The question is sort of the Yellen Dudley more dovish wing of the fomc as to whether or not theyre adamantly opposed here, but the other guys, i think it was about letting the markets settle down and waiting to see if there was anything more serious that the markets were telling us from the recent volatility. But if things have passed and they seem to be quite a bit calmer than they were previously, then i think that group of people we were just talking about are quite comfortable hiking rates. Steve, thanks so much. The markets were already moving lower throughout the last 45 minutes or so because of whats been going on in health care. Theyre going to react to this more in the minutes ahead. Steve weiss, it brings up the question again, if the fed acts in the next month, stocks are going to blow that off . Look, i dont know market can go up if the fed hikes rates . I believe that if we get Everything Else sort of more comfortable, the markets trade up. I just dont think the fed is the principal issue and i do think theyve now nobody was prepared for a hike before, very few were in terms of fed funds rates and so forth, treasury rates, futures. Now i think the market is prepared and they will go in year. Lets not forget that 13 of 17 fed members thought rates were going to go up this year. You listed the number of individuals that have already said they favor. Youre going to hear more about that because, again, the vast majority of these guys still think rates are going up this year. To some degree this shouldnt be news. You got fed chair yellen speaking later this week. Put it all into context where the market is today and where it could move and not only in the hours ahead but certainly in the days and weeks, and power lunch picks up that stoush right now. Scott, thank you very much. Welcome, everybody, to power lunch. Along with mandy drury, im tyler mathisen. Watching the markets turn a little sour at this hour. The nasdaq and the s p 500 both in the red. The dow clinging to about a 20point gain. You know, those fed voting members all saying, so many of them saying by the year end, they expect a rate hike, and that would mean either october, mandy, or december. We also begin this hour with the biotechs because theyre getting slammed following comments by president ial candidate Hillary Clinton. The ibb nasdaq buyer tape index right now down by over 5 . In a tweet responding to a New York Times article highlighting the soaring cost of Specialty Drugs, clinton says, quote, price gouging like this in the market is outrageous. She goes on to say she will lay out a plan to take it on tomorrow. So the biotech is dragging down the nasdaq this hour. Bertha coombs is there and shes tracking the big movingers. Hi, bertha. Hi, mandy. This is not a new complaint were hearing when it comes to biotech prices, but the move in biotechs has sent the nasdaq into negative territory. The big caps, small caps are down. Its actually the smaller cap by yes tech index at the nasdaq thats off the most. Prices on Specialty Drugs have raised concerns among doctors and payers alike. In this case secretary clintons complaint is about a 60yearold drug to treat parasitic infections where the price was increased from 13. 50 a pill to 750 a tablet after it was acquired. Hot drugs like hepatitis c treatments have led to outcries. New cholesterol drugs on the horizon have already galvanized payers to take action. Clinton is going to outline a remedy tomorrow. Investors are clearly worried the stakes are rising for perhaps regulatory action no matter who wins the election. Mandy . Okay. And a major exclusive in the next hour, bertha, because we have the ceo of one of the by yes techs highlighted for soaring drug prices. Stocks overall giving up their big gains. Lets look at the numbers. The dow is currently only up by 31 points. The s p up by less than 1 point, and the nasdaq is currently sitting to the downside. Bob pisani joins us from the nyse floor. Not just whats happening with biotechs but a plethora of fed speak to digest here for the market, largely hawkish as well. And i think that is impacting as well. Lets take a look at the s p 500. 3 to 2 advancing to declining stocks at the New York Stock Exchange but it was a lot bet irthan that earlier. The volume is on the moderate side after fridays titanic volume, second biggest volume day of the year. Put up the s p 500. We started turning south a bit right around the european close around 11 30 but i think 3457ndy has it right. All that talk from fed officials about maybe raising rates combined with Hillary Clintons comments weakened the market a bit. If you look at the sectors, energy has held up pretty well as we had oil up about 3 . Theres always a big mover. Financials doing better after getting clocked a little bit last week. Consumer staples strong, but there you see health care down noticeably, and while bertha highlighted the biotechs rightly so, its not just that. Its the big Cap Health Care names. I mean big pharma names. Bristolmyers, merck is a dow component, down 2 . Thats whats weighing on the dow right now. Pfizer as well, down 1. 7 . So the Dow Jones Industrial average is actually underperforming the s p 500 because of the stronger somewhat stronger big pharma component in there. Elsewhere if you take a look, we had strong whenever oil is up it tends to help the dow because you have chevron and exxon on the upside. Theyre fairly highpriced stocks. Ibm turning around a little bit. Tough week last week and the financials doing better. Goldman is a very high priced stock. Thats moving things and, tyler, ge and some of the global industrials that had a terrible time loost wake alast week also little bit catch up. Thank you very much. Fed lines well call them. Steve, recap what we just heard. We had Dennis Lockhart, the atlanta fed president , basically making a case for rate hikes defending the idea of a pause saying, you know what, weve made it on the labor test or the labor market improvement test for hiking rates and hes confident enough in the Inflation Numbers to go ahead and hike. He sees marketbased measures of inflation are pretty stable. The economy is growing. He says performing solidly was the term he used, and plus he sees wage pressure a little bit more widespread than we heard any other fed president say. So all of this combines to say, you know what, hes ready to hike rates. He used that phrase, the idea of im confident that the muchused phrase, quote, unquote, later this year is still operative. Theres not much of the year left s there . No. You have these comments from williams, the u. S. Economy is on a solid footing, and then just now lockhart saying the u. S. Economy is performing well. It begs the question why are we at an emergency level of Interest Rates, right . Thats what jim bullard talked about this morning. He said its hard to make the case for emergency levels of Interest Rates and made a strong case for hiking rates saying dont tell me when we raise by a quarter point were still not accommodati accommodative. Theres an enormous amount of accommodation in the system even after the First Quarter point hike, the fed will still be accommodative. Michael farr was mentioning on fed day that dont mistake a change in the number for a change in policy particularly because its still going to be very accommodating. The outlook is for the fed to be accommodating for as long as three years even when they get to the place, the final place, or the terminal rate, its still going to be well below where theyve even started other rate hikes at previous times. So the current outlook is 3. 5 . Our cnbc fed survey is even lower than that at 2. 9 for where the terminal rate is. Thats a debate between markets and the fed, but in either case its very, very low, and so theres not really a concern that ultimately the will be tightening it. Last week you were right on the money. I asked what you they were going to do and you were right on the money. It was easy. I flipped a coin and took the other side. Next fed meet something on october 28th. Thats the night of cnbcs republican president ial candidate debate. The candidates will have a lot to talk about from the fed and a big day and night, october 28th, right here on cnbc. As weve been mentioning, the biotechs have been taking a hit. Small of caps out of correction territory. So where are the opportunities in this market . The feds decision to hold rates may have just made this sector a big bargain. Which sector are we talking about, dom . Perhaps a bargain. Were talking about the financials. One of those sectors thats extremely levered to what happens with fed Interest Rate policy. Those financials have been a big focus for a lot of investors because they may represent an opportunity. Remember, financials the second biggest sector in the s p 500. If you take a look since those august 25th crisis lows, the recent market in turmoil lows that we had, equinix, Iron Mountain at this, and s. L. Green realty have been some of the financials, i say this loosely, financials that have outperformed the broader market. I stha because these are each Real Estate Investment trusts. Thats the reason why theyre important because theyre those Interest Rate plays. If you take a look at some of the ones that have been lagging behind, amg, franklin templeton, legg mason. They have been relative laggards. Theyre not bad. They just havent participated as much. One other place we want to look at, some of the big Investment Bank broker dealer type. You look at Morgan Stanley in focus, right . You see here that some call it a death cross, maybe some momentum lagging behind here and then, of course, the reason why its important, the last time that we did see this kind of a downward move was back in 2011 and it took a little while for the markets to bottom out. So thats why some traders are a little bit skeptical right now. The last time we saw a cross like this, guys, it took a while for the markets to reach a bottom. Thats why some traders are a little bit cautious about the current market action. Back over to you. Dom, thank you very much. Lets get some Market Insight from an investing legend. Jack bogle is the founder of the vanguard group. Jack, a legend. You have become a legend in your own time. How do you like that . A legend in my own mind might be more like it, tyler. Lets talk a little bit about Interest Rates and whether you think a slight rise in Interest Rates is, one, appropriate, two, any occasion to change your fundamental investing practices. No, i dont think its going to be big enough. The stage is set for very cautious policy for a long time to come, whether its up a quarter of a point or a half a point, who knows and who knows when. Tyler, i thought for one, i thought that the feds decision to put off any rate increase at the meeting last week, i uttered a quick bravo to the one of the interviewers. Because . Because i think caution should be the watch word of the day. The fed should be watching out for an economy that, you know, i dont know if its really vibrant. I dont think ts vibrant. Its adequately strong, but im not sure thats good enough. I mean, we know that wages are still under pressure. We know that the workforce, the size of the workforce, is not growing much, and we know there are plenty of challenges ahead for our economy as the whole World Economy gets into this messy state its in. So i think the fed is doing just the right thing under the old hippocratic oath, tyler, first do no harm. Right. Lets move on, i just did a radio piece an hour or so ago on dollar cost averaging, jack, and it seems to me that in a market like the current one, equity market is what im really talking about here, where there is volatility, that it makes a perfect argument for why dollar cost averaging is the smart way to go for most investors. Im not asking you to agree with me but maybe you do. What do you think . Well, certainly for anybody with a Retirement Plan or trying to invest for their childrens college education, those are some of the main needs of investors, but take the simple one, the Retirement Plan. There is no other way to do it. You want to Start Building early, as early as you possibly can because that slope gets steeper and steeper. The more money you have to put in per month the closer you get to retirement, you almost cant get up that hill later on. So start now, keep investing. When the prices go down, be happy. People dont seem to understand that when the markets are at highs, its great for sellers and bad for buyers. When the markets go way down its great for buyers and bad for sellers. These are the markets. This is the great casino out there, tyler, so just ignore all the noise. Ignore all the noise and keep your eyes off the headlines. Good to see you. I want to ask you about Goldman Sachs making a play for mom and pop investors with a new line of low cost etfs and i believe reportedly some are even cheaper than some of those from vanguard. Do you see this as competition for you . Well, i never thought wed be in competition with Goldman Sachs for anything, but you have to understand that etfs today are a very unusual kind of index fund. Theyre largely created for speculators rather than for longterm investors, and this year the numbers are Something Like this, that the trading in etfs for the year is going to be Something Like 1. 4 trillion im sorry, 14 trillion and trading in the hundred largest stocks is going to be about 16 trillion, and yet etfs have this tiny, tiny asset base compared to the market. So etfs are turning over at around 950 per year and common stocks, the old way of speculating, are turning around at about 120 . So if Goldman Sachs wants to get into the game of speculation, i salute them. And if they want to beat our prices at vanguard, i dont know how durable that will be, but their record as Mutual Fund Managers has been been, if i may say so, rather distinctly poor. Now theyve moved to indexing and thats possibly a good thing, a good sign for the strength of the index. Let me get your thoughts, you have taught me a lot over the years about the constituents of total return for equities. As you look at where stocks are priced today and the level of corporate profit growth, the differ dend payouts, what do you think over the next five years or so will be an average annual rate of return if i were to invest in a broad s p 500 index fu fund . Its Pretty Simple for me although i use ten years rather than five. The longer out you go within reason, the more predictable things are, but the dividend yield is 2 . I think we would be fortunate to have 6 earnings growth. That would be an 8 return, investment return. Those are the components that make the return. But with pes up around 20, price earnings multiples up around 20, they could easily drop to 15 or 16, and that would slice two or three Percentage Points off that eight. Now, thats not great obviously, and it comes before fund costs. You knew i was going to mention that. So in an actively managed fund you get five less, too, which is 3 which isnt good at all, but when you think of bonds being available, descend bonds, decent maturities at around 3 , that 5 would be a 2 equity premium and i think thats all you can hope for. All right. Jack bogle. On that note we leave it. Appreciate your being with us. Always good to be with you both. Likewise. Mandy. Thank you. Home sales plunging. What is causing that . We have the real read on the American Housing market right now and as we were saying, Goldman Sachs is getting into that 3 trillion etf market launching the first in a series of lowcost funds. But the question is will it be able to compete with the likes of vanguard . We were just talking about that, blockrock, and state street. Well try to find out. Ckrock, a. Well try to find out. Ackrock,. Well try to find out. Care of my heart. Thats why i take meta. Meta is clinically proven to help lower cholesterol. Try meta today. And for a tasty heart healthy snack, try a meta health bar. Blackrock, and state street. Go pro taking a hit today. Its currently sitting at 32 and change because of competition from apple and sony. Go pro stock is down 50 so far this year and down 8 just today. Starwood way point which owns thousands of singlefamily rentals is buying rival colony American Homes for 1. 5 billion in stock. And lennar is moving higher actually moving lower right now, down by 1 . The number two home builder beating earnings estimate selling more homes at higher prices. The stock is up almost 20 this year. But right now its moved to the downside. Tyler . Sticking with housing, new data out showing home sales dropping more than expected. Whats behind this little dip . Diana olick joins us from washington. Hi, di. Hi, ty. It was actually bigger than usual dip. August sales dipped well below expectations and even below the normal monthly moves. Total sales down 4. 8 month to month led by much steeper drops in the south and west. Those are the regions where home prices have jumped the most. The median sale price nationally was up 4. 7 from a year ago but it was up 6 in the south and over 7 in the west. Now, realtors point to very weak demand among firsttime home buyers who have a harder time saving for down payments and meeting credit score requirements. Fha is usually their loan of choice with a low down payment but the nations big banks have all but gotten out of the business because they keep getting sued by fha. Chase mortgage which is the nations second largest Mortgage Lender is not even in the top 100 anymore of new