company. going to be merged down 7 today you have to buy it >> pfizer got downgraded it's wrong they've got a great pipeline >> great seeing you. >> thank you for having me "the exchange" with kelly starts now. thank you. welcome to "the exchange." i'm kelly evans. stock picking is back. some big names up on big beats today. we'll tell you about one cautionary sign still emerging from all of these earnings some trade talk reality. we'll talk to one of the president's top chinese officials. and unconventional mortgages are making a return. should we be worried about that? bewee begin with the big market move >> it's been a choppy session. markets struggling to find direction. that uncertainty over a trade deal continues to grow

we were up 296 points at the highs. we dipped into negative territory around 10:00 a.m. eastern as you can see here. we're bup about 50 on the dow look at some of the stocks on the move one pocket of weakness throughout the trading day has been transports. one report from "the wall street journal" about stiffening competition from amazon on some of the traditional shippers like fedex and u.p.s. both stocks down about 2%. look at ibm. that's one bright spot throughout the day swinging into a profit and that stock is higher by 8% it's maintained its gains on track for its best day since october of 2017. despite the move in ibm, still seeing the broader tech sector under pressure >> thank you, seema. the big earnings beats couldn't keep the dow from turning negative after kevin hassett said zero economic growth is possible let's start with the earnings,

though bob pisani is at the new york with more on what's jumping out to you so far from these results. >> united technologies and ibm above consensus on 2019 earnings proctor & gamble in line one thing worries me a little bit. the specter of higher costs and margin erosion we have 6% revenue growth. that's terrific. these are expectations earnings only up 3%. revenue higher than earnings this suggests there's costs, inflation going on margin erosion and that's an issue. we saw this with kimberly-clark, one of the few companies that disappointed today here's the ceo who came out and said overall it was a challenging macro environment and our margins declined reflecting significant commodity inflation and currency volatility kimberly-clark had this issue as well last year >> yesterday stanley black & decker we thought was more of a housing story but it

was also a lot about margin pressure they talked about the tariffs, the commodity price pressures they're facing that's a different story than it looked at first blush. >> completely difference than the china slowing story. global slowing story margins in the s&p about 10% for the last several years that's been near records if that starts eroding, that's going to be a major problem. one way is cost pressures go up. >> absolutely. bob, thank you, down at the nyse for us nancy davis is founder and chief investment officer at quadratic company. paul christopher from wells fargo capital investment institute. we have kind of been off to a tear for the first part of this year but only corrects the real weakness we saw at the end of last year. i wonder how bad it was for them at the end of the year, was that like a mini credit crunch? liquidity dried up it's not the kind of volatility

where people make money. no one issued a junk bond. what was going on there? are we -- is that over now >> yeah, i think we've had quantitative tightening start to kick in. we've enjoyed ten years of money printing and loose monetary policy and now policy is beginning to tighten we're seeing that in financial conditions the bouts of volatility, whether it's december, but there's been a lot of vol in january on the upside so vol works both ways >> we had a big one last february december was kind of bad for every asset class. is 2019, now we put that behind us or is there more coming >> no, i think there's going to be more volatility in the market i think it's a sign of health in the economy because it's been too complacent investors have been lulled in this very, very low realized volatility market. so i think it's a positive sign we're seeing more volatility in

markets now. >> trade might be putting too fine a point on it, but what should investors do to be positioned for this? i say volatility is a bad word around here because people fall back on it too easily. but you're talking about deep knowledge of these products and how they work. what is the right way for investors to be prepared for this >> i think investors have to look at their portfolio and really understand their diversification because i think most investors have stocks and then bonds and then some amount of real estate and real estate is not something they're probably going to sell or have a liquid asset so a lot of the institutional portfolios have moved more into private markets. and i think that has become quite expensive. if you look at private equity last year, they raised almost a trillion dollars of money going into that asset class. i like to call that the three monkey strategies where they see no evil, hear no evil and speak no evil because there's no marks. >> we talked about that last week how a lot of junk bond

issuers are issuing to private markets. look, we don't want people to know how much these prices are moving in markets like these paul, you live in the mark to market world and we have larry kudlow coming out and saying, you -- there were no preliminary u.s./china trade talks. they weren't called off. everything is okay markets started with a better sheen to them. we had great earnings beats but we've given that up. there's nothing for people to hang their hat on, i guess >> that's right. it's going to be a volatile quarter. concerns about growth and what might happen with the shutdown and how that might subtract from growth primarily it's about trade and the prospects for the rest of this year. we think investors have a great opportunity here to start beginning a rotation a nice bounce in stocks here time to start taking some money out of the defenses that have done well. put some cash aside and through this volatility, start putting that cash toward gradually and more growth oriented we like discretionary,

financials, health care as well. so there are some places to put money here, just have to be willing to take some profits >> isn't today a good example of why sectors don't work, per se look at proctor & gamble relative to kimberly-clark you can have two completely difference stories going on with companies typically lumped into the same sector. i know you can't talk about specific names as an overall strategy, would investors do better to focus on companies that execute well, especially in margin compression environments than they would be to try to pick the right sector and market timing. >> that's right. quality is an important watch word in terms of this late cycle market where rusk and reward have to be measured more carefully against one another. it's not the case anymore the economy simply lifts all the boats. together the quality companies should do better and might even protect you better on the down side when that volatility does reassert itself. >> can you give us one example of that before we go >> just in terms of the sectors, we think industrials have been a

sector that's been badly beaten up here but we do like the growth prospects here. the growth profile for that sector so we'd be continuing to look for quality names in that area >> nancy, your call to action for investors would be >> i think you need to diversify at this point. look at your portfolio and see how much equity related risk you have equities might do quite well global growth is -- especially some emerging market equities and other equities but look at your exposure and understand the correlation between the different asset classes. i think there's a lot of perception that with a portfolio that has different holdings, whether it's sectors, to this point, it's really correlation goes to one and these periods of risk off so you need to diversify. >> do you believe gold is a real -- people say you can be in gold it's un -- >> i'm not a gold bug. i think gold has its own beta and what that is, is a mystery to me.

i definitely don't think it's a safe haven as many people think of, but, yeah, i'm not a gold bug. >> no one is saying that about bitcoin either nancy davis and paul christopher. let's drill down on the government shutdown. it's day 33. now federal workers and unions are protesting over in the hart senate office building in washington that's where we find ylan mui. >> there were hundreds of people gathered here in the atrium. the protest is now breaking up as they take their message to individual lawmakers' offices. they started the rally with silence. they took a minute for every day of the shutdown so far and then began chanting no more food banks. we need paychecks. we talked to one woman facing her second missed paycheck on friday she's worried about paying her bills. >> i've been there for 25 years, 24 years, and i love my job, but

at this point, i'm having to postpone medical procedures because i can't afford the co-pay >> there are some pivotal votes expected to happen in the senate tomorrow also potential movement in the house around more money for border security. but no wall that president trump wants. kelly, none of these proposals are expected to be the breakthrough these workers say they need in order to start getting paid again >> ylan, we heard the president is going to try to deliver the state of the union address this back and forth with pelosi goes to the negotiations that may or may not be happening to open the government, period. but he'll now have a big platform in which to take his message once again to the american public. >> well, it remains to be seen whether he'll appear in the house chamber. just this morning after the democrats held their weekly caucus meeting, the chairman said it's very unlikely that the president would be on the house floor if the shutdown continues. we have not heard a response yet from nancy pelosi. in order for the president to speak on the house floor, it

would take a joint resolution that passes both chambers of commerce haven't seen that resolution come up. it hasn't passed yet until then, we're still in this tit-for-tat that has characterized the entire nature of the discussions around the shutdown >> that's true ylan mui, thank you. here's what's straight ahead on "the exchange." >> coming up -- a view from the inside one of the president's top china advisers tells us what he thinks will happen next and what's holding up talks? a flashback to 2008. as affordability becomes a bigger and bigger issue. unconventional mortgages are making their way back. and a silicon valley ceo calls out his own industry saying they're not supporting america's defense needs. >> this is "the exchange" on

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which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. welcome back there's a look at the dow 30 you're seeing much more red than green on the screen. the earnings beats this morning still the ones driving that index positive by just a couple of points. the s&p and nasdaq are still negative breaking news from the white house. eamon javers has that. >> the president issuing a statement within the past couple of moments responding as the

political instability and some of the violence in the streets we've seen in venezuela saying i'm officially recognizing the president of the venezuelan national assembly juan diado as the interim president of venezuela. the national assembly invoked the country's constitution to declare maduro's presidency illegitimately the people have spoken out against maduro and demanded freedom and the rule of law. juan giado is a 35-year-old politician challenging the maduro regime in the wake of disputed elections last year he has been taking to the str t streets in caracas he was pulled from an suv by intelligence agents just a few days ago but ultimately released now the president of the united states has recognized him as the interim president of venezuela

a dramatic shift here in policy from the united states government this follows a meeting the president had at the white house yesterday with members of the florida delegation and the governor of florida who spoke to him to urge a hard line against the socialist regime in venezuela. the president presumably listening to some of those political allies yesterday and taking this action today >> rubio and others were pushing him to do that i saw reports about oil and the president possibly targeting sanctions in venezuela to prevent oil exports that way i don't know if there's any word on that? >> i would expect there may be more details forthcoming from the white house on how it plans to handle this situation over the course of the afternoon. as soon as we get those details, we'll bring them to you. >> oil was moving lower today, not higher, but we'll watch it closely. where do we stand in the china negotiations he's michael pillsbury director

at the hudson institute. >> hi. politico was just having some fun. i didn't capture the president's brain. if anything, he influences me. >> all the more reason to talk to you about what is happening larry kudlow yesterday said that he denied the cancellation of preliminary talks between the u.s. and china saying that was never planned in the first place. what can you tell us about how important any kind of preliminary talks are to this jan 30 trip where we're still expecting maybe some major negotiating points, some big things put on the table and maybe some progress? >> over the last 45 years, a lot of american presidents have negotiated with china. and there's some patterns to what's gone on one of them is chinese prefer to make a last-minute deal to get the best deal they can i'm not among those who think there's going to be a breakthrough in the next few days secondly, i think the president is right president trump's tweets in his press conferences, he said

there's progress he's also said it's going to be a comprehensive agreement and covering many issues one of the lessons from the past 45 years has also been that the chinese try to influence things from the sidelines they will get their old friends to call the president, whichever president it is. it's certainly happening now they'll get businessmen who are close to them to call up they'll get ex-presidents to call up. there's no reason the white house can't do the same thing. i think you're seeing comments from larry kudlow and others they're trying to put a positive spin on the talks. let's get back to cooperation with china >> but it doesn't mean -- we take your point it doesn't mean there's going to be progress and you're skeptical there will be progress. so -- >> that's right. >> in the reports -- >> in the near term. >> yes china had offered a trillion dollars worth of imports over, i think, a six-year period to the u.s. trump did campaign on closing the bilateral trade deficit with china. whatever the critics say about whether that's smart policy, that's his main focus.

probably even more so than intellectual property and other things we know are thorny issues with china is that -- is that something that can actually be a win a trillion dollars is a big figure is that all talk something they could put on the table to give him a win but no real substance there or are we talking about a major change >> we're talking about a major change theu deal outcome is the chinese double or triple the exports they buy from us we're running roughly $100 billion a year now one of the chinese offers about a year ago was to go to $70 billion more president trump asked in may that they do that twice in a row. so that would pretty much eliminate the trade deficit. can china do that? it means they'd buy soybeans more from us than brazil wouldn't buy airbus airliners. a normal economy that was totally free trade, free market could not do that. but china as a state-controlled economy --

>> it can. >> president xi has the power to say, okay, buy american. there have been witsy articles in the chinese press over the past few weeks that we may have to all buy american more in the future >> that's a compelling thing for american manufacturers so then final point on this -- >> bulldozers and trucks is another example. caterpillar. >> it sounds like you're saying this is achievable and yet skeptical there will be an overall trade deal which is it? >> it's that the president has written a book about 18 years ago. he's been into this china issue for a long time. the book praises the skills of the chinese negotiators. he says they're the best in the world in this book and then says what i would do if i were president is outsmart them be unpredictable he uses that word unpredictable a couple of times. i don't expect this to be a smooth deal but i expect success because president trump cares so much about the issue

>> michael pillsbury, thanks for joining us >> his new book is the 100-year marathon the secret strategy to replace america as the global superpower don't miss commerce secretary wilbur ross tomorrow on "squawk box" at 8:30 a.m. eastern time unconventional mortgages are back we'll discuss whether that's a warning sign for the housing market later on "the exchange. we're back in two. more teched out than silicon valley? with a cockpit fit for aspaceship. hang on. radar that senses things the human eye can't. busted. and the ability to make a thousand decisions before you even make one. was all this, really necessary? what do you think? ♪ ♪ ♪

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welcome back to "the exchange." here are some of the movers this hour so many today. united technologies is among the top dow performers the company beat estimates thanks to a more than 20% surge in its aerospace business. also comcast, the parent company of cnbc, reporting better than expected earnings and revenue. also raised its dividend by 10%. comcast shares are up nearly 5%. capital one missed on earnings and revenue the company saw a big 81% jump in marketing costs capital one, one of the worst performers in the s&p 500. it's down 5% now to sue herherera >> president trump says he's looking forward to delivering his state of the union address before congress as scheduled on january 29th pelosi had earlier asked trump to consider postponing the address over security concerns caused by the partial government

shutdown white house press secretary sarah sanders says democrats need to decide if and when they want to work with president trump to get thousands of furloughed workers back on the job. >> the president asked her point blank if we reopen the government, at that point, talking about a 30-day cr. the president asked her point blank, if i sign this and we open the government today, will you support in 30 days funding for border security, including a wall and she said no the president has been clear that that has to be addressed. >> actor alec baldwin has pleaded guilty to harassing a man during a dispute over a parking spot last fall the 60-year-old actor appearing in a new york city courtroom earlier this morning he agreed to complete a one-day anger management class and to pay a $120 fine to resolve the case you're up to date. that's the news update kelly, back to you >> have you ever done an anger management class >> one day

i just don't know that that would really get you there >> if you have deep anger. >> you got it, guys. sue herera, i'm here with tyler mathisen have you seen this amazon scout thing? >> i hadn't heard about it >> it's a little device that supposedly delivers autonomously, packages there it goes down the sideline. looks like wisteria lane this is in snohomish >> they are testing it out i want to see the first time it encounters a dog, a mercedes-benz or, c, someone who has sort of ill motives and just takes the thing. >> would you support it in your neighborhood, though >> i just don't think it would work remember when they were going with drones. in the past month we've had two airports shut because of drones, and i just don't see drone delivery taking off. maybe this because it's terrestrial but who knows.

>> expensive, too. also news on hulu. following netflix on the price hikes. >> there either is or isn't pricing power in this area it would seem there is hulu raising prices for its ultimate packages. >> ad free >> ad free cutting prices for some of the other lower end packages but you have to start asking yourself, and we will on "power lunch," at what point do these a la cart services add up to less than you might be getting when you are paying for broadband and a cable package and -- >> and they have a hulu plus live option. if only there was a way to bundle it altogether >> it's disaggregating and then aggregating back again we'll look at hulu, netflix and the other streamers. >> don't trip on scout we'll see you at the top of the

hour tyler mathisen here's what's ahead on "the exchange." >> ahead -- how detergeent helped p&g report a clean beat china could soon be the retail king of the world. and free bacon for all ♪ our mission is to make offshore wind one of the principal new sources of energy. not every bank is willing to get involved in a first-of-its-kind project. citi saw the promise of clean energy. we're polluting the air less.

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time for a few more headlines that should be on your radar today. time for rapid fire. here are leslie picker, robert frank and kate rogers. first up, we'll talk about proctor & gamble shares up nearly 6% after the company reported an earnings beat and raised its outlook for 2019 looking at the details, a boost in beauty and detergeent weak sales for the shaving business but investors like what they hear. >> some of that organic sales growth was due to higher prices which consumers aren't too bothered by, but p&g has higher end and lower end beauty products they also have olay. >> what skg? >> it's more expensive pricier products >> $290 for an 11-ounce thing. facial cream >> but you can mix higher and lower. >> sk2 is $200

okay >> then olay on the lower. i'm someone who mixes and matches. i wonder how harry and shave club have impacted gillette. >> the premium facial care products the gillette stuff, the shavers that guys buy, that was down like 3%. >> what does this is a about p&g shares that they raised their guidance for 2019 and the stock is up 6% was the sentiment that negative on p&g that any kind of growth, we'll take it as investors >> probably. by the way, aren't men buying a lot of fancy skin care products these days >> i don't see it. >> are you >> i'm not >> you know, they maybe go to the spa a little more and get procedures more but the daily sort of -- i'm going to stay young forever, i've got to use this moisturizer, i donts s't se that >> stay away from the fancy

things >> get a load of this. alex carp sharply critical of the silicon valley colleagues. he is calling them hypocrites for shunning u.s. defense work take a listen. >> the reason why i'm also on top of that very critical silicon valley approach is that silicon valley, what made them strong, they had a hand over supportive relationship to the u.s. economy and u.s. defense from the beginning the reason why people put up with crazy looking people that are doing their thing in a different way is because we have historically delivered either jobs or national security in silicon valley people understood the value of what we're doing now silicon valley is creating micro communities that break the consensus of larger society while simultaneously telling the average american, i will not support your defense needs, and then selling their products to countries adversarial to

america. that's a loser position. it is not intelligible to the average person it's academically not sustainable. and i am very happy that we're not on that side of the debate >> this was real surprising he was this blunt about it with this ipo that may or may not be coming this year there's no ceo corporate speak from this guy. >> not at all. >> and his blunt speak is very rare in silicon valley but i think he's really comparing apples and averages here what palantir does, they are very secretive, they do data mining and data collection and they got their bread and butter business fromthe pentagon, from the cia so the government has been reported, represents about half of their revenue with big corporate clients representing the other half so the government is their key constituency here. so to say that other tech companies, let's take apple, for example, facebook, amazon, that's not really their key

constituents that's not their business model. >> but palantir is not trying to get away from that the, companies, it's a smaller share of their business. their employees are saying, we should get away from this and we should think twice about this. his point is that's a bad message for america because silicon valley and the u.s. military grew up together and had a symbiotic positive relationship and for companies like google and others, you do business in other markets with much more repressive governments so you're fine being in those markets but not helping the u.s. military he says that's the hypocrisy >> it's hard for these tech companies especially as they try and scale to be able to hold true to the values that they have grown up with in silicon valley especially as they get to the stage of an ipo or the stage where they represent such a large proportion of the u.s. economy. what's interesting, though, about palantir is this idea that that is their business they have to

so the whole privacy concerns that have rattled a lot of silicon valley companies, palantir has been dealing with that for years and have had to say, this is what we do in order to fight terrorists and protect our troops overseas. we need to be able to collect this data and we'll protect your civil liberties in the process but we have to be able to look at these things whereas other companies are already just now starting to -- >> that ipo approaches if it still go this year from palantir to drones, air traffic was disrupted at newark international airport yesterday after pilots reported seeing a drone hovering over a nearby airport about 15 miles away. nine flights diverted. 43 put into a holding pattern. this was a relatively short period of time this after we know what happened at gatwick also some sightings at heathrow. what are authorities supposed to do >> this follows the d.o.t. just passed some new rules where they basically freed up drones to fly into more crowded areas. they freed up drones to fly at night.

we're going to see a lot more of this what's interesting about this drone, above teterboro airport, in the wealth world is the hub for private jets so i'm not sure why a drone was flying right around teterboro. >> half a mile above, too. >> thousands of feet up. so that's very strange for a drone to do that i think we'll see more of this i don't know what airlines are going to do. whether you weaponize aircraft so they can shoot them down. >> look, in the case of gatwick, especially, in london, i don't know about u.s. air space but drones are programmed to not fly into those zones so to get around that, someone has to be sophisticated to know how to do that it's one thing when someone is messing around with a lazier pointer. the best way to deter them is give harsh sentences and penalties once they find out who is responsibility. >> absolutely. >> i don't want to be on the next plane and look at the window and -- >> if they can do some sort of

electronic fence around airports where, to your point, they can electronically prevent drones from flying in that area even so, that's not the whole -- >> the defense that keeps your dog in, keep the drone away. mcdonald's is giving away free bacon at participating locations for one hour next tuesday, january 29th. customers can get one free side of thick cut applewood smoked bacon with any purchase during bacon hour which means get bacon with a hot fudge sunday. they'readding three new bacon inspired menu items. people go to bacon when they're desperate. is mcdonald's going to bacon with this one-hour attention grabbing promo because they need a sales boost? >> i think value wars matter and menu innovation matters for all of these companies you are seeing different companies do it in different way. chipotle brought back churizo. americans love bacon we eat nearly 18 pounds of bacon a year which is surprising but

also not surprising. >> each person >> yes >> so people go to bacon when they're desperate? that means i'm desperate 24 hours a day. i can never get enough bacon i'll put it on anything. especially the hot fudge sundae and bacon on the side. >> apple pie bacon was another option i like the sweet/salty >> chipotle is at about a three-month high they rolled out the breakfast items all day. getting them ready at the same time the rest of the menu is ready is -- they're losing some sales. you see the line and you are out of there you don't want to wait >> culture matters so much at these companies. chipotle brought in this second make line. so when you add items like that that are popular to the menu, you also need to think about what goes on in the kitchen. bacon is very splashy. people like robert love it

i love it, too i think they'll get a lot of customers and press from it. >> and everyone is going tobaco. we'll meet you there jan 29th. coming up -- the unconventional mortgage is back. why more banks are issuing loans and what that means for the housing market is next

welcome back it's been a rough go for the housing market with disappointing data, including a plunge in existing home sales last month and a drop in mortgage pplications this is "the wall street journal report"s that unconventional mortgages are making a comeback. let's bring in fred glick and diana olick. olick and glick here welcome to you both. is unconventional mortgages, do we need that because housing is

unaffordable and we need innovation to get -- we're back to 2006 all over again that ended badly so this one will, too? >> i call these subprime loans i'll always call them subprime >> not nonprime? >> whatever. but the bottom line is what the dodd/frank act did was make owner-occupied property fully income documentable. so you're not going to get the no docs with 2% down with an option a.r.m. for people with a 420 score. so that's out. so if you want to live somewhere, you have to document your income. what they're doing alternatively as opposed to pay stubbs and w2s, they'll take bank statements for 6, 12, 24 months and take your gross income and divide it by two and say that's the income to qualify. that's where i'm worried if these self-employed people stop making as much money >> on that point, though, diana,

i can see why, looking at someone's actual bank statement and saying here's what you can afford is very different from literally lying on applications ten years ago and that completely blowing up because there was no real there, there >> we are not back to the future let me repeat that we're not back to the subprime we saw in 2004 '05 and '06 it's just a difference way of documenting the borrower there are a lot of folks out there. these are not backed by fannie, fredie or fha so they're on the books of the lenders they're underwriting these looking at the ability to repay. yes, they may be using different types of documentation, but a lot of these loans we call alternative are for high-income borrowers. so folks who really don't need a mortgage but are getting one because of tax benefits or for some other reason. these are not the really, really sketchy loans that we saw over a decade ago >> fred, what do you think is going on with the housing

market we've heard industry insiders say this is an affordability crisis with how high home prices have gotten. is that why we've seen it? >> i think the entire world took a month off from december 15 tot january 15th and everybody thought we're going into recession. i did an informal survey on a couple of facebook groups i'm in and every single real estate agent all over the country said we're back to being busy it happened about a week ago so it's still there. there's still an affordability crisis because normal people can't buy a house but it's back. people have jobs we're not seeing big layoffs we're not seeing massive problems and i think because of that, everybody is back into their routine, and i think it's going to be fine at least plateaued >> in the northeast -- >> it's all about affordability. >> the recent tax law made that worse, right

>> but i don't think people care they still want to buy a house >> diana, go ahead >> it's affordable plain and simple you look into why the december home sales plunged, it's because mortgage rates jumped in october and the closing sales are based on deals made in october in november, mortgage rates came down and stayed lower in december we saw people coming back into the market in january. there's so many people who are just on the cusp of affordability that that interest rate move one way or the other is really going to affect them and that's exactly what we saw on affordability as for the northeast, there's a lot of issues there having to do with tax deductions and what they are losing there. and that's on the high end and a lot of people very concerned in manhattan, northern new jersey and areas like that, they are going to see home values really plummet because of that >> all fred's customers are going to florida thank you both >> california, i hope. fred glick and diana olick, thank you both so much

>> thanks. the trade war may be prod something u.s. companies to pull back on dealing with chin ap but a new deal says china is about to overtake the u.s. can the u.s. afford to miss out? that's next. to have a hundred percent renewable energy goal. if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution that lets us collect near real time data on our power grid. ♪ if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪

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welcome back the chines a new report says china's retail sales will top those of americans. courtney reagan is here. >> it's an awkward timing. this new report says that china will surpass the u.s. in total retail sales for the first time this year. so what the group is saying is that china's total sales will grow to pace that's more than twice that of the u.s. this year that mean's china's total retail sales will hit 5.636 trillion. here in the u.s., we get 5.29 trillion so they're going to pass us for the first time if this report is right. it's growing at 30%. more than 35% of everything spent this retail is spent

online in china. >> here, 20? >> maybe 11. >> wow >> maybe 11. so 35% of what's spent in retail is spent online in china we're number two, but at 11% if you look at where they're spending online, we know alibaba. then jd.com. then i got to tell you, i'm the retail reporter. amazon china is number seven with 0.6% market share >> my guess is something like how dion is probably bigger than walmart.com. >> look at amazon china. 0.6% there >> that also suggests that for u.s. companies trying to make end roads, alibaba is there. >> macy's decided to close up its t mall shop in december. they couldn't figure it out. everyone knows that china is the

opportunity. it's challenging >> thank you u it's day 33 of the government shutdown with the sec closed, we have an ipo expert who says it will cause a big backlog in public offerings some may turn to automatic ipos to get around this we'll have more on that right after this r finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react...

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welcome back with the government shutdown entering day 33 now, some of the bigs names of the world economic forum are voicing their concerns about the ipo market for 2019. >> ipos can't get done anything's going to get signed off, can't get it done so the backlog will continue to grow. people waiting people not getting comments on their 10k. just not good. if it xtends for weeks sh you're talking about more companies wanting to go public >> nothing we can do b about the shutdown what we can do is run a good business continue to build our brand and that's really where we're focused on now >> now it seems that companies are doing something about the shutdown and looking for legal ways to go public with the help of the sec let's get more with the -- and bob pisani glad you're here

the journal reporting there's a way for companies to basically do an automatic ipo and the sec is kind of saying yeah, just amend the filing and it kind of becomes automatic in 20 days, but the nasdaq and some bankers are saying we don't know if we want to get involved with this >> there's a way to do that. the guidance there is you better be wired tight with your legal team to make sure you have the proper legal documentation all the proper risk metrics. there's a huge legal aspect if you miss something >> how much back and forth is there? if i'm an investor and say tomorrow we read a headline and the journal is using bio tech companies in particular, if it says such and such company is yauzing this method to go public, should i immediately be weary or know this must be really locked solid. >> it's the fact your investor base how much appetite are you going to have if you go hey, we're going to do something unconventional and nontraditional public. the point to protect the public.

to build that demand and have a great ipo. so why try something instead of seeing how this shutdown pans out to for your ipo. >> my guess is none of the companies, the big one, ubers, air b and bs, these are going to be smaller ones who might really need that funding. >> i would forget b about that route. there's no major law firm that's going to sign off on the legal risks of slipping it in under the ray r darr there's two bigger problems. one, if this continues for the next several weeks, essentially sh the won't be fully functiona until march then that's a big backlog to deal with secondly, is the question of if it goes on longer than that, steal numbers. they're chosing out the numbers. they're all talk iing about how the 2018 numbers are fitting in with the 2019 ipo. if you start getting into the second quarter, or close, those

get steal. they have to redo it we want to end that shutdown very quickly for the ipo market to open up >> if this persists to the first quarter, there's so much that is driven to the bottom line. for banks and the primary issue answer it's going to be hurtful to those first quarter earnings >> the end of the first quarter is the end of march. that's lopg time from now. that said, doesn't look like there's going to be a resolution imminently so at what point are we talking about early fed, mid fed, does this really make a difference? >> i think we had a high water mark of 28, 38 ipos in june. you can catch up year in the first quarter, we printed 34 ipos. i know we're laying a goose egg. we have zero we can catch back up mid feb? >> are there companies who are going to use this as an excuse if they're the opposite and say

we don't want to go public, sor rirk dwoent have enough time >> i just, you're your billion valuation companies, uribers, ly ftsings, they're in no rush. why jam it in. why rush why pin it on the investor >> bob, you agree? >> one slight disagreement this is the year of the unicorn. their private investors have been sitting for ten years on massive investments. tas nhat's not in their busines plan they want a clear exit strategy. this is the year to do it. the market is holding u. i think tl a problem if everything gets backed up. these companies want to go public this year, they want the markets to be up and running and they want the markets to be up and they don't want to get crowded into some particular corner when they have an idea where they want to go public. >> thank you so much

>> $290 face creams are one reason for proctor and gamble's earnings sk2. that does it i'll be joining tyler and melissa in a moment on "power lunch" which begins right now. why the huge rally may already be over and why it may be downhill from here. president trump holing his hard line on china, but is it a good strategy and shares getting slammed we'll get you set up for that. "power lunch" starts right now welcome. it's a whip saw kind of wednesday. the dow went into the red. right now, up 101. the dow carving out some gains at this hour the s&