google and facebook and provides a nice sectoral growth >> nike they brought out the money calls, a lot of them just today. >> thanks for being here th that does it for the halftime. the exchange starts right now. >> welcome to the exchange an olive branch to the u.s. from china giving stocks a big lift can investors trust this trade progress a difficult ahead. that's what tesla's ceo says as they announce big layoffs. >> jackets and jewelry, business is looking good for vf corp. we look at the haves and have notes in retail. we begin with the numbers. s&p out of correction. >> shul right. take

take a look at the dow up 354 point we're up just about a third one and a third to one and a half percent on those one of the key markets of the market to watch is the small caps the russell 2000 year-to-date, still early, off to it's strongest start since 1987 and, remember, that sharp move lower down about 27% for the index between highs and lows last year it's up about 17% to start this year since those december 24th lows then the stock to watch as you pointed out, vf corporation, parents company of wrangler jeans and other brands they are up 12.5% best performer in the s&p 500 thanks to a profit beat, revenue beat and a guidance raise and all about vance shoes one of the better performers there. back to you. >> bond yields are following stocks higher today. the ten year is now nearing

2.8% trade optimism is overshadowing a big drop in consumer sentiment. wall street didn't like so much. industrial production numbers were better than expected and new york fed president john williams said the fed will be patient and prudent on further rate hikes and that's how you get a market up 350. let's get more with bob pisani what do you make of it >> i'm as happy as everybody else about this trade talk, happy talk i got a couple of problems we've gone way too far too fast. we've gone 500 points in the dow jones industrials rally since yesterday, since the middle of the day the "journal" reported that great news another leg up to the current rally which is partly based on trade talks going well here's the problem i got the markets are pricing in a favorable deal there's down side risk first risk no trade deal then we have problems. or we get a trade deal and the markets have moved so essentially you do nothing or sell on the news

one other problem i have everybody thinks now we'll get everything we'll get a dovish fed, a trade deal if we get a big trade deal that helps the u.s. economy the fed may get more hawkish at that point. then we can start worrying about the fed. >> people say is it one or the other. if we get the trade deal does the shutdown keep going. >> the shutdown is a separate issue. if this starts going into another couple of weeks, i've been watching this ohio markipot march 1st i'm sorry february 1st we're not going to have an ipo market going until march, even if we open in february 1st it will take that long the longer this goes on. it gets worse and worse the further out you go >> bob, thank you. bob pisani on the floor there for us the big story today is that china offered a six year $1

trillion boost to u.s. imports in those trade talks let's get more on that kayla tausche returns. great to see you >> reporter: the market is zeroing in on what will be on the table when those top economic officials from the u.s. and china meet in washington later this month at the g-20, a couple of months ago each side gave a list of demands, suggestions and nonstarters. those g-20 discussions are where china proposed a massive increase in purchases of u.s. goods through 2024 that six year time frame was not a coincidence. china's pitch was the purchases would span president trump's re-election campaign and his potential second term. china hoping that would resonate with trump who rejected previous offers that were focused solely on imports bloomberg is reporting the package now being discussed is $1 trillion. that would cut the trade deficit in goods with china in half for each of the next six years what's unclear from my reporting

is whether this package being discussed is the g-20 offer or whether it's a revised offer from china based on how the u.s. responded to that and what either of those facts would mean for the likelihood the u.s. would consider it seriously this time around. >> we have the material stocks popping today. is that related to this news >> reporter: it could be potentially related to news. could also be related to the status conference ascribed to me a meeting on tuesday that white house, cabinet officials and other white house policy officials had on infrastructure. it's infrastructure week yet again, kelly >> fifth one now >> reporter: maybe more than that hard to keep track at this point. they were basically debating if we want to move forward on infrastructure one of the only bipartisan policy efforts that the white house could maybe find some common ground with house democrats on, how would that look what would it took like? how could we move forward? i was told that was a robust debate nothing was decided

specifically but the president made it clear he wanted a big sticker price on that he resurfaced that $1 trillion number he doesn't think public-private partnerships work. he was very critical of that plan watch stocks in the energy space. i'm told this meeting focused on permitting and specifically stocks in the permeian basin >> is this all just happy talk are we really making progress on a trade deal with china? let's bring in our experts guys, welcome. bob alluded to this earlier but we have a nice pop on this, on these trade caucus now that means it's priced in so they don't deliver do you think it's getting too

ahead of itself. >> no what got ahead of it is the selloff. it's just get back to where it should be. i think the market is screaming for clarity, right so look what's happening you're getting exactly what you want i think there's still room to go the market had a overreaction in december it's now getting to the point where we should have been and now with this trade deal happening i think the market does better. >> fred, how likely is this $1 trillion boost to u.s. exports or chinese imports we're talking about, how realistic is that >> i can't comment how realistic the actual number is but the notion of some sort of a deal of that magnitude is pretty likely. you got to understand that donald trump needs this to calm markets. you had a fall in the s&p since it was first announced that they would try to reach a solution within 90 days president trump was said to

worry about that >> a solution is different from a victory. if the president can claim victory and there are real issues here, theft of intellectual property. we don't want it to be a kind of an empty, hollow victory the market will see through that the trillion dollars fits more in this idea he'll get some real concessions? >> he'll get something he may even get something through 2024 the underlying problem is we have shifted in 2018 from strategic engagement to strategic competition and that's particularly true in the technological field. you have a new investigation of huawei, federal investigation. you have new congressional action saying u.s. components cannot be sold to chinese telecommunications companies on one hand they may have a short term deal that provides some money and some boost for the market but the long term problem is the fact that we're on a collision course particularly in the emerging technologies and do we divide up the world between people using chinese technology and people

using u.s. technology, can we find a way to work with each other. >> on that front, it's one thing if you're an investor in huawei, you have problems trying to figure out where that company can do business. what happens for the u.s. technology what are the ways -- can people stay invested and ignore this or is fred right it will create this digital curtain between west and china >> i think it creates a little bit of a digital curtain certainly u.s. tech companies are positioned, are in such a position they will benefit as this trade deal gets done and as we move forward and there's a victory i think, you know, certainly the whole market will benefit but tech, u.s. tech will benefit as well. i don't think there's -- huawei issues are what they are those are not the same issues here in the states u.s. tech is okay. >> i disagree with that because i think the chinese will be very wary about bringing in much u.s. technology if they think huawei is under attack and that this

isn't going to be lasting. i think the markets are pricing in these trade negotiations, but not pricing in at all perhaps generational nature of u.s.-chinese contest for the commanding -- >> hard to price in unless you put a zero on the chinese business and maybe that's why investors felt more comfortable and netflix and companies with exposure to china lately >> it's impossible to price in but impossible to ignore at the same time. i talked to the national security adviser he says what has to happen we have to be strategic competitors and strategic collaborators at the same time. in history that's never happened been the two leading competitors. >> seems like we're trying to do that with every other country. maybe this could be a template thank you both here's what's ahead on the exchange >> coming up, netflix rallying 30% this month heading in to earnings with disappointing guidance and

competition from some unexpected sources did it get ahead of itself >> tesla is cutting its workforce. elon musk says they are face a difficult road ahead how difficult? new estimates on the effect of the shutdown on this quarter and it's not pretty. >> announcer: this is "the exchange" on cnbc. every feeling. a product of mastery. lease the 2019 es 350 for $399/mo. for 36 months. experience amazing at your lexus dealer.

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exchange. welcome back netflix reporting a mixed bag of results. the streaming giant beat estimates on earnings and subscriber growth but fell short on revenue shares of the company trading lower today despite several firms raising their price targets this morning let's start, it was much more negative when they first came out yesterday. now we're seeing a little bit of a come back. >> that's right, kelly it was really interesting because netflix has shifted to just focused on reporting its paying subscribers it will tell investors how many people are using their free trial service. but it was those paying numbers that was front and center. there's confusion about whether or not those paying numbers beat expectations a lot of questions about these big viewer numbers that netflix released for the first time.

what do those mean and what could those numbers mean going forward. >> john, we saw the price hikes. to me this made it more clear why they are hiking prices in the u.s. they are not adding u.s. subscribers. this is the way they have to grow, the way they have to be profitable, the way to support this debt load >> i was worried about that going in was this an isfo e7b situation for netflix where they knew growth was slowing so they hiked forces it was a pretty good quarter even if you look at what the stock is doing today down, 2%, 2.5% i think as julia was saying, you know, i think investors are trying to understand the numbers that -- >> they can't keep growing in the u.s. they can't add households, can they >> a bit that's not the whole game. it's more about the data they have and the right choices that they are making and how successful it has been on

netflix versus lifetime is a prime example of that. >> i think what's been really interesting, kelly, is they have been able to attract content creators ryan murphy was one of the biggest names at fox and chandra rhimes who used to create contact for tv and cable. they lured them to netflix what they are doing is showing content creators, hollywood stars if you make contend for netflix it will be seen just as much on this platform. >> but market saturation they showing the power of their scale. there's nowhere left to grow at least in north america >> that's the question if they have 2 million people using netflix as a free trial subscription can they convert those over i think they will continue growing in the u.s. slowly because the market is more saturated. more big names they get from the

traditional media business the more they will have more leverage to lure ever more subscribers. the real growth will come internationally and be really interesting to see what happens when they face more real competition here in the u.s. especially from likes like disney plus. >> i wonder what the impact will be there were reports about this new software to help netflix discuss software sharing that's one way to boost subscriber growth assuming all those people like me, i guess i have my brother's log in but i don't use it but if i had to, because i hear now maury has a show would i be converted to a new household or i would not be just dropped out of their eco system. >> netflix used to say they didn't care about sharing. now counting with paid subscribers they do want to know who is really on the platform. actually more and more subscribers itself isn't the

number, the only number that matters. it's going to be engagement and viewing time because the more people engaged -- wall street will catch up because that engagement will translate into lower term and also translate into better data from net flirks and as that plays out they don't have to spend as much to retain and grow the audience they want to grow that's the kind of efficiency if you're an investor you want to see them get to. >> okay, thank you there are the price targets for netflix. a lot raised after the earnings report let's move on to tesla elon musk announcing he'll be slashing the workforce by 7% and wrote the road ahead is very difficult. musk said q4 profits will amount to less than what tesla made in the third quarter. the stock is down 11%. >> i'm not sure we see too many days where tesla shares go lower than 10% in one day.

this is much more significant than that. kelly, it comes down to this the question of sustained profitability. they expect to be according to elon musk slightly profitable in the fourth quarter but not as profitable in the third quarter. what happens this quarter, q2, 3 and 4 as they don't ramp up sales or try to ramp up sale of the model 3 but bring in a lower priced version of the model 3. remember the average model 3 right now sells for north of $50,000. they would like to it be south of $40,000 for that mass market version. question is can they get the cost down there so they can do that profitably. >> how do you do that? >> you need be more efficient. they hired scores of workers they erected a tent up at tesla

where they added another production line. in terms of efficiency this is not the example you want to look to nobody in the auto industry looked at that and said boy that's the model of efficiency hats off in terms of being able to ramp up production in order to boost sales they certainly did that. but in the manufacturing business for vehicles it's all about efficiency that's what they are driving at now. >> john, i was struck when we talked about the detroit auto show which is moving to the summer, everybody in autos is focused on ces what will that convergence look like >> a lot whatever elon musk says in that same letter he pointed out for that ramp on the model 3 they added 30% you got to put that in the context of cutting back. i would also say what do you know here's elon musk acting like an ordinary responsible ceo you're moving from the ramp time

to kind of efficiency time he's cutting back on staff sending out a letter that sounds very reasonable. no pot smoking no podcasts going on yes, there's a certain kind of volatility in the stock one day but not much volatility in elon musk >> there was a crazy elon premium in the stock >> one last point. we're in a period here with tesla where you're going to have lumpy deliveries in other words you may see a surge in deliveries especially as they send over vehicles to europe and then to china and may not be as great the following quarter. not unheard of in the manufacturing industry any company. so investors need to accept that, that there's going be that lumpiness. >> thank you coming up, america's opioid crisis fresh work on pharma and the family that owns it. how they misled doctors and patients about oxycontin the writer behind that piece

joins us movie pass' parent company is lotioning the ast.se is this the ticket to turn things around? "the exchange" is back in two. duncan just protected his family

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welcome back to "the exchange". eli lilly is lower on disappointing study results for one of its cancer treatments mgm is higher have striking a deal to get a board seat

the stock has had a great erso far. up 15% now to cnbc's sue herrera for a news update. >> here's what's happening at this hour. former president jimmy carter speaking at a ceremony to mark the 40th anniversary of the normal san diego of diplomatic relations with china he said he was grateful president trump has met with north korea's leader kim jong-un. >> i haven't met kim jong-un, but i would say 20 hours in all i've spent intense discussions with north korean leaders about what they want and what the united states want i shared that information with president trump and with other leaders since then >> thousands of people who are against abortion gathering in washington for their annual march for life it marks the supreme court's roe

v. wade decision which legalized abortion organizers say it's the largest anti-abortion event in the world. now check out this video it has gone viral on the internet that's two shark researchers coming face-to-face and swimming alongside what is perhaps one of the largest great white sharks ever recorded. it is a female she's nicknamed deep blue. the two researchers are pushing for legalization and legislation that would protect sharks in hawaii deep blue, it's a female they think she might be pregnant >> could she eat them? >> well, yes, she could. they used that video to say, you know, great white sharks, yes, they can be very vicious, but not all the time they were touching her and swimming alongside here. >> people say i can keep a lion and i would be fine. >> i would have fainted. back to you. i'm joined by tyler

mathison we have a big anniversary coming up >> the second anniversary of president trump's inauguration and we're going to spend is a little time in our 2:00 p.m. hour looking back at the accomplishments of the first two years. >> feels like longer than two years. >> to some to others it's gone by fast. tax reform regulatory reform. moments on trade that maybe no other president would have been bold enough to do and that leads us to number two, what lies ahead in the next two years of the trump presidency >> the first two years he had congress >> now he has a split government and, obviously, a contentious relationship, shall we put it with speaker pelosi, for sure. >> that's to put it nicely >> we'll take a look at that and of course follow the markets which are way up today ending what looks like another positive week for equities in light of this report on china perhaps being willing to bring in more american goods and reduce the u.s. trade deficit. >> that may or may not be one of

the big things of the next two years. we'll see you soon here's what's coming up on "the exchange". >> ahead johnson & johnson teams up with apple. why investors aren't concerned about tiffany's not sparkling sales. and the $1,000 ear buds. it's all ahead in rapid fire

welcome back a bunch of headlines to get to today that should be on your radar. time for rapid fire. kate rogers is here, contessa brewer in quite the pant suit. and courtney regan first up, apple and johnson & johnson are joining forces on a study to find out whether the apple watch could be used to speed up the diagnosis of afib as a leading cause of stroke apple is in talks to offer it to seniors. may lose a cool factor >> we just want our grandparents to right the apple watch that has the elect introduce cardiogram on it

is $399 which may be out of the reach of seniors what they are saying when you go into afib or this really rapid pulse it means that there's something dire happening in your body typically you should go right to the doctor apple watch could tell you go to the doctor as a precursor they say think it's a precursor for stroke. could it be very useful in saving lives we've seen apple partnering with johnson & johnson with some of these other insurance partners talking to advantage people. >> it makes sense. it's expensive but if they feel in the long run it will save someone from going the emergency room >> use it on fsa dollars >> here's a $50 lotion to buy. crazy. we won't go down that road

next parent company of movie pass may spin off the troubled asset into its own company movie pass has been a cultural phenomenon but not good for investors. my mother-in-law loved it have given up on it >> i never quite understood the reason for this. i do love to go to the movies but i would never purchase something like this. >> you must not go to the movies that much. >> you need to go four to five times to make it worth then they dropped the price to $10. but still looks -- >> they are burning through $40 million a month. >> how are they going make money in the future. they haven't said what the strategy is to turn this thing around >> they tightened up on the terms. you can get this for only certain day. amc came out with its own and say we can offer, if people want to go to movies this way we have

a subscription plan. >> it's doing better >> competition, and it reminds me of silicone unkorns yicorns v to be profitable >> vf corp is up more than 12% advance seekers and north base jackets giving them huge earnings boost they are high margin products. can we see some of these products >> here he comes >> let's get a shot of the model. >> they were high margin pants >> michael how much did your sneakers cost? >> $90 >> hard to see my guess is they probably didn't cost $90 to make and the jacket, there lovely piece of apparel there. >> north face. >> you're a walking vf corp. >> why were investors surprised? >> there's still weakness in the jeans wear business and that company has not fully spun out

of the plan. that will happen in the spring >> if the shutdown ends. >> that could hold things up they said as much on the current call there was some surprise about that because that's still a part of the company it was a drag but not as much. men's wear is super hot. don't you think it has pretty incredible staying power those were brands i was into when i was in highle school but i still have north face products and wear them all the time i'm usually ten years behind it turns out -- >> you're cool >> it has a pretty dominant spot and keeping moving up north face >> remember when adidos was all the rage how much longer can it go? >> i wish i knew that.

if i knew that i could make a lot of money >> they are hot now. >> big jewelry brands lost some of their sparkle tiffany's is saying worldwide same store sales fell 2% after signet slashed its 2019 outlook and said they may need to close some stores. signet i understand -- >> getting a lot of competition from macy's. >> macy's said fine jewelry was a strong point during the holiday. >> there's different ends of the price point. signet is lower end and tifr any's is more higher end if we're seeing weak on both sides just might mean jewelry category is weak >> you have chinese spending around the globe that's a pressure point. that's not going so well >> is jewelry cool >> my first thought is i know gifts have become more and more popular every year i was wonder if the jewelry category as a whole isn't as hot

any more >> let's talk about high school. my friends would get these tiffany necklaces. but do people do that any more if they do is that enough? here i'll move on to the next to pick louie vitton is producing head phones it will have the monogram on them nearly $1,000. $995 so we talked about the apple watch. are these head phones the new jewelry type products. is it cool >> wait a minute also with people like us your hair is going to cover your ear buds >> if i'm dplarngs 1,000 i'm showing. >> what if you get mugged. there's a lot of stuff about people taking iphones and stealing head phones >> you're advertising as you walk down the street you have a

$1,000 product sitting in your ear. >> for the price of these head phones you can buy two grandparents an apple watch. >> i am curious if that's what's happening here the way technology -- i don't know if it's tech because $350 montclare hat that kids are wearing to school. so much administrators said please don't send your kids to school in this hat because they are getting lost whatever the parents are thinking this is not a technology product, it's not jewelry. is jewelry not cool? >> i would not turn down a product from tiffany i don't know maybe it's not cool for girls in high school. >> or a nice vacation. >> all of those things people want to be street wear models, influencers. >> jeffries analyst had this really good quote.

he says that tiffany has been higher in past 30 years. he has expectations what's to come let's not give up on tiffany >> guys, thank you great stuff. americans are more likely to die from an accident all opioid overdose than a car crash. new documents reveal the family behind purdue pharma misled prescribers and patients about the dangers of the pain killer for years. we have those details ahead. a check of markets we're off session highs. up more than 1% for all the major indexes. "the exchange" is back in two. o. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale.

mm. 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. ♪

newly disclosed documents in a massachusetts lawsuit against perdue pharma allege the family that owns perdue directed

efforts to mislead doctors and patients about the harmful effects of opioids employees raised the red flags in one case a sales manager pleas for the company to contact the dea what she suspected to be an organized drug ring until several years later when the company's executives were indicted let's bring in former reporter at the "new york times" and winner of the pulitzer prize, barry myer joins us. what do you think is most significant about these new documents? >> they are rather remarkable because they give us a unique and almost our first look inside -- inside perdue and the involvement of members of the family in the day-to-day operations of perdue >> perdue is a product company there's many others on wall street, publicly listed who have also been named as defendants in some lawsuits about opioids.

how much worse does this get for them as more and more of these disclosures what's happening at perdue come out? >> it's hard to predict. it's not going to get any better perdue has been very successful over the past 20 years in, number one, kind of masking the involvement of the family in the company's operations and also fending offattorney generals, plaintiffs lawyers who sudden the company. very few documents about this company have come to light now we're starting to see them come to light and they are really giving us a vast new insight into how the company operated and at first blush it's not very favorable >> do you think that purdue had a different culture from these other companies, there were concerns the ceo at the time was overly promoting these pills that they were engaged in

nefarious behavior to make sure doctors and patients were getting them does that set purdue apart from others >> purdue like any other company are profit driven. they were driven to make as much money as possible. purdue is unique and fascinating. an issue i tried to describe at length in the book the family really helped invent the whole modern day marketing of prescription drugs. so they have a legacy. they have a part within the pharmaceutical industry and the development of marketing techniques that's unique among drug makers. >> what about the drug distributors these are companies that distribute all kinds of different drugs. opioids is one of them there was a recent "60 minutes" of mike moore the lawyer who did the tobacco settlement for billions and billions of dollars in the past and he said he's now coming for the drug distributors is he going to win this case,

the distributors should have known there was something nefarious going on >> i know mike moore from tobacco litigation which i covered while i was at the "times" many years ago there's no question in my mind as an observer that the distributors knew that they were shipping millions and millions of pain pills into areas like west virginia that were already rife with opioid addiction and that the population wasn't using these drugs. you know, there was a remarkable series of articles in the west virginia newspaper, i think it came to the conclusion that there were dozens and dozens of pain pills being shipped there for every man, woman and child in the state >> is that where this ends that's what we're trying to figure out as we understand deaths are surpassing traffic deaths awareness is much greater than it used to be. and multi-billion dollar settlements with the states

either from the distributors or from the manufacturers or both >> it could be both. but i think where i hope it ends with along with people getting the treatment that they need is that the truth of this episode finally comes to light, both these manufacturers and the distributors of opioids have been very successful in suppressing the truth. we all recognize this is the greatest public health catastrophe of our time and so the truth of how this happened, why it happened, and the individuals who were responsible for it happening should come to public light as well >> perhaps those individuals being held responsible too thank you very much for joining us coming up the government shutdown nearing the one month mark today economists are issuing more downgrades the longer it lasts l ve the latest forecast and they are not pretty after this ♪ ♪

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hey, batter, batter, [ crowd cheers ] like everyone, i lead a busy life. but i know the importance of having time to do what you love. at comcast we know our customers' time is valuable. 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. welcome back to "the exchange". let's look at the s&p sector heat map with the dow up 300 points all sectors are in the green as you can see there. we're keeping a close eye on 1% plus gains for all the major

averages more on that coming up in just a bit. we're getting some estimates on the effect of shutdown on growth this quarter and it ain't pretty steve liesman is here with the n and i want to share with you some of the new information, but i'm not really going to lead with the news here so just work with me for a second i want to show your our cnbc rapid update forecast for q1 >> all right. >> the first thing is it's not pretty on its own. the 2.4 there and down 0.3% on the week. >> we started this week off at 2.7% and down to 2.4. >> down to 2.4 but does not include the shutdown i called all of our people who do this and none of them have yet -- >> why did it go down? have we even gotten data >> well, what they're doing is they take q4 and the production today was good a big drop in confidence but that wouldn't do it. now, people not in our survey have put out a couple forecasts

for what q1 may look like. bank of the west, 1.4. they were already sort of on the downside 0.4% this is from the shutdown. >> usually in the middle >> they've been on the low side on q1 but came down, because of the shutdown. >> the non-shutdown came down to 2.4% with the shutdown, these people are down about 1 more percentage point. >> one more, now, this gets worse here this is one of our guys, brett, i can't remember his name, brett from deutsche bank brett ryan he said this in the worst case, a full quarter shutdown could subtract 1.4 to 3.5 percentage points we didn't have that to give and now give it up i went from no shutdown to shutdown to the worst possible case this is the worst case scenario

but this is a negative he becomes the second person remember, we had from the pantheon earlier the first economist to suggest if it lasts through the quarter, it could actually be negative we'll get some of that back in the second quarter >> the recession, two quarters of negative growth as a rough benchmark but that's talking about business cycles too. i mean, sure, i don't even know if they call it a technical recession if we had two quarters of that because of the shutdown. >> not even close but sometimes things happened afterwards and they said because of this event, the prior events were a recession. >> we understand them better now. >> exactly is what they are. we understand better now just how close we might be to the flat line. thank you, steve liesman hurt wall street is the market dying out for good that's next. hexcng wl rht back mom and dad got a new car. it's not theirs, it's mine. the rx350l with three rows for up to seven passengers. lease the 2019 rx350 for $449 a month for 36 months.

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welcome back the junk board market has opened back up after ending a 40 day stretch with zero issuance, highly unusual at the same time, we just saw the biggest inflows in two years into the sector last week, so what is going on with the economy? let's bring in charlie o'shea, lead retail analyst at moody's

and brian reynolds at canaccord gentlem genuity. >> it will be three years in april. ish we a ish -- ishe issuers it's a shift way from the public market, even though the overall credit market is growing rapidly. >> these are for pension funds and they tend to hold them to maturity not like the tpanic when oil prices collapsed and these stay on their books >> that way the companies don't have the market out there.

look at how your bonds are dropping you look at the retail sector where people look at this as the gauge of the health of these companies. >> exactly one of the things we look at with retamers is, you know, we're fundamentally driven and not short-term driven and the bond market has short-term components to it, especially from a market to market pricing perspective and one of the scary things for us is we've got a company that's got fundamentally pretty sound and for some reason, the bonds die and then we take another hard look at it and say, wait a second, are these still sound? is view of the company remains the same but an opposite view because the market may have a different perspective than we do. >> also, etfs where investors can fly in and out of junk bonds as quickly as stocks is that exacerbating the propensity in an era where we have the death by amazon retail index to say, look, this might be the next to go when it could also just be short-term flows. >> i think that's a really good way of putting this. it could be short-term flows and again, at moody's, we take a

long-term view fundamental ratings analyst and we have to separate the noise from reality sometimes and what you're describing can be, you know, maybe there's a small investor that made a trade and it doesn't reflect the overall view if you've got a billion dollar issue out there and somebody sells $10 bonds, is that a benchmark for the company's performance or how investors ought to view it >> let's say it's cal purchase as an example. they say, we'd be happy to buy these junk bonds get a 7 or 6% yield, that's better than elsewhere in the market right now and if the market overall is shrinking, when retail investors do pile in, are they getting the worst of the worst you know, are they getting the same kind of yield that they could have if they were the big private guys >> the credit market, especially the junk market, is an institutional market unlike the stock market where retail investors can be on the same plane as the institutions,

it's very different in credit. i think retail investors should be in a mutual fund where they can get better pricing and better execution >> what do you think are the long-term ramifications if the junk bond market continues to shrink, brian? >> there's two ramifications first, it increases the intensity of the credit boom probably another three to five years. steve liesman just made a great point. the economy is slowing more than people thought, even before the shutdown which means the fed in december was even more wrong than people thought they were and now that the fed has made a mea culpa, now the credit market is opening back up and this allows people who take on more risk than they otherwise would, so that intensifies the credit boom and leads to more buybacks and mergers while times are good and then in three to five years when the cycle ends, people will be lulling into a false sense of security and that will make the ensuing financial crisis worse. >> that's a fascinating point. brian, charlie, thank you both for joining me brian reynolds and charlie o'shea thank you for joining me "the

exchange." i'll join tyler and melissa on "power lunch" which begins right now. >> see you shortly, kelly. i'm melissa lee on "power lunch. trouble at tesla a rough outlook. how investors navigate the road ahead and netflix says fortnite is a bigger threat than hbo and hulu will gain that out. "power lunch" starts right now >> indeed it downside, melissa, welcome to "power lunch," everybody. wall street's win streak in tact, keep going the s&p 500 now out of correction territory all pretty major averages on track for the fourth straight week of gains. all 11 of the s&p 500 sectors, they are higher. led by industrials and materials. in the meantime, the dow and the s&p are on pace for their best week of the year and this month is sta