Out. The billionaire Tilman Fertitta will be here power lunch starts right now the dow making major moves to keep up with the changing times and the changing economy bob is looking at the moves and how they will affect the markets. Bob a bit of a shake up in the dow but the moves make some sense. Let me explain why lets take it piece by piece first we have salesforce. Com replacing exxon mobile the apple split has reduced the tech weighting in the dow and we need more Technology Sales force reflect the growing importance of Software Overall in the u. S. Economy. You dont need two Oil Companies in the dow you dont need exxon and chevron with energy only 3 of the s p one of them chevron will do. Lets look at the dow industrials. Pfizer is the lowest stock price in the dow the price would be even lower. Another reason to move it away amgen is reflecting the growing importance of the biotech space. This sounds like two industrial swaps and they are theytheon overlaps a bit with boeing now, again, these changes are conservative but not baffling. Look at the dow shake up here. The stuff thats being added is nicely on the upside today thats kind of interesting the stuff thats being deleted thats exxon, pfizer and raytheon, all three are on the down side. Everybody is betting the stuff is coming out of the dow the dow has very little money index to it. I wouldnt put too much emphasis on any of these moves today. In fact, if you look at actual amount of money thats linked to the Dow Jones Industrial average, its about 31 billion. Thats nothing compared to the s p 500. Theres about 11 trillion that indexed to the s p look at that difference. 31 billion versus 11 trillion. Its really the s p that matters in these types of things we like to follow it because we all love the dow back to you. I guess we love the dow some of the time, dont we. Thanks very much Quincy Crosby is chief Market Strategist with prudential financial. Quin quincy, why we care so much about the dow . Its not the one the pros like you follow that is one reason why we see this change taking place next week one reason why pros dont like it why does it have such weight in the publics mind . It just does. Its main streets index another thing, what is really interesting is when we get calls from around the world to give a comment about the days market performance, they ask about the dow and we follow up and see where we its the dow you know what happens when the dow makes a new high that big round high. The market stop. The balloons come out. Its the dow it represents america. It represents old america and more and more its representing new america as it moves more and more toward Technology Even honeywell they want to be Software Industry its changing, evolving and main street loves it. I guess, paul, its really a question of history and really good branding behind the dow here in part because apple which in term of its price will be quartered. Yes i think the sector weightings go more in line with the s p 500. Hopefully it will track that index a little better. The additions and the sub str subtractions arent the big story with the way the dow be look its the split of apple that will be 4 for 1. So far this year, apple is contributed about 1500 points to the dow. Post split, if the stock went to zero between next monday and year end, the negative impact would be about 850 points. If that happened, it wouldnt happen apple would still have a 2 positive weight on the index for the entire year just because of the stock split. Stock splits are meaningless for a Company Fundamentals for the dow, they mean a lot as far as the individual companies are concerned, bob was talking about it earlier and quincy was just mentioning it. Theres not a lot of money index to the dow so its a seal of approval one year later they saw declines on median basis. The stocks tend to go down more often than they didnt stocks, the stocks removed saw similar inventory. Let me make sure im understanding because i was going to ask you should i buy these stocks that are going in because they are going in and sell the ones that are going out. Youre telling me, that history tells the us that if you buy the ones that go in, you lose money over next year if you buy the ones that go out, you lose money over the next year yeah, you lose slightly less on immediate ymedian basis and e ones that come out for stocks in the last 20 years, you look at United Health which has been Great Success story the stock did well after it was added. Then you have stocks like aig and bank of america which shouldnt last six years in the index because they went down so much and had such low prices so they got removed you wouldnt read too much into these additions and subtracti s subtractions just going back to 1999, we were talking how the dow likes to wait and see how things progress microsoft and intel were added in 1999 when those stocks were near their peaks now were getting into software with the First Software stock added to the dow thats something to watch Going Forward as well. Right we just answered the question, should you buy them as a group are the ones going in, is there one or more of them that you like as a potential investment even though history suggests that the median is that they decline over the next year i mentioned honeywell it does well as the economy heals. Its a strong company. They are cutting costs they have tremendous cash flow the dividends are atraktractived you have a new ceo who is more and more transitioning toward Software Company they want to be in both camps and seem to be successful. I do want to mention what about the dogs of the dow. People love to hear about the dogs of the dow once we turn the new year thanks very much for your insights we appreciate it very much kelly. Lets focus on the dows newest tech heavy weight a big day for cloud stock sales force. You have earnings after the bell what practical significance do you think that has for investors . I just think its great sales force is a leader in the cloud. They have a charismatic ceo who helps us lead through a lot of the challenges that we been having in the industry i think its terrific. I want to ask as well about there were some critics who said if they are looking to add a tech name, why not add facebook. Why not add alphabet those are tightly controlled founder companies. Why is his Ownership Structure a little more hands off . They are the clear leader, a clear play for b to b cloud Enterprise Sales mark has really innovated in that area and shown the path that so many other companies have followed. I think its well deserved it does indicate how essential Services Like sales force have become. Lets turn to ternings today and what your expectations are there. What are you going to be listening for . Two big picture things. Have they been able to accelerate the growth in the business and the key metric is something called crpo or bookings secondly, are they able to show margin upside . One of the complaints is their margins have been stuck in the same area for the last three years. Particularly now that theres no dream force, very lit travel no sales people entertaining clients, are they going to be able to show meaningful up side in terms of make money we have just been talking about how companies are added to the dow only once they are kind of so obvious that they are almost utilities thats usually after the biggest profit making days have happened what would Main Business threats be at this point they dont continue they have to keep coming up new products that solve their customers problem and not let the little upstarts come up with Better Solutions and do a better job serving their customers needs. Well see if they can squash some of those concerns thank you. Thank you for having me ty should be fascinating thank you. Coming up, new home sales surging to the highest level since december of 2006 home prices rise and the Housing Market continues to be a bright spot for the economy is it a sign American Cities are in for more pain we will discuss that best buy reporting a 242 jump you heard me right in online sales. The stock falling from record highs after warning its growth is slowing did the stock come too far, too fast well explore that one when power lunch returns after this quk ea icbrk. The Housing Market is staying hot as people continue to flee the big cities for the suburbs. Reporters are all over this story. Diana tracking the migration and Steve Liesman looking at what the future could hold for the big cities reporter sale s of newly built homes jumped to a 13 high in july. A new need for bigger, more hightech homes gave the billers a major boost. July sales were up 36 annually causing supplies to drop dramatically and prices to jump 7 the numbers are bigger in colorado where builders like Oakwood Homes are seeing an influx of buyers across the country but especially in california new home sales were up 80 oakwood builds in several colorado markets and ceo says 7 out of 10 of his out of state buyers are from california its just so much more affordable to live in colorado cost of their work force is going to be less and the quality of life is awesome reporter all this demand is pushing home Prices Higher in colorado now as the supply of existing homes fall. Denver prices were up 7 annually in august its already been hot for quite some time. I can only imagine kelly, theres actually a good bit of Research Back up the immedia comedian Jerry Seinfeld that areas will bounce back people have been fleeing cities during epidemics for just about as holong as theres been citie but they come back mark frong found heavily affected areas recover in price and rent price growth return to their National Growth paths within a few years after an epidem epidemic on average they found housing prices in cities hit by pande c pandemics fall 5. 5 in first year another 4 the year after. Housing and rental prices after a few years rebounded to price that, where else will you see a price chart of housing in in 19th century, if not on cnbc new migrants underpin the rebound as infrastructure upgrades made by cities to enhance the quality of life after the pandemics. Technology and work from home present a new and bigger challenge. These technologies have been around for a while the attraction of cities of social, cultural and economic. The real city killer, violence that could lead to a serious lasting exodus from the metro area to me thats why this time not to focus so much on new york but as a follow up this time could be a little different from previous pandemics because you had citijournal last summer calling it the new disorder. You had people concerned about disorder in the city well before the pandemic and anything thats happened this year don pebbles was on the show on friday and he said he thinks it will take new york a decade or more to recover because they were losing affordability and becoming less business friendly coming into this ill let diane field the affordability issue. You cant say somebody is not going to do something until you tell me the price theyre not going to do it at. Those rates remain below where they were at times when cities have done well the hope is from all the articles i read this is a temporary phenomenon linked to the epidemic it may go away when the shutdowns end. Do we know, just quickly, whether jerry wrote that column from his house in the hamptons probably. If you go back, there are wonderful stories. Grenwich village had a boom time when they fled manhattan they were fleeing a cholera epidemic sg kwhast happeni sg. Kwhast happwhats happening. Area the story over the past 25 or 30 years have been the growth of going out in hay market in virginia and frederick in maryland and beyond. What is the activity in the suburbs right now . What are the prices doing . Is there a lot of pressure upward on prices in d. C. Theres a lot of pressure you have to separate steve is talking about new york city new york had a lot of problems before the pandemic ever struck. That was very, very high prices and also incredible over building of condos, apartment rentals. Sky high prices for thousands and thousands of units its like what happened to miami back in 2006 you look at d. C. , its a very healthy market a lot of Real Estate Agents will tell you yes youre seeing urban flight from new york city and from San Francisco because of high prices there. Because tech workers can now work from anywhere in most nay jmajor cities theres healthy growth in the downtown im in the city proper right now. You have Single Family homes where the inventory is low prices are going high and in the suburbs just a couple of miles north of here and south of here, prices very, very strong because there is so little supply. I think youll have to look at new york city and San Francisco as very separate entities to the rest of the country. Yes theres some urban flight but not nearly what were seeing in those two cities in the rest of the country also as you consider d. C. , it is not as vertical a Living Environment as new york is youve got a lot more neighborhood like the one youre standing in right now where they are Single Family homes. Reporter exactly thats what people want now. Youre seeing a ton of remodelling in neighborhoods like this one. People expanding, putting in backyard, tiny homes to expand spaces you see more construction downtown those condos might suffer a little bit right now but d. C. Always comes back from whatever it gets into you see more violence downtown d. C. Has been very popular because of the protests and the black lives matter action that we saw downtown and writing it on the street down there people are really feeling good about the city now youre seeingpeople moving int the downtown as well as into the suburbs. I think you have to go city to city and look at whats happening. New york city, San Francisco, very different entities. Thank you very much we appreciate the time today and the insight. For more on the future of american city, well talk to tilman in houston. Hell explain what it takes for his businesses to survive and thrive hes coming up shortly tuesdays with tilman. Facebook a record high getting a new price target the traders will tell you if there is still time to buy should you chase the face. More power lunch next. Come on in, were open. All we do is hand you the bag. Simple. Done. We adapt and we change. You know, you just figure it out. Weve just been finding a way to keep on pushing. Welcome back were getting news on teva pharmaceuticals. Stock is down about 4 . Thats coming off news from a bloomberg report teva rebuffed a settlement offer from the doj earlier the charges may be felt as soon as today thats according to people familiar now you see the stock down closer to 5 its been rapidly falling in the last couple of minutes the story has been going on for quite some time. We had the news in july about how the judge was going to put that case forward and we knew teva would be the First Company affected here. We see the charges my come as soon as today. Back to you. Thank you tyler. Over to you. The bulls are getting more bullish on high flying stocks. Analysts getting street high price targets to facebook, apple and chipotle today nvidia with a street high target last week. Lets bring in your trading nation team for a tuesday. Todd gordon of asent the ubs facebook call, quint, do you agree with it or not i like the call i think you can trade further upside in facebook its not an overly high momo stock until today. I think traders can catch some upside i think its on its way to the trillion dollar market cap club. Its already broken higher they beat by 25 we already moved higher. The current target is about 18 away from current levels which as the company is growing, we dont see an issue for that. We do own the stock in our opportunity strategy we were in that range heading last quarters earnings we think facebook and instagram are reflecting the dom naninant players. Facebook is the go to for Small Business advertising dollars theres nowhere else to go plus we think the advertising budgets for facebook will grow you come out the other side of covid. That will be a driver for new initiatives plus the new facebook and instagram shopping app they incorporated shopify into were bullish. We hold it not adding here but any pull back. It would be attractive to us all right todd and quint, thank you very much we appreciate your time today and your thoughts on facebook. For more trading nation head over to our website or follow us on twitter tradingnation. Still ahead, its time for our weekly special tilman tuesdays the chairman and ceo joins us next to talk about the uncertainty facing restaurants this fall. Stay with us stock slices. For as little as 5, now anyone can own companies in the s p 500, even if their shares cost more. At 5 a slice, you could own Ten Companies for 50 instead of paying thousands. All Commission Free online. 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