volatile year. but from current levels, 2450, to 2650, there is six, seven high single digit upside with a stop, low single low single digit downside. i would like that reward we don't get that many pull backs of an ongoing bull market. if it is not over and we do not' say break of that level we could see a very meaningful upside off of that level. >> is this by the markets call, rich >> i think it is premature to pound the table on anything and the global but at a minimum every meaningful bottom starts as a bounce. we can work larger from there. >> all right we'll check back with you. thanks >> with just over an hour to go let's get the traders take on.

arthur joins us. he is director of floor operations how does it look to you this afternoon compared with this morning? >> well, it looks slightly deceptive. you know, the averages, the indexes are getting pounded pretty heavily that is because apple has a bit of an undue influence in the dow and in the nasdaq. if you look at things like the advances and declines and things of that type it is not quite as horrendous as the dow would make it look. now, that having been said it is some what disappointing that we did not get an afternoon rally we have seen many of these days where we have got down on the opening then going rally as europe closes and then come on strong and get them back in plus territory. we are not doing that today. it is a bit of a disappointment. the trouble is while today it is all about apple the problems aren't only just apple

you know, we have political things going on. the president is due meet with congressional representatives again tomorrow to see if we can end the shut down. so that's lot of things up in the air. >> do you believe in the one simple cause theory or is it -- does it take a lot of things going wrong to get the kind of action we have seen over the last couple of months? >> it is a combination of things going wrong. the disappointment is as much as it has been punishing we haven't gotten to that point yet where they throw the baby out with the bath water or whatever other analogy they want to use they get very close but they don't quite get there. i would like to see it kind of purge far little bit and i would be far more relaxed to see them go up. now we are fighting each crisis each day >> i guess you never know until it is over bare markets or bull

markets but what are we in right now if you had to guess? >> we are in a sick market it has been very healthy for the first two-thirds, if you would or three quarters of last year and now it's beginning to develop some signs of weakness around you know, to do it the market has certain human characteristics. if you or i heaven forbid had a kar cardiac vent we would be very cautious in the days to follow mashlgts get like that they are cautious. that's why it is important as we heard from the previous guest to look at a couple of levels keep your eye on them. if they hold things get better if they break get out of the way. >> you throw in the yield does

it make it more optimistic we are seeing levels we haven't seen since mid-january 2018 and we are down 2.5 and change for all of those saying generational low, sorry, here is another one. >> you know i have been on yield all the way through. you know, i think -- i knew they were going to up in december i knew they were committed the president helped commit them there. i think they are done for the year i think there's an outside shot that maybe towards the end of the year there's a possibility that things might soften up enough that they maybe want to cut. so i think the yield on the ten year is telling you people are concerned. remember where we were six months ago it was the global growth that's gone. now people are concerned about a

global slowdown caused by these and whatever else is going on. >> so before we go remind us what the most important level is you're watching now. >> you know, i would think that i would be careful in the s&p back down around that 2350 area and see where we go from there so i don't think we have got a trapped door built in any where special but continued we erosion, selling off is going to make the market feel worst >> there is 2458 that's where we stand. thank you again. >> all right and moments ago nancy pelosi was announced new speaker of the house. we claimed the gavel to lead democrats one of the very few who has lost the title and came back to reclaim it that's pelosi there with members of her family, grandchildren and

the like check please is next

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we were talking about cash and bonds. so bonds, you tiutilities and n up 2% today. part of that reason could be that netflix has absolutely no china exposure it relies on international growth as being an engine of growth for the overall company but absolutely no china exposure here it treats the companies that become the market cap leaders whether it was microsoft or general electric which held that title for a while. i believe even intel had it for a little while some times it takes a little

while. >> they also fit the skyscraper indicator. >> yeah. >> and i'll save donut fries for another time >> quite a tease >> mcdonalds is down so do nut fries are your defense in this market >> thanks for watching power lunch. closing bell starts right now. welcome to the closing bell. i'm sarah. >> and i'm scott walker. >> the dow developing on alp sales warnings it plunged 677 points at the low of the session we are moving south again here down more than 600 points with an hour to go. >> not a great set up really the market was down 677 at the low. the dow was. if you had any bit of optimism you would have hopt