Transcripts For CNBC Closing Bell 20140718 : vimarsana.com

CNBC Closing Bell July 18, 2014

Just why was that malaysia air flight flying over such a dangerous area and what has been the policy of all airlines that fly internationally with so many hotspots across the globe . We have phil lebeau standing by. Hes been looking into that. And for anyone who travels, you may be surprised about where airlines have been willing to go, at least until yesterdays tragedy. Then back in corporate america, two developing stories. Time warner trading above rupert Murdo Murdochs 85 offer, which was rejected. So, what does that say about what wall street thinks is going to happen next . Somebody thinks were going to get a deal. Yep, for sure. But at a higher price. Also, fedex higher today, despite being indicted by the u. S. Government, accused of being a drug mule for illegal pharmacies, saying fedex is knowingly shipping drugs to dealers and addicts. Well look at the governments case. All right, lets get you caught up on the markets. Weve essentially, as michelle was highlighting, done a round turn from yesterdays lows. The dow up 112 points. We were down 160 yesterday, so were most of the way back from that. The nasdaq has recouped yesterdays losses. We were down 62 points yesterday, up 62 points right now. The s p at this hour is trading up 18plus points, gaining back most of what we lost yesterday. Were now at 1,976. Still, the key geopolitical story today was so much uncertainty, the situation with the Malaysian Air passenger plane. Well start with developments there. President obama saying at least one american was on board. We have john harwood there at the white house with the very latest details on all that. John . Bill, weve been wondering since this plane went down whether there were americans on board. Yesterday there was speculation there might be 23. We got the tentative news today from the president that it appears to have been only one, quinn lucas shonsman, a 20something Business School student born in the United States, where his father worked, now in Business School, had been in Business School in the netherlands. And the president used his death and the death of the 297 other people on board along with his u. N. Ambassador, Samantha Power at the u. N. To try to increase pressure on russia to back off in ukraine. We have been very clear from the outset that we want russia to take the path that would result in peace in ukraine, but so far, at least, russia has failed to take that path. Instead, it has continued to violate ukrainian sovereignty and to support violent separatists. It has also failed to use its influence to press the separatists to abide by a ceasefire. Thats why together with our allies weve imposed growing costs on russia. This war can be ended. Russia can end this war. Russia must end this war. Reporter now, the president was given an opportunity at the News Conference today to assign blame directly to Vladimir Putin. He did not do that, said that weve got to wait to get the facts and cant get ahead of those facts. But you can see that once the investigation happens and as a case is built, that it was russian equipment, russian training that led to this shootdown by separatists, which is what the u. S. Government believes, then i think youre going to see the next step in a move to tighten sanctions, make russia pay a higher price, and well see whether its successful in getting them to back off. All right. John harwood there at the white house. Thank you, john. And we go from one geopolitical crisis to another, israel. As we know yesterday, they stepped up their military invasion of gaza. Nbcs Martin Fletcher is in tel aviv. Hes got the latest. Mart martin. Reporter hi, michelle. Hi, bill. Well, israels invasion now is in full force, almost exactly 24 hours after they went in last night. Theyre mainly looking for tunnels along the north, central and southern borders, the Israeli Government said. Those tunnels which lead from gaza into israel which are used to smuggle gunmen inside israel to attack civilians and soldiers here. Well, the israelis say they have found about 21 exits of tunnels. That doesnt mean 21 tunnels. Some of them have multiple exits, but thats an achievement so far, but the israelis say it will take 10 to 14 days to find and destroy all of those tunnels. At the same time, theyre moving very slowly into the urban centers in the north of the gaza strip. You remember, the leaflets, the israelis dropped about 100,000 leaflets on three areas of northern gaza, warning the residents to leave for their own safety. Well, those are the areas where the troops are moving slowly, going house to house, searching schools, mosques, any major any building they come across to find tunnel entrances, rocket launchers, anything to stop the palestinians from firing more rockets into israel. This morning, Prime Minister netanyahu said that israel may extend the operation in order to bring what he called sustained quiet to israeli citizens. Now, thats a pretty general term, sustained quiet. It could be jargon for a longterm, deeper invasion into gaza, or it could just mean ending the immediate rocket threat. Either way, hamas is continuing to fire rockets into israel, despite this massive pressure on them from ground, sea and air. Hamas fired about 80 rockets into israel since the Ground Invasion began. No significant damage in israel and no injuries, although one israeli soldier has been killed since the Ground Invasion began, and about two dozen palestinians killed, too. And the fear, of course, is that the longer the Ground Invasion continues in gaza, the greater the loss of civilian life in gaza. Bill, michelle . All right, nbcs Martin Fletcher. As always, thank you, martin. Great reporting there from tel aviv. Now, yesterday, this all, of course, with these two stories we were following simultaneously, resulted in a rather marked selloff in the markets, but not today. So, lets talk about this comeback for the markets in our closing bell exchange. Steve east from height analytics is with us, kevin caron from stifel, Patty Edwards from u. S. Bank, jeff cox from our own cnbc. Com gang, and rick santelli. I started with you yesterday, rick. Let me start with you today. Yesterday the big selloff, the riskon trades for gold, for oil, for the bonds and so forth, the dollar in some cases. What about today . Has this been a complete reversal or what are you seeing . Well, it hasnt been a complete reversal, but then again, we cant know that for sure. If you look at a tenyear and you see today it did trade up and yield around 2. 5 , that is basically the margin that has been the effects of much of the geopolitical. From the 2. 50 mark into the kind of 2. 45 area, were actually down only three basis poins on the week after settling last week at 2. 52. I think the best way to express this, bill, is theres a lot of things that influence and affect treasury prices and rates. We know most of the major ones. And geopolitics fits in, but it doesnt determine where they are ultimately valued. I think its all of the above, and i think one of the biggest all of the above right now is the next chart. This is tenyear bund yields. They touched 1. 13 today, sold a little off of that. Theyve never traded down this far. And italy, bank of italy cut growth expectations for gdp to 0. 2 . So, to summarize, would we have been here anyway . Maybe not to the basis point, but truly, anybody who wants to be objective on the effects of anything like weather or horrible tragedies or geopolitics in general, this market really was determined in terms of its trading path in the first six weeks of 2014. Yeah, thank you very much, rick. Its so interesting to see stocks move sharply higher today. And yet, that tenyear yields still below 2. 5 . I thought we would have gotten more out of that. Steve, let me ask you, every geopolitical event that we have seen iraq, ukraine, again over and over again, those have all turned out to be buying opportunities. Do you think thats what this is going to be . Were just going to have a oneday selloff here . Yeah, i think so, because as you said, weve seen it over and over again. The geopolitical news comes out. Its riskoff, equities sell off. The markets get a little time overnight to digest, is this really going to move the needle for Global Economic growth or for corporate Earnings Growth . And generally, the answer to that question is no. And so, the next day its risk on and markets recover. And ill point out, we are moving to highs of the day right now. The dows now up 123 points. What about you, Patty Edwards . Does this yet present another buying opportunity or should we be more mindful of some of the risk factors that these geopolitical events are presenting right now . Well, certainly, you have to take into consideration the risks, but that being said, we are still calling for this market to go higher. And so, from that perspective, its a buying opportunity. Ultimately, markets are driven by earnings, and the prices of stocks are going up because the earnings are going up. We expect to see that continue. Were only trading at 17 times our 116 estimate and we expect 2,030 by the end of the year on the s p. Is there nothing that can interrupt those levels . Oh, theres probably a lot of things that could interrupt that, but to interrupt is not to end. Its just to interrupt. And so, we still stand by the what about the Federal Reserve . Could that be the interrupter . It will ultimately be, michelle. Let me throw three quick numbers at you. Stock allocations in part folios at a nineyear high, cash locations at a nineyear low. Outflows from yield funds at a high. So, what does that tell you . It tells you that theres a lot of fear in the market, but the biggest fear in the market continues to be out of the market and to not be a part of this rally until the fed finally exits and until those waves are caused by the fed. I think if you want to look at what the big investing trends are going to be, its just going to be going back to basically stick to your knitting. The two ds, diversification and defensiveness as investors want to stay invested in the market, but theyre getting out of the highrisk stuff. One other thing to throw in, we know that small cap stocks have been getting slaughtered as well. People are just wanting to move up the quality ladder. Although the russell has come back today and is the best performer among major averages right now, interestingly enough. Kevin, where do you stand . Is this a buying opportunity or an opportunity to take some money off of the table . Well, there wasnt much of a buying opportunity, because whatever pullback you had yesterday is gone. In fact, thats indicative of what weve seen in the market the last several months, quarters. Just a market that has been pushing higher and higher. A lot of its been fueled by liquidity, a bounceback in earnings from the trough in 2009. But at this point in time, you look at multiples, and even on forward numbers it looks like the markets probably 10 or so overvalued. So, i think you can still have a pullback just on fundamentals. Ultimately, it is going to be growth in the economy, though. The good news is that most of the data were seeing now in the Second Quarter is suggesting that were going to continue to grow from here. I think the market closes higher than where we are at the end of the year, but i wouldnt be at all surprised to see a pullback. Spreads are tight. Where do you go for return . Im sure you guys saw the journal story today. Their survey of economists do not believe were going to see the growth that we originally expected this year. So, i think that, you know, thats part of the markets worries. And also, you know, how does the fed fit into all that . Does the fed tighten too soon . Does the fed tighten too late . So, just all of these cross currents are going to make people, you know, more and more defensive. Unless bad news is good news. And then the fed becomes easier because of the weak economy. Right. I dont know how far you can go in that trade, but you know, weve certainly been there before. Been years, it feels like. Steve, you said at the beginning that once we look through the geopolitical issues, the market asks, okay, does it move the needle economically for the Global Economy or for earnings . If thats the case, what do you think about the Global Economy at this point . Rick santelli highlighted that theyre ratcheting down numbers in europe again today, and those bank stocks over there have been selling off. Is that a little whiff of trouble, perhaps . Well, i dont think that the problems in europe have really been solved. The european debt crisis has gone from the front burner to the back burner. But here domestically, the one thing that i think is very encouraging is the bank lending data. For three years through january of this year, banks were loaning or increasing the loan book at a 2. 8 annualized rate. The last five months, its been an 8. 1 annualized rate. Bank lending is really picking up. Its bank lending that creates money. The fed with qe creates bank reserves, but real money is created by bank lending. And as money in the economy goes up, nominal gdp should go up and support earnings. Actually get some velocity. Thats it. Youve got to get the money moving. Right. Get that velocity going as well. Right. Thank you all. Appreciate it very much. Thanks for your insights and have a great weekend. All right, 46 minutes to the closing bell. The Dow Jones Industrial average is higher by 124 points. The nasdaq is higher by 67. And the s ps higher by 20. If you werent around yesterday, you were there wednesday and you come back today, its like nothing happened, right . Move along. Nothing to see here. Everythings the same. Be that as it may, jim cramer has a warning for investors, despite todays move to the up side. Listen. Dont be overanxious up here. I think that a better moment to buy stocks awaits. Patience is warranted. All right. Is cramer right . Were going to talk about that, coming up in just a few minutes here. And one of the big geopolitical risks that were talking about, the growing tension between russia and the west after a Malaysian Airplane was shot down over ukraine. Coming up next, former National Transportation safety board chair Deborah Hersman tells us how investigators will piece together who orchestrated this tragedy as we send members of the ntsb over to ukraine. And well see if it points back to Vladimir Putin. Then, in corporate news, time warner shares now trading higher than the rejected offer from Rupert Murdoch earlier this week, but would shares plummet if murdoch withdrew the deal completely, or do investors now believe that time warner has actually been undervalued all this time or its been put into play . Is somebody else going to step up . So much to talk about. Michelle and i look forward to doing that coming up on the closing bell. Stay tuned. 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Gone are the days when they always beat by a penny. Today its the worst performer in the dow after secondquarter earnings came in right in line with expectations. The company says it expects its credit card unit to raise 3. 25 billion in an initial Public Offering later this year. Different story for gilead sciences, moving higher after the price target was raised to 141 a share. Gilead, which will be reporting next wednesday, up 5. 4 on that news. And two Companies Making successful debuts today. Pet insurer truepanion rising as much as 15 after pricing below the estimate for what it was going to be for its offering. Investors betting on the growing demand among pet owners to insure their cats and dogs. Then, there is Terraform Power up 35 after having priced near the top of the range. The company is a spinoff of solar sun edison. And were going to end with the airlines, which are rebounding from yesterdays losses on news of the downing of Malaysia Flight 17 over Eastern Ukraine. United there up nearly 2 on the day. Bill . All right, bertha, thank you very much. As the inves

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