Transcripts For CNBC Power Lunch 20151106 : vimarsana.com

CNBC Power Lunch November 6, 2015

Now Strong Enough for a december rate hike . A lot of things happening today, but first of all, a very Big Development in the president ial race. Eamon javers joins us in d. C. With more details. Eamon . Mandy, thats right. A blockbuster report here in politico. Com this morning. Politico reporting that ben carsons campaign is admitting that a central piece of his biography was not, in fact, correct as reported by him in his own books. Theyre saying ultimately ben carson was not ever an applicant to west point. In his books ben carson wrote he applied to west point and was offered a full scholarship after meeting with general william westmoreland. Politico reporting that the Carson Campaign is now saying that, no, in fact, he was never offered a full scholarship to west point. In fact, west point is tuitionfree for those offered admission. Theres no such thing as a full scholarship in any case to west point. This follows on a number of controversies for ben carson and his campaign which has been the frontrunner in several National Polls here. A couple of controversies just to bring you up to date on, obviously this west point controversy today will be very damaging to the Carson Campaign but also some questions now about an anecdote in which carson was allegedly involved in a stabbing incident. Some media reports raising questions about whether or not carson was actually involved in that stabbing incident or how it actually occurred. And also questions raised about his involvement with the company manatec. Last week in the cnbc debate, questions raised about that. Carson saying he had no involvement with that company last week. So clearly a troubling period now for the Carson Campaign. Its going to be very important to see how they respond to this story in politico and how that fallout affects the standings of candidates in the republican president ial race, mandy. Were going to be talking about more about the implications for his Campaign Later in the show. Thank you very much for the details. In the meantime, as we mentioned in the headlines, president obama rejecting the controversial keystone xl pipeline saying it was not in the national interest. Transcanada, by the way, is taking a big hit right now down by 5. 5 . Lets get more with Jackie Deangelis with the fallout. Good afternoon to you, mandy. Were looking at the different groups within the Energy Sector in terms of the equities and they certainly are taking a hit today. But oil prices were under pressure after the unemployment report came out. Traders think we may see a december rate hike. That sent the dollar index 99 which sent oil prices 2 lower. And thats where they stayed even when the president rejected the can he stone pipeline. Its a significant piece of discuss to discuss. Transcanada issuing a statement saying it is committed to building this Important Energy Infrastructure Project and it will ex pore options to file a new application. In response to the red wing the president gave this morning for rejecting the pipeline, the propon ents are countering. The 2,000 jobs roughly that could be created by the construction they feel is significant. The 3. 5 billion that could be added to u. S. Gdp also significant. And while domestic gas prices certainly are down, weve been tracking that as oil prices have fell as well, it doesnt mean that they couldnt potentially go lower. If we do have to ship canadian crude via rail and barge, it costs more for the refiners in the gulf coast to refine that product, and so that does support gas prices. It also supports gas prices if we take in more oil from the middle east. So either way the proponents are coming out and saying these reasons are not necessarily as sound as they seem. Back to you. Very interesting, of course. The president s point on that was the pipeline would not have lowered those gas prices. Thank you very much, Jackie Deangelis. A stunningly strong jobs report. The u. S. Economy hiring at its strongest pace this year, 271,000 jobs added last month, and the Unemployment Rate edging lower to 5 even which now folks is the lowest reading since april of 2008. Average Hourly Earnings also rising 0. 4 . All of this coming as fed chair janet yellen says the december fed meeting is a live possibility for a rate hike. Our very own Steve Liesman speaking exclusively with one of the people who will make that decision in december. Steve, over to you. Thanks, mandy. In my interview with chicago fed president charles evans, he was pretty clear he could stomach the december rate hike although its not his first choice. For evans though, he wants the fed to make sure, make it clear to markets that the path of future rate hikes will be gradual and likely shallow. I agree with chair yellen when in the past she sort of said theres a lot of focus on one move, the first move. We need to think about the entire path because thats whats going to dictate how accommodative or restrictive our policy is, and so i think we need to have communications which indicate that a path is going to be gradual. Not everyone is so sure about that. Here are those numbers. 271 blowing out the estimate of just 183. Revisions modest, just 12,000. But that average hourly wage number which mandy talked about earlier, thats the one that really raises questions about future fed policy. Unemployment rate as well falling to 5 . Labor force participation steady at 62. 4 . Jpmorgan writes, it is much too soon to say the fed is behind the curve, but a few more reports like the one we received today would raise doubts about the forecast of a gradual pace of tightening. Theres a market, a debate out there in the path of rates. For now most economists see the strong report as a snapback from the weakness of the past two months. Theyre more inclined to look at the klthreemonth average for t actual trend. For evans the problem is not jobs but his worries about the fed continuing its miss on the inflation target. My continued preference for more delay or a shallower path continues to be my uncertainty over the packfact that inflatio going to get up to 2 within a reasonable period of time. So now barring extreme weakness in november, the fed should be on track for that december rate hike and the new battleground will be the next one and the next one after that, that is the path of future rate hikes. I will tell you, mandy, i know phil lebeau is coming up shortly. Just before he came on he was in a tshirt and jeans so we know what the truth is now out here in the chicago bureau. Theres deep dish pizza strewn all over the bureau and stuff like that so, you know, dont let him fool you. I would never let him fool me. Thank you very much, Steve Liesman. Thank you. So Brian Sullivan now in dallas as promised with a news alert. Hi, brian. Hey, mandy. Thanks very much. Were just getting that weekly rig count number. A big day, jobs data, now the rig count data. We lost six oil rig last week so down six, not a big down move and not enough to move the price of oil up. Oil is still down about 1. 5 to the mid 44 level. Were down 1154 oil rigs from one year ago and yet the price of oil still in the mid 40 range. Thats a huge question as to why were seeing these rigs come off, the price has not come up and that will be part of a big two hours left of the show. We have kelcy warren, knows the business, one of the biggest pipeline operators in the world. Well talk about transcanada, talk about oil and gas. Weve got mark cuban as well coming up plus the ceo of oil firm matador. A big two hours from dallas. Love the big d, by the way. Thank you very much. Were going to get back to you very shortly but stocks are under pressure just a little bit. Not hugely. The nasdaq itself is just ever so slightly higher, but nonetheless investors are now kind of scrambling to revise their bets on a december rate hike. I think were sitting around bets of 72 . Bob pisani joins us from the nyse floor with more. Hey there, bob. Hi, mandy. A titanic jobs report and traders who are active in the markets are a little disappointed at the lack of action. Lets see whats going on here. Its not the brebreadth, its t volume and volatility. We had a blow out number. Traders expected big volume but its not really materializing. They were also expecting big volatility but essentially its not happening either. Take a look at the vix. Not moving, i mean vix at 15, thats not doing too much. Up 1. 5 is not a move given how important this jobs report was. So a little bit of disappointment down here. Certain predictable things did happen. Yields move up across the Interest Rate curve, no surprise here. The Interest Rate sensitive group, utilities, reits, Home Builders on the bottom, theyre getting hit a little bit. We could have predicted that. We could have predicted the banks being up 2 or 3 . No surprise there. Not surprised the dollar index at the highest level since april and since commodities are denominated in the dollar, its expensive to buy these commodities and theres weaker demand. Its predictable we saw the metals getting hit. Freeportmcmoran having a terrible day. Glencore in london, vale, thats predictab predictable. Industrials are holding up. Its curious some of the defense stocks are among the weakest in the Group Overall that youre seeing. My sense here is that while the action is very limited today, investment committees are meeting and not everybody was aligned with this idea of the fed possibly raising in december. I think over the next few days you will see more action and you will see more realignment and reallocation as people move some money around in response to this jobs report and a much more potential fed rate hike. Back to you. Thank you very much, bob. Well check in with you later. Lets get to phil lebeau with a news alert. This comes to us from the department of Homeland Security. We expected them to announce some type of enhancement in security for foreignbound flights or flights from overseas following the downing of a russian airliner. Homeland security is recommending there are precautionary enhancements to Aviation Security with respect to the commercial flights bound to the United States. This is standard language we hear after incidents overseas. They dont like to give a whole lot of details. They say there will be expanded screening applied to items in airports overseas. Russia has suspended flights from egypt and britain has told travelers coming from the sinai, dont check bags, leave nthem i egypt. You can do carryon. When we look at Homeland Security and what changes we might see in the United States, weve heard from the department of Homeland Security in terms of whats going to happen for those flights bound to the United States. Certain enhancements at certain airports overseas in that region, but here in the u. S. We shouldnt see any changes at airports. By the way, u. S. Airlines do not fly over the Sinai Peninsula nor do they fly into the airport in question in egypt. This though comes at a time when the tsa is under fire for failing security checks. In fact, there have been reports within the last week that the most recent round of checks that were done at airport screening sites they failed to catch most of the mock items that were sent through. In other words, not noting whether or not there was a potential bomb or a potential weapon that was in a bag that was there simply to test if they were doing all the checks that they should be doing. Take a look at shares of the major airlines. You really havent seen much in response from investors following this incident over in egypt, but, guys, the department of Homeland Security is saying there will be security enhancements for those flights from overseas from certain airports bound to the United States. Lets hope its effective. Thank you very much, phil lebeau. And check out these incredible pictures of flooding in brazil following the collapse of a dam there. At least 15 people are dead and 45 others are missing after that dam burst destroying dozens of homes and sweeping away cars and large trucks. It happened near a mine which is also near the brazilian city of marianna. The neighborhood was suddenly flooded with mining waste of rock and mud. Shares of mining giant bhp getting slam today. Right now down by more than 5 . Lets get back out to brian in dallas. Are you giving us a little sneak peek preview of what is on tap . Give us a bigger one. How about this for a question. You guys talked about transcanada shares being down 6 on this news about keystone getting rejected. Is it possible transcanada is actually happy about that decision . Kind of a counterintuitive thought there, but maybe, just maybe, that is the case. Well find out why coming up after the break. A rare exclusive interview with kelcy williams. Well get his take on oil and gas. Thats coming up on a special edition of power lunch from the American Airlines center right after this. Gas. Welcome back to power lunch. Im mandy drury. Chipotle is under pressure today down by 1. 6 with baird downgrading the chain to neutral from outperform on concerns that the impact of the recent e. Coli outbreak would close several dozen restaurants in the pacific northwest. 40 cases now linked to chipotle. Elsewhere cigna beating profit estimates but revenue at the Health Insurer missing the mark. The shares unchanged. And merck and eli lilly say theyve received an inquiry from the Justice Department about their drug pricing. Both of them moving lower, merck is down by 1. 1 . Those are the headlines. Lets get a big headlines from the big b with mr. Big Brian Sullivan. Over to you in dallas, brian. All right, mandy. Thank you very much. Were here for a very rare and exclusive interview with Kelsey Warren. The ceo of energy transfer. Ete, etp, fxl, and sun. Doesnt do a lot of tv and we appreciate you coming on to cnbc. We had planned to come and talk to you about all these things about natural gas and oil and we will, but you and i were chatting off camera before this and you said you thought theres a chance that transcanada might actually be pleased with this decision because through all the rhetoric the pipeline may not be economic anyway. Explain. I dont believe the pipeline has been economic for a while now. Theres just not the spread. Transcanada, these are bright people, very bright people. For them to go through the permitting process and all this ridiculous process theyve gone through, of course they would like to see the permit received but i dont believe the pipeline gets built, not during these economic times. If somebody said lets reset, start over, transcanada, you have the ability to resubmit your bid for keystone, do you think they would do it . Oh, i think again, theyre very bright people. I think they will wait until the economics suggest that a line should be built, but pipeliners, we rely on something being worth more at one place than it is at another place and we take advantage of that. Thats the basis. And theres no basis. Theres minimal but theres certainly not the economics there to justify the pipeline. Would you build a pipeline today . Were building a pipeline to back can but its based on a different set of economics. Pipeline beats rail every time. Its a nobrainer. The keystone line was built more on a quality of crude being produced from canada and brought down to refineries. The project was outstanding when it was announced but now the thing that happens in the energy business, we ebb and flow with Commodity Prices and today the spreads arent there. Are you shocked with how low natural gas is . I would say yes, yes. Whats happened in the market . The people that are so important to our market are the independent oil and Gas Producers that develop science. They try and tell and then they tweak things and they try and fail and finally get it right. These people have developed so much science, we are glutted for generations with natural gas. Do you believe it will stay low . I do believe it will stay low. People get mad when i say these things but im being truthful. I dont see what turns this around. Now, were going to have regional price increases with the lng facilities coming on on the gulf coast and with petrochemical expansions, with what were exporting, we will be exporting a lot of gas to mexico which is displacing crude, but with those things, with additional demand, youre going to see regional price differentials. I think that theres going to be low pricing in the marcellus and utica for a while but i think as you get closer to the gulf coast, i think you might see an improvement in prices. What about oil . Are you surprised by its price. Youre not an oil producer but youre a pipeline guy but you have a refinery, sunoco. Despite the fact weve lost 1154 rigs yearoveryear. When it was at 100. I dont understand this. I really dont. I do understand why we are today. Where we are today is its a staring contest to see who is going to blink and who is going to be the first one to truly cut production. Everybody talks about rig counts, thats fine. You have got to see production fall or demand increase. Thats not happening. Every game of chicken doesnt have to end with somebody turning. They could collide. Russia keeps pumping, saudi arabia keeps pumping, iraq however many Million Barrels a day, iran is pumping. Theyre pumping at uneconomical rates. How do you compete with countries that pay no attention to economics. They simply got to put more into the system to cover their budgets. Its really unfair because youve got the u. S. Producers that are responsible for this global glut, but we are fixing it. The Silver L

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