tv Power Lunch CNBC February 22, 2016 1:00pm-3:01pm EST
we know where a lot of the dollars are going because of the lower gas prices. i think tjx crushes. >> you own the stock? >> i do not. not right now. >> stocks off their best week of the year. stocks are positive for the month of february. stocks are off to the races now again. "power lunch" talks about that now. >> welcome to "power lunch," i'm michelle caruso-cabrera with melissa lee and brian sullivan. tyler matheson is off today and scott said stocks are in rally mode, adding to last week's nice gains. the dow, the s&p and nasdaq all higher by at least 1% at this hour. positive for the last week and month, the major averages is still however lower year to date. the dow higher by 200 points. the nasdaq by almost 57. helping out today, oil, it is soaring. now, remember, the contract rolls over, so we may see oil fall back tomorrow with the new contract still, though, trading well above, according to my
screen, approaching 33. here it says 3192. gain of more than two bucks. stocks and oil so deeply correlated, helping out equity. c check out wall street's fear index. >> energy emerging markets and high yield debt, some of most beaten down sectors in the past year. you know that. but did you know how much they have been smacked. look at these one-year moves in the sector etfs. the xle energy etf down 28%. the jnk high yield etf down 18%. and the i shares emerging market etf down 24%. sometimes one investor's trash is another investor's treasure. ryan jacobson of wells fargo funds is such a treasure hunter. he seems to love all the stuff that everybody hates. and he joins us now. brian, do you remember the car,
the yugo, from the '80s? >> oh, yes, i remember that one very fondly. >> okay. well, the yugo was cheap because it was a piece of junk. now, sometimes things are cheap for a reason. sometimes you find hidden gems. most of the market seems to think that energy and emerging markets are yugos and not some 911 in mint condition in somebody's garage. you feel the opposite. how come? >> well, i don't exactly feel the opposite. i wouldn't say emerging markets are a 911. perhaps more a difference between a yugo and hyundai, because it is still a good quality vehicle, at a reasonable price. and i think that when you're looking at the emerging markets broadly speaking, we know why it is traded off so significantly. a lot of the countries are tied to the commodity export business. we also have seen an increase in the amount of debt issuance over the last decade by emerging market companies and countries. so i think that a lot of people have legitimate concerns about what the outlook for the emerging markets are.
if you are like me where i believe that commodities are beginning to rebound or at least finding a bottom here, and you don't think that the fed is going to hike rates too quickly, i think you can take a little comfort in trying to ease into the emerging markets. >> mexico a commodity economy, china a commodity economy, you like those, there is one out there that is not a commodity economy and in fact a nation that may benefit greatly from low oil prices because of the amount of imports and that is india. is india the best place outside of america to invest in the world right now? >> you know, outside of america, i would put india up there as being one with the most opportunities. i would also put emerging europe perhaps in that category. but india itself, keep in mind, there is a catalyst on the horizon for india stocks to reprice higher and that would be the release of the union budget, the 2016, 2017 budget at the end of february. one of the reasons why india got dragged down with a lot of other
emerging market economies was because it had the label emerging market on it. it is a very young country. it is a fast growing economy. it is more service oriented and should benefit from the commodity trade. if mody get his budget correct and they recapitalize their banks and have a target for continued growth, i think india represents a great opportunity for investors over the next not only the next few years, but even over the next few months. >> brian, do you really just believe that economic growth around the world is maybe stalling right now, but going to pick up. it seems like all of the trades that you're outlining are slices of the same sort of view. you have energy, you have commodities, you have high yield, 11% of high yield is energy. and then you also see the s&p 500 up 17% from friday's close. is it just that you're an optimist when it comes to global economic growth? >> i prefer to refer to myself as a realist, but you could probably call me an optimist if you don't share the same views as what i do.
mainly because i think that the probability of the u.s. economy going into a recession over the next six months is probably close to about 14 to 15%. seems like things are priced for something significantly higher and the 25 to 30% range. so i think that we're just going through a slow patch here for the global economy. keep in mind, a lot of this is really tied to the fallout from the declining commodity prices and continued austerity prices in europe. so, you know, if things are beginning to -- those head winds are beginning to no longer be head winds, they don't necessarily have to become tailwinds, i think the economy can accelerate from this point forward. >> if i'm looking at this as an individual investor, i see an energy etf on your recommendation list, high yield and emerging markets as well. to me, that feels like all the same trade. if i'm going to choose one, i'm trying to -- put a little bit in my portfolio to potentially tap into your world view, which one should it be. >> i think that it really depends on your individual
tolerance for risk. i would say that the high yield space represents some very good opportunity, but fairly limited upside potential. so that might be a quote/unquote safer way to try to play my optimistic view about what the outlook is because as was pointed out, i think sarah pointed out that 11% of the high yield space is energy where as 100% of the energy etf is energy. so i think that, you know, that might be a safer way to play it. but otherwise the second figure would be the emerging markets. that's mainly because i'm more of a buy and hold investor as opposed to trading things day to day. >> thank you, brian. appreciate it. >> thanks. straight to john ford in barcelona with breaking news. >> well, mark zuckerberg made a statement directly about the cia -- sorry, the fbi, apple, controversy around encryption back doors. we have a bit of that for you.
take a listen. >> i don't think requiring back doors into encryption is either going to be an effective way to increase security, or is really the right thing to do for just the direction of the world is going in. so, yeah, we're pretty sympathetic with tim and apple on this one. >> now, last week facebook made a statement saying that they'll continue to fight aggressively against efforts to make companies weaken their security, but this is zuckerberg making a statement directly about it. he also said on counterterrorism, if we have opportunities to prevent attacks and work with governments, we will, so clearly saying, facebook is open to working with governments, but at the same time, back doors to encryption not the way to do it. >> thank you, john. let's talk more about facebook now, chris begini is a senior portfolio manager with turner investments. great to have you with us. >> thank you, melissa. >> do you own apple shares? i'm wondering what you think
about zuckerberg coming out defending the side he's going against the government. >> yeah, it is a tough topic. it is almost akin to gun control and some of the discussion networks we talk about. i think it is a very big discussion that has to go on for a long period of time. i don't think you can make a quick fix or make it a determination on a short amount of time here, but we do own apple. it is not because of encryption, it is because of what they can do in their business model. and quite frankly, you know, facebook had to discuss today was more about virtual reality, more about the long-term opportunities that around technology and the mobile world today. >> right. i'm wondering if -- because you own apple and facebook, facebook is one of the stocks, one of the -- i don't want to say rare stocks, one of the few stocks able to be a performer in 2016, following a great perform anancn 2015 where as apple has not. do you struggle with owning
aprille wh apple when you have facebook that has a path to growth with future products that have yet to materialize such as vr and what's app which is the opposite of apple, which has the current product stream, but nothing in the pipeline that we know of right now. >> right, right. you raise a very good point. the two companies are in totally different parts of their product maturity set if you will. facebook is still relatively young. despite the fact it is now the eighth largest company in the s&p 500, and has over $25 billion in revenue expected out of them in 2016, they're still pretty young in this growth curve. the move to digital advertising is still relatively early. we still have facebook now at 21% plus of all minutes spent is done on a facebook application which is astounding. but yet they're advertising dollars or small percentage of that 21% number i'm discussing.
so facebook is still very early on. the case of apple, they already have, you know, now the largest company in the s&p 500. they already have had a dramatic run in their business units, and the next big item for them is going to be very difficult to move the needle. so, again, that's more of a solid, steady, easy -- not easy grower, but steady grower over the next few years. facebook has been a holding of ours for a large period of time and apple, we have only recently started to put our toe back in the water. expectations have come down dramatically and we have multiple product cycles coming out. the next iphone version, the mini iphone coming out pretty soon. these are not expected to be home runs and drive dramatic upside appreciation, but very steady eddie type of company. >> the youth of facebook is what makes it exciting. i get that. i argued it is becoming internet. if you invested in airline or car company or manufacturer, we had those. there is models for the past
that may help determine the future. this kind of a company, everything is brand-new. isn't there a risk there in investing in a facebook, or a google or whatever it is, because you don't know what five years from now on the internet is going to look like because there is no history. >> you are spot on. there is always risk there. i say a couple of things. remember the wang computer, right? that was a pioneer. it didn't last more than ten years. so certainly execution is going to be extremely important for companies like facebook and companies like google. so far the track record for those firms have been, you know, spot on. virtual reality is certainly something that zuckerberg is talking about, they are very heavily committed to virtual reality, but they have to execute flawlessly for it to become an important part of their business. the prices for an all in system in virtual reality is over $600. you won't have a lot of takers at that price. you don't know who will be the
leader bringing the price down, right, coming up the next couple of years, but certainly facebook wants to be positioned there for that segment to take off. >> chris, i'm sure you saw the photo over the weekend of zuckerberg walking down the aisle and all the guys wearing these virtual reality headsets. there was some talk about how it looked so fahrenheit 451, 1984 type of thing. articulate for me, from an investor's point of view, what is the opportunity in virtual reality that facebook is betting so heavily on. >> yes, so, it is not in the business models today, a very small amount of what their business is. $25 billion. you have the core facebook business. you have instagram, you have messenger, which still has to be monetized. you have what's app. so virtual reality is out there, down the road, certainly the puck is moving in that direction and facebook wants to be there should it take off. but today it is very small for them. it is really, you know, you mentioned risk before.
let's say the biggest risk for facebook is that it is an advertising company. if we go into recession, mild or deep recession, you don't advertising companies will take it on the chin a little bit and you'll see advertisers pull back on discretionary spending. that to me is their biggest risk. back to the great recession of '08, '09, google saw their revenues go negative. they were the leadership company. that's the biggest risk in their models today. >> chris, thanks. chris baggini, turner investments. >> thank you. privacy versus security, freedom versus security, apple's tim cook going on the offensive over its fight with the fbi. is this battle over data access just the tip of the iceberg for u.s. tech companies? we'll discuss more. you're watching cnbc, first in business worldwide. (patrick 1) what's it like to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% raise? (patrick 2) how about 20? (patrick 1) how about done?
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man 1: he just got fired. man 2: why? man 1: network breach. man 2: since when do they fire ceos for computer problems? man 1: they got in through a vendor. man 1: do you know how many vendors have access to our systems? man 2: no. man 1: hundreds, if you don't count the freelancers. man 2: should i be worried? man 1: you are the ceo. it's not just security. it's defense. bae systems.
welcome back to "power lunch." big story. let's get to david faber who has news on two giant companies. david? >> thanks a lot, michelle. aerospace giants honey well and united technologies have recently held talks about a merger that would create a $94 billion sales colossus according to people familiar with the situation. the discussions occurred within the last two weeks and we're focused on a deal in which honeywell offered a premium with stock, but some cash, for the smaller united technologies. there is no assurance the talks
will lead to a deal. there are significant concerns on the utx side over whether any combination can pass any trust review given the two companies provide so much of what goes into an airplane and would likely face opposition from the likes of some of their big customers, boeing and airbus. it is therefore unclear whether honey well, which initiated the latest talks, will emerge with the deal. the current talks represent the latest engagement in an on again/off again courtship that began almost one year ago and changed shape as the respected market caps of the two companies diverged. last year when utx was larger in value than honeywell, greg hayes approached his counterpart at honeywell, david cody about the possibility of merging the two companies. those discussions centered on a deal that represented a merger of equals but would have had utx management in control according to people close to the conversations. those talks broke down when united technology stock prices offered significant declines and the two companies found themselves unable to agree on who would be in control of the
combination. last fall, honeywell turned the tables and approached utx about the deal. they offered holders a slight premium for the shares but was structured as a merger of equals. u utx cites concerns about trust risk. they had no contact for the months that followed. as stock prices outperformed utx and the market value has grown to be more than $10 billion above its own it was emboldened to try again. the ceo represented a new proposa proposal. given the respective sizes, any combination would end up somewhere around equal ownership of both shareholder bases. the industri october of 2000, i
reported utx was close to a deal to buy honey well, only to watch that trumped by an offer from ge, which after opposition from eu regulators found itself unable to close the transaction. the two companies are leaders in aviation and aerospace, where utx's pratt and whitney makes aircraft engines. both provide the evianics and other systems to let airplanes fly. they're also both large players in the climate control business. given the respective market shares in those businesses, any combination would be expected to face a significant antitrust review, not just here in the u.s., but in europe as well. spokesman for honey well has not returned calls. >> while you were talking, not surprising, if you look -- let's bring up the intraday chart, it has shot higher by -- in this case, based on all of the
different romances, honey well would be buying united technologies. even honey well was in positive territory at this point. you have no idea at this point what the price would be and what the preem upwould be fium would >> it was a slight premium. this one i believe is a higher premium. but i really do believe antitrust risk certainly viewed on the part of utx may not allow these to get that -- they have been talking for a long time. but from what i'm hearing there is a substantial view on the utx side that antitrust would be too tough to get through. not necessarily so much on the honeywell side, unclear exactly what asset sales or other things they would do to potentially stave off a significant review. we well know what those reviews could look like when ge tried to buy honey well, mario monti, remember him, stopped them in their track, in the eu even though that deal was able to
pass u.s. antitrust regulators, that was a very different era in 2000, but still they do provide a great deal of what goes into an airplane and so the right questions. there is also some desire it would seem, on the part of honeywell to try to get something going here. >> the interesting thing, david, as you noted, was 16 years ago these companies were in merger talks, only to be thwarted by ge coming in at the 11th hour and nothing going to done really. if you go back there, and you say, okay, honey well was at 35 bucks a share, the offer reported around $50 a share in 2000 -- >> that was my story. i broke that story. >> so about a 50% -- >> that's how long i've been doing this. >> we all remember it, david. >> sadly we were also watching you break -- some different companies. you get the point, that was a 50% premium back then or 40% premium. so i guess if we did the kind of same math now you would be
looking at 109 bucks a share, you go maybe 150. you think the premium could be about the same, because we have a little past -- >> i know. i don't believe so. i think there is a cash consideration here. but it is largely in stock what they're talking about. and, again, you report stories like this, you don't get every last detail. i wish we did. and so it is not clear to me it would be anywhere near that kind of a premium, that was paid when they were -- contemplated when utx was the buyer back 16 years ago. you also want to keep respective market caps and sizes, so far they can go before it comes 50/50 in an moe. what i'm picking up is while they were willing to engage in conversations, the utx side does seem to be very much focused on the antitrust concerns. >> i'm curious in your view, you know, we talked to sources, is boeing now in play? approximately the same size as utx, both stocks are down 25% over the past 12 months.
so it would be approximately -- i'm wondering if the product lines would be attractive to honey well as attractive as utx. >> what is the question? i'm sorry. >> is boeing now in play? >> i don't believe so, no. i don't think so at all. what is in play is certainly united technologies. very difficult, though, to do a hostile here where honeywell decides to amp it up. as i reported, while they did send in the so-called bear hug letter, they didn't follow it up with a public appeal which would, of course, raise the ante there. they have been at it here, these two companies for some time, greg hayes having taken over, and then suffered a couple of -- one in particular earnings miss that really took the stock price down. that's why this has changed so much in terms of the conversation. utx was $30 billion larger than honeywell and that changed dra
matly. >> you may have set a financial journalism record by break the a same story 15 years apart. >> no one else can claim to have done that. >> stick around, david. great stuff. we are seeing utx shares on the move. stock at $109 and gaining. jim cramer, hugely busy. thank you for joining us. >> sure. >> your take. >> dan cody is remarkable. he's done a fantastic job at honey well and made acquisitions, small and big over time. i think this has an antitrust challenge because they would make up a huge part of the plane. i'm sure that and greg smith knows that, the ceo of united technologies. he is a great new engine. this sounds strange, could move the needle. it is really kind of taken the whole industry by storm. these are the two most important companies in climate control. let's up it this way, if they were allowed to get together you would pay 120 for honeywell.
it would be so amazing. mr. smith just took over and got rid of sikorski. he's early in his tenure. both are great business people. fabulous business people. i think left to their own devices, hayes is a quarter a way from having the stock be 110. >> speaking of the ceo, who would run the company? do we know at this point? has that been discussed? >> the first time around when utx came courting, the idea was utx's management would be in control. i think socialist issues shall remain another potential impediment to them seeing this deal get done. it is not clear to me. i believe in this case, mr. cody sei sees honeywell's management running a combination. those kinds of things can change
during negotiations. and jim, to your point, and i think antitrust needs to be -- i raised it in my report, cody is a confident guy, and so seems to believe somehow there is a way, there is a road here to get this thing done when it comes to antitrust. i'm not quite sure what it is, but he, i'm told, believes there is. >> i think it is possible. you're dealing with a world where airbus is the most mo mop liftic of companies in europe and those guys have a due openly. you talk about the cockpit, landing gear and engines being made by one company. it is entirely possible that you can say, well, wait a second, there is a lot of other companies in competition. general electric, rolls-royce. i think dave cody has a point. this administration, maybe he's thinking, hey, listen, the next administration will be a lot more friendly. it is true. there is a single candidate that isn't more friendly in terms of antitrust issues and this deal would take a long time. there would be a new president. >> right. but to your point, jim, you
know, the eu figures prominently here and they take the viewpoint of the customers. not just of consumers into account. which is why ge failed in its attempts to buy honeywell 16 years ago. >> i think they would love to block this. they like to block pretty much everything these days. you got to come back, what grate idea. dave cody is right to do this. you would just have lock, stop and barrel, we got this package for you, sweet, it has got everything you need, and we can do it all in one stop shop. when it comes to air conditioners and climate control, what a fantastic merger. dave has a great idea. >> so, jim, you break down, i don't know utx as well as you do. you break down utx, you think about we're talking about aviation right now. they're in a lot of other things. would you think this would be an aviation-based deal or would it be about climate, home security, the internet, because if it is an aviation deal, then don't we also have to put not only boeing, melissa, but rockwell
collins, spirit arrow systems into the dialogue. >> i think all the other companies are -- i don't want to call them second rate because they're pretty good, but united technology is a giant. there is a decent service stream. when you have a new engine, that's a service stream. you give them the engine, lose money for two years and then just got years and years of service. that's why ge had a great service stream. honey well cockpit business is fantastic. the idea behind this deal, which is always ticking around, makes it -- an incredible amount of sense. smith just got the job. >> hayes. >> hayes just got the job. >> yeah. >> do you agree that he's been incredibly unlikely to want to do any sort of deal at all? >> no. i wouldn't say that. even very soon after having taken the deal, he approached them about talking about putting the companies together.
>> but to run the companies, one thing, to give up its job after he's been in -- >> you're absolutely right. >> he got the job and he's doing a great job, man. >> you're absolutely right. there would seem to be potentially an impediment there. they also can either hide behind antitrust or actually cite it as a real reason as to why they were willing to engage again here when honeywell came calling four months after having ended the talks that took place when they sent them a letter. but we'll see. hearing you talk about it jim, clearly the industrial logic is there. >> it is fabulous. >> the cost saving numbers would be significant. but those do typically come when you see -- >> you have -- you talk to cody these are nonstop great businesses, fire control and security. the idea that you can have an elevator without having an inspection elevator, never going to happen. these have great annuity streams, two incredibly well run
companies with fabulous workforces, worldwide, put these two together and you have the great american industrial. but i just have to believe that eu doesn't want that, and i have to believe that the antitrust -- >> can't some of the concerns be allayed by what is the typical response which is to divest certain things or is it that you need all those things together to get to the great industrial that you're talking about. >> it works together. if you want to divest heating and air conditioning -- >> what is the point. >> if you want to divest landing gear, give us landing gear away, maybe do that. >> let's go back and this is what they call, i think in our industry, guys, wild speculation. that i'm going to engage in right now. >> okay, all right. >> but i do have a little past to my side. back to 2000, david was talking about him breaking this news back then. about a $35 stock. now flipped. utx after honey well. >> $40 billion deal. >> and reports are 50 bucks a
share. call that a 40% premium. we assigned that to utx now, that would imply maybe $130 stock on utx. would that be too rich? >> can we assume the same premium in this environment, though? >> i'm going off the past and what happened and maybe other deals. >> that would be a lot more to pay. >> 50/50 would require a lot of cash. >> they have to offer something that will entice shareholders and not going to be 10%. >> it may not be except if you can argue that the benefits of the transaction itself will accrue to both sets of shareholders bah of some of the things jim is talking about. >> brent saunders and pfizer and -- >> a key point here also is multiple disparity. honey well, with sales that are below that of utx, nonetheless, gets much higher multiple on its earnings. 16 times versus 15 or maybe
more. which is one reason why it is in a position to say, hey, we want to be the buyer, not you guys. >> that's what happens when you make every single corner never miss. the hand he was delivered was an uncertain hand. and that's why i think it is very opportunistic of cody to do this. i think hayes is about to have an earnings breakout. they really have a lot of things going for them now that hayes has basically rationalized the operation. i think cody knows this is his chance. they have been very tough in terms of offshoring some stuff recently. but they have -- this engine, i know, again, it sounds like i don't want to overdo the engine, but it is the one that everybody wants because it is much more fuel, rational and every single aircraft company i talked to says we got have united technologies engine and look at
rolls-royce. >> what happens to the rest of the industrial landscape should this go forward. it is such a great deal. what does it do to the rest of the players? >> everybody else is kind of, wow, everyone is a piker after this. i talk about the idea that aerospace division, they split that up, he has this tremendous business in both the materials that go into aircraft and also the faster business. and i felt alcoa would get taken over immediately before that deal is done or after when they split the two because people don't want the commodity. because people want pieces, because the aerospace business is in bull mode. >> one of the tools that you use when you're really concerned about whether or not you have an issue with the doj is you say, okay, you want us to play? you got to do massive breakup fee here to get us involved so that way we get paid in case this doesn't work. is that a possibility here? >> i think it is. i think picking up from my reporting that there is going to be -- there is significant
question marks on the utx side and the question then becomes does honey well choose to amp it up here. this is where having it made public in this way can force them to make a decision on that. but if you try to entice them, you mitigate the risk of antitrust. that can be a big ticket as well and big risk for honey well. >> and, again, speculating, if you look at history, there is one person right now who is squirming at his desk, who if they're going to call the doj, this would be the person who would promote it, dan malloy, the governor of connecticut. dan malloy lost ge. ge is moving its headquarters to boston and 800 positions with it. utx, a huge connecticut company that would then if this deal is consummated, be moving to new jersey. >> hartford to morris town. >> you wonder if -- i don't
know, jim, listen, you know, you were a lawyer, you have a law degree, but could the state of connecticut do anything? do they have that power as a state? i don't know. >> that's a tough call. i don't think they really can. i think it is just -- it is just a -- >> big blow. >> ge first. now literally the two companies that the state of connecticut is arguably the most closely -- you drive up to merit parkway and see the helicopter taking off from beside the river, and that would be a play here. >> and going to lockheed martin. >> i don't know the investors orie activists. do you know anything about the so-called activists? >> southeastern has been there before. they were involved briefly, i think, in the dell situation sometime back. teaming up with icon and
stepping away. they're not insignificant. and that is something like this where you get shareholders of utx and encourage them to engage. and continue to engage and see what they can work out. it will be an important component of the decision-making. now that people are aware that the talks are taking place and have been taking place on and off again for a fairly long period of time. >> it is so brilliant. cody is so right. you really had a company in disarray, frankly. and hayes has come in and really has looked at every single -- he announced a big plan that will be closed in the midwest just last week. and he's taken a hard look at costs. the place wasn't necessarily around as a country club but wasn't run that well. just at the cusp when he's about to hit it out of the park, cody comes in. davis doing something that is so smart and i know that if i were
greg hayes i would feel terrible. just terrible that i'm about to -- i'm just about to have my earnings breakout. >> cody is a tough guy. >> he's a sweet guy. >> you can be tough but not difficult. >> i just want to make it clear you don't want to conflate the two. >> we all like mr. cody. i haven't seen him in quite some time. the beard off. >> you had him on mad money, talked to him on cnbc, you also know him personally. >> he is my literal next door neighbor. >> really? >> i did not say that. >> we share a -- >> how do these things work. when this news crossed, we heard david has huge breaking news on utx and honey well, i said, get jim on because i knew he was your neighbor. >> he's a great guy, okay.
you're not supposed to have friends, but what do you do if the guy is your next door neighbor? he comes back from africa, some great tales, you say, hey, listen, i'm not talking to you, pal, i got "mad money". >> has he indicated to you over cocktail or whatever he feels honey well has got holes? >> no. very proud of his company. look, that last quarter was a -- the quarter was fabulous. best industrial quarter. the ge guys say there is more growth. honey well was a real statement quarter because a lot of people felt the dollar would hurt them, people felt they didn't necessarily have it to guide up like they did. you got to understand, the company was so undermanaged before hayes. that's why he's taking advantage. hayes gets this thing together very quickly. >> united technologies now 94, above 94. >> united technology was -- in
terms of the industrials, it was not doing as well as some others before this news broke. all the industrials are doing quite well. united technologies does not belong -- the current earnings basis is out, you can't justify the price. on the future earnings and what he's doing with the engine, that's why i said, you're stealing it. i don't blame you. >> you would own utx regardless? >> i like the new -- i like what hayes is doing. i spent a lot of time with the company. i think that he has got so many things now that are about to -- it was not easy to do. and it would be incredible. just when he finishes. not unlike the great american jeff bukus, this is like that. this is like that. he is about to have his earnings break out. >> it is not every day where we get to come on and talk about a possible deal where a dow component gets bought. the dow sxoents are usualcompon
the ones doing the buying. david faber, breaking news, united technologies and honey well have held potential talks about a deal. also broke that story back in 2000, 16 years ago. we'll see you in 16 years from now when the space elevator companies talk about a merger. awesome work. thank you very much. >> jim, great to have you. thank you. >> thank you for rushing out. we know you're busy. utx, by far the best, up 6.5%. that's propelled the dow higher. dow is up 260 points as the potential for a dow component getting bought sending the index higher as well. more to do on this and other news.
welcome back to "power lunch." a lot of curve action and it is staying in tact. all maturities are up one basis point. look at the difference on two day charts of the two year and ten year. two-year holding its gains from last week, flattening the curve. if we look at what is going on in foreign exchange, look at the euro versus the yen. this chart starts in april of 2013. these levels are not in favor of
the euro. think about the trade implications, japan is going to have some issues here being an export economy. last chart, we know what is go on with the vote on the uk side with regard to the european union. this chart goes back to march of 2009, the last time we were in this neighborhood regarding the pound versus the dollar. hey, "power lunch" returns right after these commercials. we needed 30 new hires for our call center.
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hello, everyone. i'm sue herera. here is the cnbc news update. rick snyder touring a new state of emergency operations center near lansing where people are tracking all aspects of flint's water crisis. he released the latest test results saying more study is needed before replacing the city's lead pipes. the maker of the gun used e
in the massacre of the 2012 at -- the ar-15 assault weapon used in that attack should never have been sold for civilian use. syrian government forces took over parts of an eastern aleppo suburb after heavy battles over the weekend. the syrian observatory for human rights says the government forces backed by russian air strikes have captured 18 ville nathz the suburbs. and labrador retrievers the top u.s. dog breed for the 25th consecutive year according to the american kennel club. the longest started ranking canines in the 1880s. it is rough competition. that's the cnbc news update this hour. "power lunch" is back in two.
honey well and united technologies have held merger talks. it would create a huge company if the deal were to get done. let's discuss the markets and what is going on with bob pavlik. i understand you own technology, united technologies and that stock is up 6% on david's report. so besides the obvious you must be happy the stock you own is higher today. what do you think? >> we're placed for our shareholders with this acquisition. typically you focus on dividend paying stocks, you do tend to see a disproportionate numbers of take-outs in portfolio. we're looking at it before today's news, around 13 times earnings, it is rare to find a
blue chip company in the market today trading at a discount. you have to pay about 16 times earnings for this name. you look at some of the comparable comparables. >> this company is the nimidst a turn around. great concern, we just heard, about whether or not the doj would allow this to happen with european union allow this to happen. if the hurdles are that high, you want a ceo wasting time on a deal that might never happen? >> i think that -- i think that in this case the ceo is -- stands to benefit from the fact he has cash coming in behind him. they have a very diversified portfolio. the crown joewel is 40% of thei market comes from after market businesses, service repairs, maintenance, they can utilize this to -- it certainly -- you have the cash generating
business, it gives you leeway to go out and handle something like this. >> so, bob, i'm wondering, does this tell you anything about the global economy if these two large industrial companies are looking to merge, is that a read on anything? >> i think it is an opportunistic maneuvering on the part of honey well. there is still challenges facing the global economy. we have slow growth in europe, we have slowing growth in parts of asia. we have slow growth in the united states. boeing has said their orders are expected to be down a little bit going into this year. i think you see this deal for a possible deal for united technologies and think it is a great opportunity, you know, on the part of honey well. what does it mean for united technologies. the company is going through transition. stock has been down for over a year. i think if this deal does get done, there is going to have to be pieces that are broken out of utx. i just don't see it happening as it stands right now. >> bob, thank you for joining us on this breaking news today. we appreciate it.
welcome back. if you're just checking into the markets, it is a pretty good monday. the dow jones industrial average is up more than 250 points. the majority of dow companies are higher. but they're being led by united technologies. the news breaking minutes ago from david faber. honeywell and utx may be in talks about a deal with honeywell potentially buying united technologies. utx up more than 6%. one stock not doing well today, valiant pharmaceuticals, a battleground stock and that stock is getting slammed today. down more than 10%. no news out today. on friday, wells fargo putting out an underperform rating. stock down 11%. we'll continue to work the phones and research into valiant, one of the hotly traded stocks out there today. ere.
that honeywell and utx may be talking about a deal. david faber broke that story. he'll join us in a couple of minutes to talk more about it. nasdaq and s&p 500 are also higher. pretty good start to the week for your monday. oil may be helping because oil moving up as well. it is up more than 6% right now, though, again, a 6% move on oil, just about 31.5 bucks. more on oil coming up. by the way in a big week, heading out to houston, we have a bunch of big oil guests tomorrow and wednesday for you. let us know with a bold call in bond land. guggenheim cheap investment officer says the yield on the ten year treasury could fall below 1% but perhaps 2.8% before the end of the year. joining us by phone to confirm whether or not he's been drinking is scott miner. thank you for joining us. i would never go drinking without you. >> this is why you're on the show.
i like your style. okay. you're saying the yield could go below 1%, down to .3 or .25%. can and will are different things. what kind of probability potentially you assigning to these types of moves? >> let me go back and just let you get a glimpse of how i get to the 1% number. and that is that, you know it pretty clear that the ecb and the bank of japan are going to continue to move deeper into negative interest rates. and, you know, with the likelihood that the ecb could move to, let's say, minus 100 basis points on overnight rates, that would mean the bund would fall by another 70 basis points or so. which puts the ten year note at 1%. the issue then becomes, brian, and we never know this stuff with, you know, certitude, but, you know, if we find ourselves in an environment with rates in the united states at 1% and have
some sort of a shock, like a stock market decline, then we could see rates moving lower or if people seek safe haven and u.s. assets would be real tif y cheap compared to the rest of the world. >> each time it resulted in less and less market action. not seeing much of a reaction there. japan is still struggling despite the works of kuroda. do you think there could be some global coordinated action coming, more actual cash into the system, rather than trying to push it from behind. >> well, i think, brian, the probability of a coordinated effort around the world is increasing as we talk. the reality is that negative interest rates are pushing, you
know, the term structure of debt down. when we have jgb at zero and bunds at basically 25 to 30 basis points, it has been very effective at pushing interest rates down, but it is not translating into the real economy. it is not translating into people taking on more speculative risk. and at some point it seems like the central banks are running out of ammunition. and so i think that's part of the reason why when i look at a chart on the ten year note and i do a technical count, i can find things like 28 basis points on the chart because i think the underlying fundamentals are not good. and that the central banks are just running out of power to do anything. >> so, scott, i want you to walk through what happens to u.s. stocks once again, because from what i heard from you just now, you said that if yields go down, that could then spark a stock
market sell-off of some sort. yields would fall further and then in a bid to safety people come back to the u.s. i would think that if yields ever hit 1%, that would be awful for u.s. stocks, all stocks in fact. >> well, i think the issue here is the catalyst. and that is that, you know, when the scenario that i'm playing out, the central banks around the world continue to go deeper into negative territory. the reason they're going deeper into negative territory is that the economies in europe and asia are not expanding as they should. and that would be the first phase in getting rates to come down. but once the world wakes up and realizes what brian was mentioning, that the central bank policy of reducing interest rate is not necessarily having the effect that the central banks would like, then i think
people will call into question the value of other asset categories and will see stocks follow rates lower. so i think that -- then, of course, if we see stocks begin to decline, then we're going to see a big portfolio adjustment where people try to move more money away from stock and fixed income. that's the way i see the cycle playing itself out. >> scott, michelle here. if we start to see the ten year approaching the levels that you're talking about, i'm assuming that the fed doesn't want to move because then suddenly their short-term rate is the same as the long-term rate or you're even talking about an inverted yield curve, very short-term rates are even higher than very long-term rates. >> i think, you know, it is interesting, when i talked to fed officials six months or so ago and i speculated that an increase in the short-term rate was likely to cause long-term rates to fall, the feedback i got was that they would interpret that in a very
negative light. and so if interest rates would continue to fall, i think the fed would become alarmed. and, you know, i think the likelihood is increasing if we -- if the scenario is playing out and it happened that that -- that the fed may well have to face the likelihood of reversing course sometime later in the year. >> scott minerd, always a pleasure to get your insight there, bold call on the ten-year note. we appreciate it, buddy. see you soon. take care. >> thank you, brian. take care. >> let's get back to the big news, breaking during the last hour, sources telling cnbc's david faber that honeywell and united technologies have held merger talks, david joins us now. what is interesting is in the past 30, 40 minutes or so, honeywell turned negative, it was up, holding its gains during initial report of 2%, now it is in negative territory. >> yeah. always important to watch the potential acquire stock prices. and it had been up. utx still up dramatically, really.
and, again, to just come back to people, to what we reported, these talks took place very recently in the last couple of weeks. initiated by honey well. which offered a cash but largely stock deal. and premium, though, undetermined that the point to acquire utx. any deal given the respective sizes of the two companies would result in almost what ends up being a merger of equals. this is not first time the two companies have spoken as we reported last hour. they in fact had been talking for quite some time and initially the talks were initiated by united technologies. this one, it was the larger of the two companies in terms of its market value. let's call it early to mid last year. proposed its management would be running the combination. those talks ended once they couldn't really agree on so-called social issues, but also after united technologies suffered a decline in the stock price. that can upset the balance in
terms of stock ratios that had been thought about when trying to negotiate a potential deal. fast-forward to september, honeywell, now larger than united technologies, comes back, sends them a bear hug letter and says we would like to acquire you, we'll give you a small premium, cash and, again, a large portion of stock, largely structured as a merger of equals, but we would be running at this time and utx says no thank you. we have a lot of concerns about antitrust. you make a lot of things for an airplane. we make a lot of things for an airplane. we think the antitrust regulators wouldn't like that. no talks take place until the last couple of weeks, honeywell tries yet again to get utx to really focus in on a potential deal. this time as i said, cash and stock, larger preem er premium offered in september. but antitrust is the overriding question mark here, guys, that we're dealing with. >> i don't want to be conspiracy theorist but i'll say it. greg hayes, ceo of utx is
scheduled to appear on cnbc tomorrow morning. what can we, if anything, read into that. it is kind of unusual, if companies were actually in talks for one of the ceos to make public statements about this deal. >> i don't think we can read anything into it. i think this -- it was -- had been preplanned, i believe. i don't think they were anticipating any news of this type being made public. and i'll be curious to hear what he has to say. >> if the interview gets canceled, the producers can blame faber. is that an accurate statement? >> they do that all the time. >> i think it would be if he chooses not to. he should choose not to appear. >> deals are supposed to be long-term things and long-term strategies. but if we were in the midst of -- if we go back to january 20th, when things were just falling apart, you think we would be discussing this? do they need to see some stability over the last week before you can actually start to talk about this.
you don't see deals get done when there is intense volatility, which means stocks are down. >> it is difficult to negotiate a ratio when the stocks are moving all over the place. that's true, michelle. that said, i think the key thing here is that honeywell held up much better. it gets a much higher multiple for its earnings. they had tried in the fall. to do the same. i think that's the key thing here is, yes, the stock market giveth and taketh away but it taketh away a lot more from united technologies than honeywell given the troubles that unite technologies had meeting some previous earnings guidance. >> some of the other players in the aeronautical industry are trading above the market. rockwell collins up 2% and
spirit aerosystems up 3%. it is worth noting given their industry. >> sure. >> thanks, david. >> okay. >> coming up next, the big fight in britain when it comes to the eurozone. greg hayes, will he show up and answer the questions? after this break, wednesday, on wednesday. we have been saying tomorrow. wednesday. after this, we'll talk boris johnson, what is going on? leaving the eu? does it matter breakthrough. this morning i read over 4000 articles on leukemia. in less than a second. (speaking japanese) i can understand euphemisms, idiosyncrasy and complex metaphors. i know every detail of every public quarterly report in the last 20 years. and i'm just getting warmed up. hello. my name is watson.
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. welcome back to "power lunch." one of the most popular leaders in the united kingdom, mayor of london, boris johnson, announcing over the weekend he will campaign for the uk to leave the european union. being called brexit, short for britain and exit. johnson is so popular that analyst at citigroup raised it to a 30% to 40% probability. the british pound getting hammered as a result of boris johnson's announcement. the biggest one day decline since 2010. who is boris johnson. you can see him in this clip we cut. he stood up at parliament today to ask david cameron for why he thinks uk citizens should vote to stay in the european union.
>> the prime minister to explain to the house and to the country exactly what way this deal returns sovereignty over any field of law-making to these houses of parliament. >> this deal brings back some welfare powers. it brings back immigration powers. it brings back some bail out powers. to those that worry that somehow if we vote to remain in, the consequence could be more action in brussels to try and change the arrangements we have, we have a lot in this house of commons, no power can be passed from britain to brussels without a referendum of the british people. >> joining us now to discuss is tara palmieri, reporting on european union politics for politico. great to have you here. what is the view from brussels. are they worried more about the uk actually leaving or they worried about the fact they have given the uk special exemptions,
a lot compared to other countries in the european union? >> they're worried about both. the eu wants. uk to stay in the european union and boris johnson gives a huge boost to leave the campaign. he's seen as a credible politician. he has high favorability rating and if they have him as the voice of the leave campaign, it really gives them a lot of momentum against all of the hard work that cameron did this weekend when he tried to get special exemption for the uk from the eu. >> let's talk more about the exemptions. the discussion sounded dwrb -- reminded me of the united states. i want you to respond to something that david cameron said in parliament today about the very issue. >> people should not be able to come here and get access to our benefit system straightaway. no more something for nothing and that is what we have
achieved. >> what did he achieve when it comes to benefits for immigrants? >> well, cameron was able to get a safety mechanism that halts in work benefits for eu migrants for four years when they arrive in the uk. and to some people this seems look a watered down deal because he wanted this for the uk's entire membership with the eu but only over a seven-year period of time. but it would save the uk some money on in work benefits and able to win a child welfare benefit exception where the cost of benefits for the child, if he or she doesn't live in the uk would be equal to the state of -- the quality of life where the child lives. so it is really not a lot of money that he's saved in terms of benefits for migrants, but seen as sort of helping to stop the artificial pull factor because the uk has a very generous benefits package.
and it has seen that the eu migrants from the east are coming over to the uk for jobs. and using the benefits, instead of sending money back to the children living in poland, czech republic, remain why and brits are furious because they think they should have jobs and shouldn't be competing with migrants in the eu who don't need visas and can live and work there. >> i know you're dialled into the political leadership and they'll say one thing. when you talk to the people in brussels or in france or in germany, do they care if england leaves or is it -- forgetting -- you know what i'm going to say, let them go or we need them. >> they need them. they would love to say i'm sure especially the french, let them go, we don't need them, but they do. they're a real counterbalance to germany and the german french relationship. they're also an economic power. the city is the financial center of europe, letting that -- letting the uk leave would have
economic damage and could just put the entire experiment of a european union into complete state of chaos. if one leaves, the other can leave. it could spur referendums all over europe. populous movements are grow and people are saying why are we staying in the eu or staying toward this super union, so it is really -- just a domino effect that they're scared of and the uk is a power within the eu that they're scared to lose it. >> thank you very much for staying up late for us. tara palmieri. >> no problem. >> if you're just joining us, hey, good morning, guam. we got a big rally on wall street now. the dow jones industrial average is up more than 200 points, up 222. off the ties up 1.4%. the s&p and nasdaq up as well. coming up next, the five big stock calls of the street you got to hear about. street talk. we're digging out opportunity
you may not like them, but we're picking them. >> no choice. >> welcome. it is the land of the free. first stock, except for street talk, cracker barrel. yes, we talked about old country stores earlier today. bob gerington upgrading from outperform to market perform. consistently better than most peers, same store sales and operating performance and cash cutting helping free cash flow. the core business continues to rock along, that's bob's term, not ours. cbl to 16 from 142. >> i got to give it to bob for making this call the day before earnings. they are out with earnings tomorrow. this will be interesting. their most popular dish, i don't know if you've been to cracker barrel -- >> my parent goes to cracker barrel three times a week. biscuits and gravy. >> chicken and dumplings.
>> that's the dinner version. >> second stock, imax, upgrade from outperform. the analyst says screen installations picked up after years of being flat and improved film slate in 2016 and expects laser technology. but that will accelerate herbings growher earnings growth in 2018. i remember a few months ago, everybody said "star wars" would lift all movie -- theaters, snack vendors, imax is down 18% over the past three months. stock number three, express scripps. deutsche bank says sell. he had slashed their rating from hold to a sell, they're concerned about the risks related to anthem. that's their biggest client. they say given the acrimony between express scripps and anthem, they believe express is heading toward a significant negative earnings revision and the market is not fully discounting that risk, and
anthem believes it is overpaying express scripps by 3 billion a year. huge fight. deutsche bank cutting the rating. stocks at 69. they see eight more buck a downside. >> that 3 billion number stood out to me as well. negative could be a positive for anthem. that's another way of looking at it if it works out for anthem. sales force.com, we talk about ratings changes. i'm highlighting this because it is getting a bullish note today from mkm ahead of earnings on wednesday. no changes to the ratings or estimates. one of those momentum stocks that have gotten punished this year, down 21% versus half that decline for the nasdaq. five year low. they expect a solid quarter. this could be a big mover. 10% move, 10% to the upside or
downside. >> amazing, five year low on some valuation metrics, but forward pe, no trailing, 70 times. that's the five year low. >> amazing, right? >> you're under the radar stock call of the day is well care health. jpmorgan, complicated note, dual risk model. the bottom line is, analyst thinks this is all going to flow to well care's below average margin. boost them off the bottom. they boosted jpmorgan. a 40% jump in target, 35% above the current price, not sure why we're showing ge. wcg is the ticker. ge is a great ticker though, they bring good things toive life. >> this call from jpmorgan is helping the other health care
here is your cnbc news update. the white house says president obama telephoned russian president putin to discuss the syrian cease-fire. josh earnest sighing while the cease-fire will be difficult to implement, it presents a moment of opportunity and the u.s. will try to capitalize on it. the u.s. supreme court took a moment this morning to pay tribute to the late justice antonin scalia before getting to work. chief justice john roberts began the court session by remembering scalia as a friend and a colleague. pope francis celebrating a special jubilee year mass for the vatican staff and members of the roman curia. he asked those in attendance to keep their minds and their hearts fixed on jesus christ.
jury selection has begun in the wall street filed by erin andrews. she filed a lawsuit against a thoel owner, manager and the man who admitted to secretly making new videos of her back in 2008. she was -- she was in her hotel room. you're up to date. that's the cnbc news update this hour. back to you, brian. it is time now for trading nation. traders trade better together. let's dig in today's market rally with erin gibbs with s&p investment advisory and ari with oppenheimer. you believe we could be in for a rally followed by a downturn. all the little gains we had lately could be a giant head fake, why do you believe that? >> making the case for additional near term strength, two key points here, first, just how quickly sentiment turned pessimistic. trends don't move in straight lines here. i think given how fast when -- when everyone sold who is left
to sell, i think we're do for upside relief. why we have conviction that this can continue is underneenl the data, the volume trends have very encourage. we have been seeing volume into advancing shares. greater than that going into shares that are declining. strong hands moving in here. i think we're setting up for a move on the s&p into 1965 to potentially up to 2000. still have to deal with the broken trend, we see this falling 200 day movie ining ave. here is how i play it. sell the relatively weaker trends. but u.s. blue chips, our favorite segment of the market, give them the burden of proof up to 2000 and i think you could watch for some stronger signs of exhaustion there. >> short-term gain, maybe midterm pain. what is your take on the yore overall? >> i think we have seen good economic news in the past couple of weeks and also really good revisions where the consumer is
spending more. particularly for december and january. so for us, again, i think this goes to ari's argument of look, we're seeing sentiment change, things are looking a little better, we could see valuations expand a little. right now we're trading pretty cheaply at 16 times forward earnings. we could see it go back up to 17, which is around 2000. so, yeah, we could also see some recovery as well. >> aaron gibbs, ari wald, thank you, both. we do two additional segments online every day. check them ow, tradingnation.cnbc.com. breaking news, david faber reporting according to his sources honeywell and united technologies have held merger talks and recently. shares of united technologies are higher. according to david's recording, they would be the company achoired.
on the cnbc news line is nicholas haymon, and william blair, covers honeywell and utx, rates both of them a hold. what do crew think you think of? >> there is definite a lot of different elements to consider here. one, who will operate the consolidated company? that's the desire of dave cody initially. possibly followed by, you know, greg hayes over at utc. honeywell is considered to be the better managed of the two companies and you look from an antitrust standpoint, a lot of complementary areas, but also some overlap. whether it is the build and control or the components such as auxiliary power, units na both companies are the only suppliers of. you wonder about how this would be structured in terms of debt
and equity. both companies are relatively nominally levered. honey well much less so. and concerns about customers. boeing and airbus would be ones that might be interested in the outcome of this and probably some concerns from the eu over at the uk about the impact possibly on rolls-royce. >> i aren't considered that. you think there could be pushback from companies like bowing? >> boeing and airbus now have begun over the last 18 months to initiate programs to be able to capture move the value created in the commercial aerospace sector. both from the oem suppliers and after market. that's because both have been very expensive new jets like the 87 and the 350, which are unable to generate significant satisfactory returns. so they in turn have been bringing in house some of the after market parts business.
and they also have been reworking a lot of the contracts with suppliers to be able to, you know, get much larger discounts. by oem component suppliers. there is a lot of things going on here that -- there is a multitude of different issues. >> right. nick, walk us through the impact on the competitive landscape, should this deal go forward when it comes to the likes of boeing or rolls-royce. and also what it does to multiples, does this mean the other players deserve a higher multiple because utx would be brought at a premium? >> good question. the impact to poing a inboeing , this could be a bigger supplier. to the air frame manufacturers and say the consolidation of good rich with united technologies in 2012 created. that was more on the aerospace components side. you look at the engines, pratt
has gotten back into the small jet engine business with very commercially successful fan, but not so much financially successful. rolls has run into hard times and they have been focusing on the large end of the spectrum for jet engines. this might preclude their ability to participate or get back in on the small segment of the market where the strength has been because of the large wide body orders and rampant production there. and so when we think about any trust, there are components that would jump out, like the power units, which provide power to aircraft when engines are not running on the ground and the case of utc, they clearly have a position with sun strand and honeywell has a strong position as well. so those are the two principle suppliers for key component of
aircraft. >> all right, nick. >> sorry, go ahead. >> what is the bottom line? is boeing up 2 plus percent on the news? does that make sense to you? >> no. >> no, all right. >> i'm not convinced of that, no. >> okay. >> thanks, nick. >> okay. >> joining us on this breaking news. we already had united technologies ceo greg hayes booked to talk wednesday. don't miss that, now that david faber has broken this news. another day of oil rallying after friday's rally as well. up nearly 5% on crude oil. chris, i guess the sad irony here is that we're up 5% today. up a couple of percent a lot of days and we're still at 33.5 bucks. are you a buyer of the rally or little momentum we have seen? >> so we're not chasing the
rally. i still think there is some fundamental issues that will pose problems for the rally to continue. i think there is a sense of fear missing out. the idea that, like you said, momentum around this build, people are putting capital to work. refiners have to go online and take a cull out of the market. we're seeing record high builds in gasoline inventories and diesel. big question mark into the spring of the magnitude of the spring rally. we're not willing to chase it. >> you're not. has anything fundamentally changed from the supply demand global? we know production has gone down. has anything fundamentally changed? >> i think it started 30,000 foot view. we look at macro a lot. the pboc defending the yuan gave a clear signal to the market and commodities in general there was a time to put capital to work.
there has been chatter in opec that these organizations or the sovereign nations are communicating. december 4th meeting, disarray, a lot of the press around the meeting was there was really no coordination in the meet iing. i think the headlines, they're driving the market higher. >> what is the impact, you're the energy, not the oil guy, what is the impact on renewables, solar, wind, everything, based on what happened. >> sure, pretty common for both -- oil is down, investment and renewables should go down. renewables compete directly with power generation. less than 1% of base power load or total power load comes from fuel oil. natural gas and coal. coal prices have -- collapsing. natural gas. >> bankruptcy left and right.
>> the renewables had their feet to the fire for years. and their cost competitiveness increased. we think that it is set up for a nice attractive entry point and some very attractive renewable energy stocks. >> chris, pleasure, thank you for coming on the set. appreciate that. thank you. >> i'll say good-bye. not forever. sorry, america. just until tomorrow. i got to fly to houston. huge -- >> did you get excited? >> you're like, yes, oh, he's back in a few days. big conference, oil conference, we have exclusives with the ceos of shell, penex and nine or ten other companies over the next two days, huge conference. we talked about oil a bit. we'll talk about oil, the global markets. i never do this, but i'll do it because i love her. my mother's 78th birthday today. happy birthday, mom. brob l probably at work, still busting her butt. if you're out there, working,
happy birthday, i love you. i'll see you from texas tomorrow. markets in rally mode now. all three major averages solidly in the green. nasdaq up 1.3%. "power lunch" right back. and now the latest from trading nation.cnbc.com and a word from our sponsor. >> as an investor, it is important to have a trading plan because a trading plan will not only help you define the products, the markets and strategies you'll use, but it will also help you determine realistic profit and loss goals. realistic profit and loss goals are critical in helping you determine when to get in and when to get out.
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breaking news, cnbc's david faber reporting that according to his sources, honeywell and united technologies have held merger talks. hence the big moves in the stock. let's bring in phil lebeau. phil? >> it is interesting, michelle, i hear a lot of speculation about whether or not these two companies could put a deal together and david faber has been doing great reporting on this. how much overlap there is between the two companies. a lost people focusing on united technology and honeywell saying honey well makes the
electronics. united technologies is in avionics. there is a number of fields within that. not like there is one component that goes into a commercial airplane. there is some overlap there, where wl or not that could require some divestiture, that's way down the line if the two are ever able to put some kind of deal together. the other thing to keep in mind, looking at united technologies and greg hayes, they unloaded sik sikorski, he made it clear he's not going to sit still in terms of streamlining operations at united technologies. they no longer felt that he was the right fit with them. and then sold it with middle of last year, toward the end of last year. i'm not surprised to hear there is some discussions here as david faber is reporting between honeywell and united technologies. remember, you look at this from
utx's perspective, they got about half of their business in what is known as a commercial and industrial, you got otis elevator in there, most well known brand within that division and then the engine business, commercial aerospace, that's above 33%, 30%. somewhere around there. pratt and whitney, and then military and aerospace, the remaining about 20% of the company. don't forget we are scheduled to talk with greg hayes the ceo of united technologies. we'll be live at the pratt and whitney engine plant wednesday morning. interesting to see what mr. hayes has to say about not only these talks that david faber reported on, but the state of the business overall. >> and prescheduled interview for the topic of the new engine as opposed to all this news that has broken since. thank you. we'll be right back. ke reese, "day to feel alive"♪
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boring at first. but then when i actually started doing it, it was fun. >> reporter: 11-year-old madison harvey is one of 300 girls learning how to build a robot at this weekend workshop put on by black girls code, aiming to bridge the gap in stem education for girls of color. >> she's excited about science and math and engineering and what other opportunity for her to be around other girls that look just like her. >> this one go right here. >> reporter: many of these girls don't have role modeling in engineering or computer science. black women make up less than 3% at the workforce at the biggest company companies. kimberly bryant understands their dilemma. >> i was one of maybe two or three students of color in my electrical engineering class when i went to college. >> reporter: bryant founded black girls code with hopes of changing the face of technology. >> we generally think of
computer science, it does not look like a woman of color, it's very much male dominant and that's important for us to show that black girls can code. >> most black girls aren't into computers, but it's really cool and fun. >> reporter: black girls code held first event four years ago in sflan with eight girls. today the non-profit has chapters in eight u.s. cities and south africa, with plans to expand to dallas and miami this year. donations and $35 fee to attend workshops which can be waived in some cases. >> since starting in 2011, black girls code has offered workshops to about 5,000 girls. ages 7 to 17. they are learning everything from computer programming to coding to building mobile applications and even robotics. many of these girls won't just come to one black girls code workshop, madison is here for
the second time. >> it's like i enjoy this. can do it again and again. >> the organization though still young is already achieving its intended impact. >> we're seeing girls that have come into our program and really found they have a love of technology and use that to go into computer science as a major in college. >> reporter: madison may just follow that same path. >> got me an open mind, like the door opened for me. it's a possibility that i might want to pursue this. >> black girls code founder kimberly bryant says by 2040 she wants to reach 1 million girls and with black males making up 4% of the workforce, plans to start black boys code very soon. for more on inspiration and its impact, go to cnbc.com/bridging the divide xbl what a graeat organization. do we know if this gets them
interested and keeps them interested? they have a number of girl already pursuing computer science, spelman and dartmouth and number of universities. they want girls to understand that technology impacts our lives and to be comfortable with technology is the goal. >> stem isn't scary. >> exactly. >> great story. tomorrow on bridging the divide, we look at how one employer is helping workers become first time homeowners, more on today's market rally coming up next on "power lunch." what are you work? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
markets in rally mode. let's bring in the co-founder and cnbc contributor. how does this feel given that we have a lot of trashy names, oil names, et cetera? >> we definitely had that and to see that nearly 6% rally out of crude, that was one of the things that really kicked things off. you look at the volatility of crude and of the s&p 500, ovx for crude, vix for the s&p 500, both down better than 25% just in the last few days. that's a huge drop and instead of buying, they are actually thinking both go considerably lower. there's a lot of puts trading in the vix and call selling which means people don't think we're going back to those 28 and 29 levels. and a whole bunch of speculative buys in weeklies for equities
and as well as longer dated options. >> basically the bottom line, investors are buying to the notion that we go higher on the s&p 500 and on crude is what i'm hearing from you? >> yeah, exactly right. in particular, s&p 500 and some of the stocks you would think wouldn't normally participate in something like that, like airlines and refiners, boy are they ever catching bids in a big way and a lot of options speculation in those names. >> what is the importance if any of the vix seeing its lowest levels for the year right now? >> lowest since late january and just pushing lower still. again, this is the vix pit behind me and a lot of them are surprised how fast it has come down and people are aggressively buying puts, betting again it goes lower still. >> thanks so much for joining us, jon, we'll see everybody on "fast money" tonight at 5:00. he talked about the transports, one of our traders thinks the
transports is due for -- >> another decline, even after this? >> yeah. >> stay tuned to see if this rally continues for the day. thanks for watching "power lunch." >> "closing bell" starts right now. >> hi, everybody, welcome to "the closing bell." i'm kelley evans. >> and i'm bill griffeth. rally day on the stock market. as you heard by now, wiping out essentially the losses that the major averages had incurred for the month of february, over to oil, that's been calling the shots again today. the march contract expired a little while ago. you saw a short squeeze that pushed it up 8% for a time. we're just coming off those highs for the day but that's enough to help power the stock market today and of co