that does itfor us thanks for watching. >> "closing bell" starts right now. ♪ good afternoon and welcome to the "closing bell." i'm saraizen. >> i'm will frost. we'll talk with adviser ceo jerry storch. >> fed chair jay powell says he doesn't see any evidence of a slowdown we're going to talk to the former fed number two, vice chair don cohn and find out if he agrees. >> the dow today, you can see it

pulled back a couple of hours ago when fed chair jerome powell was speaking we'll dive into what words drew the market low we're up 2/10 of one percent. >> going for five days in the row for the dow, the first time since october. for the s&p it would be the first time we've seen that kind of win streak since september. really gains across the board. did not look this way after the open today. >> slightly more defensive in terms of the sector performance today than past days but nonetheless as you say, five days again in a row for the dow would be a big win given what we saw late last year. >> 10% off the lows for the s&p 500. today's top stories. we have the latest on the government 14shutdown and more n the retail tech. >> sara, they are going to feel the shutdown all the way over in switzerland. president trump tweeting that he is respectfully canceling his

trip to davos. a smaller delegation led by treasury secretary steven mnuchin is still likely to attend but the president himself will not be there. right now president trump is in texas where he is visiting a border patrol station and holding a roundtable on immigration. there's growing speculation that the only way out of this is for president trump to declare a national emergency in order to build the border wall. earlier today the president said he hasn't quite made up his mind. >> i have the absolute right to declare a national emergency i haven't done it yet. i may do it. if this doesn't work out, probably i will do it. i would almost say definitely. >> here on capitol hill, vice president mike pence has been meeting with republican lawmakers to rally them around the president's shutdown strategy he also sat down with a small group of reporters and i asked him about the recent warnings from moodies that a prolonged

shutdown could impact negotiations over the debt ceiling and what that could mean for america's credit rating and the economy. pence says that the economy is roaring and that the president's first priority though is to protect the american people. back over to you guys. >> thank you very much for that. turning now to the other big stock story of the day, shares of macy's plummeting courtney reagan joins us with the fallout. >> reporter: hi, will fred macy's certainly not as high on the nice list as it had hoped to be holiday sales for the retailer did grow 1.1% for november and december online sales of double digits. the ceo said despite a strong black friday weekend sales started to weaken in mid-december and didn't restrengthen until around christmas. as a result, the retailer missed its plan, lowered its earnings forecast for the full year as well as sales and margin expectations shares of macy's are plummeting, on pace for its worst day ever this is after shares had gained about 80% from thanksgiving of

2017 to thanksgiving 2018. take a look at off-mall competitor kohl's. they also saw holiday sales grow about the same of 1.2% like macy's, they saw double digit growth online. unlike macy's, they've revised the lower end of their full year earnings guidance. still, kohl's shares taking a hit from what's going on over at macy's and the sentiment bleeding in. target the strongest holiday sales so far, up 5.7% on strong traffic. online sales stronger by 29%, and stores became a very important part of the holiday season for target, fulfilling three-quarters of online orders in some way. that means the distribution centers were only used for about 25% of what was ordered online still target shares are lower. master card said total holiday sales based on real spending data is up about 5%. today showed us it's not the

jolliest holiday for every retailer back to you. >> courtney, thank you let's bring in jerry storch, ceo of storch advisers strong consumer, strong economy not doing the trick for macy's why? >> the health of the consumer from the traditional departments, there's a massive share shift going on and that's what it is we took a look at november department stores were negative sales in november so this is no surprise whatsoever. it's exactly consistent with what we talked about look at the other retailers that have reported. target up 5.7. costco up 7% comps these are vastly larger and more significant retailers than macy's who does $25 billion. costco does 1 -- $130 billion.

i volume weighted the comp stores and guess what they total, 4.5% exactly, just what everyone has been saying the holiday season would deliver. >> macy's clearly a massive share price decline today. is that justified? it had a bit of improvement coming into this is the writing on the wall >> traditional departments are extremely challenged it probably came too far up and now it's going back down it's going to be very hard for anybody who makes a living by selling somebody else's widely available product. they're not going to be able to make the margin, make a buck in this internet-driven economy the price will be footballed away. >> the narrative was that they were finally figuring it out, macy's and other department stores were finally catching on to e-commerce and growing double digit business, finally getting the experiential treat of going

into department stores, and what happened that's why the stock was up so much in the last year. >> that's the best you can do with where you are but it's not where the consumer is. the consumer is where value ismeis we haven't heard from walmart. that's a giant let's wait and see where their sales are before we decide there's a problem with the consumer i bet amazon is up at least 15, 20%. if you put them in the equation you're going to be over 7% gains for that group it's a matter of traditional department stores fighting for their lives in an amazon era we haven't heard from nordstrom's and they're the best in breed. >> over all you're relaxed about the u.s. consumer in general was that just for the fourth quarter? >> in general, as long as they're making money, as long as their paychecks are there, as long as their pocketbooks are filled, as long as they're employed, they're going to shop and that's what we've seen these share shifts that we've

seen in these numbers are totally predictable. it's exactly what we've been talking about and there's no surprise whatsoever. could it have been 2.5% at macy's and everybody would have cheered, maybe but it's still insignificant because you're only dealing with $25 billion share of a giant, multi-trillion dollar retail pie. >> who is getting the share? you mentioned costco and target. >> walmart, we haven't seen their numbers. that's going to be interesting they're the big guy in the room. by comparison they do over $300 billion in the u.s. compared to the $25 billion at macy's. let's see how they did before we make a call on this holiday season amazon, now they're probably up to $200 billion in the u.s they're growing rapidly in the marketplace there. their numbers are going to be very high as well. high numbers in the off price players, the t.j. max, burlington coats of the world, et cetera. anyone who's offering value. also, anyone who has a good marketplace. i like etsy a lot, amazon a lot

because they make money no matter what happens. they tie a little bit of everybody's sale there are differentiated places too that are vertical and have a lot of margin so they can afford the extreme cost of doing business on the internet like a lululemon or nike and they're going to keep doing well. >> can i ask you a quick nonretail question because you're on the board of bristol-meyers and that stock is basically plummeted this year. how are you guys going to convince investors >> i appreciate you asking but a board member really shouldn't talk about their company i thought giovanni did a fantastic job with jim cramer explaining the deal and i'll refer you to you. >> great to see you, jerry. the federal reserve chair, jerome powell, was speaking at the economic summit in washington earlier today. >> data through the end of the year to the beginning of this year, you don't really see any evidence of a slowdown

>> we've got retail numbers, we've got the fed share speaking what does it all mean for markets? craig fineberg, and rick santelli in chicago. craig, i'll start with you following on what jerry said, are you relaxed still about the u.s. consumer kind of in line with what the fed chair said he was relaxed about the u.s. economy? >> i think we expected this. we came in the beginning of november to beginning of december saying we have bullish sales. we see a pullback now. these companies are still driving revenue. they're still out there. consumers are spending money online sales are way up. that's good. >> which company are you exposed in the retail sector >> we talk about the retail sector but overall i would say value, value as a whole sector is good. when we a if the consumer is not spending money, then we worry

the consumer is spending money they're out there, they're shopping online. we're seeing the brick and mortar not hitting the numbers that they want to and that could be a trickle-down effect. >> talk us through your interpretation of what the fed chair said today he was a little off visscript bt not to drastic levels. >> off script is a wonderful thing. the main issue is investors don't want fed officials on script they want them to interact in a normal way, not using the fancy jargon, and i think j. powell did a wonderful job certainly by saying words like substantial with regard to the size drop in the balance sheet. they may be a bit confusing but i don't think he was trying to be confusing i thought he put forth some great information on balance sheet. it was under 7, right around 700 billion before the crises, 4.5 and change at the highs. it's just dipped below 4

trillion steve leishman was right the runoff amount is a cap that isn't necessarily always on the high side of the cap but all in all, he's in a pickle, he's in a tough spot we've seen central banking move to a level never seen before in terms of the stimulus and the accomodation, and poor jerome powell has the job to try to reserve it, turn on the lights, clean up the bar and make sure everybody goes home, and it's not going to be easy when we include other countries stepping up their pace and removing stimulus, it's going to be bumpy for everybody as well but there's some bright spots. the ten-year is about ready to make -- it's within a half a base point of a new high yield close for 2019 third year bonds by far going to make the high yield close for the year the previous was earlier in the year at 301.5. they're at 305 now after the $78 billion package completed today, we had a little bit of a selloff that's normal after an auction

but to see the long end continue to move out i think is a function of more easiness with j. powell and the fed but i also think what j. said is right, the data hasn't really slowed down that much. it slowed down just a little bit. i think maybe that's part of the selloff in the long end that's pushing rates up which is, in my opinion, a very good thing >> just to build on what rick was saying as far as what does it mean for stock investors like you, central banks around the world purchased, what, $9 trillion worth of assets between 2010 and 2017. that's going to start to unwind. he said it's going to be bumpy can stocks rise in an environment where that continues as it is supposed to >> economically it should continue that way. the market is not reacting well to the last announcement today with the talks today i think there was mixed emotions i don't think anybody on either side of the table was committing to what's going to happen. i think that value investors,

s&p 500, they're going to value, going to be long term and the value is still there you need to be in the game to be in the game. you need to be able to withstand the ups and downs. >> you don't care that the fed is trimming its balance sheet? >> i think it's good econom economically but i don't think the market is ready for another trimming so quickly. >> we'll leave it there today. thank you both so much still to come on the "closing bell," a new report says the u.s. could lose its spot as the largest economy. up next, former fed vice chairman donald cohen will be joining us to break down j. powell's remarks and what it means for policy going forward you can reach out to the show on twitter, on facebook or send us an e-mail. "csi bl"ils.p 61 point longel wl be right back

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comments on the balance sheet, but first he repeated his k07 s comments that the fed can be flexible and patient because of low inflation. he called the u.s. economy strong and said he expects the momentum from 2018 to carry into 2019 his biggest concerns, weaker global growth, trade tension and an extended glochovernment shutn we have to be fair, several factors were in playing including a soft 30-year bond option and a tweet from president trump nouannouncing h would not be going to the davos world economic forum some saying the balance will be, quote, substantially smaller than it is now. >> we wanted to have the balance sheet return to a more normal level which is a level no larger than it needs to be for us to conduct monetary policy. i don't know the exact level that will depend on really the public's appetite for our liabilities, specifically currency to us that's a liability and the public has a large appetite for

currency and also reserves and other liabilities. so it will be substantially smaller than it is now >> the average market expectation, the number that's talked about on the street is for the balance sheet to fall to around 3.5 trillion from the current level of 4 trillion. peter bookvar says now we got to wait until the next press conference to find out what substantially smaller means. sara >> here we go again trying to debate that. steve, thank you coming up, those market-moving remarks. now let's bring in don kohn to discuss all of this. it was such an enjoyable conversation, don, listening to the fed chairman talk about how he knows how to in his head spell names backwards and play guitar and go cycling and then he talked about the balance sheet. what would your advice be to chair powell when it comes to communicating about the balance sheet and actually trying to unwind it? >> i think this is an issue that the fomc is clearly wrestling

with right now i think my advice is to continue on the path that they're already on which is a steady, predictable, slow unwinding of the balance sheet. that will enable them to find out how low it can go and still retain control over the policy interest rate over the federal funds rate i think they're on the right path i think they're right to be a agnost agnostic. wrestling with this i. how low can it go and do we need additional tools, instruments to maintain close control over the federal funds rate or whatever the policy rate happens to be but for now they're on the right path. >> don, a very clear message he's relaxed about the strength of the u.s. economy. no signs of recession. he was pretty clear about that but was his tone on the rest of

the global economy a little bit more negative than we've heard recently >> well, it is hard to compare they expressed concerns about the global economy in their announcement, in their statement a couple weeks ago right? so this is nothing new an it's one of the things that markets have been focused on so i thought it was -- he reinforced the message he gave in atlanta a couple days ago and have been put out by any number of fmoc participants about how inflation's low. they can be patient. there are two competing narratives out here. one is given by the real economy. and the strength of the incoming data there with the labor market data extraordinarily strong, extraordinarily good and then the markets who seem to be more concerned about the downside risks ahead with inflation low, they can be patient. on the global economy, yes, he

was concerned about where that was going but he also expressed some confidence in the chinese authorities saying they are -- they have problems but they are taking a number of steps to deal with those problems. so he -- i think he ended up saying he expected the chinese economy to cook along at kind of a solid pace as he put it. >> can you give us just a little bit of a taste of what it is like inside those policy meetings, especially one like this one as we learned from the minutes yesterday many in favor of not hiking in december though we got the hike. how much do they pay attention to things like auto sales, what's going on in the housing market which is pretty break last year, semiconductor stocks, another sort of leading indicator and the underlying fundamentals of that industry looking weak look at what happened with macy's how much is discussed around the table and how does it work with the models >> so that's certainly getting

discussed and gets brought in importantly through the presidents of the reserve banks out there talking to businesses, labor leaders, talking to members of the community so they have a pretty good sense of how things are evolving they have to put those data and those data points that you just mentioned of particular companies in an overall context of where they expect the economy to go. so i think the readout we got from the meeting, the readout of chairman powell today is they still have quite a bit of confidence that the economy is on what they like to call solid path it keeps growing and probably growing faster than the rate of growth of potential driving the unemployment rate down a little more but with not much inflation pressure it's a great place to be and seem to have a lot of confidence there with some worry about am i getting a message from the financial markets that isn't yet showing up in these data that i

need to be really sensitive to so i would say that, sara, their antenna probably quivering more than usual about the stories they're getting and what that might be telling them about the future >> don, on that note, there was a quip about financial markets i think it was just a quip of removing the punch bowl and the fact that the punch bowl is firmly in the cupboard and not coming out again do you think that suggests while he looks at the financial markets given that extreme volatility last quarter that once things are back on a solid footing that it's really not something he'll be concerned about and investors shouldn't hope for too much liquidity looking forward? >> i think he has to put the financial markets in the context of the whole economy so if he sees -- yes, i do think that was a quip and a nice quip i would say. i think we saw a jay people, people saw a jay powell i know who's really sharp, really smart

and really funny and he's a very good man and a very good person to have in that position right now so i think he will have to factor the financial market responses and what the financial markets are doing into their projection of the economy and inflation going forward. he emphasized again the dual mandate so they keep theireyes on employment, on inflation so all those things factor in there. if they feel the economy is on a solid path, even an unsustainable path, i think the message we got from the dots, from the press conference is the next move in rates is more likely to be higher than lower there's stale gentle upward slope to that dot plot so they -- yeah. they think -- i think they see the economy signals as stronger than the financial markets signals but that doesn't mean

they ignore the financial markets. they factor that in and really try to figure out what it's telling them. >> finally, we had on earlier sheila bear. she had a new op-ed today warning of corporate debt levels and she was really excited we were going the talk to you to ask the question about the fragility of the financial system and just how solid of a footing the financial system is on now, decades since the financial crisis if we were to head into a downturn or have any sort of issues or potential blow-ups like corporate debt. what would you say >> the financial sector is on a good footing i think there are things you can worry about. people worry about business indebtedness, especially lower rated corporations and the leverage loan market and junk bond market and at the bottom there are a lot of companies, higher proportion than usual,

companies at the margin. so if we hit a recession, those companies could be hit pretty bad and they would come down and the investment grade companies would drop to below investment grade, competing in a different market credit could tighten up some i think this is a market to make sure that the financial system is very well capitalized, very strong, very solid and so i have been advocating myself that the federal reserve give much more thought to raising the buffer so that they can lower it when bad things happen and banks will surely have enough capital then. >> donald kohn, thank you for sharing you thoughts. >> thank you for having me on again. still ahead on show, former omb director and governor mitch daniels will be here to weigh in on the government shutdown and potential impact it's having on the u.s. economy. after the break, twitter may be gaining ground with a key zem

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get to know us at... aflac dot com. welcome to "the closing bell." gains across the board with the dow up individual movers today. up first, l brands, falling after holiday sales below expectations in particular, sales of victoria's secret were weak. that stock down almost 5%.

it's already dragged in with some of the other retail weakness on the back of macy's but a serial underperform among retail and the problem child has been victoria's secret same store sales down a few percent. >> i was surprised to hear jerry quite so positive still about the u.s. consumer. in light of some of these numbers. we focused on macy's but - >> you get bigger -- mastercard saying best growth in a decade and we are seeing spending rise and the economic data and wages are up and unemployment is down. and all these factors are pointing to a better consumer. but there's serious secular shifts going on online to discount and that sort of thing. off price. >> different than macy's. >> mall based a problem. >> consumer discretionary in terms of s&p twitter got an upgrade more young users are turning to the platform and could become

the leading platform in multimedia distribution. up 2% today. in particular, also saying that consensus for advertising growth this year is more achievable last year consensus saw 29% year over year growth in advertising for twitter. this year consensus 14% so they think that's more achievable top pick remains google. but this was quite a noted upgrade on twitter. >> twitter had a strong three months up more than 20% and really come back strong. time now for cnbc news update with sue herera >> here's what's happening this hour, everyone. house speaker nancy pelosi accusing president trump of failing to negotiate in good faith saying wednesday's brief negotiation at the white house was a set-up so president trump could walk out she also said the president will face pushback from fellow republicans if he declares a national emergency >> if and when the president does that, you'll find out how we'll react. but i'm not going to that place

now but i think the president will have problems on his own side of the aisle for exploitding the situation in a way that enhances his power. over a dozen countries rejecting the legitimacy of maduro's presidency as he was sworn in to a second term amid calls for him to step down he denies that he is a dictator and accuses the u.s. of trying to overthrow his police. thai says a saudi woman could be resettled in a third country. the teen has been given refugee status you are up to date that's the news update, guys back downtown to you see you next hour. >> okay. thank you very much. we have 27 minutes left to go in today's session. the dow's high 100 points and close to that. up 85 points what are the big movers of the

day? bob pisani is here bertha coombs at the nasdaq. bob? >> cyclicals continue to do well look here at the trade names boeing up another 2% it was under $3002 weeks ago look at that every day marching and then again more defensive names aren't doing much. pfizer which was a big leader in the middle of last year. $42 two weeks ago. $42 today. airlines are lower american, all throughout the day. weaker than expected domestic performance and the shutdown may affect things. cowen with a statement saying it impacts the industries corporate travel business the longer it lasts. american in particular exposure to the government with the hub at washington, d.c. reagan national airport back to you. >> bob, thank you. now uptown to berhe sha coombs at the nasdaq. >> we're seeing a broa

expansion and mid caps have been the standout throughout the day. really doing a lot better. part of the reason, bed bath & beyond, an outlier in retail better outlook, trading at eight times daily volume and bear in mind there is a 24% short interest in that stock bio tech continuing strong up eighth straight day they're all getting that boost from the jpmorgan conference this week. and then finally, also we are just seeing once again chip names, skyworks warning not as bad as fear and seeing the highs of the day and higher even on bad news back to you. >> bertha, thank you very much for that. next, chief economist david rosenberg with his thoughts on jay powell's speech and the state of the global economy a bagg. not that encourin wereack in a couple of minutes.

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he is the best a new report of standard charter says the u.s. could lose its top spot as the world's largest economy as soon as next year

when measured by purchasing power and nominal gdp china expected to take the tight frl the u.s. in 2020 while india may surpass the u.s. by 2030 >> federal reserve chair jerome powell gave his take on the global economy and the impact on the u.s. economy at the washington club earlier. >> i would say the u.s. economy is solid there's good momentum into this year the principle worry i would have is global growth if you look at asia, europe. you are seeing slowing in growth and the question will be, how much does this affect us it's a tightly integrated global economy and we will feel that. >> joining us now to discuss more, david rosenberg. great to see you is the fed chair right to be concerned about global growth? >> well, in a word, absolutely you know, we have a really rapid slowing chinese economy and an

insolvency trajectory there, as well german industrial production is down three months in a row looks like they're heading into a technical correction and knock-on affects of europe and europe is an economic entity is larger than the u.s. is. so i'm saying this for a while leading indicator, nobody talks about it, down 11 months in a row. just by itself forecasting a very weak global growth setting for the coming year and as was mentioned several times in the fmoc minutes yesterday, that's a principle downside risk for the u.s. economy in 2019. >> david, i guess some of these concerns we discussed with you for quite sometime the one that's newest is europe in q4. particularly in germany and france do you think that's going to be a one quarter only affect whether it's because of german auto emission standards changing or the french protests or do you think that's something that we can expect throughout 2019

>> well, you know, the view among the consensus was that the third quarter was the one quarter wonder and now you've got the erosion into the fourth quarter and a lot of the survey data and forward looking indicators are telling you that it's going to remain very weak i'm not going to sit here and say that germany's going to go through four quarters of negative gdp but things in europe will be soft for the first half of the year at least and don't forget this is all happening at a time when the ecb pulled the plug on quantitative easing and not getting that support as it had done prior and i think you are seeing, you know, very clearly the impact of the slowdown in china which is precipitous. now seeing industrial activity there starting to contract an having a big impact on the big manufacturing countries and germany accounts for about a third of the contribution to eurozone industrial output and

cascading affects throughout the global gdp because germany is the fourth largest economy on the republican it and learned from the last cycle there's no such thing as global decoupling. there's just lags. this with some of the other impediments to growth in the u.s., this is another major downside risk for the u.s. exporting outlook for several quarters. >> we are not an export economy. i get your point there's no such thing as decoupling but this is why the president says repeatedly we are the envy of the world in terms of growth. everybody else is slowing. exports are what 10% of our gdp in germany like 40%. we are not as exposed to global growth slowing as the rest of the world. >> well, i would agree with you on that. the u.s. is a large closed economy. but it's just another extra set of basis points of downside risk and don't forget that there's other knock-on effects through

the industrial sector as exporters start to cut back on spending and job creation. you can't just look at it, sara, as a static development. it is more dynamic and there's going to be domino effects through the rest of the economy. the other thing to keep in mind, everybody talks about how -- jay powell says the economy is solid. what else will he say? he raised rates december 19th in the middle of a market maelstrom. he can't say the economy is rolling over as a politician he has to say that but i'm seeing evidence of decay and the only thing holding the u.s. economy together in the past several months has been the consumer and yeah when i looked at the jolts data of the other day, you are seeing in the retail sector, a big decline in hiring tensions and in the retail sector layoff announcements up 30% from a year ago. so the consumer has really kept

the glue together. the rest of the economy is almost stagnant by the way so the key will be the outlook for consumer spending and that's going to be a risk in 12 months. alongside everything else we have been talking about. >> we have a preview of macy's if that's any indication. >> great to see you. thank you very much. >> thank you. with just 16 minutes left to trade, we are near the session highs. it's a positive finish to the session. >> up next, actor and venture capitalist ashton kutcher weighs in on weworks. on "the closing bell."

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yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ ework is rebranding after softbank scaled down the plan to take a majority stake in the company. dee boza spoke to ashton kutcher about the investment >> reporter: we don't hear from either very often and it's been a big week for wowork. rebranding and announcing $2 billion of funding in softbank and much less than anticipated so does that mean that coo adam

newman looks to an ipo sooner? >> so not at all and even with that deal happening, it was always -- everything was on the table. there was no commitment in that deal to do or not do we keep saying did not happen. we never signed the deal we were trying to figure out the best way to do it. but no regarding an ipo, it's all been an option. we are ready for an ipo because we have our bonds. we are actually reporting on a quarterly basis. >> you areready? >> wework is always ready for an ipo. >> reporter: market readiness may be another story wework is continuing to grow at a breakneck pace and the losses and its ambitions. meanwhile, ashton kutcher is a friend of adam neumann's over a decade and now a strategic partner. he defended the latest reduced round from softbank.

>> for some reason there was an expectation there was going to be like a $20 billion, $16 billion raids. it is a $6 billion raise it's a second largest venture capital investment of all time i'm an investor in uber. second largest of all time sot softbonk coming in $10 billion invested in. the notion that anybody is projecting they don't have confidence in the company is crazy. i have confidence in the company. >> reporter: confidence that kutcher said would make him an investor even now at the latest highest valuation of $47 billion. guys >> there was also some good color. i saw you talking about earlier from kutcher in terms of what it is like to be on the various sides of deals. >> reporter: that's right. now he talked kind of two roles thinking that it's beneficial for companies to stay private for locker remember, he is an investor in

uber and airbnb and had to sit across the table and compete for deals with masa saying that can be extremely frustrating exercise and echoed in silicon valley because the vision fund, $100 billion, other are not cutting checks anywhere close to the kinds of $100 million, billion-dollar checks that masasan is. >> thank you very much for that. i have to say, sara, going back to what we discussed the other day, i wonder whether these guys have missed their great chance for an ipo big loss making companies tearing through cash still they're not new ideas. they're more mature than when the likes of facebook ipo'd and the market's had the jitters we will have to wait and see if they get the types of valuations they hope to get. moving on, new inflation

figures in china below expectations we'll break down the data and economic implications when we return ♪ slap on some cologne ♪ i'm 85 and i wanna go home ♪ ♪ just got a job ♪ as a lifeguard in savannah ♪ ♪ i'm 85 and i wanna go home ♪ ♪ dropping sick beats, they call me dj nana ♪ ♪ 85 and i wanna go don't get mad. get e*trade, kiddo.

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economic power but some tough economic numbers showing that not all is well across the pacific seema is live with what's appearing to be worsening numbers. >> reporter: okay sthe economic china experiencing is not just confined to manufacturing. it also strengthens the case for beijing to step it up on the policy front in the past week, it's cut the reserve requirement ratio to boost bank lending and today unveiling an umbrella of tax cuts for small businesses. this is likely just the start. fiscal spending and a potential stimulus package aimed at automakers are all on the table and expecting the government for citizens incentives to purchase vehicles before february 5th after seeing the first annual decline in decades in the industry the impact of the stimulus tools may take some time to restore

investor confidence. the other factor the consider is more spending on the economy to intensify concerns over china's growing debt problem back do you. >> >> seema, thank you very much for that we have five minutes left of trade. we'll be back with the closing countdown in a moment. >> back to you on that. after the bell, the government shutdown lingering on we'll ask former indiana in iwi lt mi uls how long he thkst llascongp. (vo) we're carvana, the company who invented car vending machines and buying a car 100% online.

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welcome back to "the closing bell." we're up 0.5%. you can see a pretty good steady improvement. one or two wobbles in the day and steady improvement throughout the afternoon that is despite three factors that would have blown the market off the course in last month earnings warnings or guidance cuts macy's, american airlines today. talk of a substantial reduction in the balance sheet of the fed and the shutdown issues escalating but we have continued higher and we are up half a percent. here are the sector performance charts which are a little defense and it's not a positive rally. real estate is top utilities is near the top. consumer discretionary, of course, lower after that macy's

warning. nonetheless, we look like a fifth positive day in a row for the dow. bringing in the dollar, as well as bob pisani joins me here. the dollar softer earlier in the week is stronger today and the softness in a dollar helpful for markets tie trend is down for the dollar in last couple of weeks. this might be the lightest volume day in a while. the one thing i would note here about late in the afternoon, some of that weakness i think president trump tweeted he was not going to davos and maybe hope of negotiations, discussions with chinese officials while there. nothing official and to an extent, telegraphs the idea he may not think the shutdown will end very soon and a mild negative for the market same time that powell was on an 30-year auction >> we shrugged it off. went negative for half an hour. >> we saw -- see boeing up almost 3% again. that stock's up almost every day. below 300 just 2 weeks ago

340. >> shrugging off american airlines and macy's, as well. >> there's hope that some of these numbers, these warnings are not going to be spread to other areas. >> thank you very much there goes the bell. we are up by 132 points on the dow. just over half a percent that is pretty much the high of the session. the s&p up around .5%. sara, back to you. ♪ another almost 300 point swing intraday and close near the highs. welcome to "the closing bell." i'm sara eisen mike santoli joining me. let's take a look at how we finished the day on wall street. triple digit gain for the dow. 118 points as i mentionedat one point in the day we were down 175 points.

s&p 500 up .4% the nasdaq higher by .4. and the russell up almost half a percent. little bit of a defensive tone real estate did the best utilities were strong. industrials, though, a solid day with materials and staples only sector to end red, consumer discretionary. blame macy's, l brands and a bunch of other retail spending numbers. we'll get the outlook for the government shutdown when we hear from former omb director and ex-indiana governor mitch daniels. but here are the stories on the radar for investors. fed chairman powell says he doesn't see a recession on the horizon. indicated the fed's balance sheet to be reduced from the current level. that initially sent stocks lower but they managed to recover. retail stocks routed after macy's posted weak holiday sales numbers and why the chinese

currency rallied what it says about the trade talks and the chinese economy. joining us to talk about the market today, stephanie link portfolio manager. mike, five days in a row higher. >> yes. >> first time for the s&p since back in september. and for the dow since october. >> i have to say continued healthy action a couple of pullback attempts in the middle of the day and excuses i think for the market to actually itself have a deeper pullback and we have sort of let them pass by right? obviously the macy's warning could have been just a handy little reason to pull back at a moment when the index itself back up near levels everyone is watching saying here's the natural point for the rally to stall. we are still at that level being a large call place to pause and i think you have to say that it shows there's genuine demand and point out the volatility index again receding and every day slowly grind the

way lower and that's the market trying to say, we're back in to some sort of state of normalcy. >> i asked yesterday if we saw big guidance cuts or earnings misses whether that would be stock specific reactions or spook the whole market macy's, american airlines, that sort of suggests that the market level is fine and this is now stock specific. >> at this point you're exactly right. yeah the market's trying to sequester the problem companies at this point. now, the difference comes in a week when hundreds of companies report earnings and it starts to seem like a theme. here you say it's sector specific or stock specific all the airlines got hit although way up from the morning lows. >> stephanie, you mnganaged to break your losing streak when you have been here we've been down 500 to 1,000 points. >> yes i was fine on them. >> it's correlation and not

causation. >> thank you. >> i feel so welcome here. >> how are you feeling with the market 10% off the lows and going for a pretty solid win streak here brushing off the negative warnings like a macy's. >> i feel pretty good and we are in a consolidation phase until earnings tuesday things can totally change we have to hear what the fangs have to say and to see if they continue to rally or stall i think that's very, very telling. what i think is different between this year and last year heading into earnings, expectations are still fairly muted. even though we bounced off the lows we are still off the highs and attractive valuation last year at this time we were euphoric soy like the risk/reward, the set-up we will have to see how companies, especially those that have international exposure will have to hear what they have to say especially about china. >> mike, the sector performance today i guess defensive but again we're picking at real trying to find a negative there.

>> exactly it was a mixed day right? not overwhelmingly positive in terms of stocks up versus down and a lower volume and did show you there's still an upward drift at least for the moment. again, the market is still trying to tag -- the s&p trying to tag the levels that might be or might not be a test. >> another day all about the fed. fed chief jay powell speaking today in washington. saying he sees the economy as solid. >> i don't think see anything that suggests that the possibility of a recession in the near term at all elevated. recessions are most often caused by two things. one is inflation that's high enough that the fed has to hit the brakes we don't see that. more common recent in the last several cycles, a matter of mounting imbalances. the dotcom bubble or just

excessive laef r excessive leverage where those things happen. we don't see that either. >> powell also addressed the fed's balance sheet. >> we wanted to have the balance sheet return to a more normal level. don't know the exact level that will depend on the -- really the public's appetite for our liabilities. specifically currency. to us that's a liability and also, reserves and other liabilities so it'll be substantially smaller than it is now. >> let's bring in greg ipp from "wall street journal." greg, thank you for joining this part of the discussion how do you think he did apart -- in terms of dancing between being positive on the economy but not spooking the market? >> well, it was consistent with the last few messages he's given. if anything, i think it was more dovish so he's basically saying, the data is upbeat

the markets are down beat. we step out of the fray for a moment and see which is right and saying we are on pause until we see whether our forecast proves to be right if their baseline forecast is right they'll resume tightening and i think some quarters away from now if you listen to a few other things he said, for example, if the financial markets are nightening the situation for the economy they can offset that they would lower the path for rates. not quite a fed put and saying they're ready to respond and then another point he said we can respond significantly and quickly with the tools necessary to keep the expansion going. another sort of contingent dovish statement and that should override any concern you have about his remarks about the balance sheet eventually substantially smaller. >> people thought that was the most important thing he said, greg the balance sheet will be substantial smaller. how does that happen consistent tightening and what we have seen with balance sheet

tightening is it leads to a bumpy ride for the stock market. what does he do here >> that's a more sort of recent interpretation the balance sheet shrinkage is going on for a year and not until a month ago did people notice and start to worry about it i think jay powell may have had a misstatement today insofar as he and the predecessors consistently said that the balance sheet would eventually be substantially smaller the difference is that before they were talking about -- they were speaking at a point when the balance sheet at 4.6 trillion today it's 4.1 trillion and so perhaps people think substantially smaller from 4.1 trillion is more hawkish i don't think there's new information in anything he said there and might be a situation of for example saying we're a long way from neutral and where in the kind of unstructured q&a formats he uses language that's open to misinterpretation.

>> mike -- the key point is he didn't spook the market ultimately. >> he didn't it's mostly reiteration and i don't think there's an intent to be more strict in terms of what they were saying about the balance sheet. i don't think it changes the idea, though, even from back last friday that the circumstances under which the market rethinks it they're not looking for a reason to alter the path of runoff in the balance sheet. if things got bad, if the fed made an evaluation and it was hurting market liquidity or tightening too much, they rethink it i don't think we should necessarily take tremendous comfort in the fact of they're quote flexible on the balance sheet. >> stephanie, you are an investor are you worried about fed policy and the impact to have on your portfolio? >> well, certainly cause a lot of volatility. that and china trade and the government shutdown and hard to navigate this environment. i find year to date the laggards

leading. value over growth. actually, we -- other than around the holiday christmastime, christmas eve when i was on your show an had high volatility, that's kind of calmed down a little bit i think a lot is going to happen starting next week with earnings and then we can really assess the fundamentals and all of this macro and what it's done to fundamentals i think fundamentals and valuation is pretty good i was buying on christmas eve. >> greg, final word, quick prediction will the next move from the federal reserve be a hike, a pause, a cut and will they change they balance sheet policy this year >> we are already in the pause but when that pause ends i think that's the question. i actually am with the same camp as the fed i think it's a healthy economy and the next move is up and not for several months until they have the comfort of the data that the forecast is correct. >> greg, respect for removing pause is your easy out there and

going further to give us an answer greg ip, thank you very much. >> yes we are technically in a pause. >> if they skip january it's a pause. >> right. >> the expectation is going it's march. we have a news conference every -- >> all live right now. the market's idea it was going to be march and a quarterly pace that was never really put out there by anybody. >> the market shows a higher price -- higher odds of a cut than a hike, right >> correct. >> that's a different page than the fed is on. >> there's still a gulf there. >> data dependent. data dependent >> flexible, patient. >> patience, all the good words. >> happy talk. macy's stock cratering today, having the worst day ever after the department store reported weak holiday sales, november and december, cut its fiscal 2018/2019 earnings outlook at l brands and kohl's reported weaker than expected holiday sales growth and concerns of a weaker consumer bringing down the retail sector. stephanie, are you exposed at

all? >> yeah. i own kohl's, costco, nike admittedly trimming nike with such nice gains. i think there's a big difference of macy's today and even a kohles and a costco. they have real issues. kohl's on the offensive and making the changes to their store format partnering with amazon and their comps 1.7% was actually better than the consensus was it was whispered numbers high at 1.8 but you had double digit digital sales and costco with a 7% comp. what else do you want? i think that you have to be very careful and selective. >> kohl's dropped 5% today. >> i would buy. >> what about macy's >> no. they're different than khol's and changed the store format and

the ceo is out there proactively trying to generate revenue i feel like macy's is on the back foot and exposed to different competition. that doesn't mean that kohl's isn't but better positioned because they have taken the lumps. >> mike, l brands, as well disappointing. should we be more focused on the broader u.s. economy or are they right to say it's one offs >> i don't think necessarily for the broader consumer picture, at least not yet. it does -- it's a reminder that physical retail is structurally challenged and reminds the market of promotional periods happen and also by the way, when everyone was excited about the tax cut being benefiting the retail sector, everyone should have looked at the other argument which is it's competed away pretty quickly and exactly what's happened here i think it's hard for a lot of stocks to regain any much of a valuation multiple right now i mean, macy's is six times.

that's price for decline for a kohl's and target, they look inexpensive. >> we were going do say it shows a rising tide does not lift all boats with consumer spending. >> right. >> and retail and the winners are separated by the losers and the margin pressure. >> still too many stores >> you know what's interesting kohl's, their comps 8.1% best numbers since 2011. you have to dig in. >> that's what cramer said. >> i would expect him to say the same thing. >> in sync on that one. >> winners and losers for sure be careful. >> stephanie, thank you for joining us. >> thank you. no, not saying good-bye to stephanie. we have another story. slight change in order we'll talk about the chinese yuan i mean, the interesting thing

about this is we have also had a weaker dollar. not like this is bullish china on its own we have a chart of the 10-year chinese government bond over the last 2 years which highlights this point quite well. we had a two-year low in the yields and it highlights quite clearly how improving sentiment towards china throughout 2017, worsening in 2018, it's a crude comparison to the u.s. 10-year kind of shows that the kind of risk on/risk off sentiment not as bad a stock change and clearly the chinese currency coming off that pressure to the downside - >> it is a reflection of china they have managed to get control of their currency and i think it reflects two things. one, the optimism over the u.s./china trade talks given the fact we saw the talks this week. they seem to end in a place of more talks that's good for chinese asset prices and they're full in on stimulus mode. i mean, they're easing reserve

raburn o ratio and you get a weaker number like today and you see that the chinese currency is up and a sign they're looking up. >> 40 different separate stimulusprograms since july so i mean that's pretty remarkable. we'll see if we can -- if we see the evidence right? we are starting to speculate maybe things are getter better but the industrials and the multinationals with exposure to china exposed. freeport just under $9 to almost 12 and so, it's very telling in terms of the action of what is working. we'll see if it continues. >> one of the things, we spoke about at the time of the market's new lows in september and didn't seem a systemic issue. there was not necessarily signals of global capital markets like the chinese currency markets saying, wow, something's gone haywire i think this reinforces it so when you see the currency firm

up it at least gives a little clearance for the u.s. stock market to pull back some of its losses. >> stephanie, this time -- >> for real? >> good-bye. >> thank you. >> great to hear your take on the chinese currency. >> fabulous. still to come, stocks rallying for a fifth straight day. we'll debate whether it's a better environment for active or passive activitying. first, former indiana governor mitch daniels to tell veme stdn llhe thinks the gornnthuowwi have and the impact it will have on the economy.

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welcome back day 20 oth partial government shutdown there appears to be no end in site as the president continues to make a case for the wall. >> reporter: president trump making the case for theborder wall at the nation's southern border he visited a patrol station. he held an immigration roundtable and he said that he doesn't care what you call the wall but wants to be sure it gets built. >> we'll call it a barrier instead of a wall. and i'm okay with that, too. i don't care what you call it. but it's got to be there

democrats have refused to listen to the border agents and they say this is a manufactured crisis >> reporter: now, this trip is fueling speculation that the only way out of this is for president trump to declare a national emergency in order to build the border wall without congressional approval now, this is not entirely supported by republican lawmakers but currently there are no other options there is no plan "b. across the country federal workers are making the frustration with washington crystal clear with protests and rallies, tsa workers marching. tomorrow will be the first day that the workers miss a paycheck and it is very possible it will not be the last paycheck they miss back over to you. >> so upsetting for them and their families and everyone. ylan, thank you. let's bring in mitch daniels, the former omb director

from president bush and faced shutdown threats firsthand as the governor of indiana. welcome, governor. nice the see you how does this end? >> oh, i suppose it will end as it has before with a making good, making whole of the workers with some disruption but probably less economic effect than some people are speculating. you know if history's any guide, people will be paid retroactively even for work they didn't do. it's not good practice and one can hope it will come to an ending fairly soon. >> who do you think has the stronger negotiating position as you look at it now, president trump or the democrats >> i'm going to leave that to you. i suspect that the public will show increasing impatience and rightly so with this -- with the

intransigence on both sides. when's different about this time from past shutdown stare downs is that it's not over fiscal policy you know, if it were about our out of control spending, out of control debt, one could at least understand the use of the leverage this way. but over a policy issue of this kind, i don't think -- i think public patience will be exhausted fairly quickly. >> you know, wall street worries about this i guess in terms of the gridlock and what it would mean for the debt ceiling which is a much more serious issue as you know it gets reinstated in march and they can fund until i think august is the drop dead date but i think the concern would be, govern no governor daniels, this does not signal there's progress on that front in this divided

government is wall street right to worry about that >> somebody better worry about it frankly, i think the continuing disgrace of our policy at this time is neither party and neither branch of government has shown any interest whatsoever in heading off the real economic problem that's coming and that's the mounting debts that we have as interest rates normalize you're going to see those climb even faster. they were artificially as we know held down by artificially low interest rates in the last several years but we have a heck of a problem coming. neith neither side showing any interest in dealing with it. i would almost applaud if someone used the leverage for that i don't think you will have in the short term real economic effect but the economic data i would urge you and your listeners to be careful with

it will be distorted it will be bent out of shape for a little while i think they'll spring back later as the corrections and repayments are made. >> although, governor, you say nobody is focused on perhaps this longer term possible threat in terms of indebtedness but, you knowing it seems as if one of the lessons is drawn is treasury yields remain very, very low even though the debt ballooned to the levels it has and maybe there isn't a moment of reckoning coming and anybody worried about this would have been worried of a real world effect before this level of debt. >> you can pick your own definition of soon but the reckoning is coming. this is not a matter of opinion or policy difference this is a matter of arithmetic and no mystery it's been coming for a long time. you know, it was possible, has been possible through recent years to take an optimistic view

to just get started particularly on the run away autopilot entitlement program reform that's necessary to protect today's recipients, even those nearing retirement age we are passing through that period now somebody's going to get hurt when the crunch comes or when we eventually are compelled to deal with this. >> you mentioned intransigence rarti regarding the shutdown on both sides. when's winning the pr battle at the moment is this a very binary issue like so much of politics at the moment that both respective bases are applauding their own team and hating the opposition team >> yeah, right, wilfred. i'll let you handicap it nationally here in the midwest i don't see a lot of difference and i think people are still for the moment in the trench that they

occupied, have occupied in other arguments recently and therefore the opinion is fairly evenly divided now. i do believe quite appropriately in patience will grow and maybe some will slide from one side to the other. again, this particular fight is different in kind to me at least in that it's not over economics or long-term macro problems like spending and the debt and for that reason people may tire of it more quickly. >> finally, i mean, this is sort of what mike was asking just a moment ago, governor realistically, do you think anything gets done on the debt until the financial markets signal it's a problem or a crisis >> apparently not. and let's -- you were talking about the chinese currency before the break one day this could be the

trigger, some retreat from the dollar as the dominant reserve currency of the world. that could start it. the starvation of vital government services, you can see this at the state level. look at the illinois and indiana and where public education, higher education, law enforcement is being damaged severely as the dollars are swallowed up in the ma of pensions and entitlements. that will happen at the federal level eventually and, you know, it's a sad dereliction of duty on both sides of the divide that nobody's dealing with it. >> governor mitch daniels, thank you for weighing in. former omb director worried about our nation's debt. up next, we'll break down the charts to see whether earnings season will help stocks erase the big losses.

find out what happens to the tech sector. we're back in a couple of minutes. have to choose, 'cause, uh... have to choose, oh! (vo) switch to the network awarded by rootmetrics and j.d. power. buy the latest galaxy phones, get galaxy s9 free.

we have a market flash on activision josh lipton has the details. >> act ivision with a publishing agreement with bungee for the destiny franchise and now it sounds like atthe rights and

responsibilities for that are going to go to bungee fully so activision would not expect to recognize revenue from that destiny franchise and the street to adjust numbers there and investors reacting in the afterhours back to you. >> down sharply. almost 7%. josh, thank you. earnings season next week and the charts could point to positive surprises for the market mike santoli will explain. >> this is the citigroup global earnings revision index and compares the number of upward earnings revision of companies against the downward and it's global keep in mind. not just u.s. companies and dramatically lower here. some interesting things to note on the chart this is exactly one year ago and all-time high in the spread between upward and downward earnings revisions and massive enthusiasm going into reporting season one year ago about how great earnings would be and of

course the market did not trade well off of the actual results because we built up the expectations now we are at the level relatively low and go back to early 2016 or here in 2011 to find its comparable area where in advance of a quarterly reporting season of skeptical views built boo the numbers and what it can mean is there's room for upside surprise and perhaps the stocks will have already built in some of the lower expectations so on a net basis, i would say it's a positive indicator for perhaps how the market would take what happens going forward. of course, 2009 we got much deeper. >> particularly, mike, factors in today that markets are sort of stable so if we do see stock specific beats or misses it can learn to earnings being a factor. >> i think that's what we can look for

earnings season is noisy, a lot of back and forth and one company with an upside surprise and maybe you can extrapolate to the rest or not but this shows you that we have kind of looking on did dim side heading into the reporting season and usually a better thing than the opposite. >> which is not how it's been in the last few earnings season. >> right, exactly. >> why aren't companies getting credit >> exactly yet still the stocks didn't trade well >> good one. >> mike, great stuff thank you. >> starting with the banks next week. >> monday. citi previewing that in more detail tomorrow. >> excellent. >> yes. time now for a cnbc news update sue herera has it for us. >> thank you. at this hour, everyone, former trump lawyer michael cohen agreed to testify on february 7th a month before serving his three-year prison sentence cohen says it will give him the opportunity to give a full and

credible account of the events that have transpired senate minority leader chuck schumer says congress should separate their differences on border security from the shutdown and reopen the government blaming the republicans for the impasse. >> there is nothing, i repeat nothing, contained in the legislation that senate republicans oppose so why aren't we voting on them? because leader mcconnell is hiding behind president trump saying he won't bring to the floor a bill to reopen the government unless the president says okay. royal caribbean's oasis of the sea is returning to port a day early after 277 guests and crew members were hit with an outbreak of the norovirus and they're given full refunds for the fare you are up to date that's the update. back downtown to you. >> all passengers? all passengers, even if you

didn't get it full refund for the whole cruise >> yes they were not allowed to disembark when they got to jamaica. >> i see just coming back a day early >> a day early and the last stop was jamaica and they were not allowed to complete that part of the trip so thecompany is giving everybody a refund. >> that sounds right do you have a problem with that? >> right if it's a two-week cruise and missed the last three days and didn't get sick, i take a full refund not get on a cruise ship in the first place. >> that's the question. >> an outbreak of norovirus. >> thank you, very much. >> you got it. up next, we'll debate whether active or passive investing is the best bet with the return of volatility to the markets. find out why the all-new ford explorer is so important to the automaker's future

breaking news out of pepsico. the current ceo elected chairman of the board not surprising replacing an announcement of

stepping down at ceo laguarta and said she would be chairman through this year to ensure a smooth transition and that transition is under way and will take over as chairman of pepsico. and he's got to turn the stock price around it was underperforming co coca-cola. also has a fairly new ceo james quincy who investors seem to really like his strategy total beverage getting the company growing again back to the organic growth and pepsi north america stumbled a bit. also is returning to growth. but -- >> great stretch. >> rivalry continues consumer staples in general not the most favored group of late in this sort of upswing that we have been having in the market but takes over new generation a straight shooter i have met him eager to see what he has planned there on the growth front. >> we shall see moving forward

that confirmation coming through in the last couple of minutes. one of the biggest names in hedge funds back in active management six years after closing his fund leslie pickard is here with the details. >> the timing is really interesting because while other hedge fund titans are running away that's active manage. jeff is running back in after shutting the hedge fund in 2013 and returning $6 billion to investors. he says, quote, the fire in my belly still burns. but much has changed in six years. capital has flowed out of active management and into passive. xutders are trading a majority of the daily flow in equities and greater competition has made alpha harder to obtain vinik was a long short ek tills fund said he's not deterred by these forces. >> i think this is an incredible opportunity for old-fashioned stock picking. you know, we have had decades

or, you know, maybe 10 or 20 years of active managers underperforming. money poured in to passive funds at the expense of active funds the amount of coverage of companies on wall street decreased. all these trends have kind of ignored the fundamentals of companies. i think there's a great opportunity now. >> vinik said he believes the current bull market could last, get this, another ten years. thanks to good economic growth and low inflation. perhaps that optimistic outlook pulling him back into the fray, guys. >> i love this made my ears perk up it is the argument of before and being delivered by someone that hasn't been dragged down by the label of underperformance for four or five years. >> exactly he is managing his own money you could tell just sitting with him kind of in between breaks and before he went on, he is a stickler to the ticker he loves watching the prices of securities you could tell he was really excited to get back into it.

you are right. it's a lot more fun thinking you're managing money in a bull market. >> and it would be a test of his style. right? because today it's a different set of competitors, different rhythm to the markets and interesting to see how hug -- if he can pull it off i was half jokingly saying if you think the markets are going up on balance for ten years -- you know wouldn't be the worst thing in the world. >> true. leslie, great interview. thank you for bringing us that let's debate more this topic black rock by the way announced today to cut 500 jobs or 3% of the work force saying it will also invest to capitalize on the etf. we'll have the debate now about whether active or passive investing is the best way to go this year. todd rosenbluth who joins us and jeff mills who is pro active so, jeff, what makes this year different from the last decade or so where passive was the way

to go? >> yeah, well, let me say from a portfolio construction standpoint we are going to use a combination of act i have and passive and we believe that active management is cyclical and starting to see the beginnings of a shift and possibly better environment for active managers. what happened over the past decade is the fed pushing interest rates essentially to zero and it pushed investors out the risk curve often into equities, often agnostic of price and of quality. and what you got was higher c e correlations and a more difficult environment and you have seen as the fed tightens monetary policy, seeing active hedge funds finally eked out outperformance in 2018 and outperformed the broad market by about 00 basis points in december when things got ugly and looking within style so growth versus value growth massively outperformed value but

30% of individual value constituents outpaced the growth index and there's opportunity in the market and i think that comparison is a good example of this. >> todd, do you see a shift? do you think active can start to sort of justify its fees >> they would have in 2018 that would have been a good environment. the stock market was volatile. the average equity fund significantly underperformed the s&p related index. fees are a bigs pa part of it. to pay for it. we haven't seen stock selection work and in the fourth quarter when it was volatile, the average active manager performed in line with the index to reduce or enhance the profile, use index funds and not just passive vehicles. reduce low voluntary tillty, momentum you don't have to be passive and stat wick the products. >> yeah. it is interesting. that's the whole thing right now where it's essentially the etf industry giving you kind of a

components of what active management is. right? different factors and the challenges for an active manager to actually m body those and outperform those collecting more money. >> you need to be different and often taking on the risk hasn't been rewarded and what we have seen is investors are gravitating towards index-based product that is do some of that. multi-factor oriented etfs or shichting it to bonds if you're more concerned about the marketplace with index products. >> jeff, in terms of your attraction to active management is that the more expensive hedge funds of this world or just a more traditional mutual fund with stock picking in it >> we tend to get exposure to both and i think the point of the average active manager is really important when we think about the process, we look to try to identify active managers and it's quite difficult to identify the managers that are going to outperform ahead of time but we think you can screen them

aboutive share you have to be different than the benchmark to outperform and we combine that with longevity of holdings and we use longevity as a proxy for conviction and strategies that hold positions for long ir periods of time with the active share element we feel like is a better pool to choose from and then deeper due diligence and the point about passive investing being an active decision is critical and thinking about exposure to small cop stocks, russell 2000, s&p 600, the crisp small cap index are all very different from an exposure standpoint and the acknowledgement that it's an active choice is important, too, in this debate. >> okay, guys. thank you both very much >> thanks a lot. more than 7 million. that's how many ford explorers have been sold since 1990. is f aa rough patch, the suv is poedor comeback. we will have the details next.

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body so we'll change the dynamics of the swrevehicle. last night in detroit ford rolled out the all-new explorer. it was quite the presentation that they gave it is the first complete redesign in eight years on sale this summer starting at $33,000. for the ford company, they need this look, it's been a while since they have had good news on the product front. yes, they have the ranger coming out, but otherwise their sales are down 3.5% last year. the company believes this is the beginning of that new product cod e cadence that will give the company a lot of help as they're redoing the company. >> so for the next week or so, months, you're going to learn a lot more about the hard work we've been doing over the last year on our business strategy. partnerships are a key part of that, restructuring into the most profitable part, getting out of product lines that aren't profitable. >> look for some news regarding them and volkswagen.

there's been a lot of reports already that there could be some news i wouldn't be surprised if we see something coming out at the detroit auto show, although you've seen some people saying it's going to be a big alliance between these two. that tempers some of the concerns there's going to be a full line. they're going to be working together more likely that's one piece of news that people are looking for the other thing to keep in mind as we look at shares of general motors, tomorrow gm ceo mary barra will give her presentation to investors -- to analysts, i could say. a lot of people will wanting to he hear from her on 2019. >> phil, we've had a lot of auto sales numbers. particularly in europe and asia it's been pretty bearish, some of the numbers. >> you've got two issues here. in europe you take a look at the land rover news. brexit as well as the concerns with emissions and where they are positioned in the market

there's so much suv competition. if you look over in asia, the concern in china is there's too much capacity. you had all of these chinese automakers that were backed by the government over the last 20 years. plants were popping up all over the country. you've got way too much capacity in that country. now that the market has slowed down a little bit, now you've got people saying, okay, how do we deal with this? general motors, they're going to be okay. they're number one or two depending on how you measure it in china sales will slow down but they'll be okay. the real shakeout will be at the lower end of the market. >> you mentioned layoff mode. >> jaguar, land rover. >> there's too much capacity worldwide. too many been built the last 20 years. >> thanks, phil. does wall street have a growing profit problem we're going to discuss that when "the closing bell" comes right back sure, they probably know what they're talking about. or the one that j.d. power says

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up nt,ex does wall street have a profit problem? we'll discuss, next.

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way or another, including apple, delta, fedex and samsung we were discussing earlier, apple had a big effect on the broader market since then it's been sector specific the way the market is reacting. >> i think you can also argue apple's warning did not get you back down to the lows because i think a lot of it was built in i think we're definitely downgrading our expectations of what this quarter will bring a lot of this is guidance, it's not just about the fourth quarter. clearly we have to soften up our expectations, but not always a bad thing. as i was saying, when the pendulum swings to that one side where people are geared to assume that earnings are going to disappoint, the market has already often got there first. >> where is the market trading right now? >> close to 15 times, like high 14 times. >> and it got to as low as -- >> it got below 14 at the lows so what's gone on is the market has bounced 10 or 11% at the same time as estimates have come down a little. >> i guess we'll find out what

the right multiple is. >> and encouraging resilient day today. the dow closed up 122 points, near the high of the session. >> rebounding from a down 175 at one point. >> good turn-around, five days in a row of gains for the dow. that does it for "the closing bell." thanks for watching. >> "fast money" begins right now. >> live from the nasdaq market site overlooking new york city's times square, i'm melissa lee. tonight on "fast," patient powell strikes again the fed chair managing to keep the markets calm while answering questions about the easing strategy in washington, d.c., today but can investors really trust the fed? chris harvey says there is one group of stocks he hated until now. he will explain why this surprising group could be the big winner in 2019 we start off with macy's igniting a retail inferno. the department store having its worst day ever, down 18% after slashing full year guidance and

announcing