Points, the s p by nearly 20, and the nasdaq by about 57 points. Also being helped, im sure, by the news from china. What do we think about this . I saw the rally in oil prices on friday. Basically a rumor that you were going to see Something Like this. If its contingent on iran and iraq both playing along with it, that raises all kinds of questions. Seems to be the same caveat weve heard over and over again. Iran has theyve walked back some of their more explicit talk about ramping up production. Still, theyre so eager to get back in the markets. And iraq is desperate too. Lets not forget iran boosted output a month ago by 500,000 barrels a day. If saudi arabia and russia and whoever else want to get together, they need to get iran in the room. And lets not forget that a freeze is not the same as an output cut. If demand grows, then theoretically supplydemand will come back into balance. If demand slows because of china, the freeze leaves the gap where it is. Oil is still under 30 a barrel. And below where it was a week ago. Something else was they had seen production come offline. Not nearly as much as you would have expected. In fact, here in the United States, shale is still coming out more than 5 Million Barrels per day. There have long been predictions. We havent seen it that much. I think the fact were seeing these kinds of headlines and the price of oil is up 30 cents tells you where the market is. All right. Here are more of your top stories on this tuesday morning, including another nice rally for chinese stocks overnight. China closed higher, extending mondays rally. The shanghai composite rose more than 3 . Japans nikkei closed marginally higher after yesterdays big gain. By the way, well have more on china and why it matters to you and your money in a few minutes. Those moves did not help european stocks. Every major market there in the red right now. Yesterday in a speech, mario draghi said the ecb is ready to act and could ease policy further in march. Draghi suggests policymakers will look at risks from weaker emerging Market Growth and evaluate whether lower crude prices and market turbulence could derail the ecbs efforts to boost inflation. Perhaps the ecb and opec should get together and have a combined meeting. Meantime in corporate news, Apollo Global reportedly close to a deal to buy adt. Apollo would buy adt and merge it with another Security Company it already owns. No price tag reported yet, but adt is valued around 10 billion. And if you own shares of miner Anglo American, your payout just got cut. The company suspending its dividend after posting a nearly 6 billion pretext loss in the most recent quarter. The company also announcing plans to sell as much as 4 billion in assets to try to turn that business around as it struggles through a major you might have heard about this commodity slump. Just a little bit. Although, Commodity Prices picked up overnight and in the last two days. In the meantime, lets get you up to speed on a couple other markets. Checking again on the futures. Big gains for this morning. Dow futures are indicated up by 176 points above fair value. You should bear in mind that the markets, even with the big gains we saw on friday, the dow was down by 1. 4 for the week. S p futures up by 20. Nasdaq up by 57. Take a look at oil prices once again. The Energy Prices up by about 1. 5 if youre looking at wti, sitting just below 30 a barrel. Lets take a look at treasuries. The ten year really saw a massive amount of action last week. You saw the yield on the ten year slip as low as 1. 53 . Its rebounded, still well below 2 at 1. 757 . Take a look at the currency markets. This morning the dollar is down across the board. Youre still looking at the euro right near 1. 12. Dollaryen at 113. 78. And gold prices, which have been on fire lately, are down by 27 this morning. Thats a severe pullback from that risk trade that had been on last week. Right now down by 27. 30. Well get back to the markets in a moment. The other big story over the weekend, the death of Supreme Court justice Antonin Scalia. The Court Vacancy has already sparked a battle between the Obama Administration and Senate Republicans. John harwood joins us with more this morning. Reporter this is a fight thats going to play out on at least three levels. First is the constitutional level, where it pits president obama against Mitch Mcconnell, the Senate Republican leader. President obama reasserted over the weekend his constitutional responsibility to negotiate a successor to Antonin Scalia and have the court up to full strength with nine. Mitch mcconnell asserted his Constitutional Authority not to act if the senate chooses not to act. The question is, can he sustain that position throughout the year under political pressure from the administration . The second venue for this fight is the president ial campaign trail. We saw republican candidates all urged the Senate Leader not to move forward, not to affirm an obama nominee. Theres a lot of pressure from the Republican Base not to do that. Ing Hillary Clint hillary cli opposite view, of course. She said it would be disgraceful for the Senate Republicans not to affirm a nominee. Everyone noted that Justice Anthony kennedy was affirmed unanimously by a democratic controlled senate in president Ronald Reagans last year. The republicans are saying in an Election Year we shouldnt do this. Finally, its going to play out on a human level once the president announces his nominee. You can bet hes going to try to pick a consensus choice, one with broad appeal to republicans, like a couple of Appeals Court judges approved unanimously. Sri srinivasan is one. Jane kelly from iowa is another. Were going to have to let this settle in and see how the politics play out. You cant assume that either side has a position thats going to prevail at this point, guys. John, i thought it was interesting, the New York Times has a story that takes a look at what Justice Scalia had written about what he had said he might like to see in one being chosen as his successor. We talk all the time about diversity. He said hed like to see someone who hadnt gone to harvard or yale, someone potentially from south, and maybe an evangelical because theres not much representation on the court from any of those constituencies. Becky, we have a court right now with six catholics, three jews. There are no protestants on the court. There are no evangelicals. Justice scalia talked about Tall Building lawyers and the insular world of people who had gone to elite law school. Thats a point thats well taken. Well see whether president obama goes in that direction. Of course, president obama is someone who comes out of Harvard Law School, and people look to those that they know and are most familiar with. Jane kelly, the Appeals Court judges i mentioned from iowa, she was a Harvard Law School classmate of president obamas. John, its michelle. Lets say somebody doesnt get put on the court and you end up with some 44 decisions. Its my understanding that doesnt necessarily mean that you dont have a result. It just falls back on whatever the Appeals Court had decided, right . So its not like were hanging in some unknown abyss. Exactly right. It lets stand the Appeals Court ruling, which in some cases, as in the case of Public Employee union rights out of california, would go the liberal direction. Others, like the Appeals Court ruling that would hold up president obamas clean power plan, would go in the conservative direction. But those rulings would not have president ial value. It means they can come up again in Different Cases and be reargued for the court. So it delays consequential Supreme Court decisions, doesnt necessarily mean theyre put off forever. The court started with six. It went up to seven, then eight and nine in the 1830s. It added a tenth, john, but this could alter the kinds of cases the court chooses, correct . You mean over the next year . Yes, exactly. Theres thought maybe theyll back off the most controversial cases because they dont want to have it come down to a theoretical tie. Yes, exactly right. So again, democrats are going to portray this as something that would be another sign of government dysfunction, that it would prevent the Supreme Court from doing its job. Republicans are going to argue not that big a deal. We can wait a little bit for the nominee. Ultimately, its going to come down to public pressure. The administration will make a twofold argument. One is republicans dont want to make government work. This is akin to the government shutdowns that weve been through in budget disputes. The other argument theyre going to make is everybodys going to raise the temperature. Weve already seen that on the trail. Ted cruz yesterday was saying were one justice away from losing our fundamental freedoms as americans. Hes going to try to rile the Republican Base that way. Democrats are going to say republicans are holding this up because they want to take away your rights to an abortion or to gay marriage. The question of whose base is more energized by that and who can make a crucial difference politically is one that were just going to have to see play out. John, people wonder for it makes a huge difference if this seat is filled very quickly or not. Scalia himself made the swing vote that decided the president s Climate Change bill was a step too far. Thats something that happened just in the last week. So if you wonder about the influence thats there, certainly did have a major impact. Absolutely. And weve got a court that has a soft or had a soft conservative majority. You know, five conservative justices, four consistent liberals. This poses the potential for a real change in ideological direction on the court. Thats what is fueling the opposition of republican president ial candidates and so far republican senators behind Mitch Mcconnell not to affirm. John, thank you very much. Well talk to you again very soon. I dont mean to startle the control room, but just crossing the wires, reuters is quoting a Senior Iranian official saying iran is willing to discuss an output freeze once its production has reached presanctions level. Thats a caveat. Once were back to where we want to be, well consider it. If we can add a few more Million Barrels a day to the market, then were happy to freeze at those higher levels. This is just a confirmation iran wants to keep pumping more oil. All right. Lets talk about the other big issue moving the markets. China rallied into the close, still remains a major fear factor for investors. Chinese chairs among the worlds worst performing this year. Year to date, shanghai is down 19 . Shenzhen is down 22 . Hong kong down 12 . Concerns being fueled by potential economic crisis, near of further devaluation of the yuan is still to come, even though today the Chinese Central Bank let it strengthen more than it has in a decade. Joining i first, let me ask you about todays action. What do you think it signals, if anything . Weve been talking about this for a long time. Theyre not looking to devalue in the near term. Theyre not looking to allow massive depreciation. Theyre trying to signal stability and they have a real plan in place. So the idea theyre trying to send a message to markets is really whats going on here. Theyre trying to say theres going to be stability and well make sure people understand that. What makes both of you interesting this morning, i think, is that you have a very contrarian position to people like kyle bass and george soros, who have been explicit that the chinese will be forced to devalue despite having 3 trillion yuan worth of reserves. Thats not going to be enough considering what the economy is facing. You think actually it would help them to let the yuan strengthen, that it would help the economy. How . Yes, actually what china needs is a lot of people have said this, it needs to shift from a dependence on exports and investment to a more consumerbased economy. I think thats one of the reasons why Chinas Central Bank has been very supportive of it over the past year. A lot of people are out there, theyre howling about that its inevitable that it will have to devalue because of the debt problem in china. What theyre missing is that the bear case and aye been as bearish as anybody about china, whether its the stock markets the property market. But the bear case was always that to draw a comparison with japan in the 1980s, and japan had a massive slowdown in its economy, had a property in stock market bubbles that popped. It did not have a currency crisis because it was a structurally surplus creditor country. And this is now, a lot of hedge funds are treating this like its the Asian Financial crisis, debtor crisis. Its not an emerging debt market debtor crisis. Its a different kind of crisis with a different kind of solution. Do you agree with that . If you let the chinese currency strengthen, the chinese population has more buying power, and therefore you help build up this path to a more consumerbased economy. Absolutely. By keeping it strong, youre putting purchasing power in the pockets of households. If you want to switch from investment to consumption, this is one of the easiest ways to do it. This is something the pboc has been pushing for several years now. I never thought about it before until i was reading the notes over the weekend. The idea that if you are a creditor nation, you dont want your currency devalued. We devalue currencies so you can pay back your debts at a much cheaper price. That completely is the opposite problem of their situation. The problem china has right now is that capital is freeing the country. And thats why theres downward pressure. The reason why capital is fleeing the country is because of a failure to rebalance, a failure to make that shift. So they dont want to i mean, let me be very clear here. Im not predicting what tchina will do. Im saying what they should do or what they dont necessarily have to do, which is devalue. They may make a policy decision. Theyve been sending a lot of mixed messages about shoring up. Theyre hearing a lot of mixed messages, whether its coming from imf or treasury. Theyre under a lot of pressure to float the currency as some kind of market solution. But i think what that ignores is the need to unravel the past intervention in the currency markets that have created a lot of global imbalances. I think we forget china is a very poor country. We treat china like its a global super power. The average income is about 25,000 a year. Second biggest economy. Its just per capita. Theres just a lot of people. Theyre not producing a lot of valuable output. Some of that manufacturing, the risk is and this is the idea behind bass. If the rmb goes up, were going to see more manufacturing leave china. Weve already seen manufacturing leave china, laos, cambodia, myanmar, et cetera. Thats going to put downward pressure on the overall economy. 3 trillion, while it sounds like a big number, its not that big when you factor it up to private sector debt. This transition youre talking about is called restructuring. Its what the chinese say they need to do. But history says will take generations. Absolutely. Were pretending china is going to do this in a decade or two. It took the United States 100 years to become a firstworld economy from a manufacturing economy and 100 years before that to become a manufacturing economy from an agrarian economy. When you Start Talking about kyle bass argument, there are certain things taken as presupposition as fact. These numbers dont work. Second second, you have an imf number under which you have a crisis level. Theres no reason that number is right. All of these things are arbitrary. It doesnt mean their economy is not slowing or in trouble, it just means they have far more fire power than a commercial Banking System has. I think thats where the analogy goes flat. I think its important to make the distinction between the domestic debt situation in china and the bad debt situation, which is internally funded. There are a lot of losses there. Its going to drag down chinese economy in significant ways. But the exposure is not to foreign debt, where countries run into currency crises is when they owe a lot of money abroad and the dependence on foreign financing. China is not in that circumstance. All right, guys. Provocati provocative. Thank you so much. Great to be with you. Were going to take a break. First, if you went to sleep early last night, you missed uptown funk winning record of the year at the grammys. Well have more of the big winners coming up. Coming up, could be a good start to the trading week for your money. Futures indicating a higher open helped by a rebound in china and a slight turn higher for oil this morning. Also on deck, the Market Strategy session for you and your money. Aflac. Ohh ah ah aflac aaaaflac tadaa hes not a very good magician. He paid my claim in just one day. One day . shh how does