and now fully lapped that and i think back to when macro playing field. the question is do we take a step down but even if we're stable, i think the benefit underlying is less so than it was a year ago. >> neutral on macy's overweight on tjx. thank you so much for having me. courtney reagan, thank you for joining me i join tyler and melissa in a minute on "power lunch" which begins right now. >> yes, it does, kelly, we'll see you over here on "power lunch. i'm tyler mathisen along with melissa lee, new at 2:00 today, the fed chair powell on capitol hill warning about head winds for the economy and the mounting deficit the s.e.c. wants elon musk held in contempt of court musk is fighting back. it all boils down to a tweet and is this going badly for tesla and investors? we'll explore that one is housing about to hit a slump ahead of the crucial spring selling season? you heard courtney talk about

that we'll explore it more as "power lunch" begins right now. >> and welcome to "power lunch." i'm melissa lee. stocks holding steady on the back of fed chair powell's testimony and stronger than expected consumer confidence data check out the etf with the housing stocks tyler jurs mentist mentioned th. the itb under pressure following the weak numbers we mentioned before we begin though with the fed chair's testimony. the remarks of congress today. he made a lot of headlines straight to steve liesman covering that for us >> jerome powell on day one of congressional testimony offering a generally dovish outlook on policy not closing the door with the rate hike entirely but emphasizing the fed in a wait and see mode he offered an optimistic view but head winds had clouded the outlook and powell suggested he did not see a threat from the economy running out of workers >> there's more slack in the

labor market because people are coming back in if people weren't coming back in, the unemployment rate would be substantially lower but they are or they're staying in so labor force participation is rising in either case and telling us there is more room to grow and that certainly has implications for monetary policy >> implications clearly lower rates that the feds are concerned about the supply of labor. also said estimates of $1 trillion level are reasonable suggesting they went in adding all the other items on the ballots and aiming for $3.6 trillion balance sheet to put it on track to stop running off the balance sheet which was quite controversial in december. stop running it off later this year, guys. >> his comments having minimal impact on the market so far but by the way, steve, since there's a big soup of stuff of him today, what is the real headline and the real takeaway? >> he's patient. he's watching these headlines. i think he told us about policy in january and this pivot. this pivot is total, to me, the idea he's now sort of getting

close to the idea of backing a balance sheet number that's important, but also the idea that there's this gathering concept of letting the economy run a little bit to see if the unemployment rate can be driven lower and inflation not become a problem. >> this solidifies that pivot. if there's any doubt in the pivot, it's gone >> that's right. >> thank you. >> pleasure. bob, stocks not taking too much reaction to that dovishness >> reporter: i think the problem is we're running up against the limits of what has created this rally so far so i think steve's right the absolute key is the reiteration of that patient word there. that's what the market wants to hear we've also had trade wars diminishing, the fears of that diminishing but these headlines have been out for several weeks now. we pushed this pretty far. remember, we had a huge rally. we're talking about 19% in the s&p 500 since december 24th bottom how much more can you really push forward if you look today at our

sectors, banks, semis and material names as well as industrials are lagging. those are the sectors that have advanced the most since the rally, so this shows some signs of selling a few of the winners. look at some individual laggers on the s&p 500 today you can see caterpillar on a downgrade. j.p. morgan, not much going on there and advanced micro these were leadership stocks coming out of that december 24th bottom so i think you need to interpret this as markets advanced a lot we've had good news overall but a lot of it is already priced in kelly, back to you >> i'll pick it up there, bob. thank you very much. wall street power players. wealth advisers and industry leaders gathering out in las vegas today to discuss opportunities in the current market and the big trends and challenges that lie ahead. leslie picker is there with avenue capital got a cnbc exclusive leslie >> hey, tyler. thank you so much and thank you, mark, for joining us today so obviously, everybody is talking about powell's testimony

in front of congress today what do you make of his assessment of the economy? do you buy into the idea that the economy is getting some conflicting signals when it comes to the prospects for growth >> the economy slowed and i think that's what chairman powell is seeing at the end of the day, you know, the real question and i think for you and i and for ordinary americans, how much has it slowed if it's gone from 3% to 2%, then really what's happened is the economy has contracted by 33%. right? so you're still growing. everybody's worried about a recession. i don't think that's happening at all i do think you're going to have slower growth and what that means is, at least for most people, you're going to feel that it's not going to feel as if things were as good as they were last year. it's just going to be slower. >> what does that mean for the markets if it's a downturn versus a recession or slower growth versus a downturn, how should investors be? >> if you're an investor, what

you really want if you're an equity investor, 3% to 4% growth because that's actually great for equities if you're a debt investor, ha --present. what you want is anywhere from 1% to 2% growth. what we're doing, it's great i think you'll find wiequities e going to have a hard timer >> we've seen a couple coming out. pg&e >> we ended up participating in and doing the dip financing there. so we thought that was a pretty safe investment. we thought we were getting a bit overpaid for that. i think there's a lot of opportunities there and we'll probably end up doing a little bit more in that situation >> hey mark? >> i think back at headquarters, mark, i wanted to ask you about a position that you talked about in the fall and that is buying into tesla's debt. you said at the time that you weren't worried about the

company's ability to pay that back what are your thoughts now that you've seen what the company has gone through at the s.e.c. and now asking the court to find elon musk in contempt of the judgment >> well, i think what you're going to find is that that's going to be, the equity value will drop a little bit i didn't see where tesla is today but at the end of the day, it's still got an excess of $60 billion market cap and it's only got about $7 billion in debt so that would imply a $67 billion enterprise value even if the equity drops, look, the equity could drop by sort of 80% and we're fine so i don't think it's great for elon musk but i think for the company, at least for where we are and where we're invested in the capital structure, we're fine if the bonds go down a little bit more because people are nervous, that would be a great opportunity for us to buy more of those bonds.

>> where are you in the capital structure with what sort of debts you have and maturities? >> we're just at the top of the capital structure. so at least for us, right now, those bonds are are trading. they were trading around mid to high 80s it's because of the news today they've dropped a little bit you're still making somewhere around sort of a 9%, 10% current yield on that which would be great and thenyou've got the capital appreciation from 85 to par. so, you know, we think that's actually, in this environment, it's an extremely safe investment >> market, it's kelly here. i wanted to quickly ask you about giannis antetokounmpo, we'll keep this quick and back on subject but you guys, has this been your best investment ever and why not sell with all the success you've had, with these levels and walk away and say, you know what? couldn't have gotten much better than this one.

>> well, it's been a great investment, so on that i agree it can get better. i think right now, we're the best team in the east. i think, hopefully, we have a real shot to get to the eastern conference finals and depending on who we play i think we've got a pretty decent shot of winning the nba, becoming an nba champion look, part of the reason we did this is, yeah, it was a great investment, but it's also, at least for me, it's enormously fun. there's nothing more satisfying than being able to win and the last thing you would ever want to do is sell when everything is going great. at least in this, so i think this will be something we end upholding u up holding on for a long time. >> mark, tyler mathisen here i asked last week adam silver a question about the fact in the nba and other sports leagues, there tend to be haves and have

n nots and you have a nice new stadium, succeeding team, not a huge market team so not necessarily defined by market size you can look at a team like the knicks and say, well, they're a have because they're in a big market they sell out, but they have not translated that into success on the court. my question is, what does the fact that there are have and have nots say not just to the question of economic balance on the court but viability on the league, is it a livable thing that you have a real divide between a cluster of teams at the top that are very profitable and successful and a bunch that aren't >> yeah, look, i think it's a great question, but time seems to solve all these issues, right, and if you take a look at

it, when we bought the bucks, they were the worst team in the nba. they had the worst record and at the time, we paid the most that had been paid for that franchise. so it's five years later and look where we are, we're the best team in the nba today i would say a lot of that goes to how you run your organization and the people that you have i think in the beginning, jason ended up doing a great job in sort of taking the team to a certain level and bud taking the team to another level. our gm should be gm of the year, in my opinion. our coach should be coach of the year and nothing to do with it being sort of one of the largest franchises or smallest franchise. if you have the right people, you'll tend to end up doing a really good job and i think what ends up being missed here is there's times when certain teams just aren't able to execute, not

just on the floor, but at the gm level, the coaching level and there's other teams who have been able to do that but i think time will solve those problems and the draft will also solve some of those problems if you draft well look, when we drafted giannis, he was the 15th pick that means 14 other teams had the opportunity to draft him and they didn't. why was that our gms saw something others didn't see at the time you've got to execute. same thing on the investment side make investments that are going to work out. so i think the nba is fine and i think everything is going to work itself out. the knicks will get back to where they are hopefully in the next draft and with some of the salary cap they have, but a lot of it is going to be, do they make the right choices as somebody who lives in new york, i hope they do and as somebody who owns the bucks, i hope they don't. >> i want to piggy back about

tyler's question of have and have nots through a political lens we see a larger conversation with wealth distribution and closing the income gap and you've been a long time democratic donor what do you make of the current 2020 proposals the candidates how are you assessing those at this time? >> look, i think there's a lot of issues out there. and it's true, i mean, there is this huge income gap the question is, how do you solve it the solution of let's raise taxes doesn't solve it you'll be able to distribute some money back but what does it really do? that's a great short-term fix. my view, you've got to get to the root of the problem and that ends up being, you've got to enable people to beable to sor of create businesses, to build businesses, to do things that right now, they don't have that opportunity and the question is how do you give them that opportunity? i think when you're looking around, look, i'm a centrist

i mean, i think i'm socially liberal, but i'm fiscally responsible, so i think at the end of the day, we'll see sort of where the country is. when you look at the midterms, my view is the vast majority of democrats who got elected were really in the middle and the people who got all the news were the people very much on the left i don't think that's where the country is, but we'll find out in the next 18 months where the country really is and see who the candidate is i hope it's a centrist, somebody in the middle at least for the sake of democrats. >> mark lasry, thank you very much >> thank you more big interviewing coming your way joel greenblatt on "the closing bell." a new battle in the war between elon musk and the s.e.c.

they want him charged with contempt musk lashing out with new tweets how much trouble could he really get into not just jay powell on the hill big pharma ceos facing questions about drug pricing is legislation coming and what could it mean for the big pharma companies? all that and more coming up on "power lunch." was ahead of its time. still, we never stopped making it stronger. faster. smarter. because to be the best, is to never ever stop making it better. the new 2019 c-class family. lease the c 300 sport sedan for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

jamie diamond talking about the bank's movement to crypto

currency will >> reporter: this is coming after taking place in new york and of course, j.p. morgan coined the new initiative from the bank the story broken a few weeks ago. jamie diamond addressing where it could lead to in the future >> j.p. morgan coin could be internal, it could be commercial, it could one day be consumer, et cetera. but we think it pays both consumer and one of the most important things we do is moving money in a sound, secure, safe way. which we already do. some of these things just reduce the cost and make it easier. >> the news there, of course, j.p. and coin could one day be a consumer product it was a brief comment there by diamond. we did hear from the head to discuss j.p. morgan coin as well, testing out at this stage to see if it could help them move money around the world and at the moment, focus more to corporate but maybe one day for

consumers too. guys >> thank you, will ross. musk saying something is broken with s.e.c. overnight his tweet coming a day after the s.e.c. judge asked to hold him in contempt for violating his deal over the february 19th tweet. in that tweet, musk said tesla would make around 500,000 cars this year. the s.e.c. said that was inaccurate has until march 11 to make his case to a federal judge. how much trouble is elon musk in and what are the risks for tesla and investors? let's bring in cnbc contributor jeff and matt de lorenzo watching the stock today, it's slightly higher. so here's the direct question. why should investors care? he's a maverick ceo. isn't that what stock prices

show us today? >> i think they do but on the other hand, there was this agreement to bring in robin the chairman and the question is, is that window dressing who is sort of elon's boss and how is this issue going to be addressed? it's one thing if it's a private company and he's able to engage consumers the way he does, but it's a public company and there are rules. >> i understand why people might be upset on this about i'll go to this on you, jeff the stock is not reacting to this investors seem to shirk this off at this point. is this par at the course when it comes to investing in tesla maybe this isn't a big of a problem. >> it's a bigger problem than the market reck thieognizes but stock dropped 5%. >> in after hours trading once the news came out, in volume,

but go ahead. >> there was a response to that but you're right, it wasn't a wholesale panic. depending what the s.e.c. does here, they could right now with a court order remove him he could certainly be barred from serving as an officer or a director people have been barred for less than this. people we know >> wait a minute, wait a minute, i mean, the s.e.c. wants him to be charged with contempt but as i read the tweet, it hardly seems contemptuous he corrects himself some hours later, meant to say, annualized production rate at the end of 2019, probably around 500,000. maybe it was just an honest sort of hiccup. does it really rise to the level of the guy ought to be thrown out of the company which is what

i think i just heard you say >> i didn't suggest they do that the s.e.c. has the option to do that and if he continues to poke the bear as he has, he's begging them to do it by calling them these crazy names as he's sort of been making fun of them as the s.e.c. joking names and making fun of his old chair, as we just referred to her as patricia, no oversight over him, making fun on "60 minutes," mocking the idea that he'll actually have any tweets reviewed and decide when to get the reviews and none have been because he'll decide if they're material to the stock price and he doesn't think they are, so in fact, the agreement with the s.e.c. is being ignored. that's -- >> that's the contemptuous behavior >> he didn't realize who he was adding, the brilliant larry ellerson, the greatest defender of steve jobs when they were

taken out of service and he, of course, is one of the biggest fans, almost to the point of being a religious cultist around elon musk, who by the way, is brilliant. maybe almost as larry ellison but so was nikolai tesla and these big people became their own worst enemies. you get this market mindset where they take down their own empire. >> does this behavior rise to the level of justifying a suggestion by the s.e.c. to remove him as the ceo of the company? >> one way to get his attention to say they're watching him and i think that's one of the things he has to learn is to control some of these impulses they have a lot of huge challenges ahead, maintaining that clip of 400,000 to 500,000 a year and servicing,

maintaining the vehicles in the field which is a looming issue and you can't have distractions dealing with those problems. >> twitter is -- >> i think matt's point is excellent of distraction. >> well, i think we could all agree or maybe we can't,but i think we could all agree that in the hands of impulsive people, twitter can get you into hot water, right >> i would agree with that >> that's what got him in trouble with the insults of the heroic british naval seal that he had to come up with all the insults about him and the whole idea just about on twitter, suggesting which was a securities crime that he had so that financing lined up for $4 to $25 a share which he didn't have and what did he do this week he suggested his production 25% more than it really is that's not excusable >> although ternings call, the upper range was 500,000 but

we'll leave it there thank you very much. jeff and matt, thank you >> trucks versus vehicles. >> okay. staying with vehicles, dragging down today after downgraded the stock from buy all the way to sell. didn't even stop at neutral. "trading nation" team will weigh in car parts, crafts all soaring higher today we've got those big movers ands much more when "power lunch" return s. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. 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 your patient's tests come back...

we sunleashing the promisegas of clean energy. at emerson, when issues become inspiration, creating a better world isn't just a result, it's a responsibility. emerson. consider it solved. your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. sending your own clubs ahead with shipsticks.com makes it fast & easy to get to your golf destination. with just a few clicks or a phone call, we'll pick up and deliver your clubs on-time, guaranteed, for as low as $39.99. shipsticks.com saves you time and money. make it simple. make it ship sticks.

welcome back to "the exchange" -- "power lunch. caterpillar in the hole today. stock stomach tumbling after a double downgrade earnings declining 2020 is not yet priced into the stock. let's bring in mark teper of strategic wealth partners and management to weigh in on this call i'll start you here. a heavy global industry weighed down by trade fears. stock looks cheap but say, be careful, they look cheap, where do you come down on this one

>> i wouldn't be running away from this stock. i think the double downgrade was excessive. it is dirt cheap but the hurdle is low the potential for outperformance is there price increases should offset that and let's not forget, they have record profits last year and their issue has been guidance and the last several years, been focusing on restructuring the business which should help with profitability going forward so that will put him in a better position if we do see an economic downturn but nothing we're seeing is signaling a downturn loan growth on fire in commercial and industrial loan growth is leading the way growing by 10% per year. the loan growth is good for profit growth. we think there's potential for the stock to go up from here. >> boris, there's a lot of people pointing to chinese infrastructure investment, for example. surging. some of the elements are rounding into place and the stock down 2%.

where does that leave you? >> still dubious cat has become a proxy for macro global growth and i think what will drive the stocks much more than any individual to the company is how well the global pmi has done global pmi, manufacturing indices, trending all the way down for quite a long time if they can stabilize and perk up, that would give me a lot more confidence that cat will benefit from that recovery until that, stay away. >> okay. thanks a lot for sharing your thoughts on this one for more trading nation, follow us on twitter @tradingnation >> thank you so much ahead on "power lunch. big pharma under fire over drug prices is legislation coming and what would it look like the ceo of red fin on housing. is home depot signaling the end

of the housing trade that's it, don't go anywhecomin. don't go anywhere. >> 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 the double top consists of two well defined peaks approximately the same price a break of the lowest low in the formation as a bear signal ♪

(butcher) we both know you're not just looking for pork chops. you're searching for something more... ...red-blooded. right this way. you thirst for adrenaline, you hunger for raw power. well, you've come to the right place. the road is yours, dig in.

welcome back everybody i'm sue herera here's your cnbc news update at this hour. secretary of state mike pompeo holding talks with vietnam's foreign minister and deputy prime minister in hanoi. pompeo in vietnam for the summit between president trump and north korean leader kim jong-un. reuters reporting hasan is holding back from accepting resignation from zarif targeted by hard liners over the nuclear deal with the west zarif handing in sudden resignation late monday. an appointee of former new jersey governor chris christi spends less time in prison for

the george washington lane closing scandal. reducing from 2 years to 18 months >> jenna bush haiger will succeed kathy lee gifford as the new today show host of the fourth hour. gifford will leave in april and haiger sits alongside co-host hoda kotb. we wish you the best of luck she is a lovely lady send it back to you. >> thank you so much sue herera about 90 minutes until closing bell major averages, pretty steady. bigger movers this hour like auto zone hitting an all time high after reporting better than expected earnings. shares about 5.5%. etsy, retail winner. beating top and bottom estimates and raising guidance for this year eth etsy shares surging and dillard's better than expected earnings could continue to benefit from retail bankruptcies. those shares up 20%.

amid all the gridlock in washington, there may be one issue that has both sides in agreement. sort of. drug prices. and today, several big name pharma executives appeared in front of a senate committee on that very topic. ylan mui has that story from washington ylan >> reporter: the focus on the high cost of prescription drugs. we saw the ceos seven of the major pharmaceutical defending the list prices of the products but there was a lot of pushback from lawmakers including this exchange between democratic senator ben cardin and the head of johnson&johnson's pharmaceutical division. >> isn't it the better price you're going to get. >> the larger the market share, the better the price it depends on a number of factors including the number of competitors and the companies that are bidding to try to get -- >> if you control more of the market, isn't that going to bring down your price? i learned that in economics 101. >> you heard about the high cost of r&d and said it spent $10

million on r&d last year that's one of the reason drug prices are so high and tried to shift the blame to the middlemen. pharmacy benefit and insurance companies not passing on discounts to consumers and forcing them to pay more out of pocket this is just the beginning of the debate here on capitol hill. chuck grassley, the chairman of the senate finance committee, talked to reporters afterwards and ready to legislate he's just not sure what on yet so clearly a lot of debate left to have. >> ylan, thank you so much ylan mui what might this legislation look like how could it impact drug makers? let's ask david merris and bill hogland. twok you bot-- thank you to youh the pharmacy managers kind of getting beat up on the issues around drug pricing.

president and washington may go after them someone suggested the rebates aren't passed along to the consumer who buys the drug but other people in the insurance pool in the form of cost savings. are they right this is the problem in terms of drug pricing across the industry? >> they're right in that's part of the problem so all of these discounts, there's no transparency. no one really knows what happens with those discounts every one of the drug company ceos today was like, let's get rid of these rebaites and pass o all of the savings to consumers if they can. the question is, can they and what would an insurance company do once you say to them, we're not giving you a rebate? they might want some sort of other payment. >> help us what it would look like if that changed starting tomorrow when we get drugs, what does it look like? >> amazingly, about 50% of a price of a drug goes to a

rebate so if the list price is 1$100, the insurance company is paying $50. what happens to that who knows but for a lot of consumers, nothing would change. they think they'd see the average consumer would see some price benefit but no one is able to quantify what it would be. >> if we got rid of the pbms, what role are the insurance companies playing here >> i think it's possible with getting rid, we'd have to have a combination of lower list prices as well as limiting the drug rebates. it should have a benefit of reducing the price to the consumer but the bigger problem from my perspective is the nature of this very obtuse type of pricing system that runs all the way from the manufacturers to the pbms to the insurance company, all working for various disincentives are created that result in the consumer at the end of the day and i think that's what the executives heard this morning it's that the consumer is not

benefitting from even the lowering of the list price or doing away with the rebates and that's the big problem going forward. >> by revenue, bill, correct me if i'm wrong, but some of the pbms are among the largest companies in the united states three or four of the top ten or 15 were pbms have they solved any damn thing? >> i would say the concept of them being able to bring together and negotiate with manufacturers and produce the lowest price possible for the insurance company to pass that along, i think there was a good concept there going forward and still are some major benefits associated with pbms but not working, it's not just the insurance companies or the pbms but the combination that's created throughout this convoluted system of pricing for drugs and keep coming back to

the real issue here is that consumer out there that's what the executives heard this morning is that if i lower your list prices, if we do away with the rebates, will the consumer benefit i listened at the end of the hearing and i couldn't quite determine whether or not even doing all that, the manufacturers, the pharmaceutical, the ceos represented there would commit to the consumer benefitting from that >> sure. >> one would think it should >> if i'm one of those ceos, i'm those companies, david, oftentimes when an industry is under fire, they come out and propose their own legislation. grassley said he's going to legislate. they don't know what yet, what exactly to do. if you're in the cap bird's seat, what would you say to contain the damage and give the senators a win >> the industry did the right thing for themselves which was, hey, let's go after the pbms and

get rid of rebates and insurance companies to say let's put a cap on out of pocket spending hoping the insurance companies would have to pay for that and who's to say the government could say, let's have a cap and make that a tax on pharma. so how to pay for it is something different but there's lots of things in the testimony that could turn out to be probab problematic but the industry did a good job with pbms and more biosimilars aapproved. things that don't affect us right now. it wasn't so much a grilling as a toasting >> a light grilling. >> like an easy bake oven kind of >> we'll see if it gets turned up >> bill, appreciate it >> thank you to the bond market rick santelli is tracking the action at the cme. >> hey, melissa lee. we had an auction of $113 billion in supply, $32 billion in seven years solid auction. gave it a "b."

2.54% and actually $22.534%. the weak spot, indirects 55.2, the weakest since february of '16 28.4, the best in five years now, as for the market, when jay powell was testifying and answering questions, he brought yields up just a bit but still not in the positive territory. and they've dwindled since look at a one week of ten year note yields. you could see it moving down a bit. going all the way back to 2018, that happened earlier this year. we're not that far away. look at the year-to-date chart on the left side, see the low close. finally, the dollar index, not having a good day as you see on the chart. as a matter of fact, if it closes here, it will be the lowest in 15 sessions. it will be the lowest closed since the fifth of february.

tyler, back to you >> thank you, rick appreciate it. signs of weakness in housing ahead of the crucial spring selling season we'll have the latest numbers on that and ask the ceo of red fin what he is seeing. that stock is soaring. it's up 30% so far this year ou iisowa tt bit today. we'll be right back. so they say that ai will put the future in the palm of our hands. that's great. but right now you've got your hands full with your global supply chain. okay, france wants 50,000 front fenders by friday. that's why you work with watson. i analyzed thousands of contracts and detected a discrepancy. it works with procurement systems you already use to help speed up distribution without slowing down your team. frank, tell fred full force on those french fenders. fine. fine. fantastic. for ai that knows your industry, choose watson. hello! the best ai for the job.

welcome back a slew of on housing today some of it delayed because of the government shutdown. diana olick joins us with the report >> reporter: single family housing starts fell and down over 10% to the lowest level in over 2 years building permits which indicate future construction down over 5% annually builders blamed high cost for land and labor and shortage of labor and weaker buyer demand. and they blamed high home prices prices still up 4.7% in december but that's the smallest annual gain since the number of 2015. everyone is looking at today's

lower mortgage rates to juice demand but so far we are not seeing that in the home sales or in the home construction back the you guys. >> diana, thank you very much. the numbers come as we head into the spring selling season when so many houses do move let's get a perspective from glen kellman, he is the ceo of red fin. glen, let's go through some things. >> hey. >> new home sales declining. housing starting are dropping. luxury sales are dropping. and yet, you have a big smile on your face as you always do and you say, we believe the housing market is getting stronger why? >> lions and tigers and bears. >> well -- there's a fantasy for you. go ahead why is it getting stronger >> demand is stronger in january and february we're not out of the woods yet and it is significantly stronger than it was in the third or fourth quarter of last year. >> and that is because - >> because rates went down

people have been on a hair trigger about rates. everybody knows the other shoe drops on the economy it is very strong for a long time and when people see rates go up, they freak out. buyers have come back. not all the way back but they're back. >> how about the luxury market one of your firm's findings that prices in the 2 million plus area have declined for the first time in a couple of years? >> well, i think some of that's because of stock market volatility people aren't using the wages to buy $2 million houses but the portfolios and saw in the fourth quarter is the stock market going crazy. you were going crazy and the people who had to sign up for a 30-year mortgage and sell their stock to do that just got a little skittish. >> is more inventory coming on the market >> some. >> is that problem going to be partly solved? >> you're going to see more inventory but i think some sellers are worried about the market so the buyers and the

sellers in a dance right now where it's hard to put deals together nobody's certain where the market lands it is better than it was in the fourth quarter, seeing stronger buyer demand and not as if people are willing to pay any price to get a home and we saw at 2018 and past four years before that. >> glen, what is going on in the high tax states and is there a doubt in your mind we haven't seen the impact of the elimination of the salt deduction on the coast >> we have absolutely seen that impact our business is the business of helping people find -- california in particular is just having a significant exodus and people are leaving for boise, idaho, and atlanta, georgia, and all the spots in between and been a strong move, especially from the west coast. >> yeah. i think we bought our house a month before that passed or something, glen. >> oh, i'm - >> the chart doesn't look pretty it's new jersey. what will happen

they have to bring the cap back? does that solve anything or what do you think happens now >> i think there's a long term trend happening before tax reform because the markets were so expensive you can only have so much wealth built up at the edges of the country before people move into the center and unless we see significant wage growth in the coastal cities you see people moving to the center of the country and helped by the fact you can work from home using the internet technologies. >> what are the three hottest markets you see right now? >> atlanta, boise, buffalo. >> buffalo buffalo, new york? >> i knew you were going to get me on buffalo. i have two i'm hot on. buffalo is - >> must be the weather it's got to be -- well -- got to be the weather. >> quote me. quote me on the other two. boise and atlanta. atlanta right now is tearing it up. >> doesn't help you in buffalo for the salt cap. >> there's salt there for the roads. glenn, see ya, man.

>> good to see you guys. >> thank you. board diversification at ibm, as well they have just named admiral michelle howard to their board of directors bringing female representation on the board to five women for those in the military circles, she is the first woman ever to be a four-star admiral in the u.s. navy and the first woman in african-american to become a vice chief of naval operations for the navy. also, the first female graduate of the u.s. naval academy at annapolis for a rank of flag officer. she is currently teaching as a professor of international affairs, also cyber security and international policy, right now at george washington university. so this comes, of course, a day after melissa, that amazon named former pepsico ceo to their board. a big deal for ibm here and board diversity, as well. >> thank you, dom chu. shares of home depot hit

today, one of the worst performers in the dow at this hour missing earnings estimates giving a weak outlook despite that wall street is bullish in general. the majority of analysts rating the stock a buy. joining us is peter keith, research analyst at piper jaffrey. >> thank you for having me. >> they were unprepared for the extent of the unfavorable weather. i thought that's what they lived for? i thought home depot should have capitalized on the extent of unfavorable weather. >> yes so i was a bit surprised with that comment the same store sales under expectations at 3.2% and they said weather was about .85% drag you talk to them after the conference call, blamed heavy precipitation and record rainfall and i look from that, home depot is a great company and last five years they powered through weather and when you see a company now missing and starting to call out weather and rain, frankly, i think first called out in quite sometime and

seems to express some weakness in the underlying trends. >> is that an excuse issue in your view? do you get concerned that maybe they're not executing as well as they might have once executed? >> no. not at all one thing of home depot, they're probably the best retailer in the country and one of the best operators in general to me it's very clear. it is just signs of the housing market are starting to slow. you've seen turnover decline year on year home price appreciation coming down they like to talk about home equity in homes today and not seeing homeowners extract that equity so it's just a moderation of the housing market. >> an interest rate function there? as glenn kelman said, now that interest rates, a foot off the brake, powell says, interest rates coming down, will this turn it around >> i would say we have been looking at home equity extraction for a number of years

to be big ticket remodel projects and flattish for a year and a half q3 probably related to rates see that years decline year on year. >> this is really a double whammy because you have people not buying homes at least that's what the data shows us and seeing people also not doing the big renovation projects and that argument of people staying in the homes and spending more goes by the wayside. >> yeah. i think it does i mean, home depot fairly argues that housing turnover is an abnormally low level for quite sometime and the overall results dislocated from that metric and certainly want housing turnover up in terms of nonmover remodeling, it is still there and posts same store sales growth and a moderation after a very strong five years in recent history. >> lowe's tomorrow, is that right? >> right. >> confirms or denies rain was the issue? >> lowe's will be interesting. they're in the early stages of

what could be a long-term turn around they have been donating a lot of share to home depot for several years and people look at the same store sales. >> donating shares that sounds so nice of them. >> a tax break. >> they use that word? i don't know. >> that's what we use. >> it's nice analyst community. you guys are very polite. >> euphemism for losing share. home depot is losing share to lowe's in terms of other things, we heard down the supply chain about weakness, this is just a latest data points are you getting any color of home depot will you be looking for lowe's given that the quarter ends later and that they are seeing the trends later than those quarters in the past that anything's improving >> yeah. we'll be looking again is this delta between their same store sales and if lowe's is able to close that gap perhaps they weren't as negatively impacted by weather or no longer donating

as much share and getting back on their feet. >> is there different geography? >> not really. west coast versus east coast and not a meaningful fashion. >> peter, thank you. >> thank you so much. thanks for watching "power lunch" today. >> "closing bell" starts right now. ♪ good afternoon welcome to the "closing bell." i'm wilfred frost. >> i'm morgan brennan in for sara eisen we have got a big lineup of guests coming your way joel greenblatt, rick rieder and randy kroszner are here. let's start with the markets which you can see just positive at the moment. up .2% for the dow the high was up -- well, this is the high of the session. >> looks like. >> not a b