>> $5.25 walmart or walmart.com walmart.com. that's got to be a loss leader that's not sustainable if amazon can't do it, walmart can't do it. everyone will order it now and ruin their quarter that does it for "the exchange" for me and i'll join tyler and melissa on "power lunch" in a moment that begins right now. >> kelly, thank you very much and see you in a moment. i'm tyler mathisen welcome everyone along with melissa lee, here's what's new at 2:00 president trump meeting china's top trade negotiator over the next hour. so will we get a deal before a key tariff deadline? plus, the fed giving investors seemingly exactly what they wanted is it a pause or a full stop in the interest rate cycle? too much optimism in this market we'll take a look at that. plus, 77% tax on the wealthy we will tell you about a new bill being unveiled in dc as "power lunch" starts right now

welcome to "power lunch. i'm melissa lee. the dow holding steady right now close to wiping out 170 point loss s&p 500, in the meantime, is rallying but it is all about the nasdaq today making a strong run out of territory the index also aiming for biggest monthly percentage gain in more than seven years we're watching general electric shares having their best day much more coming up but we begin today in washington and president trump speaking a short while ago about the trade war with china a high stakes negotiations taking place in the next hour. we begin with kayla. what do you know this hour, kayla? >> reporter: the official white house line is the u.s. is focused on substance and not next step but in a series of tweets and on-camera comments today, the president, whiling a knowledgi knowled cknowledging there's a lot of

work to be done, he'll be meeting president xi in the future and expects a deal can happen by march 1st. >> we're taking in billions of dollars and frankly, we're creating a lot of industry, but the rate goes from 10% to 25% on march 1st, so they would like to do it and i'd like to accommodate them if we can i'd like to accommodate china if we could get the deal done it's a lot of work because this is a very comprehensive deal. >> reporter: he doubted maybe a deal fully on paper march 1st but optimistic one could at least be agreed. china would want to announce any sort of deal with the president's side by side with a meeting on chinese soil. a few issues with that though. number one, the optics of doing that the white house advisers that i've spoken to are said to not want to go that route for obvious reasons. allies are worried about meetings with kim jong-un and president xi back-to-back and then also, there's the fine print of what a deal looks like with china hoping to shelf some

of the thornier issues and two leaders to meet, u.s. wants commitments up front we'll see what progress has been made over the last two days in more comments from the president and the number two leader from china later this afternoon melissa? >> kayla, thank you, kayla tausche from the white house let's get to eamon javers from the white house. the president speaking on other issues border wall and north korea. >> a lot of deadlines going on at the white house you heard the march 1st deadline and a february 15th deadline for the negotiations with democrats over border wall funding and government funding more generally. what we're told is that the president is holding the line here we saw him continuing to press his case for a border wall but simultaneously saying the border wall is built right now and he needs more money for more extensive border wall construction, sort of mocking nancy pelosi saying if they removed some of the border wall

in southern california, would be begging him for a wall so the president continuing to press the case with democrats and nancy pelosi said not one penny for the wall and unclear how that gets resolved before that february 15th deadline. the president also talking about troops in afghanistan, signaling an optimistic note there saying troops have been fighting in afghanistan for 19 years and now the possibility of a settlement with negotiations ongoing there with the taliban and the north koreans. coming out and all but saying he's going to have a summit with kim jong-un of north korea at some point here in coming weeks, the president saying not a very big secret but not ready yet guys, to announce the location and the date of that summit, clearly, it's going to be in southeast asia at some point in the coming weeks and we'll see whether we get an announcement from the white house on that one as well, kelly >> kayla, i'll put this to you but the talk now about the president meeting with xi jinping in terms of coming to an agreement with china on trade, does that mean instead of march

1st, are they getting that meeting before march 1 or about extending this out now >> reporter: ambassador lighthizer said he's not willing to move the march 1st deadline the president could override him on that but what my sources have said is the proposal that came from china for this meeting would essentially make it an extension of the kim jong-un summit if that meeting with kim happens in southeast asia at the end of february, then what they propose is the president could then come somewhere in china, meet with president xi and then deal with trade issues at that meeting there are a whole host of issues that come up there, of course, u.s. allies would want to be briefed after that and does the president go to japan or south korea to talk to prime minister moon abe or president moon? any meeting on u.s. oil or neutral territory and that's one of the sticking points >> ueamon, the president talked about billions of dollars of

tariff money flowing into the u.s. treasury and substantial portions of a barrier on the southern border that are already being built. what are the facts on those things to the extent that you know >> ultimately, as you know, tariffs are paid by the u.s. importers, so those are paid by u.s. firms for the most part that are wanting to import items coming in that are subject to the new tariffs, so they're not paid by the chinese government and in terms of the wall, the president insisting here that there is wall being built and sort of finessing the issue of whether that's old wall or new wall and suggesting they're renovating and rehabilitating a lot of existing wall that's on the border that is definitely true. the bill that was signed last week does not allow for is brand-new construction of wall in new locations where it previously didn't exist. so there is some money going into reconstruction and rehabilitation of existing border wall and fencing and security devices along the border >> eamon, thank you very much and kayla both, appreciate it. the clock is ticking for the u.s. and china to make that deal

before the trump administration's march 1 deadline if that's still the deadline can the two sides get a deal before then? thank you for joining us and what do you make of the latest news that the president and xi jinping may seal this themselves and may suggest it's all but done >> listen, we hope so because that would be very good news if we can back away from this very unproductive t iive tit for tarr that's not only negatively impacting china's economy but our economy as well but we'll see how the talks go this week i do think it is a good sign that china sent delegation led by one of their four vice premiers and i'm told it's a full delegation of leaders with the authority to make some very tough decisions but we'll have to see what comes out of it. unfortunately, as you've

referenced, this president loves to sort of make a grand pronouncement, whether there's an agreement or not but if the two leaders were going to meet, at least in past administrations, the presumption is that some deal would have been worked out for the leaders to meet and formally embrace. >> right so with that being the case, we have tariffs imposed a year ago on china and as a result, it's, you know, u.s. steel and aluminum companies actually suffered what happens now if those are lifted >> well, one, it would provide immediate relief, not only to u.s. steel and aluminum companies but as you reported yesterday, you have american manufacturers like harley davidson and others that are the end users of these products that are now feeling the pain of it and it's beginning to show up not only in their earnings but they have to make some tough decisions whether they have to shift manufacturing to mexico or canada, for example, where they

wouldn't be subject to those tariffs. and then one of the american industries caught up in all of this, of course, are agribusiness, our farmers who are always subject to retaliation and are now losing billions of dollars of lost opportunity, not only in china but because this is going on against the backdrop of the 11 other surviving members of the transpacific partnership having put that agreement into force in january. now we're locked out of that market, so i think you can see all of us, no matter whether we agree with the president's strategy or not, are hopeful these talks will be productive and can back away from this war that's hurting both our economies. >> ron, how do you interpret the chinese position at this point day by day, there seems to be another incremental data point out of china indicating that the economy is slowed.

i don't know if you caught this article on roeutersreuters. as of wednesday, companies estimated 800 million wan a piece. i'm not this is not lost on chinese leadership but does it put pressure on them in your view >> there's no question, it's beginning to put pressure on them china's economy may have some structural challenges that they have to deal with. obviously, they still are clinging to a belief they can run a top down state owned economy and provide the type of assistance that they have done to both businesses in terms of non-taxation and others, but they have to weigh that against the reality that they have to move to an economy that relies more on internal consumption than just export and it's a very tough lift for them, but it has to be weighing on them and we have to look at the reality that

closing ourself out of the market that could potentially be an extraordinary receiver of american goods is not helping us as well. >> mr. kirk, i assume you agree with eamon javers who said the americans are paying these additional tariffs and tell me if i'm wrong on that but my question is how separable or complicating is the matter of the huawei indictment and the indictment attempts at extraditing the daughter of the founder of huawei at cfo, how complicated is that in this whole stew >> i want to be careful because i don't have all of the details of the story behind that, but for one, we're already going to be very difficult negotiations you know in the past when we've taken actions like this, to no surprise, many times, american executives in china have been targeted for enforcement

activity from the chinese government so this is a very, very tentative stage of negotiations to begin with and that can't be helpful, but i'm not going to criticize the administration on that because whether it's the trump administration or obama's or bush or clinton's, we have consistently warned china against the theft, attempted theft of america's intellectual property and trade secrets, so i want to be careful on that and let's see how that plays out >> all right ambassador kirk, thank you so much >> thank you again, sir. jay powell and the fed sounding very dovish yesterday did they press the pause button or did they press stop plus, the s&p 500, best month in more than two years have stocks gotten a little too ofpensive, a little ahead themselves we'll talk about that on "power lunch. in the u.s. 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

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maybe even laugh while crying. what the fertilizer? sounds pretty great, right? riiiiiiiiiiiiiiiight! just say, "add epix" and it can all be yours. it's easy to upgrade. and you don't want to miss out on everything epix. the market seemed to have gotten exactly what it wanted from the fed but is this one on done from the rates and back in field play once again, steve liesman joining us now with more >> there is a big question first, go to the two commentaries, i think the two commentaries do a very good job of setting the stage barkley said it sends a strong signal that the interest rate cycle as complete, there it is yesterday. hyperdata dependence means a

reactive fed, whip sawed by market movements and absent clear direction. highlighted to dissate the labor market to tighten further and should allow for additional tightening this cycle. so what i did, guys, is put together a rate hike checklist and what i'm saying is, you know, i could be wrong about this you may need to check three of these boxes but i'm saying right now, let's check two of them here's what's on the checklist inflation needs to be firm to rising the tariff troubles need to be resolved the global economies need to stabilize or their effect on the u.s. and u.s. growth needs to be stronger than forecast, i think. remember, it's already forecast to come down in the 2.3% area according to the fed so i don't know. you need to check. kelly, you tell me two of the boxes, three of the boxes? >> right now >> over time in other words, if these things get checked. >> the market is what, september for the first hike

>> no, no. >> i just checked on this with my buddy alex in chicago we're at a 30% chance of a cut for january 2020 and by the way, guys, if you would pull off the two year chart, one way to think about this, to see where the market is priced, first of all, there's el captain from yosemite. that's what happened yesterday. >> september was about 3:00 p.m. yesterday and now out to a rate hike. >> 2.46. the fed fund rate is 2.4 one way to think about this is that the market believes that the average of the overnight rate for the funds, the fed funds, will average 2.47 over the next two years >> right so >> so the market says. >> done. i don't know when you firmly end the hiking cycle but if you go six or eight months without hiking. >> what does your friend in chicago say? >> alex thinks you're done

from pg o'reilly >> that's a bar, right >> no. everything is a bar in chicago, one way or the other but i think ultimately, here where we are, it's a pause and we'll see. but maybe the market's a little bit ahead of it and, you have a look of dismay. >> this is my question going into the meeting yesterday and i was talking with kelly about it on "the exchange" and that is there's going to be a gap with market expectations. the fed is not going to come out and say, no more hikes dependable, see what happens with the economy and the markets, as you have seen, have already said nothing and if we get anything, it's going to be a cut. that's a huge gap in terms of expectations between the fed and the market still even though the markets seem to have gotten what they wanted to get, they really didn't get what they wanted to get. >> give them an inch, they want a mile >> i think they got, as i said yesterday, a trifecta and

something they didn't ask for. the one comment about further adjustments. you know what adjustments could go up or down. i don't think anybody was out there hoping for the word adjustments, in other words, an equal bias of hike or cut. so you're right, we'll wait and see. >> what market signal with the fact you were called on like tenth in that q and a? >> i don't know, maybe the chairman knew i was going to ask a question about the balance sheet that he was not prepared at that moment to answer. >> like an analyst that has an accelerating stock at the end of the line. >> i wanted to know if they were ready to reduce the balance sheet now and he was not ready to talk about that i wanted to know if he was ready to tell us what level of balance sheet they're going to and he was not ready. we'll be waiting for an answer eventually >> sure will thank you, steve >> all right, sir, thank you turning to the markets now

how about this the s&p 500 having the best january in 30 years. if you go back to the day after christmas, 15% since then. the question is gotten too expensive? bob pisani here to answer that from the new york stock exchange. >> i hope everyone was listening to steve there an awful lot of happy talk i'm sorry, that's what it is fed is not going to raise rates for years, potentially they come to believe the trade talks are going to go well and earnings down, all right, but still might be positive on the year my concern is, look, we're at 2400 on the s&p 500 right now. that is 16 times forward earnings if you know something about a multiple, 15 times, 16 times, that's about normal but wait a minute, last year, we were talking about 10% earnings growth we're not talking about that anymore. we're talking, the debate is whether we get zero this year or on the high side, it's going to be 5%. that's a much different game than it was eight months ago and 16 times is really rich.

right now, 24700 is where a lot of strategists had the full year already. so look at what january, these are amazing numbers here, kelly, referencing them up almost 8% this is the best january since 1987 it's the fourth best january since 1950 2700 to 2800 is where most analysts are for the full year i'm not being curmudgeon by saying the market is fully valued right here. back to you. >> thank you very much, bob. coming up, this s&p sector is up 10% so far this month. best month in more than seven years. what is it mystery sector and should you buy it that's next on "power lunch. plus, bernie sanders out with his own huge new tax targeting the wealthy. shocngumr mi u duncan just protected his family

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frank, obviously, also been a pretty big move in crude oil how does that set up as well as the majors in this sector? >> hi, mike. like you said, crude oil up for the month. up the following month seven times. for energy stocks, obviously, the benefit of crude oil and energy so looking at some of them, chevron looks pretty interesting. cvx on the chart there hasn't done much on a net basis since 2012 but a pattern over a couple of years. we think that can play out this won't matter over the next few weeks but something we should pay attention to in 2019. also, been outperforming exxon since the beginning of 2016. so we think this could continue. other positives, which is why we like chevron here. >> on a fundamental basis, did the oil majors seem to make sense to you for 2019? >> yeah, oil and energy stocks

looking good from dividend yield perspective. even though fundamentally, they're very different, both of them are coming off of five year valuation lows if great dividend yields and part of that whole value play and value has been keeping up and actually slightly outpacing the broader market so exxon is great for having that lower volatility but it's got less production growth but very stable earnings cheron also has a strong balance sheet but may expect a contraction but either way, we like both of these and would say get them ahead of their earnings >> all right, valuing dividends. maybe the old fashioned tools are going to be useful this year we'll see. erin, frank, thank you very much for more "trading nation," head to our web site or follow us on twitter @tradingnation kelly, back to you >> we'll see you later ahead on "power lunch," ge with the best day in a decade. is now the time to get bullish >>. plus, the stocks to buy

right now and one group banking on big time. we'll tell you what that is. amazon earnings on tap after the bell today and three biggest things investors should watch we'll tell you when "power lunch" returns. and now the latest from tradingnation.cnbc.com and a word from our sponsor. >> a double top is a chart formation that suggests an uptrend may be ending and ready to reverse sometimes called an m formation because the pattern looks like an m a double top consists of two well defined peaks approximately the sa pcemeri the break is the lowest low in the formation as a bear signal

hello, everybody i'm sue herera here's your cnbc news update at this hour. tablg take a look at this. no, this is not video from disney's "frozen" but the windchill that's making it feel like 12 below part of that deadly polar vortex system that's brought bitter cold to 27 states here's a lesson in whatnot to do at a game. when police tried to remove an unruly miami heat fan from his seat, he resisted and ended up falling down several rows taking

the police with him. the man was eventually taken away and charged with battery. fidelity said the average 401(k) balance fell to just over $95,000 the last year. despite volatility and made few changes to the asset allocation pan da cubs made their debut played around in an enclosure to celebrate next week's lunar new year celebration it's the year of the pig melissa, back to you >> so cute i wish you could just play that on a loop. >> absolutely, all day it's the feel good look at that they're so cute. do you know that's the sanctuary and they have 60% of the, oops, i love when they tumble.

that's my favorite part. 60% of the pandas in china isn't that fantastic is this. >> is this where the caretakers have to dress up like pandas >> in some cases, yes. >> why >> make them feel better, i guess. back to you guys. >> thank you, sue. sue herera general electric shares having the best day in about a decade wall street believed no new nasty surprises in the business report but ge with the major question mark by a billion dollar settlement with the justice department on the street with a $21 price target on the stock still about double where it is right now you feel a lot better about getting there, huh >> feel a lot better, yeah no new bad news is the first time in two years we haven't had inceremental bad news. i think the rally in the stock was justified and room to grow >> made it clear there would be

no details about what's to come at another date. sounds like a potential for shares to drop. >> i don't think so. i wouldn't reach much into it. he has to navigate into this power restructuring. restructuring is code word for layoffs. you don't just come out in wall street and say i'll fire 20,000 people without repercussions he has to manage that through the french government and the folks in the u.s. too. it's not easy. >> you've been covering the stocks for 17 years. >> since edison. forever. >> not quite >> i just turned 25. >> it says since you founded in 2017, you had a buy rating on it, $25 price target >> don't remind me >> so, did you know how deep the problems ran at this company and now that everybody probably has their arms around it, what does that really change potentially in decline.

>> in hindsight, this was a value trap the whole way down. >> in hindsight, yeah. >> we'd be taking the numbers down and saying, i think it's fine and they'd convince you it's fine and run the numbers and disclosure was terrible and so you had to count on ge numbers for a while and those were wrong and sometimes, fraudulent i think as we sit right now, we have a tremendous amount of respect with larry he's a rock star and he's an honest guy i mean, the integrity level is high when he tells you these are the numbers, i think you can believe him. >> you really think the predecessors were not honest guys >> look, if one tenth of the shareholder out there, if one tenth of it is accurate, prior to management was deceiving shareholders, at the very least. >> purposely >> at the very least >> what is the biggest piece of wood they got to chop in the next year? >> it's power. you've got to fix the balance

sheet but a lot is power you have a business that went from making $6 billion to losing $2 plus billion. that's an $8 billion swing that's a massive amount, really. and how much of that can they fix? we don't know yet. we do think the steady run rate of that business ought to be a reasonably profitable, let's just say, $3 billion profitable business, maybe not 6 ever again but if i followed your advice, i would have, with you, chased the stock down >> yeah. >> i want you to make the strongest arstrong est argument right now for why you think you're right this time >> i own the stock so i wanted it to go up. all kidding aside, we think they can earn a clean honest earning. plus, health care and a piece of the locomotive spin, about 10% or so. delevering the balance sheet over the next 24 months and it will happen faster than you think and as far as fixing

power, i think you hit the water mark right now so circle a $10 stock and just dial in today, i think with the high level of confidence, you can realistically probably get to 15 or $16 of value on the way to the 20 year two year target price. >> all right >> did he sell you, ty >> i don't know. but i can't buy it anyway, so it doesn't matter >> thank you, scott. >> you're quite welcome. >> rick santelli tracking the action there how cold is it >> it is cold. when you have to put boots on your dogs, you know it's cold. if you look at two days of tens, looking for higher yields, you have a position that's gone pretty cold because they are dropping we're only 7 basis points away open the chart up to january of last year, you'll see, should we

take that out? we revert back to early in 2018 very quickly and many saying the fed is responsible well, maybe they are but the long end is kind of responsible for itself in many ways. look at a one year chart and 10 minus 2. it hasn't steepened but we've been treading water in the teens for a while. if we had a major flattening or a major steepening after yesterday's statement and notion of where the fed now stands, we could now point to something but twos and tens are basically the same amount in yields that goes to the global economy in my opinion and a lack of information on the economy tomorrow's big jobs report, expectations are for half of last time, i think that's partially responsible for the way ten year notes are acting. finally, let's look at the dollar index about ready to challenge the low close of 2019 as well.

back to you. >> thank you very much, rick santelli we're hearing from bernie sanders. details of his proposal and how the ultra chri are responding. straight ahead on "power lunch." at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated. & she can talk to him, & yes... atta, boy. some people assign genders to machines. and you can be sure you won't have any problems. except for the daily theft of your danish. not cool! 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 &. & this shipment will be delivered... when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time.

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lunch. calls to tax the rich are getting louder and louder. a new bill today aiming for a 77% tax rate robert frank here with the details. >> so far, an income tax, a wealth tax and now estate tax. bernie sanders proposing the estate tax the highest in over 50 years his plan would kick in on estate valued $3.5 million or more. bring back to about 2009 levels, not so bad but the big change, that's the rate. now, the sliding scale for sanders plan start at 45% on states over $3.5 million but states over a billion, it would rise to 77%. here's an example. if you die, if you're lucky enough to die with $2 billion estate, you would pay taxes of about $1.2 billion

the last time u.s. had a rate that high was 1976 the big question, how much would it raise revenues from the estate tax have fallen from about $35 billion a year in 2000 to less than $20 billion in 2018 expected to fall to only $6 billion by 2025. so when you compare it -- >> that was under the current, the $6 billion because of the current tax. >> that's correct. so it's already been falling his plan, it's unclear how much it would raise but the thing about the estate tax is it's very easy to get around through trusts >> which is what that number shows you. not that fewer people have died. they found loopholes. >> given the amount of wealth created over the last 20 years, it should be going up astronomically and as gary cohen said, only morons pay the state tax. >> he's a smart man. robert frank, thank you.

an investment club for the ultra rich he joins us from the club's annual conference. great to have you with us, michael. we'll get to how the members are investing in just a moment but whether or not your members are worried about what seems to be an assault on the wealthy with all these tax proposals wanting to tax not just what they have when they're alive but now when they're dead >> first, thanks for having me great to be here yes, our members are concerned about some of these confiscatory proposals but most of our members are also concerned about a trillion dollar deficit. so there has to be a balance clearly, we can't run these kind of deficits and there's going to have to be some change perhaps in tax policy, but to tax hard work and try and redistribute wealth has never created wealth and finding that balance is really what we need to do. >> so for the most part, your members are against all of these proposals? >> well, the extreme levels of

all of these proposals i think many members would say the current tax regime is not sustainable if it's going to continue to drive trillion dollar deficits. that's going to have an impact on the bond market and eventually inflationary. so we do need to do something but to throw the baby out with the wash and go to these extreme levels is not going to produce wealth or enhance our country. >> how are your members changing how they invest, where they invest given these potential proposals but the market volatility we saw at the end of the year >> sure. so, you know, we're here with members from 50 different cities around the globe all great entrepreneurs. these are the basic businesses that are the backbone of the economy. so there's a lot of caution and some of it is volatility you just mentioned the last year, 15 days of 3% moves in the vick's 0 the year before. a lot has changed and the uncertainty of government policy so they're shifting their

portfolios, taking some real estate off the table at the top about 10% of it. fixed income for the first time is a short-term solution so there's a lot of interest there and then they're shifting around some of their portfolios as well to do it but as sam sell this morning said, you don't invest in markets but you invest in deals and even when markets are frothy or priced to perfection, a deal of a lifetime comes across your desk every day if you're willing to look for it. >> bruce of canopy growth. i'm curious, michael, your members are now looking at cannabis as an investment. how are they expressing that view through publicly traded companies or through private equity investments and private companies? >> so it's all of the above. in our asset allocation survey, our members have about a quarter of their money in private equity and a quarter in public equity and a little more than a quarter in real estate and they use all

of these in the cannabis, sometimes it's owning the land that cannabis is grown on. sometimes, it's owning the real estate where the factories, if you will, and sometimes it's owning the companies and then, of course, there's the public market, having the top cannabis investor here is fantastic >> what about gold why are they leaning into gold >> soit'sinteresting so gold peaked around 1% or 2% a decade ago and then went quiet we had a big discussion with sam zell about it. sam has gone public but he's been the master of supply and demand and in the last eight years, there's been no new supply of gold no great finds of gold so supply is down and typically, people first think of gold as an inflation hedge, but over history, it's really been an instability hedge and even sam has stuck his finger in gold for the first time a little bit because of instability and

mostly, because he's the master of supply and demand >> heil, it's gremichael, it's e you. thank you for your time. amazon earnings are out after the bell shares are rallying right now. we'll tell you absolutely everything you need to know before those results come out. that is stig aadn e maing 13 minutes of "power lunch. ou from the market when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

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welcome back shares ofamazon after the bell deirdre has key things to watch in this report. >> first, this is the big holiday quarter and it was a record for online sales, so amazon should have reaped the rewards. full-year revenue could top 200 billion for the first time and investors may look for the streak of record profits to continue bill miller earlier today said that's a segment he's focused on. >> i tend to focus on the advertising business and on aws andthen the mix shift where th third party sellers more than 50% of retail and not seeing the sales growth in retail you used to see but good margins.

>> last, guys, any color of amazon's international business, still losing money and declining margins and makes up nearly 30% of total revenue and spending heavily in india and the middle east but is it gaining traction? back to you guys. >> that's a question thank you. just over an hour until that report so let's break it down with rob sanderson of mkm partners with a buy rating of price target of $242 we're talking about some serious upside facebook's upside today is coming from better revenue growth than expected what do you think will drive amazon's performance >> you know, i think there's a couple of things on the table. margins, always. profits are part of this story the profit pivot has really started to come in a big way for amazon we'll look for continued momentum there this quarter maybe more than recently the growth of online sales is i

think a metric i'm watching closely because the guidance was a little bit softer than it was typically and i think that that is sort of an umbrella from which a lot of the other mix related businesses fall under. >> in terms of that guidance, rob, you know, investors at the last earnings caught off guard given that the fourth quarter was supposed to be strong for amazon and wondering if you have a handle as to why to give that guidance so early on and if you're concerned because when they gave that guidance we hadn't seen the sort of market volatility of december and may have taken a hit on consumer confidence and maybe exacerbated whatever sales slowdown they might have been anticipating. >> yeah. a couple of things one is i think important to recognize that the step down in growth rate because of the anniversary of the whole foods acquisition so on the headline it looks like a bigger deceleration than it was

mix shift away from the first party sales to third party sales is something i think they would liketo give themselves room to get a richer mix, to bill miller's comment on the intro. that's what they're looking for. finally, in terms of capacity and supply, making sure they're not overextending and the street isn't getting ahead of themselves that's the way i analyze the set-up. >> they were shy on revenues and the eps number beat. what are you looking for this time will they repeat that or look different? >> yeah. the top line bar might be a little lower because of that soft guide so i think there's more opportunity for a better top line number and i think the season looks pretty strong i think they're in a position to fulfill, they put a lot of capacity in the previous two years. that capacity is really humming right now and i think the demand side of the equation on the prime membership acquisition looks robust and i think adds up

to probably a strong top line result from amazon tonight. >> rob, let's ask you about facebook if we could take a look at that stock and the incredible rally really we know this was one of the stocks that got taken to the cleaners in the fourth quarter and was trading probably below 17 times forward earnings. how does it look now and are you concerned at all about this app with the kids who are giving them data for 20 bucks a month and how they're running things >> yeah, yeah. there's a lot in that one. i think the valuation is still a long way to come back to what should be considered normal if there weren't all these external factors and scrutiny and we're still trading, you know, somewhat below 20 times below earnings and still an upward bias on valuation as sentiment continues to improve now, things like the aforementioned, you know, headlines today with apple and the kids, you know, it's a

questionable looking practice. i think at the end of the day they're trying to gather information and query their audience i don't think anything nefariou there. >> there's also a story of how many of their accounts frankly are genuine accounts ornot you know, there is a report of -- i can't remember the journal or the times said, look, maybe internally they don't have a firm read on the user numbers as it seems and if we come to learn that a lot of these accounts maybe aren't quite as robust as the street thinks they are does that put a dent in them >> i don't believe it will there are caveats on their disclosed user met ricks that can suggest up to 14% of them even can be bots or duplicate accounts and fuzziness in the number and unquestionably the biggest base of connected audience on the planet and

whether it's 14% lower or not i don't think that really matters. the reach is untouchable versus other distribution platforms. >> fuzziness in the authenticity that's the fake news speak. >> i think it's difficult to know >> no, i'm just -- >> the ways to set up an account. >> i understand. rob, thank you so much for joining us good get your point of view on facebook and amazon. >> all right. check please is next ♪ hawaii is the first state in the u.s. 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

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check please >> keeping an eye on the regionals. talking about how the markets getting exactly what they wanted from the federal reserve and the regionals lagging the broader markets. take a look at the spread between the 2s and 10s at about 17 and not improved that notion. of course, hung up on this spread talk and too flat, et cetera and getting them today. >> the flatness is look at the 10-year. for example, down 2.65 or so 2.636 and we keep sinking. >> the froth off the market today and it seems to me while i was away the last couple of days looking at 2019 there were two looming issues one was china and china trade. the other was the fed and what they were going to do. it seems to me that the fed has come off the table or largely so for so 2019 which means that maybe 2019 will prove to be as many third years of presidential

terms have proven the best of the election cycle years. >> feels like longer. >> with an average of i think it's 16.7% returns and 15 out of 17 of those cycles since 1950 have been higher. >> just carry that around? >> wow amazing. thank you for watching "power lunch. >> "closing bell" starts right now. ♪ good afternoon very warm welcome to the "closing bell. i'm wilfred frost. >> i'm sara eisen. president trump gearing up to meet with the vice premier of china at the white house this hour we'll bring you the very latest on the trade talks. plus, one hour away from amazon's earnings after the break. we'll break it down with the panel. 59 minutes and 30 seconds left until the close of today's trade. check in to see how we're doing.