Whopperrito is worth your hard earned three bucks. Th tyler, power lunch starts right now. It does indeed. Thank you, brian. Welcome everybody to power lunch. Im tyler mathisen. Heres what else is happening at this hour. Hillary clinton widening her lead over donald trump in some key battleground states. Clinton now up double digits in colorado and virginia, according to a new nbc news the wall street journal marist poll. Parts of louisiana and mississippi under a state of emergency at this hour as torrential downpours trigger flash floods. And team usa continues to dominate at the rio games with 38 total medals, 16 are gold. And a lot of those by the most amazing athlete ive ever seen, michael phelps. Kayla. It has been fun to watch michael phelps. Im Kayla Tausche down at the new york stock exchange. We have three hours left in the trading week. Stocks have been headed lower throughout the morning. Dow down just about a third of 1 . The nasdaq down by about 0. 1 . S p lower as well. Russell 2000, which has been closely watched for a while, is lower as well on the week. The dow is slightly higher, the s p is flat, the nasdaq is very close to break even. It is of course eyeing seven weeks of gains. Dig deeper into todays trading action with bob pisani here at the floor. And its a low volume summer, as it always is, but highs nonetheless. Thats right. And were in a narrow trading range. But the important thing here is to focus on what really matters and that is we are at historic highs and there is tremendous rotation going on. So take a look at where weve been going on and where weve been moving in the last week or so. Q3 leadership weve had notable moves up in tech stocks and recently as oil has stabilized energy has come up. Q3 laggards, all the stuff that we were buying in q1 and q2, the utilities, telecom, consumer staples, dividend players have been lagging. One group still struggling trying to show some leadership are those bank stocks here. Focus on tech stocks. New highs in the big names we keep talking about. Nvidia with their excellent Earnings Report new high overall. Broadcom, amazon, google, these stocks all hitting new highs recently. Another group, industrial stocks, some of this of course on less concerns about brexit but all of them have not reduced their second half earnings. And that has been the key driver for all of these industrial names at 52week highs. Finally, talking about all these old chestnuts we like to talk about not working. A lot of traders say sell in may and go away. That hasnt worked. Weve been up, as goes january, so goes the year, the s p is up 7 . August is the weakest month of the year, were up in august. I think interesting point to hear talk about the president ial election cycle last seven months of the election years have been strong. Only two losing years in 16 elections since 1950. And i think thats very important. And we have seen the influence of the president ial cycles. And thats what the Stock Traders almanac insists on. So well take the year off for all those adages. No sell in may and go away, their point was it doesnt work in a president ial election year. You should not sell in may and go away in a president ial election year. Thanks, bob. Probably shouldnt invest based on a oneword slogan. Thats not a good investing strategy. Lets keep an eye on oil. Bob maybe wants to hit exxon oil am some point in the show, theyre higher right now despite the fact rig counts just crossed and theyre not only up, but theyre up a lot. Drillers are getting back to work. Baker hughes recount indicating 15 oil drillers were added. This again the seventh straight week weve added rigs. Back to 396. Still a very low total overall, but it is up from significantly more than 100 rigs from two months ago. Oil not reacting up about 50 cents a barrel right now. Tyler. 1999, the last time the dow, the s p 500 and nasdaq simultaneously closed at record highs. A trifecta. The question is what happened next back then . Seema mody knows. Hi, seema. Hi, tyler. Thats right. Calling it a market trifecta, dow, nasdaq and s p 500 closing at all time highs at the same time, it doesnt happen often. Thats why investors are now trying to understand how stocks typically perform after a milestone like this is hit. The last time it occurred, as you mentioned, was september of 199, but spoke investments points out one month after the major indices hit alltime highs, the s p 500 fell by 5 . But potentially not a good bullish sign, but some investors out there like Jeremy Siegel making the case that this time is different by looking at market valuations. All right. Stocks could potentially have more room to run. Choke out the pricetoearnings ratios back in 1999 before the dot com crash, the s p 500 traded at around 29 times while the nasdaq 100 traded at 72 times. Of course much higher than what were trading at here in 2016. So valuation wise 1999 versus 2016 a very different story. Another thing i would point out, tyler and brian, is Interest Rates back then around 5 to 6 . Right now here in 2016 we are living in a low rate environment. That is of course seen as another catalyst for equities. Seema, thank you very much. So are these new highs the sign of a market top . Joining us are brian jacobsen, chief portfolio strategist at wells fargo funds and gene perrone, chief Investment Officer of perrone advisors. You heard what seema just said about the history, the History Lesson last time as far as it goes didnt auger well for the s p over the next few weeks. But valuations were really so much higher. Brian, what do you think, is this market too toppy for your taste . Brian . No, actually, its not. I think kind of we have to think about you know, we have to think about the history in a little different way here. The last time that we had this trifecta was in 1999. But think about when was the first time that we had it . It was basically 1984 it happened a couple dozen times all the way until 1999. So instead of comparing ourselves to the end of the series in which we had these trifecta moves, think about it in terms of the beginning of this series, 1984, maybe 1990, happened a couple dozen times every year. So i dont think this is a sign of a market top. We shouldnt be comparing it to the end of that series. But 1984 1984, brian, was much closer to the beginning of a bull market than we are now, right . Well, thats very true. It was. And if you think about it though in terms of where are we in terms of the double dip corrections that we have had over the last year, i think that theres a strong argument to be made that maybe this is more like 1990 or 1991. Not necessarily 1984. My point is that compare this more towards maybe the start of the series as opposed to the end of it. Okay. Gene, over to you. You have a summertime target of about 19,000 for the dow. That would be about another 400 points from here. Year end 19 to 20,000. Thats a fairly big range, but not an implausible move. How do we get to 20,000 this year . Well, this market i think you have to really regard this market as on a threshold of another significant move to the upside. So i do agree with brian you really cant look at the history of 1999. That was near the end of the market. And that was a market cycle toward the end that was being driven by a microtheme, mostly technology. This market is still being driven by many different and diverse sectors, so it is far from a market top. And if we are to take the cue from the previous two market cycles, i believe were in a bull market trilogy, this being the third installment, this market, i think, will not end until theres more acknowledgment of the uptrend, until theres more urgency to buy. So im encouraged after a day we had socalled trifecta that the markets pulling back a little bit. Markets pulling back a little bit. People are taking money out of equity funds and putting them into bond funds. So there isnt just unbridled speculation or enthusiasm for stocks. And you cite, gene, the idea that the market advance has been pretty broad based. That does sound encouraging and important. Its been broad based almost throughout the entire cycle dating back to 2002. This is a really super cycle here. And i dont think weve seen the best of it yet because the previous two cycles did end climactically and were far from that. Valuations would speak to much higher levels. So while i think that the longer term target could be 22,000 with just a few things going somewhat correctly, we could see a much higher finish to this market in the dow other than major averages with many different sectors doing well, not Just Technology or manufacturing or health care. I want to ask both of you, but let me start back with brian, what sign would be a worrisome one for you . What indicator would you look at and go, hey, wait a minute, now maybe its going to get a little tougher . What would you be watching . Well, what im watching is at least on a daily and weekly basis is whether or not the moves up in the stock market are matched with moves up in yields on the 10year treasury. When we have the 10year treasury yield moving down and you have the stock market moving up, to me that doesnt look all that sustainable because then thats just this is just purely speculation of more monetary easing. I want to see the tenyear treasury yield move higher to support that this is driven by economic growth. So thats really the key thing im watching is that correlation between moves in the 10year treasury and in the stock market. And, gene, would there be a tellta telltale, a signal you would watch that would make you go, well, maybe i better get more cautious than i am . You say the best is yet to come in this supercycle. Tell me what might tell you something different. Well, i want to watch the transportations here. They are lagging behind industrials, so i like to see that dow theory confirmation where the transports indeed take the lead once again. Theyve been kind of hopscotching this year. And i think that will happen because i think commodities are going to come up here later in the year and into next year. So that would be one factor that would be a concern if that continued to persist. Gentlemen, have a good weekend. Stay cool. Brian jacobsen, gene perrone, appreciate it. Go to powerlunch. Cnbc. Com right now to see why theyre not surprised we might see a bit of a pullback soon. Kayla. Tyler, were taking a look at the markets right now, which have been lower throughout the morning but took another leg down in just the past ten minutes. The dow hit session lows as did the nasdaq and s p. Oil paired its gains and all of this on the back of that rig count number that brian reported at the top of the show, seventh straight week of adding rigs on a baker hughes count. So well bring more to you when we have it. Meanwhile, jc penney and nordstrom capping off a big week of earnings. Up next wall streets number one retail analyst stops by with the names he likes at the mall. Power lunch back in two. Equals great rates. Its a fact. Kind of like bill splitting equals nitpicking. But i only had a salad. It was a buffalo chicken salad. Salad. Perfect driving record. Until one of you clips a food truck. Then your rates go through the roof. Perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. And if you do have an accident, our claims centers are available to assist you twentyfour seven. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. I we worked with pg eof to save energy because wenie. Wanted to help the school. They would put these signs on the door to let the teacher know you didnt cut off the light. The teachers, they would call us the energy patrol. So they would be like, here they come, turn off your lights those three young ladies were teaching the whole school about energy efficiency. We actually saved 50,000. And thats just one school, two semesters, three girls. Together, were building a better california. Jc penney and nordstrom capping off a big week of retail earnings. Lets get a roundup from Courtney Reagan who has been busy on the retail beat, court. Hi, kayla. Jc penney capping off a very big retail week with most results surprising to the upside. Jc penney still posting a quarterly loss, but its onethird of the level expected. 50 cents versus 40 loss last year. Comparable sales improving just more than 2 , but also just short of consensus, also reiterating guidance. Home, sephora, footwear categories reemphasizing strategy of focusing on less weather sensitive categories. After a year of disappointing results nordstrom beats on earnings and comp sales on light revenue but a full year earnings forecast lift. Nordstrom slightly later anniversary sale was, quote, even better than recent trends. According to the company. And nordstrom rack, the stronger than regular stories but also nordstroms main website comps grew more than 9 . And thats notable because 20 of nordstroms sales are online. Macys set the tone thursday with better than expected results across the board leading to the strongest oneday share gain in seven years. But expectations for the entire Department Store sector were pretty low. So its hard to know if this quarter is a blip or a trend, especially after mixed results from handbag makers that are rethinking their Department Store strategies. And on wednesday im going to be in texas at the jc penney analyst day and sit down exclusively with ceo marvin ellison, so hopefully more incite than what we know today, brian. Courtney, thank you very much. Lets continue this conversation. J. P. Morgan just raised price target from 7 to 12 and 16 more seen on top of a stock already up 32 in the past 90 days. Matt is with us, and like a boss he is the number one ranked retail analyst by institutional investor, jan rogers niffen. Matt, first to you. All weve heard for the last three or four, six months, whatever it is, is the consumers dead, they want experiences, they want to travel. They want to eat out. The Department Store is cooked. All of a sudden sears is up 50 , macys is booming, nordstrom is booming. Whats changed with the stock Market Perception . Yeah. So the theme this week from the Department Stores was less bad. Every single Department Stores on the top line improved roughly 2 to 3 versus the First Quarter. You had the warmest winter in history this past fall and winter. Followed by an atrocious First Quarter where they had excess inventory. So a less bad theme, inventories more in line now heading back to school, and sequentially as the quarter progressed people talked about june better than may and july the best of the quarter. That combination for stocks that were down almost 50 over the last 18 months, i think you had a relief rally, plus macys kicked off the potential addressing of the overstored nature of the mall. So how much of the expectation in improvement, matt, is already now priced into these stocks . Sears is up 50 in 90 days. Yeah, i mean, look, in terms of our price target change on jc penney, were now looking at five times ebitda on our 18 numbers. And with macys were looking for mid 40s. I think the reality is it all now comes down to the back half. You have much easier compares, again, cycling this warmest winter we had in over a decade. If the Department Stores continue to show sequential improvement, i think the stocks will follow. Jan, speaking of the back half, we got retail sales today for july that were flat. They were much worse than expected unless youre selling cars. And im wondering if you think that bodes poorly for a lot of these retailers who saw their stocks jump this week because the expectations had been brought down so low . I can only say i really hope that was a blip. Because ive been saying for months now First Quarter will be the toughest, Second Quarter wouldnt be good but better than first, third be better than second and fourth would be the best quarter. Everything is set up for that to be true from the mac macroenvironment of the economy and the weather to these individual companies being much better positioned going into the back half. Until i saw that this morning i was like, yes, yes, youre right on the money. And then i see them report this on july and im like if this is not a blip, this could be a problem. So, yes, did it worry me . It does because i dont think that the consumer is that strong. I dont think the economy is that strong. I keep waiting for this gradual improvement. And then every once in a while you get a number like july. Maybe its a blip just like we saw with employment a couple months ago. But if its not, its very worrisome. Otherwise im expecting to go right through the back half improving numbers, macys should be great, penney should be great, im optimistic. Im much more optimistic before four hours ago. Matt, quick question here. Are the moves in these stocks because the store themselves are doing something right and have turned it around . If so, what is it . And if so, is it sustainable, or are they moving up for what i just kind of interpreted you saying for reasons of sort of coincidence . Its less bad, the weather got better, the comps were better and they were oversold. I think this weeks move is more the setup. So more of the less bad with the easy compares on tap. I think what were watching is this balance of power. Weve written about it a couple times this week. And the reality is it comes down to the brands. The brands are pulling some of their distribution from the wholesale channel, but its to varying degrees. Some of the smaller, some of the regional players, more of the cnd malls, i think those are more of your losers where macys may be more of a destination. Theyre all trying to battle with amazon. Amazon is only 5 of the u. S. Apparel market today. Thats going to be a bigger number over time. The other thing brands are doing is pulling back on promotions like friends and family. So everybodys trying to navigate how does this balance of power play out between amazon, the Department Stores, and the specialty retailers. Jan, were going to wrap it with you, but i think what matts making is a very, very important point. Because based on the amount of attention it gets, one would think amazon has 90 of the american shopping market. Online retail everything amazon and everybody else is only 8 of american sales. Still a lot of room for brick and mortar. Brian. Jan. Walmart was 20 years old, they were 3 of sales and they were 50 of the growth in sales. Amazon is 20 years old, its 3 of sales and its 50 of the growth in