Transcripts For CNBC Closing Bell 20140902 : vimarsana.com

CNBC Closing Bell September 2, 2014

Time. You are back to school today. I am. Call it backtoschool time. Summers over, but does that mean the rally is as well . A tepid start to stocks kicking off the month of september. The s ps lower by two. The Major Industrial average down 40 and the nasdaq higher by 10 points. It didnt seem so long ago that the cruise industry was on the ropes with one mishap after another. Remember all those pr problems they had a couple years ago . Yeah, the smelly problem, the, mmhmm. Today it gets a big vote of confidence with news that norwegian cruise lines is buying oceana and regent seven seas, combined into a group called prestige. Its a 3 billionplus deal. And we will speak exclusively with norwegians ceo, Kevin Sheehan, in a first on cnbc interview coming up here later on the program. 400 for an apple watch . Recode is reporting that might be a highend price point for the longanticipated wearable that apple is expected to unveil a week from today at a major product event. What kind of features would that watch have to have to make it worth 400 . Do you wear a watch . You dont wear a watch. Normally, i do. You do. I just happen to have a bracelet on today. I do wear a watch. Millennials especially. I dont think they wear watches anymore, right . I wear a glow in the dark watch when i travel overseas. Millennials dont wear watches, my point. The people i think would be their target audience im skeptical is what im saying. Thats true, because youve got it on your phone. Right, exactly. You want to know what time it is, look at your blackberry. Maybe its going to be something thats both, and hence, its not the watch, its a computer on your arm. We will see. This is for all my friends out there. Were off the lows of the day. There you are. I said it. The dows down 43. We had been down 88 points at the low end of the day. Were at 17,055. The nasdaq, as we said earlier, it up ten points right now, gaining to a 4,590. And the s p still right at 2,000, down about three points right now. I dont like being reminded im not a millennial, bill. I know. Im sorry. Lets go over to dominic chu who i believe also is not a millennial. I think im on the cusp, bill and michelle, so i dont think im a millennial. Stop bragging. Yeah, yeah, anyway. So, were watching shares of pg e. Now, the reason why is the stock is spiking on news that two state regulatory judges ruled that californias largest utility should pay a 1. 4 billion penalty for a deadly 2010 natural gas pipeline explosion in san bruno, california. You can see their shares are up on this. Maybe shareholders expecting maybe a little bit of certainty with a price tag being brought to the number. Still, though, bill and michelle, this 1. 4 billion levy is the largest in california state regulatory history for the Public Utilities commission. And again, theyre saying that these penalties, the 1. 4 billion, must be paid by pg e shareholders and are not, again, not recoverable from pg e customers. And i know, bill, you grew up in california, i did. We know pg e well. This is one bit of news, at least for now, shareholders have a price tag on what theyll be owed in terms of the overall fine. Back over to you. And gee, if money is spongeable, how do you guarantee it doesnt eventually get passed on . Thats up to the chief Financial Officer to figure out, right . Uh huh. Dom, thank you very much. Lets get to the days market action. Hank smith from haverford investments, joe duran from United Capital Financial Advisers and our own Rick Santelli. By the way, we should mention as well one market we hadnt gotten to, which we will be mentioning throughout the next couple hours, the price of oil down sharply today, gang, about a 3 decline there. Rick santelli, im going to start with you, then. How much of that do you think is the rising dollar . I mean, is there a fundamental thing going on or what do you thinks going on here . Well, you know, rising dollar is obviously going to have a valuation effect. A dollardenominated commodities, but i think when it comes to the Energy Complex, i think theres many traders that, even though geopolitics never really had a big correlation with regard to some of those Energy Prices over the last several months, whether mideast or ukraine geopolitical stories, i still think we amassed a lot of speculators, and lets, of course, mention that at least driving season may be over, although the price of my gas is going up. I dont believe thats what it is. But i do think we still have something to look forward to, the cold war. I think whats going on with the ukraine area will, of course, hit some type of peek, my opinion, when the weather gets cold, because you know, if you have a trump card in a game of cards, you tend to use it when youre dealt it. We all know that putin does have that trump card in the form of natural gas. I also think, bill, that the one area nobody wants to talk about is underestimating the global horsepower with regard to energy use, and i think that may factor in as well. I agree. In fact, lets talk about that right now. Standing by to tell us more about what happened with Light Sweet Crude Oil today settling sharply lower, jackie deangelis. Bring us the numbers. Hey, michelle. Lets look at the numbers. The dollar index at a 13month high took crude down 3. 08 today, closing at 92. 88. Brent closing down nearing 100 a barrel. Rick santelli hit on the key points of what were looking at, what traders are watching. They are saying the demand picture looks bleak, specifically worried about china. Theyre also saying that geopolitics right now appear manageable, and that is why these prices continue to go lower. What we saw, this steepening of the decline in the end of the day, that really was technical pressure as we broke through some key levels. I do want to talk about the metals as well, because the dollar impacting the gold trade, down more than 20 at the close, closing at 12. 65 even. This is the lowest that weve seen gold since midjuly. And traders are saying, while geopolitics are still on the table, its not enough for them to ignore the fact that theres not a lot of physical demand out there, the equity market is strong right now and youre seeing money flow into equities, and also that inflation isnt really a huge worry right now. So, of course, that dollar having an impact as well, but a lot of reasons that people want to stay out of the gold trade. Back to you. Yeah, in fact, deflation is the big worry over in europe. Right. Thank you, jackie. Lindsey, youre the economist on the panel. When you see a decline in the price of oil like that, do you think, wow, thats great for the economy, or do you think, wow, is that signaling theres something wrong with the economy . As we know, the fastest way to derail the u. S. Consumer is sustained heightened Energy Prices. On the flip side, as we continue to see price reprieve, that should add a very welcome support to Consumer Spending. As you know, weve seen retail sales peak back in march, but since then continuously decline, setting a very negative trend as we head further into the third quarter. So, certainly, at this point, the shortterm decline in Energy Prices is going to offer a lot of support, not only to the Consumer Sector but growth overall. You know, hank smith, once upon a time, there was an inverse relationship between oil and equities. As oil went lower, equities went higher because their costs were going down, but lately, theres been a correlation because a lot of Energy Stocks play a big role in this market right now. So, as you see oil prices go lower, are you encouraged or discouraged for the equity market . Well, i agree with the previous guest, very encouraged from a Consumer Spending standpoint. Its more money in the consumers pocket. And look, what we have right now is a goldilocks scenario, not too hot, not too cold. Theres not enough growth to have the fed really get any more aggressive than they are right now, and theres not enough growth to create any excesses. And at the same time, the risk of a recession is extremely low. This is a Good Environment for equities, and we think its going to continue that way into next year. Warm oatmeal. We like that, i guess. Is that the new version of the goldilocks . Warm oatmeal. Hugh, do you agree there . Whats your sense of whats happening with the markets here, especially in light of oil and whether or not the fed here in the u. S. , compared to the ecb, is going to be relatively tighter . Well, i think youre seeing a separation of the u. S. Economy from the rest of the economies in the world and the fact that youre seeing Dollar Strength is a part of that flight to where the action is, and thats the u. S. Economy. The fact that the Energy Complex is showing declining prices is a great tax cut for the consumer, and weve seen in the last consumption data that energy costs and food costs are beginning to come down, which frees up discretionary cash flow for the consumer. So, were very optimistic that with the improving fundamentals in the u. S. Economy, those major secular trends could stay in place for quite a while. We havent mentioned, joe duran, the seasonal trend. We had a pretty strong summer for the markets. August was very good, but september traditionally is not so good for the market. In fact, its the worst month for the stock market. What do you think happens this month here . Well, its the worst month, except there are two things that are different. It actually does quite well when you have a positive trend going into september. So, after youll see noise in august, increased volatility and then a decline in september. We didnt get that this year. And so, as usual, when you have a strong august, that it actually flows into i think around a 1 increase in september. Secondly, were starting if you take a septembertoseptember in the third year of a president ial cycle, thats seasonally a really good time to invest. So, i would not be surprised if we dont get a little bit of volatility, but the market does surprisingly well from here to year end when you look at those two things together. All right. What does that all mean for the bond market, do you think, Rick Santelli . You know, i think that the bond market, its funny today. As we hover near a 2. 42 yield, wen we could have the highest yield close in two weeks. Two weeks ago wednesday, actually. I think anything above a 2. 45 and three basis points, ending above 2. 48 could give us a reversal and i havent seen a formation for a reversal in a while. I know no one wants to hear this i dont want to hear this but i think with elections, what, nine weeks away . I do think the notion of both houses being conservative could have huge implications for the markets, and i think theres been an awful lot of silence regarding that potential outcome and its impact on the notion of less spending, less government. Yeah. Lindsey what about the fact that were getting the big employment number on friday . How much of the flat market that were seeing today is hesitation ahead of that number . Right. You know, nonfarm payroll is obviously the most exciting day of the month for everyone, but its been less exciting as of late. The topline number, remember, has been very impressive, above 200,000 for the past six months, but that hasnt translated into improving fundamentals in the labor market, certainly not enough to translate into wage pressure. So, i think the market is getting a little disassociated with the Employment Data simply because the topline number is not giving us a true sense of whats happening out in the labor market. All right, folks, good to see you all. Thank you for your thoughts, as we begin the month of september on wall street. See you later. All right, we have about 47 minutes before the closing bell. The Dow Jones Industrial average is lower by 45 points, the s ps lower by 3, but the nasdaq is in positive territory by more than 9 points. Technology doing well. Facebook, as a matter of fact, surging more than 40 this year alone. It could hit 92 over the next year, according to one wall street pro. Its in the 76 range right now. The bullish case for facebook is coming up with that analyst. Also ahead, find out if wall street bear turned bull David Rosenberg is starting to have doubts about this market. Plus, wait until you hear what he thinks could drive a correction. And remember this . A little History Lesson here. Russian premier at the time with an emotional outburst at the United Nations back in 1960 after being called out for depriving eastern europeans of civil rights. Khrushchevs granddaughter, nina khrushcheva, naw School University professor, will be with us today weighing in on Vladimir Putin and whether or not hes inciting a new cold war. And remember, khrushchev is the one who handed crimea back to ukraine exactly, and shell have some thoughts on that coming up here on closing bell. Stay tuned. From 2000 to 2011, on average 17 manufacturers a day shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. Markets mixed today. The industrial average, the s p, slight declines so far today, while the nasdaq is holding on to a gain of about 10 points. We have about 45 minutes left in the trading session. Dominic chu is covering the big movers today. Whats going on today . Michelle, bill, well start off with tesla, hitting a record high, as steeple nicholas analysts upgrade it to a buy and slap a 400pershare price target, saying the company is well positioned for growth. So, those shares you can see up about 5 on the day. Regeneron and novartis hit highs on their respective drugs for heart failure, up 3 to 4 for those companies. But a different story for exelexis, which lost half its value after the Prostate Cancer failed. The company is also slashing its work force 70 . Also a tough day for cons, reporting weakerthanexpected secondquarter results and cut its fullyear earnings outlook as more customers fail to make payments for its Consumer Credit card unit. And were going to end with facebook shares, getting a boost from rbc capital, which repeated an outperform rating and put a 92 price target on the stock, citing robust user growth. Facebook shares at session highs, up by nearly 2 . So, michelle, bill, a decent day for facebooks stock. Back over to you. Oh, yeah, certainly. Were going to talk about it more. For more, lets bring in mark mahany, lead internet analyst at rbc capital and put out a note putting facebook at the top of his list with a 92 price target. Its only 76 today. Wow. Welcome back, mark. Hey, bill. Whats the rationale, mark . Its been our top pick since earlier in the year. People talked about a couple new Revenue Opportunities at the company. We call them green fields, things like instagram, monetization, video ads. What we try to do is quantify those, including the whatsapp acquisition. Theres almost 3 billion in incremental revenue, over 30 cents in incremental earnings they can make in 2013. Were above the street in terms of estimates, earnings, revenue. We think they adds more fuel to the fire and core growth in the business is still very much intact. Im going to sound like im picking on you, but im not. At the ipo, it was such a debacle. Nobody liked it. They werent into mobile. You know, zuckerberg was looking well, he got married, wasnt keeping his eye on the ball. Now he was buying things without telling everybody, spending lots of money. Now everybody likes facebook. Has it changed that much or have perceptions changed . I guess both is the honest answer to your question. Look, this company had a disastrous ipo, made a lot of mistakes and they missed the mobile transition. It took them about a year and a half to catch up to it, and thats frankly when we upgraded the stock back then at around 20 bucks. Once they figured out mobile, which is the single biggest trend in internet today, then it started to work fundamentally and the stock started to work. Lets talk about earnings. Price to ratio 47, trailing 83, 20 times sales . I mean, those are mostly impressive. You know, ive seen the references to price to sales. Look, this is a company with mature margins. Theres no reason to look at sales on this. And if you look at earnings, this trades at 30 to 35 times earnings. Thats certainly not cheap. But given the growth here, we think its sustainable 40 earnings grower. We think the market, as it did with google back in its heyday, but you have to go back to 06 and 2007, we think the market will pay 30 to 40 times earnings. Apply those multiples to it and the riskreward looks attractive. Whats the growth driver down the road . I mean, lets just say you get your 92 price target. Im sure then you think again, does it deserve a higher price target or something . But what is it that grows this Company Going forward from here . Well, i just want to step back a little bit. Theres an assumption in the question and theres an assumption in the market that what we see today in facebook is what were going to see in the future. There are still very large advertising categories. Online travel is one, financial services, automotive, film and entertainment. There are very large advertising overtimecals tha

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