Welcome to power lunch. Im melissa lee. Lets take a check on the markets. Out of the gate pulling stocks lower, we hit threemonth lows on the dow, as well as the s p 500. We are off session lows now. The s p higher by about 16 points from lows today. Banks gets hit hard again. Third day of lossesment this of course ased of a slew of bank easternings that start tomorrow. One bright spot in narcotics. Utilities are holding up nicely. Up by 1. 8 at this hour. Thank you very much. Welcome, everybody. Heres what else is happening right now. Worlds longest reigning king has died passing away today at the age of 88. He took power back in 1946. Amazon hiring 120,000 holiday workers this year. Thats up 20,000 from just last year. And u. S. Jobless claims now at a 43year low. The 84th straight week that claims have come in below 300,000. Got a big two hours ahead and we kick it off with this big move down in the market. Though not as far down, bob pisani, as earlier today. Weve come back. Weaker export data, about 1 . Affected our markets. The major sectors leer, banks to the doup side. Some of the other issue, energy stock, tech and materials on the downside. Materials down on the slowdown, so a lot of issues for the r market. Not just china here. Slower china growth, then higher rates an stronger dollar, then election jitters. Thats been an issue the last several days. Cautious start for earnings season. Ericson warning, honeywell warning. Oil has been on a wild ride. Down the last two days in the nrng stocks. Oil stopped going up, but you see the drop there on a build of inventories have been a rally back. This is eog. Went down to 94. Now, its at 96 here as it rallied back on not an awful lot here. A lot of people trying to fig that out here. Fairly heavy volume in banks. Four will be reporting. Remember, these stocks have had big run ups. Good news here, higher Interest Rates helping them out. A lot of reports about problems with commercial loan growth. Take a look at some stocks here. Regions, bank of america, suntrust, all up near double digits. What kind of loan growth and of course, guys, that whole regulatory environment, which no doubt is weighing on those stocks. Back to you. Thank you very much. Want to zero in on some key parts of the markets breaking key levels. Dom . If we take a look at some of those pocket of strength bob just referred to, so did you early on at the top of the show, but there are some moving averages, some of these average price levels that traders watch to see whether or not the slowing momentum is hitting. This is the vectors semiconductors etf. Theyve bb been a lot, a big upside trade oaf the course of 2016. As you can see, that momentum has been strong over the course of the past few months. Now, its dipped below the 50day average price. Its not a tell all, but perhaps a sign that one of the leadership points of the market is showing some signs of weakness. Also moving on here to a financial part of things, kbe. We referenced that one. Some of these big financials like bob said have been real leerds over the course of the second half of this year. Now, were seeing signs of weakness there. Theyre touching their 50day average prices. See if they can bounce off or if theres more downside. One other place i want to point out, the small stocks. Theyve been showing sign of weakness over the past week and now, they are below their 50day average price. One more thing about this market breath or sentiment independent kart. If you look at this, 371 members so far of the s p 500 are now below the 50day average price. Nearly the 200 are below their 200day or longer. More signs of longer term weakness there and one thing to watch, 32 stocks in the s p. Within 5 of their 52week lows. Doesnt seem like a lot, but melissa, just three months ago, there were no stocks in the s p 500 that were within 5 . Back the you. Trz. 30year bonds up for auction. Rick santelli is tracking the action. Matter of fact, this was the best. We just added 56 billion in total supply. Had two mediocre auctions. This auction, 12 billion of 29year, 10month securities, reopened 30s. B as in boy the plus. Maybe it was the fact we had a little rally. Maybe some investors thought the sell off may be over a bit as this risk off day seems to have taken grip on investors sie. That was an aggressive side. That was the offer side. Quickly, 244, the best cover in one year. 6. 1 was the only light part of this on the direct and 6. 1 well, lets put this it this way. If you look last option, 4. 6, youd have to go back to march of 2014 to find a lower number. Very solid. Were seeing a one basis point drop as the auction buttoned up. Back to you. Trz. Thank you very much. Now, to your top story of the day. Wells fargos embattled ceo, john stumpf, retiring in the wake of the scandal. Elate lit rally, the ins and outs of the story. We have a new ceo and board set up. For the most part, analysts have applauded that. So is the share price, it is down, but less than the bank sector as a whole, but more needs to be done. With that, we focus on earnings tomorrow morning. What to watch for in earnings. Number one, customer retention rate. New account opening. Secondly, any additional financial provisions taken, keep in mind, the additional 185 million payout was taken in q 2 numbers and number three, compare tear on legal fallout. Not just from wells, but also citigroup and jpmorgan. They report tomorrow as well. Deutsche banks analyst says hes low 2017 earnings by 4 because higher Regulatory Burden and 2 billion less in buybacks. One other thing. What about moral amongst the troops . Last night, catching up with this new ceo, i asked him whether this last 24 hours, him taking over, had been a sad moment or proud moment. Its a sad moment because john stumpf is retiring in a situation that i think he would have never imagined and he has done sauch great job in managing this company, not with standing things that i think he wished he would have done differently. Having said that, i feel a great responsibility and im looking forward to to be ceo of this company. Wells fargo report earnings tomorrow, 8 00 a. M. Eastern time. Vchl. So, is the ceo change at wells fargo good for the stock . Lets bring in kevin barker and chris, the Senior Research analyst at oppenheimer. Ill start with you, kevin. What do you expect the Earnings Call to be like tomorrow . Are we going to get increases in legal reserves, for instance, get a kitchen sink quarter because we got a new ceo . I think its too early to say were going to get a kitchen sink quarter. Primarily because i think the quarter has set. This happened the last minute they know what earnings is is going to be this week. I think this happened in the last few days. On the fallout of john stumpf. Into this quarter, i think tim sloan look to start 2017 anew. So i dont think youre quoing to see that. Chris, ill ask you this question. What investors probably like about tim sloan is that hes a 29year veteran of the bank. Long seen as the air apparent. To mr. Stumpf, but at the same time, he was still the president and coo of the past year or so, and in the hearings. Allison warren s senator from massachusetts, asked about the decision not to fire the head of the unit whose practices were under question. Mr. Stumpf at one point, said at the time, she was reporting to the president and coo. Does this fully turn the page or how much, to what degree does this turn the page past the scandal . You know, what we had with wells fargo is you know, opening all these accounts. Its obviously a terrible breach of Customer Confidence and trust. But it is a problem of a fail yaur to supervise. As oppose today a problem of policy, right . And any large ogs is going to have a problems with with supervision. Ive been in management myself. I can guarantee you, employees do things you dont want them to all the time. Sometimes, because they dont understand what you want. Because theyre not capable. Sorry to cut you off, youre make iing a good point b, howev banking is ark, largely based on trust and brk, increasingly come come otttized. Dont you think tlas risk to the business Going Forward when people have a choice of three or four banks . They say, wells fargo may do bad things with our money. Lets go somewhere else. Theres a failure to supervise and in terms f you know, kulpaablety, its fair to ask where tin the chain of command did that praech occur. If theres a breakdown in military discipline somewhere in the armed forces, our first instinlgt isnt to say the joint chiefs need to go. You try to do an analysis of where the breakdown occurred. I think on the outside, Elizabeth Warren included, do not have enough facts to know where that breach happened. As for the cust mes, i bet you theyll be much more forgiving than all the senators and congressmen. People will make their decision about where to bank based on con venus and its a documented thipg that people hate banks, but love their local bank and their local banker and the people they deal with all the time. At their branch. I agree with the earlier tom tair that theres going to be months of bad news to surface there. Possibly, all kinds of city attorneys and state attorney generals initiating investigations. The news flow is going to be tough for a while, but i think ultimately, you know, a year from now, i think most people will have forgotten this. Do you agree . Do you think ths going to cost the customers . At what point do i start to reconsider wells fargo as investment . Is there a point youd be looking at . Theres going to be some turnover within wells fargo. I think youre going to see some Financial Advisers have tough conversations with their clients. I think youre going to see some customers not walk into a branch of choose Something Else because of the reputation of wells fargo. You hear people are having issues choosing wells fargo as bank. Not the say theyre not a good bank or well run bank. I think one of the best managed banks in the country, its just this this issue in particular has hurt their reputation and it will cause turnover. You had an underp performed rating on the stock since april. Thats this most recent scandal erupted in the format today, so, you had questions about banks fundamental business and perhaps valuations. Jpmorgan is above one. Bank of america,. 7 or so. It is trading roughly one times turned. Cheaper on earnings share on 2017 compared to large cap regional banks. Our fundamental call from when we downgraded the stock in april is we didnt think wells fargo was going to reach street estimates. The revenue was struggle to go. In this low Interest Rate chirmt, i thought wells fargo is going to have difficulty continues to grow or hit street estimates. That was the bis is for our underperformed rating. The its all about fundamentals as opposed to core issues. Thank you very much. Dont go anywhere. Up next, wall streets top watchdog will put, is hit putting new rules in place on mutual funds. What they are and how they could impact your investments. Mary jo white will join us exclusively when power lunch returns. Will your business be ready when growth presents itself . American express open cards can help you take on a new job, or fill a big order or expand your office and take on whatever comes next. Find out how American Express cards and services can help prepare you for growth at open. Com. At the Marine Mammal center, the environment is everything. We want to do our very best for expreeach and every animal, and we want to operate a sustainable facility. And pg e has been a partner helping us to achieve that. Weve helped the Marine Mammal center go solar, install electric vehicle charging stations, and become more energy efficient. Pg e has allowed us to be the most Sustainable Organization we can be. Any time you help a customer, its a really good feeling. Its especially so when its a customer thats doing such good and important work for the environment. Together, were building a better california. Approving new fund rules today, which could have major imp cases on the way funds operate. The rules require much yul funds so though they have enough liquidity. The latest in the series of erats by the sec to intensify its regulation of asset manageme managers. Joining us now for a power lunch exclusive is mary jo white, the chair of the securities and change commission. Good to have you with us. Without wading too deeply into these rues, lets start with the liquidity ones. What do investors, shareholders, of which roughly half f of us are, what do we need the know and what aere you trying to add something that caused you fear or some perceived weakness in the way funds are operating. Sure, Liquidity Risk management we did today really sweeping formative for the mutual fund industry. Investors in the funds as you say. Theres nothing more important to investors that they get their money and assets when they want to have them. So, managing that risk when shareholders want to redeem is is obviously essential to the Asset Management industry. What this does, transformtive and sweeping, it really for the first time imposes regulatory controls over those risks. I mean, obviously, we saw for example, we were working hard on these rules bf that, in december. The example of a fund that was unable to meet its redemption obligations because of what was not optimal to say the least liquidity managements. As i read quickly through the release, it indicates that the funds would be capped at Something Like 15 of their assets are liquid. Is it done by the funds themselves. This is sort of liquid theres various guidance around making that determination, but yes, the funds make that determination. Weve enhanced the controls around that. 15 . Limit for liquid investments. The rule requires the categorizing or you know, bucketing of highly liquid investments and imposes the funds with board approval. Basically, a minimum requirement for highly liquid and then two other categories of more liquid and less, so they can both better monitor and the board can better monitor the Liquidity Risks as can the sec. The second of those rules is really our reporting rules enhancing the reports of information. New and different and more and more frequent information. Thats the second part of it. Without going deeply into that, lets pivot if we might to a couple of things that are very topical. Starting with wells fargo. As you may or may not know, senator warren said last night that stumpf is leaving with all of his ill gotten millions. He should return every nickel he made while this quote scam was going on, and face an investigation by the Justice Department and sec. Are you looking at anything with respect to wells fargo or to mr. Stumpf personally and is this an area that the sec ought to be, has business going into . Well, i cant really comment on all specifically on wells fargo. Were obviously aware of the calls for investigation. We dont as a a matter of policy, i think for probably pretty obvious reasons, say whether and what and whom were investigating. Obviously, we have a major enforcement division. Just announced his impressive results for 2016, so, you know, we pay a lot of attention really across market par tis papts. Obviously, wells fargo or any other bank as a bank, you know, you have banking regulators as the primary there, but i really cant go beyond that. Thank you again very much for joining us here. I want to talk about Insider Trading because theres a very, very important case in the Supreme Court. I dont want to get too much in the legal weeds, but basically, the Supreme Court has the b possibility, the option, of not blowing up what used to be one of the major standings, but wouldnt be far off according to many speak i spoke with, if the Supreme Court changes the rules regarding personal benefit. Youre right. Optimistic. Reaffirms the law in that area, which will be enormously important to the continuation of you know, what is an extraordinarily strong Insider Trading program at the sec. Has the neuman ruling, which is another case, made it harder for you to bring action sns. Its a significant case. I think some folks that have analyzed this dont realize it impacted us less at the sec than it is the criminal authorities, that was a criminal case in my old office. Our burden of proof is not as high. But to bring really multiple Insider Trading cases within the confines of newman. Weve also made the arguments to various courts at the limitations and so far, quite successfully, but were watching carefully. What your that leon cooper mann is in talks with you guys. Hes fighting the charge, but at the same time, you guys are looking at perhaps suspended him from the industry for however long a time. Its a major case we brought. In litigation. I dont want this to be taken one way or the other, we dont talk about when were in talks with charged respondents, defendants, but its a major, important case. How important is is t to you that whoever is charged with Insider Trading, admits wrong doing sm. I think its case by case. As you know, when i first became chair in to 20 13, i changed the secs sort of uniform policy of allowing settling defendants. Never to ad mitt or deny. We require those admissions of wrong doing. But we have certain criteria we apply. That weve announced. The potential harm to the markets. Since youve been cracking down on Insider Trading, Hedge Fund Returns have gone down drainful some ive spoken with on wall street have said have you noticed, since the sec got tougher, hedge funds have had a tougher time making money. Do you think theres a connection . How much hedge funds in the past do you believe were connected to having a wee bit too much information . I dont think anyone would argue some of those returns at some hedge funds can be attributable to trading on the inside information when its not allowed to trade on. There are Insider TradingProgram Within our enforcement division, historically and current ly, is a very, very hig priority. You want those markets fair and having a level Playing Field f