thanks for being with us. special coverage of the kentucky rally monday. >> announcer: from fox news headquarters in new york city the new "wall street week." reporter: welcome to "wall street week." i'm maria bartiromo. some of the biggest headlines that will continue to impact investors. the federal reserve increased interest rates by a quarter%. >> the simple message is the economy is doing well. we have confidence in the rebustness of the economy and its resilience to shocks.

maria: oil and gold both rallied as investors celebrated the federal reserve's move. and the signal only two more hikes may come this year. technology stocks among the best performers. facebook, alphabet, apple, all hitting all-time highs. the trump administration releasing its budget proposal. the white house is seeking a $54 billion increase in military and security spending. it's cutting spending for the epa and the state department. the proposal calls for $1.5 billion for construction of the border wall. it facings significant revisions from the republican-led congress. >> mark ruu terks s was

re-elected. election in france and later in germany where right-wing candidates are hoping for upset victories. president trump and angela merkel met at the white house. but they made nice in front of the world at a joint news conference friday. our chief management strategy and equity strategists are here. here we are approaching the end of the first quarter. >> things are looking good. the economy is improving and we are seeing that in terms of corporate profits. now we are heading into the third quarter in which we are emerging from this earnings recession, and expectations are

we'll see earnings up 10% in the first quarter of 2017. maria: was that better than you expected in tell us what that earnings both means. >> the 6% growth we saw, the earnings have ended up being better than the expectations by 3.5 percentage points. we could see earnings up 13%, not just the 10% now. maria: let's talk about that. the earnings story is getting better. the economic story is getting better. but the federal reserve raises interest rates. does that smash the economy that's just gaining momentum?

>> i don't think so. inflation has reached their target. the fed is trying to catch up. you might argue they are behind. they have to normalize interest rates. earnings are good and earnings are good and markets should go up. maria: you have a backdrop that's getting better. but valuations are up there. the market is up 14% since election day. >> relative to other things, stocks still are not expensive. it was not that's months ago where the s & p had a higher yield than the treasury. the fundamentals are earnings, and we'll get some policy followed through from the trump administration. >> how do you see it? it was no surprise the fed raised rates this week. >>historically the fed funds

rate has been higher than inflation by 1.5 percentage points. we should be closer to 3.5%. as bob just said, because the dividend yield is still within 1 percentage point on the s & p of the 10-year note. there is no competition from bonds. historically it has gained12% and gained in price 80% of the time. maria: do you agree with that? >> i do. the economy and earnings are doing better. that needs to continue and i think we to both think it will. but i think creeping into the market is expectation that we'll get pro-growth fiscal policy. the question mark is when, how, what does it look like. the market will struggle if we don't get that.

maria: i spoke with kevin brady this week and he says they are on track for obamacare replacement followed by tax reform and they think it will happen by august. but what's plan b? what if it doesn't happen? the stakes are up here? >> they are. you have got the trump hype and i worry about it morphing into a gripe. because what the trump administration is pushing forward might get some pushback from congress. we are 80-100% debt to gdp. so expendtures have to be met with cuts in other areas. maria: how big is the threat of a sell-off at this point? if they don't have a plan b and it doesn't materialized the way we are expecting. you are throughout with clients all the time. what will they say?

will they dump their portfolios if they see this is not going on the timeline they thought? >> there will be selling because we have come so far. 1800 where we were a year ago on the s & p. i would argue they have got to continue to show progress. if we don't see the progress we'll have a sell-off. maria: are there areas of hide in this market you will recommend where they won't necessarily get caught in a tailspin lower if things go wrong? where is the growth and where are the areas that could be resilient? bob: in an up market healthcare, and defensive would be utilities. big sell-offs that last a long

time in the market are always accompanied by a major decline in earnings and i don't see that. setback, pullback, correction if the trump administration doesn't follow through, but not sustained. maria: you said we'll get double digit earnings growth regardless of the fiscal policy coming out of washington. >> double-digit growth is expected to come from the financials. technology, et cetera. so as you are asking like where do you go for growth, where do you go for those areas that will benefit from an expanding economy. maria: we'll get into international when we come back. take a look at market events that could impact your wallet next week. existing home sales, manufacturing. a few major companies reporting earnings next week as well. that could most market.

nike, general mills and kb homes. neil gorsuch's confirmation hearings begin monday. we have a quick break. "wall street week" will be right back. >> announcer: a populist wave is taking european elections by storm and stoking fears the e.u. storm and stoking fears the e.u. its on the brink. ( ♪ ) i moved upstate because i was interested in building a career. i came to ibm to manage global clients and big data. but i found so much more. ( ♪ )

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bar report election in the united states now in the rearview mirror but a wave of crucial elections in europe are just getting started. the netherlands put a dam per on the populist wave with its result. marine le pen is doing well in the polls in france.

germany has elections in the fall and italy may hold elections this year. i want to talk about these elections. can i get your take, what does it mean if we were to see a populist wave go through europe. and we want the investment ideas. bob: it creates a problem for the eurozone. we have a series of sewer mean elections in front of us. if we get the right-wing populist, the euro will come under pressure and probably collapse. marine le pen will probably ask france to pull out. i don't think her chances are good, and i think the netherlands further am anyify that. but this -- amplify that. maria: marine le pen wants france to get out of the eurozone.

a lot of this has to do with the refugee crisis. they want their even borders. if they were to do that, the euro plummets. sam: sit would not be good for the world. you want to keep your investments home even if you think that's going to happen. i have got my money mostly in u.s.-generated earnings. not because i think marine le pen is going to be elected. but because economic growth stutters. maria: sam, how do you see it. a lot of countries in the emerging markets were the hot areas to be the last 20 years. then the last several years they can't get back on track. sam: i think it's the old phrase of reversion to the mean. if you look to the fact the last 9 years the s & p 500 has exceed or kept pace, developed in

international markets on a rolling 10-year basis are rifling their all-time low of 2009. if you have expose our overseas, now is not the time to be getting out. earnings is three times what you see in the u.s. in terms of p.e. ratios lower than they are here. also looking at dividend yields, they are 50% higher than they are here. the reason is because people are worried. if the euro ends up crashing, what's going to happen is you have a flight to safety to the u.s. dollar which will slow oure lynched together. if they fall, they will drag us with them. maria: even though valuations are so much better in europe than they are in the u.s., there is still not an appetite

certainly stop your part to go in europe right now because it's a fundamental backdrop. bob: these markets are cheap and cheap markets can have a big rally. the problem is the secular decline. undercapitalized banking system in europe. one currency, one monetary policy but a different fiscal policy for every country. most countries are having declining population, and they are falling the way of japan. maria: are you not worried this is going to impact the u.s.? bob: i think it already has. one of the reasons is our exports it's hard to sell to areas of the world that aren't growing. maria: is there any area in the st of e worlyou would recommend clients take a look at in terms of investment?

sam: i think it emerging markets look attractive from an earnings perspective and dividend yield basis. a lot of their debt has to be paid in the u.s. dollar. if we find the euro ends up collapsing we'll be seeing the strengthening of the u.s. dollar which will hurt the emerging markets. but we do find it's the emerging markets that show the greatest longer term growth. >> you have to feel like with the federal reserve raising interest rates, that will be good for the emerging markets. >> it will be good for their currencies yes, also just for trade in general. and i also don't believe they are looking to restrain with the fed still being quite stimulative with my target being

2.25%. but also they are telegraphing their moves. a boxer is rarely felled by the punch he expects. everybody expects the fed to raise rates because they had told us. maria: 2.25 is where you think it fed ends up after three interest rate hikes. you are still talking low interest rates. bob: but i think when you look to inflation itself, even at a 2.25% level, we'll be in a stimulative level. maria: you think the fed tops out at 2%. bob: if the fed goes to 3, either growth or inflation are stronger than i think they will be or they will cause a problem. i think they worked hard to keep us away from the deflation. the last thing they will do is

risk that by pushing rates up too fast. maria: we got this fundamental backdrop from you guys. what are you buying and selling. we'll be right back. >> announcer: why is snap and >> announcer: why is snap and twitter so say carl, we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

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maria: it was a good week for technology. the nasdaq leading the major indices. google and facebook soord to new highs. snap after that huge debut fell again friday.

sam stovall and bob doll back with me. when you look at technology is that where you want to be because that's the growth story? >> yes. technology, strong balance sheet. amazing free cash flow. they are the biggest been fisheries of the repatriation. maria: the valuations had such a great performance the last couple weeks. bob: their earnings back to what we talked about, their earnings are pretty good. technology comes in lots of different stripes. some are very expensive with business models you can say i don't understand. but you have lots of companies selling -- am, even after its run is not expensive. microsoft and what they are doing in the cloud is good business. if you want a down and outer, cisco systems is there.

you can find lots of good tech names. maria: i'll bet cisco will be a beneficiary as people loosen their belts. but when you have snap and twit everywhere it is -- sam: people are questioning are we back to a tech bubble. they were looking at these new-era technology companies. if you look at the s & p technology sector, a lot of them are filled with those legacy names. s & p capital i.q. is looking for a 2-4 percent gain in earnings. tech is 10.3, 10 .2. so trading at a relative discount to its longer-term history. so the question is, is tech in a

bubble? that depends on which tech stocks you are talking about. maria: snap had a good d a good i.p.o. what's your take on i.p.o.s? what does that tell us about where we are in this market cycle, sam? sam: because there haven't been as many as we have seen in prior bull markets, it indicates, where is the appetite for it? a lot of investors are look to i.p.o.s as trading opportunities. let's get in early, ride the watch and make money by shoargt at the same time. it's much more of a trader mentality. maria: i don't understand that. companies normally want to go public when the market is hot. we just hit dow 21,000.

the market is hot. is it because of the regulatory environment? >> the uncertainty and the fear can i get it done, we don't have the euphoria you are looking for. there are a posity of i.p.o.s. at the end of the bull market they will go to premiums and we are not there, maria. maria: we are waiting for the moment when we see the activity and those animal spirits. you do see animal spirits out there. bob: they have shown up in terms of expectation. but i come back to it's because the economy is doing better and people expect tax cuts. maria: bob doll, sam stovall, great to see you. that will do it for us on "wall street week." i will see you sunday morning

10:00 a.m. on the fox news channel for "sunday morning futures." my special guest, eric trump.

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