This industry has been booming, up 36 over the past year. It is up 6. 5 pk in a month. Today we will talk about making money in the market as we go through sectors that may have room to run. The bond side of the story with paul fabio mccully. He has a new look. The hair is clipped. I dont know about the goatee. He has a new note this morning in which he puts together i believe it is emerson canes and the singer, pink. Anybody who does that has my attention. Its his first note since returning to pimco. First, though, to sue at headquarters today because, well, the traffic is still horrible getting into new york city from new jersey after a terrible fatal truck accident on the g. W. Bridge. Absolutely, ty, it was really an awful situation. The markets were going to get to in a second. Phil lebeau, he has breaking news for us. Phil . Reporter this has been speculated about for some time. Teslas ceo announced on the companys website that the company is going to open up patents for other automakers and others in the Auto Industry to use. He says this is part of the company trying to spur innovation and development of electric vehicles across the entire industry. Musk saying in his blog post, we will not initiate any patent lawsuits against any competitors who, in good faith, use their patents to develop further technology for the electric vehicle and for automobiles in the industry. So there wyou have it, tesla opening up its patents for use by other competitors. This has been expected for some time. Sue, tyler, back to you. Thank you. Its a story that will develop throughout the day. I know youll work it. To the stock market now which is moving lower again today. As a matter of fact, were just off session lows. Could mark three Straight Days of losses for the s p which is down half a percent. Dow down 69 points on the trading session. Look at the transports because oil is moving higher based on the iraqi worries. Down 136 points right now. The nasdaq composite is off a half a percent and the russell 2000 is now down. Dominic chu is with me and going to take a look at the best performing chip stocks though its a down day today during this quarter because thats a sector that has really been on the run, right, dom. Thats right. The Second Quarter hasnt been too shabby for the stock market overall but encouraging signs for fundamental investors waiting to do their homework here. Some parts of market doing much better than the broader indices. The semiconductors, chip stocks. As an industry group, theyre up 8 since just the end of march. Thats a pretty hefty run, around double what the broader s p 500 has done during that same time. Among some of the biggest winners so far this quarter are company like applied materials. We havent talked about them a lot. This is the company that makes the stuff that makes computer chips. Now, its up 8 during that time from, you can see, a bit of a dip over the past couple of weeks and months and now weve risen to about an 8 level. Its a sharp bounceback after losing 13 in just april alone. So how about one of the biggest names out there . Of course, intel which is up 9 so far this quarter. But look at this 13 drop here overall and then a nice rise again through the course of january through february and then now the rise. Investors did buy that dip on this name and, of course, heres a stock thats really surged higher and just recently so. Were talking about broadcomm after it was considering Strategic Alternatives including a possible sale of its cellular chip business. Helped shares surge 24 quarter to date. Some of these stocks could be poised to enter the thirtythd d quarter with a decent head of steam. And with intel its a dividend story, a 4 dividend yield on that stock. Thanks very much. This is an auction week. We a have breaking news. I got a peek at the results and seems better than what we saw earlier this week. Reporter this one, if you were making a model of what a great auction would look like, this would be your model. Aplus on a 30year bond auction. Maybe its because its the longest guy out there, highest yield. Much of the globe, whether china, europe, have a lot of questions. This was a buy. Yield, 3. 444. 4s are wild. Lower yield, higher price. Look at the demand side. 2. 69. Best since february of 13. Its a reopening. Indirects, 51. 8. Its the best since feb of 06. Directs, 21. 8. The best since october of 13. Dealers took a mere 26. 5 of the auction. No matter how you sliced it, it was good auction and it most likely will spark a rally as some sometimes a good auction at the end of the supply chain usually does. Were about ready to trade 2626 on a ten year which moved two basis points lower in yield since the results. I know youre a tough grader. You dont give out many apluses. I definitely dont. Lets put it this way. I havent given a politician an aplus in about a century. Thats true. But rick gushing over todays auction there. This is day one of trading for shares of mobile iron. The stock is up big. The Company Makes software that protects cell phones. Live at the nasdaq with more on the stock. And the nasdaq at large. Sima . Good afternoon, tyler. Thats right. The tech ipo market is definitely heating up. In fact, just speaking to renaissance capital, they were pointing out all atech ipos in may are trading well above their price. Mobile iron focuses on creating software that enables employees to access work email and data on their own device. I caught up with the ceo, bosh tinker who says this is a fastgrowing market as more employees go mobile. Blackberry today announcing it signed a mobile payments deal with end stream to provide a secure platform for transactions between banks and their customers. An interesting deal there. The overall nasdaq, though, down about 15 points. Thats due to the disappointing retail sales number, seems to be weigh on investor sentme eo eor. The nasdaq 500 is up about 1. 5 due in part to big movers in the large cap tech space. Hp, for example, Goldman Sachs writing that hp management have executed its strategy much better than anticipated. Youre seeing hp, other names like broadcom, and qualcomm, xilinx moving to the up side. Sema mentioned the pressure in the nasdaq. The dow has been falling throughout the day. Right now it traded 7 5 points in the red. Lets get down on the floor of the New York Stock Exchange with bob pisani. It seemed who worsen as the president talked about iraq and it came back again. Traders down here saw the president , said, look, he has very few options other to encourage the iraqis to have a political solution. Theres not a lot of big effects on the major indices but ripple effects on different sectors. Energy is up today. Thats a pretty obvious pick here. No matter what youre looking at here, exploration, production companies, Oil Service Companies like noble, the major oil Companies Like marathon oil, everything is up in the energy space today. Thats a no brainer here. No brainer that the transports are getting hurt. Not just the airlines like united and delta, but the truckers are also getting hurt. Ryder, swift transport, some of the Logistics Companies involved are also on the down side. Transports is another weak sector. Think of what the opposite would be. Think of another play, alternative energy plays. Solar stocks are doing much better. Particularly chinese solar stocks today. Renesola, yingli on the upside. What else would be hurt by Higher Energy costs . Big Commodity Companies that use a lot of energy. Theyre on the downside. Vale is on the downside. Well have more in the next half hour. Guys, back to you. Look forward to it very much, bob. Thank you. Bertha coombs for a market flash. Were watching current Green Mountain near session highs and actually close to its highs of the year. Continues to power forward. Seeing some reports from traders saying that theres an awful lot of interest in call options. That is options that the stock is going to go higher. The 120 call expires tomorrow. The next activity seems to be at 135 for next month. The stock right now up better than 4. 4 . Back to you. All right, thank you very much, bertha. We have a real flashpoint popping up again in iraq. It is impacting the markets especially oil. Lets take a look at oil right now. If we could call it up, this week it is up. 3 , by the way. Wti trading above 106, hitting levels not seen since september 18th of last year. The big reason is this. A group linked with al qaeda is on a massive offensive. Weve been track it for you all week long. Knew now it appears the Islamic State in iraq is 70 miles, just 70 miles from baghdad. The Iraqi Government is asking the United States to help stave off the attack. President obama clearly starting in the last hour isnt speaking in the last hour isnt ruling anything out. Nbc news is broadcasting these pictures. Those are iraq army uniforms. Soldiers for the iraqi uniforms, theyre abandoned their post basically, taking off their clothing to hide amongst civilians as the al qaeda insurgency advances. Now, yesterday, they torched a major oil refinery in iraqs main road leading from baghdad to the north. Not far from saddam husseins hometown. Maybe you remember the name, tikrit. Today iraqis in the central part of the country are fleeing their towns trying to get ahead of this onslaught. So things deteriorating there. Morgan brennan is now looking at the u. S. Energy companies that have been trying to build and invest in iraq. Those plans, morgan, may need to change knnow. Most of the oil is produced out of the south of the country. This is certainly a risk. Most of the oil is produced out of the south of the country. Lets take a look the some of the names. Iraq has the fifth largest Proven Crude Oil reserves in the world. Many Energy Companies in the region. Lets start with the integrated oil giants. Blake fernandez says of these companies, exxonmobil has the most exposure, about 3 . Others include hess, marathon oil, occidental petroleum, murphy oil. Looking at these stocks, theyre all up today. Heres why. Iraq still only accounts for a small percentage of their overall production globally and not a lot of capital exposure because its tied to existing oil fields that dont require significant investment. Now, the area that could be most troublesome is kurdistan, where companies have been investing in exploration, but morningstar analyst, alan goode, says Higher Oil Prices from disrupted production would actually still be overall a good thing for these oil giants. Now, could be a different story for the Oil Fields Services companies. Halliburton, schlumberger, weatherford, could eat into the Companies Bottom lines. It happened before. Baker hughes reduced its Fourth Quarter profit by 80 million after operations were suspended at a facility last year, but for now those stocks are also benefiting from the Higher Oil Prices and moving up today, too, tyler. Cuts both ways potentially. Morgan, thank you very much. As oil rises you know what happens to Airline Stocks. They fall. Lets take a look at a board of Airline Stocks as a group. You see american, delta, united, jetblue, and alaska air all with significant declines. Delta, more than 6 as is americanairlines and united. The other two with somewhat lesser declines. Sue . Ty inflation has been vanquished and rates will be low. Thats the report to pimco investors since his return to that firm. First on with the power lunch were pleased to welcome back Paul Mcculley live from beautiful newport beach, california. Good to see you, paul. Good to see you, sue. Lets start with this note. You spent a lot of time talking about well anchored inflation expectations. Tell me about it. I think the grand war against inflation that volcker started in 1979 was won at the turn of the century and for the last 15 years, inflation has been incredibly absent. Weve had our cyclical ups and downs but when you look at it on a chart, i think we achieved the promised land, price stability over many cycles and right now were a little bit below where wed like to be, but this whole notion that the fed has to always be fighting an inflation war is what im attacking because we won that war. Does that mean that rates will stay low longer than, perhaps, the market expects . Or a lot of Investment Advisers expect . I mean, the whole theme going into this year was race rates going to rise. That hasnt played out. I think rates are going to be lower than what historically is the case, but i think equally important issue is that the feds cyclical, how they engage to try to cyclicly fine tune the economy will be changed because the old doctrine of opportunistic disinflation which had its companion strategy, preemptive tightening, is dead. There is no reason for the fed to be engaged in preemptive tightening. I think the fed will tighten next year but its not trying to preempt an increase in inflation. In fact, the feds told you they wont hike until after inflation has moved up closer to target. That is a profound paradigm change. And what does that mean, then, in terms of when they do decide to tighten up . How dramatic do you think it will be . Twhactually thats another p of the argument, too. Its a quite complicated piece i guess in retrospect. It was. I read it and it was complicated. See, youve been gone too long. Had too much time to think, paul. Actually my new job here is to think, write, and speak. So, therefore, i guess i will do a lot of thinking. But not only is the doctrine of preemptive tightening dead, its that i think weve had a structural reduction in what we call the neutral real fed funds rate. And prior to the moment in 2008, we viscerally thought as a marketplace, because its impe d embedded in a taylor rule, that a real fund rate would be 2 real and 2 inflation for 4 . I think in this new world that were living in, we will still ultimately get the 2 inflation because i think the fed will achieve its target. So you can put that into your shortterm Interest Rate, but i think youll put in something close to zero for the real rate. So the new reality, having won the war against inflation, escaping the liquidity trap, is no preemption on tightening and a stopping point in the neighborhood of 2 nominal. What does that mean, then, for the equity market . Because the big debate down on the floor when i go down there every day is are we overvalued or are we fairly valued . I think it means that the stock market is fairly valued. Theres a range around fair value, of course, and you move around it cyclicly. I think a structural reduction from 4 to 2 and the neutral fed funds rate has a profound impact on bonds and, therefore, on stocks. Because bonds are the discounting mechanism for stocks. For stocks. Right. So i actually dont have a problem with either bond valuation or stock valuation. Now, if i still believed in a 4 neutral fed funds rate, then sell everything that you can get your hands on, but if you believe in, too, the markets are in a fair zone of valuation. All right. Stay with us, paul. Were going to take a quick break, but i want to ask you about the story that the bond markets been telling us, specialical ical specifically the ten year, based on what the stock market has been telling us. Amazon taking a hit. Retail giant launching its streaming Music Service today. Will it really sing with consumers . The one big thing you need to know about that. Plus, twitter shares flying. The guy the company was hoping would drive growth is out the door. Who was he . Now what . Julia boorstin is in l. A. For us. Julia . Absolutely right. Twitters chief operating officer is leaving and company isnt replacing him. Ill tell you why this is good news for investors coming up after the break. Friday night, buddy. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. Welcome back to power lunch. Take a look at the Dow Jones Industrial average heading to session lows as the fighting in iraq escalates sending Oil Prices Higher today coming off wednesdays 102point decline. It would be the blue chips worst twoday stretch in a month. The dow currently at 16,767, off 76 points. Leading the way lower, caterpillar, home depot, walt disney, cisco, verizon, all off better than 1 . Back to you, sue. Thank you very much. Were back with pimcos chief economist Paul Mcculley. I posed the question in essence, if stocks are fairly skr lly va where does that put bonds . Can they move in tandem . I start with the bond market and go to the stock market. I dont think the bond market can go a lot higher from here in price because i think that its priced almost to where the feds terminal fed funds rate will be which is 2 , so i think the bond market is fair, and therefore, it makes valuation on the stock market fair, but the issue of whether or not the stock market can go up is a function of underlying growth in the economy and earnings, and so the extent that youre a believer that the economy is escaping from the liquidity trap, theres upside, i think, for stock on the back of earnings. But from a pure evaluation perspective, theres not going to be a lot more support on the upside coming from the bond market for the stock market. All right, paul, great to see you again. Welcome back. Great to see you. Talk to you soon. Thank you, appreciate it. Sue, with us from washington, general barry mccaffrey. President obama, general, welcome, saying today regarding iraq that all options are on the table. Iraq wants help. If the u. S. Gives them help. General, welcome. What would it be . What could we do . Very little. You know, at the