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tv   Power Lunch  CNBC  April 27, 2016 1:00pm-3:01pm EDT

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>> what about taking a little bit off? >> i think you're supposed to take off here. they have all the earnings growth in the tech sector or they're going to be tarnished along with the rest of the tech sector. i'm betting on the latter. >> all right. we'll see how it shakes out. five seconds to go. that's all for us. thanks for watching. "power lunch" begins now. ♪ any way you look at it >> well, the reference there is to joe dimaggio. it could have been the hottest run since '41 whether he went on that 56-game hit streak. but after 51 straight quarters of sales gains, apple whiffs. they miss. sales down. you can see shares are getting punished right now. the chart indicates by about 6% plus. so has apple fallen far from the tree? welcome, everybody. i'm tyler mathisen along with melissa lee and brian sullivan. we'll have a series of special reports from iran. and the countdown is on to the fed decision.
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or nondecision. 59 minutes from now. >> but meantime, we start off with apple. that stock is more than doubled the daily volume average, 80 million shares trade sod far today. as you might expect, apple is pressuring the nasdaq. surprising moves in the dow and s&p 500 which look to be pretty resill yenlt on t yenl-- resili of this news. what does apple need to do to bounce back from the first revenue decline in 13 years? let's bring in our analyst who lowered the price to $125 after $141. jason ware, he owns 143,000 shares of apple. gentlemen, great to you have with us. i'll start off with you, you know, it really is the second quarter revenue guidance that has a lot of investors concerned. and all the reasons they list behind that revenue guidance lower is they're terrible reasons. plan to cut inventory by $2
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billion. lower average selling prices because of that se. overly optimistic forecast for the mac during the back to school season. why do you stick with an overweight rating right now? >> well, i'll tell you, it's never a great idea to sell at the bottom. so that, you know, that is where we are today. the stock is probably going to continue to trade off people's expectations coming down. and it is definitely a big miss for june. we expect a lot of the problem is macro. you know, in the discussion yesterday apple highlighted macro weakness. we think there is a deviation on a negative side and consumer demand here. >> you are saying it's a bottom? have we seen the worst for the shares or we'll soon see the worst for the shares? >> yeah, i think can you see the shares continue to trade off a little bit here. you're kind of in a gap of information now through the summer. it looks like macro is deteriorating a little bit. we don't have any new products to talk about. so as we move into summer, typically the stock tends to
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trade off anyway. and with this kind of a report and that backdrop, i would expect it to do more so. >> jason, do we have to wait until the fall and a new iphone 7 before this stock gets some mojo? >> i think we do. i think if past is pro log, typically what you see is as we get into the next generation product cycle, you want to be in the stock ahead of that. usually by a couple months in order to enjoy the gains. we saw it on the iphone 6 when the phone did well. it was punked in 2014 and 2015, it picked up. to be an investor, you have to look ahead to the next product cycle. that may be the iphone 7 coming this fall. it could be the nexgen screens. >> while those products used to move ahead in leaps, now they seem to move ahead in inches. >> yeah. i mean, you need to see product -- >> go ahead, jason. >> yeah. it's definitely fair.
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you need to see it ragss that are meaningful. even though that gap narrowed, the fact that install base expanded and the ecosystem and the value of the ecosystem backs more and more important over time. it's a theme we talked about for months now. i'm starting to see some traction in the press talking about the value of the software, value of the services, et cetera. and that becomes more important down the road. so the hardware it ragss are still important. i think incrementally less so as we go on in that product base expands globally. >> jason, are you buying more today? >> no, we're pretty much what would be a sell side hold. but no, we're not buying more. we're comfortable with our position in apple. >> the last time on a conference call, maybe for the first time, testimony cook made reference to the possibility of making a pretty decent acquisition even saying we would buy something larger than we bought thus far. what you would tlik see apple
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buy in order for it to either get a jump-start on a category, integrate some feature into the current products or accelerate its standing in the category? >> yeah, i'm not going to speculate on specific companies. >> what company do you think investors -- where do you think apple needs to innovate? >> yeah, let's talk about the specific areas of innovation. obviously, the automotive side of things has been talked about a lochlt we could see them going that direction. that is a few years out. technology to inform that kind of a move would be interesting. i think another thing that a lot of people aren't talking a lot about, we've started to talk about is augmented reality. you know, these smart phones are peaking now very similar to the way things like the ipod peaked in '06. we know what happened in '07, the iphone got introduced. we think there are other product breakthroughs coming that will make this more obsolete. we would like to see apple start invest. >> like what? that's tantalizing.
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like what? >> yeah, well, i think that you're going to see the way i like to describe it is terminator vision. you get products that actually allow you to put on a pair of glasses, not google glass. you don't want to necessarily look that way for that low of a return on the technology. but pretty soon we'll have glass that's let us do away with our monitors. and see all sorts of overlays on a real world. and that's coming faster than people think. we think of the next year or two you'll see products on the market. >> all right. rod and jason, sit tight. we want to bring in another voice on apple. this is the charts. we know that many traders and investors buy on fund. als but some buy on technicals. matt, you're seeing a bearish story forming based on apple technicals. what are you seeing in the charts? >> first of all, you know, right now we've had -- i throw up a yellow flag on the stock.
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not quite a red one yet. but what we have is a problem with -- we're unable, even before the earnings came out yesterday, the stock was already rolling over a little bit. in fact, it got right up to the 200-day moving average. you got slightly above it and then rolled back over. that's exactly what it did back in november just before the stock got hit quite hard and along with the rest of the market. so can we have another head fake? we have a second head fake in a row. we got up to a key resistance level and it rolled back over. now that it's, you know, now that breakdown or failure to break out has been a meaningful one, and it's formed a lower high, that's a big problem. >> yeah, this looks like a classic case of lower highs and lower lows coming. >> exactly. that's -- now that's why i say it's only yellow flag yet. we have to break below those, you know, the january, february low. right around the 93 level. it was $93.40 on a closing basis. but that's -- that level right there, if you break below that,
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that means we would have, as you say, tyler, a lower low -- a lower tie followed by a lower low. and that's when the momentum really has a problem. and we know with all the etfs and things nowadays, it's a big part of the market. >> matt, you see a yellow flag. jason has a long term holder, you're equivalent of a hold rating. i go to you with the overweight rating. apple has not traded with the markets. it's down 20% over the past 12 months or. so and the markets are just within whispers of all time highs. as you say it's facing macro headwinds. it sounds like a lot of the miss and revenue guidance down from second quarter is macro. why do you stick with that -- what takes it 25% higher from where it's trading right now? >> yeah, i think like i said, you want to -- as jason said, you want to own the stock ahead of new product cycles. that product cycle, we'll start to learn more about that in the summer. i wouldn't be surprised to seat stock trading off from here a little bit.
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i think by the end of the year you have a chance to have the stock significantly higher. >> so it's going to make apple go up 25% is what you're saying? >> one thing to remember, only about probably about 47% of the base has upgraded to larger screen sizes. we know consumers like the screen sizes. so we suspect if you're feeling a little tight on the budget right now, you're looking forward to that new phone in the fall. then when that phone comes, you probably move through an upgrade. so probably will be a little bit better product in the back end of the year. >> all right, matt, rod, and jason, good discussion on apple. thank you very much. >> all right. the fed is the other story we're watching today. kind of like watching paint dry. we're counting down to the big fed decision at the top of the hour. in the meantime, let's get insight from the chief investment officer of u.s. corps strategies. the reason i make some fun of it is that no one, and i assume you're included in that no one group, thinks the fed is going to do anything and they're going
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to try and say as little as they possibly can to box them in for a move later in the year as early as june wlachlt do you say? >> well that, is probably right. the bank of japan is probably going to be mob impactful for, you know market sent. than anything the fed says today. we think the meeting today, the statement will be more about characterizing the outlook for the june meeting. it's very likely the fed wants to keep alive the june meeting so they'll likely put forth in the statement some acknowledgement of a little bit more settled conditions outside of the united states which is one of the chief reasons for not moving before. they'll acknowledge labor market. seems to be on trend. still performing well. and that perhaps u.s. growth is a little bit weaker. i think the key thing to watch for in the statement is if they bring back the statement about the outlook being balanced with respect to the economic outlook, and if they do that, we sort of expect them to do that. it means that june is in play.
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>> so the doj is meeting. they're having a news conference on thursday. you actually say the boj meeting is more important than the fed meeting. how boxed in do you think the fed is? i mean, in that do you think it is sort of waiting to see what the boj does and whether it plunges the economy further into negative interest rates? >> well, they'll be watching that with interest. you know, we think that boj will do something that's probably more constructive than what they did last time. in term of moving towards more credit easing. while they may make another step lower in moving into negative rate territory if, they do that, they'll offset that with balance sheet expansions, perhaps purposing more equities, perhaps even introducing a program like the ecb did to pay banks to lend to the real economy. so that would be perceived as a risk positive and a growth positive event. so certainly the fed will be watching that. we don't think the fed is really
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too stitched in or hampered in term of normalizing policy by what other central banks are doing. the reason i say that is because the dollar is well off its highs. i mean brit was a lot of currency strength and dollar strength. but that's really fading fast into the rearview mirror. so that's not a good reason to keep them if moving. >> that's nice. more of the same fed. so what do we do? buy stocks, let it fly? >> well, we think investors should be taking this dramatic turn around in market sentiment, repricing to equities back to the highs to take risk off the table. i mean, just remember where we were two months ago. so we would say -- we're still in an environment where sent. is goi -- sentiment will be fragile. so we think it's a time to reduce risk in the bond market. we think it's time for investors to stick higher in quality, there is still a lot we can do.
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>> does that mean reduce the ris n risk in the bond market. >> well, yes. it is the place to go to avoid risk. and particularly, you know, high grade, investment grade bonds. there are ways to reduce risk. we do that by saying treasuries are fully valued at the front end of the yield curve. but focus on things like inflation linked treasuries which have not recovered and pricing in unrealistic expectation for inflation. so that is a very cheap sector of air fi quality of the bond market you want to overweight. there is a lot of value. we had a retracement in spreads. so that is another sector. of course with, our outlook and u.s. economy that continues to move along at a 2% pace, there is value in mortgage backed securities, too. so those are the types of things we're emphasizing in the portfolio rather than going down in quality, you know, overemphasizing high yield or lowering the standards to try to chase yield. we think it's a pretty dangerous strategy at this point in time.
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we fully expect there to be episodes like we saw in january and february that repeat over the course of the year. >> quick answer here. this is a data dependent fed. they keep reminding us. are the data, u.s. and global better than they were at the last meeting? and on trend to be better still by june? or worse? quickly. >> mostly unchanged. you know, there was a market overreaction and a lot of fears about the being big change in the underlying economic momentum in the u.s. and earlier in the year. it wasn't the case. there's no real change from that sort of sttrajectory. it's not a dramatic improvement. the markets, if they're hoping for that, we haven't seen that yet in the data either. >> all right, scott, thank you very much. >> our countdown to the fed is just getting started. plus we have much more on apple's big miss yesterday. but first, we head to iran where a showdown over sanctions is heating up. our very own michelle is in
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tehran for us. >> tyler mshgs companies, many countries are trying to get back into tehran. most american companies cannot. and even nonu.s. companies, a lot of them have a lot of fear about coming back here. they're legitimate fears. i'll explain when "power lunch" is live from tehran next. anywh. it's been smashed and driven. anywh. it's perceptive enough to detect other vehicles on the road. it's been shaken and pummeled. it's innovative enough to brake by itself, park itself and help you steer. it's been in the rain... and dragged through the mud. the 2016 gle. it's where brains meet brawn. lease the gle350 for $599 a month at your local mercedes-benz dealer. the first stock index ♪ (musiwas createdoughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average.
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man 1: i came as fast as i man 2: this isn't public yet. man 1: what isn't? man 2: we've been attacked. man 1: the network? man 2: shhhh. man 1: when did this happen? man 2: over the last six months. man 1: how did we miss it? man 2: we caught it, just not in time. man 1: who? how? man 2: not sure, probably off-shore, foreign, pros. man 1: what did they get? man 2: what didn't they get. man 1: i need to call mike... man 2: don't use your phone. it's not just security, it's defense. bae systems. sd. welcome back to pl h. "powe everybody. iran is blasting the united states today, akugz america of
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scaring away businesses from entering iran. the ayatollah addressing a crowd of workers in say ran saying that the deal with the u.s. to lift international sanctions is a deal on paper only. we're live on the ground in iran. hi, michelle. >> the practical impact of lifting the nuclear sanctions is that european companies can come back in here and do business in iran. american companies cannot because there are so many sanctions still in place dating back to the carter administration, some of them. all related to us is spings that's iran is supporting terrorism, that they're doing money laundering and abusing human rights. there is an exception for the airline industry which explains why we've seen executives from ge and boeing come to iran. they bought more than 100 planes from air bus almost immediately upon signing the deal. where iran is desperate for investment is the oil and gas sector.
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they have 49 projects that they would like to see done, they're going to announce in june or july where they hope to get maybe 150 billion when it comes to investments. one sector we don't talk about a lot but deeply impacted by the sanctions is iran's auto industry. it wasn't lack of demand, it was lack of parts that caused it to decrease 50%. they couldn't import them anymore. they had to stop production until local suppliers could step n we went to the largest auto plant in iran and in all of the middle east that can produce 160,000 cars per year. it is called the ico group. they manufacture iranian brands. the vice president in charge of strategy told me that for the last several years, they could only sell this car showing here with a manual transmission because they couldn't import the electronics for the automatic transmission. he says, however, he has seen an immediate beneficial impact since the sanctions were lifted.
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>> this is getting better but it takes time, i believe. now we have some difficulty for the transmitting of money. but for supplier parts, they're working with us. >> that last thing he said, not being able to transfer money, that's a big issue for nearly every company. it highlights a big issue, one that comes to the financial sector in iran. the banks really still are struggling for a number of reasons. that's because iran is still on the international blacklist whether it comes to the financial action task force. they only have two countries on that blacklist. north korea is another one along with iran. it's one reason where many large banks are not opening up to iran. that group is concerned about money laundering in this country. additionally, a lot of the same european banks fear the long arm
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of the u.s. law because of those u.s. sanctions still in place. iran can't -- iran can't use the dollar. nearly all international business in some ways is done in dollars. so these banks fear that they're going to be fined. it's really frustrated the iranians tremendously. they had another meeting with john kerry specifically to complain about it. john kerry was in the awkward position of trying to convince european banks to actually do business when the iranians, very strange situation. that's the story trying to do business in iran. can they get their oil facilities back up and running in? in the next hour, we'll give you a behind-the-scenes look that has never been seen, it's off the coast of iran. it is where nearly all of iran's exports leave. it's crucial to them because that's where they get all the foreign exchange, their money. guys, back to you. >> all right. michelle, thank you very much.
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michelle caruso cabrera in tehran. we're getting started on "power lunch." more on apple's big fall and whether now is a good time to get into that stock. plus, we're less than 40 minutes away from the fed's latest decision on interest rates and we have the best in the business lined up to break it all down for you and look ahead. "power lunch" will be right back. antee a fair price, quality service, and that what goes down doesn't always come back up. [ toilet flushes ] so when you need a plumber, we can help you get the job done right, guaranteed. get started today at angie's list. images, videos, social updates. we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud, we can help an energy company predict pipeline corrosion. and help a start-up to use social data to predict market trends. now businesses can get more out of their data.
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the fed's decision is about 35 minutes away. that is keeping a lid on a lot of the action across asset classes. we have gold here, $1250 an ounce. what is interesting is that as we sort of push to session highs or close to session highs on gold, we have also seen the same move in the equities market or the s&p 500 right now. just points away from session highs as we await the fed. taking a check on the rest of the metals, we have big moves in silver as well as palladium. each up by 1%. copper is trade together down side right now, down by .9%. let's get a check on the bond market, of course, ahead of the fed decision. rick santelli is all over the action. >> absolutely. you know where we're going to start? we're not starting with u.s. rates. we're not starting with europe rates. we're going to start with the meeting that everybody is looking at with the most anxiety and that is the bank of japan. let's look at a ten year jgb. before you see the chart, remember, everything is relative. we're at the highest yields since the 29th of march.
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now show the chart. and what is that super high yield? minus 5 basis points. but, yes, it's still up. and it's up more. what does that mean? does that mean that investors just don't think the bank of japan could continue down the expressway of negative rates and buying equities? maybe. but look at how all the sovereigns look. let's keep that same date. look at our ten year from, what, 170 to over 190. look add booms. almost double the yield. these are important moves in front of important meetings. and on the dollar index, never before has it been so easy to decide what investors think about central banks. let's go to year to date chart. let's plop the dow on it. let's plop the dollar index on it. could anything be easier snt dollar looks strong at the beginning of the year. anybody remember how stocks look ted beginning of the year? look what happens when they cross. this san important chart. like it or not, the baby called the dollar index now has a babysitter and called the
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federal reserve. back to you. >> rick santelli, thank you. >> we're just about as rick mentioned, half an hour away. 33 minutes to be exact from the fed's latest decision on rates. ♪ i built my business with passion. but i keep it growing by making every dollar count. that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪
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hello, everyone. here's your cnbc update. dennis hastert getting 15 months in prison in connection with hush money paid to cover up sex abuse allegations. the judge calling hastert a serial child molester. during today' sentencing, he is required to enter a sex offender treatment program. there is the 74-year-old arriving at the chicago court this morning. >> the u.s. attorney in new york holding a news conference today on the arrests of more than 120 people in the bronx in what is being referred to as the largest gang takedown in that city's history. they are charged in connection with narcotics trafficking, robbery, attempted murder, and murder. >> officials say a 62-year-old woman has died after a tree fell on her home at strong storms swept through northern texas.
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the weather spurred three tornadoes last night. and mcdonald's is testing a new chicken mcnugget recipe which does not include preservetives. they rolled out the new nuggets or mcnuggets, i should say in, oregon and washington last movement it is the latest move to boost business by offering healthier food. well, all day breakfast is working for them. we'll see whether this does. that's the news update this hour. back to you. >> i wonder if the taste changes based on the lack of preservetives. >> you know what? hopefully it's better. i think they're banking on it being better. >> yeah. >> you never know. >> thank you. there's been a shift in the markets with money coming out of certain sectors like technology going into sectors like energy and materials. let's talk about that rotation and valuation. two key things driving the markets, bob pisani is with me. they did a little switch today. we start off with bob. this has been a rotation we've seen basically year to date.
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energy materials is, what, driven the markets higher. >> but it's been more noticeable even this month. so we had a terrible week and a half in, of course, the technology area. tech is down 4% for the month. but you notice the market is not falling apart. we're get something very interesting rotation. energy had an absolute great month. it's been up 9%. materials are strong. look at the banks up about will 8% as well. so what is down? consumer staples. that was a big market leader. tech is down. we're seeing rotation out. i think this is pretty healthy right now. i think the big question we have to deal with is valuation. is the market fairly valued? what is going to get the market to the next highest level? >> we're just talking to jack yesterday from vanguard. and he said that he thinks the market is sort of overvalued right now. i mean the ratio that he's looking at is 22. gap earnings basis. you know, for the rest of us, we sometimes look at 19 right now. on the s&p 500. that is bumping up against historical highs. >> it is. to put it in perspective, yes,
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that 19% on a trailing 12 months is near the multiyear highs right now. if you take a look at some of the sectors bob was talking about earlier with regard to the valuation side of this particular discussion, we all know that there have been favorites over the course of the past 12 months, arguably longer. you're talking about the likes of those consumer staples. manufacture the stocks near their record high levels right now. they are dividend payers. and then can you probably call utilities some of the ultimate dividend payers out there, the one synonymous with collecting that paycheck every quarter from the utility companies that don't really grow but also just spin off lots of cash they pay out to shareholders. over the course of the past 12 months as can you see, there you're talking about 6% to 7% gains per staples, consumer staples and utilities. that trade again, like bob said, hasn't been there as much for the staples on a year to date basis, however, it still is there over the past 12 months. now materials and energy, can you see here both of these guys over the course of this year to date have been star performers.
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they are, again, up pretty decently just on a year to date basis. but still, down marketedly over the past 12 months. i spoke to art cash as an earlier. a rotation is a very big on going type event. we could be in the early innings of one but art cashan doesn't feel there is enough data or information to say if there is a rotation happening. it is still too early to tell. right now it could just be investors getting into some of the beaten down energy names, not a wholesale liquidation. >> i think the verdict is out also because energy materials are smaller sectors on the s&p 500. tech and financials are clearly the bigger. we start to see on the seeds of a rotation in financials, perhaps, but not so much in technology and apple and twitter today are two example of why people are gun-shy about tech. >> let's answer this question. what gets stocks to new highs? there are two things here. number one, i see a weak dollar. if we can get a weak dollar, you'll see the industrials --
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>> continued weakness. >> you'll see positive comments from industrials, materials, even energy stocks. the second thing would be ending the earnings recession. if we can say in the second quarter that finally after four consecutive quarters of negative earnings growth for the s&p 500, we're flat up to slightly, i think that will change the tone of the conversation a little bit and may get us to new highs. but right now i say that is 50/50. we're down 3% for the second quarter. that's what matters. that's what the guidance looks like. >> dom chu, thank you. thanks, bob. >> let's pick it up where we just left off. on the topic of rotation with art hogan, chief market strategist at wonderlic securities and our other analyst seas the rotations are having a positive impact on the markets right now. art, why don't you elaborate here? we're rotating from what to what? why is that good? >> i tell you, it's good because you're not going to get the new highs of this market if the defensive sectors, the dividend
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darlings are the leadership. i think that's important. i think valuations, whether it's utilities or staples or tell comes, very stressed in the first quarter this year and towards the end of last year. multiples were high. yields were low. they were getting dangerously overstretched. you need to see the rotation out of those sectors and into underperformers. we're starting to seat seeds of that. first week of earnings season was lifted a bit even without rising interest rate environment. i think that is healthy. health care is certainly catching a bid here. i think the industrials are actually catching a bit here. if we can actually see that, if we can see that rotation continue and really start at the end of the first quarter, you actually saw it, you know, people dumping utilities. they were expensive and rotating things that had not performed yet, i think that is a healthy, new, constructive development. >> how do you characterize what
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rotation you see and whether it's from sector to sector and large cap to small cap. and what does it imply about the things i should buy and sell now? >> well, tyler, thank you. first i'd like to say you know the market breadth has increased. if you look at the advance/decline line for small caps and s&p 500 and looks like mid caps as well, what you're seeing is a spike. you're getting really good breadth in the market which is g you don't have five or six or seven companies representing the returns. s&p 500 has been flat for the last couple days but you had good performance within the index. so that is actually great. so on a sector sort of rotation, i've seen a lot of people selling down. your home improvement retailers like home depot and lowes using that money to buy home builders. that's a good rotation. i don't think this is one of the things where you're buying beaten down companies. you're recognizing that it's going to be hard to justify the values and utilities and
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telecom, home improvement retailers and buying things like financials and energy. i think that is the place where you're going to get really good outperformance. people don't like the sectors for a couple of months, maybe even quarters. and i think that's where, you know, if you look out six or seven months, that's where the returns are going to come from. >> jamie, finally, one quick question for art hogan. transports, you say, are sending a signal. what is it and why is it important? >> it's hard to hide economic activity from the transports. we saw them move earlier in the fourth quarter last year. we're seeing fist quarter they are year. pay close attention to. that the economy is better and we're giving you credit for it. so it's a dow theory thing and confirmed. keep a close eye on the transports. they outperformed. >> jamie and they're down though for the year so far. but starting to make a maybe a little move. there jaky ce jamie cox with has and art hogan, thanks very much. apple stock continuing to cost investors money today. i'm not supposed to read. that that's for you. go ahead. >> you have a much better voice
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than i do, tyler. i was enjoying it. >> i think it's a tossup. >> you were staring at my face which is never a good thing. >> no, not at all. >> apple stock -- wait! did he agree to that? >> yes. >> i second that. anyway. >> apple stock continuing to cost investors money today. that's what i get for having a cavalier co-host, literally. it's the worst day for apple stock in more than two years. tim cook making a note in last night's announcement. he's aware of the issues and assures investors he's building for the future. i guess that is building for the past, with deals in r & d spending. aside from the watch is ch is really a derivative product of the phone, apple hasn't had a big product launch since the ipad six years ago. joining us is ben mayo. that was my view. i wrote it up as an p will consumer on appling's biggest challenges and opportunities
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right now. do you agree with me that they really haven't come out with anything new in years? >> yeah. i think you were too dismissive of the watch's product. there are still a lot of iphone users in the base to continue to sell to. and at the moment, the ipad is declining. it may be the only product by your standards. the watch probably has longer opportunity if they can sell to every iphone customer. >> fair enough. that is the weakest part of the argument. you know, the watch, you can't use it without a phone. but that was, you're right, the weakest part of the argument. the ipad was six years ago and all we got is a little bigger screen, slightly faster processor. battery life is still terrible. what you would like to see apple do? >> well, i think they are starting it already with the iphone sc. they're bringing iphone down market. they have base price. that's going to expand the growth. they already said that india and
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china are big uptick in that. we'll see that in the june quarter. and looking beyond, they're going to expand on services. at least the biggest growth right now. it's the biggest growth sector. they're going to find new ways for developors to make money. then they make money because they take a cut from development income. apple music is growing. that will grow higher. and that was the first subscription service which implies they'll do more. potentially a skinny bundle. >> sure. >> i want to bring knew this conversation because we have been talking about, you know, the fact that apple could actually move the needful they focused on services which are still, i mean, we're talking $6 billion in the quarter versus $50 billion in revenue for the quarter. there is a relatively small part of the overall pie when it comes to revenues. but what -- i mean could it be better off if they just focus on making the right acquisition at this point? >> well, i really -- when you
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look at the services business, what i've been thinking about is why can't apple package in things like itunes, i cloud, potentially a tv service and app store and create a monthly subscription revenue, call it $25, $30, $35 a month and looks like amazon prime and gets them away from this idea that they kons instantly have to be producing these hit products. that is a very challenging business. you know, brian captured in his column. you're constantly reliant upon something topping the previous product and then you have -- when you do really well, you have the previous year's comps as this year, you know, they were unable to compete with iphone six numbers. if you start to move towards more of a software business, investors can start to think about the company a little bit differently. and the reoccurring revenue is much more predictable. the business grew 20% year over year. they have many opportunities there that they haven't tapped yet. >> all right, we're going to leave it. there we have am, twitter, the
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fed, all kinds of stuff going on. we'll leave you guys. thank you very much, i appreciate it. >> thank you. >> is tim cook's strength in innovation, is it in management? is it in something else? which may be more important to apple's future? we'll talk about just that when "power lunch" returns. the e-class has 11 intelligent
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welcome back to "power lunch," everybody. we're counting down to the big fed decision at the top of hour, 11 minutes from now. here for more on what to expect, david kelly, chief global strategist. david, welcome. good to have you with us. have the -- i asked an earlier guest today, have the data that the fed seems -- says they're so dependent on globally or nationally changed very much since the last meeting? are things getting better? worse? the same? >> i think the gdp numbers are going to be weak.
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we're going to get, i think question get a negative read on gdp tomorrow morning. so, you know, if a narrow focus, the numbers would actually have gotten weaker. it did come down a little in march. we had a stabilization of the dollar. we had a stabilization of oil prices and stabilization in global -- all the global developers there are freaked out b i don't think the data got better but the world got more stable. that should make them a little less dovish. >> would what you would like to see them say or do in ten minute's time? >> i think the important thing is for them to reinsert language saying that risks are balanced. what they've got to do is set up the expectation that june is a live meeting. because what happens is you go to the meetings and everybody says, not going to raise rates. they don't want to surprise people so they don't raise rates. they need to set up the possibility that they will raise rates in june and then go ahead and do. that. >> what does the market do in response to that, david? >> well, you could see a little bit of air pop in the dollar.
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you could see a little bit of a pop in long term interest rates. the market may selloff. but that's very short term stuff. ultimately, it is good for the economy for -- if the federal reserve tries to get back to a more normal monetary policy. i think that will be good for equities, not particularly good for fixed income. i don't think can you tell what the dollar does off central bank moves anymore. >> bob, we look at the global markets, bob doll joining us now. they use the that statement once in the last statement. the shanghai composite up is. stabilized. do you feel the world, the global which is really china, is secure enough for the fed to put that rate hike back on the table? maybe not today, but in june? >> i do. i hope so. look, predicting those things we know is a fool's game. we go back to september and then the november problem and then december it was okay again. so, look, china is going to be touch and go.
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i think in the main things are a bit more stable and like david said, they want to set up the possibility where they can go, assuming china and the rest of the world is good enough. here in the u.s., another hike makes all the sense in the world. >> bob, is now a time to buy stocks or take risk off the table and buy something else? >> so i would be a little cautious on equities. they have run hard. mostly pe as the world has gotten more stable in people's minds. i don't think it's that simple. we need better earnings. and the three things we need for that, oil has to behave. ie, not go back down. the dollar has to behave, ie, not go back up. and we have pmis and isms, the high frequent data showing better numbers if that continues, we'll get better earnings in the second half. that will justify better prices. >> sit tight. we have the fed coming up in 8 1/2 minutes. we have stock breaking news on exxon. >> brian, exxonmobil raising the quarterly dividend to 75 cents
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per share. that represents a 2.7% increase. this new dividend payable on june 10th to shareholders on record as of close of may 13th. of course, very interesting timing just yesterday exxonmobil losing the aaa rating at smp and the volatility we've been seeing in the oil market, hasn't been good for this company. but again, exxonmobil raising its quarterly dividend. back to you. >> final question, david and bob. very quick answer here. one rate hike this year? two or more? what do you say, bob? you first. >> at least one. i hope it's two. that would meent world is in good shape. i'll go for two. >> all right. going for two there. over/under is two, mr. kelly. what do you say? >> at least june. we have june and september and we'll see about december. >> call it 2 1/2. he can't tie. we don't want a tie. >> all right. gentlemen, thank you very much. we appreciate it. we're minutes away now and finally i'm reading copy that is mine, not bri's from the fed's
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latest interest rate decision.
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all right. let's forget apple and twitter and oil and exxon for a moment. something else big is set to happen in 4 1/2 minutes.
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the latest fed decision on interest rates. let's welcome in scott minor. good to see you, buddy. >> guggenheim partners. you change your name every week. steve liesman as well joining us here. >> steve liesman partners. >> steve liesman incorporated. thank you. i want to show you this, scott. since the january meeting, the dow is up 12%. since the march statement, the dow up is 4%. i know you don't agree with everything the fed is doing. i know you don't like everything the fed is doing. but don't fight the fed has been a pretty damn good investment strategy so far. should we stick by it? >> for sure. look, we have a fed put here, right? every time the market starts to go lower in a significant way, the central banks around the world, not just the fed, step up and promises us more liquidity and we should enjoy the party while it lasts. >> the fed put in play means learning to ride a bike. you have the dad or mom running behind the kid.
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the fed is keeping the stock market on the bike. >> that's right. they don't want to let risk assets fall in price too much. >> what exactly, though, is the put? is the put them staying on the sideline when it comes to the race? that put is going to expire. expiration is coming for that put. >> i think -- i think it depends on what every meeting calls for. if the market is doing well like it is today, the fed just stays on the sideline. if the market continues to improve, the fed decides to try to take the next move. >> i don't want to be overly technical about this, scott. the fed would put it a touch differently. they would say the put is on the economy and the extent to which the market reacted to bad economic news. i mean you saw something like 200 basis points or 2% come off the outlook for gdp in the first quarter. the fed may or may not have been ready to do an additional hike early on this spring. but that economic data weakened. the market weakened along it with. but you can have a situation
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where the market was down and falling but the economic data was good. and in that situation, in the absence of systemic risk, you could see the fed hike. just be a little careful and a little more precise? >> i don't quite agree with that, steve. the reason is -- >> you have 2:07 to make your point. >> you saw in january and february the stock markets and risk assets in general started to sell off. and everybody started talking about the fed going on hold. but, yet, if you look at gdp now at the atlanta fed, economic growth was doing just fine. so, you know, it doesn't seem that the correlation is a strong issue. >> i could come back and say the fed didn't really change the tune to the data changed. we asked several fed officials amid the volatility were you ready to change your outlook? fisher and williams said, no. it was only when the economic data came. right now, let's not spend our remaining minute on it. today, the -- if you get
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anything hawkish sh it's going to be what you were talking about earlier, brian. some reduction in the sense of global risk that is out. there it was mentioned twice. it may be mentioned once or not at all. i don't think they go as far to restore the balance of risk. they're not there yet. i think june is still a possibility for a rate hike. i don't know how much of a clue we're going to get in this statement now coming in one minute. >> you would agree with the previous guest? you have 20 seconds here, which is -- you're welcome, buddy. now you have will 18. >> he's a smart guy. >> he s. >> which is the fed needs to leave something on the table. they can't just close the door. >> the fed has to leave data dependcy on the table. that's their card. so i think they're going to tell us they're willing to maybe be a little more hawkish here. but it's all data dependent. >> all right. well ahead of the fed, here is your setup, folks. the dow jones industrial average up 12 points. of course, apple is this huge drag. exxon and the oil companies like chevron also doing well. exxon just raised the dividend by two cents.
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yield on the ten year treasury note is 1.9%. the price of crude oil at $44.63. gold was $1250 per ounce. so really not much has moved the markets in waiting mode. we're going to wait here in just four seconds. the fed decision. hampton? >> the open market committee decided to leave the target range for the fed funds rate at 1.25% in determining the size of future adjustment to that target range, the open market committee says they'll assess realized and economic conditions relative to the objectives of maximum floiment and 2% inflation. this assessment will take into account a wide range of information including measures of labor market conditions, indicators of inflation pressures and inflation expectations and readings on financial and international developments. the open market committee goes on to say that in light of the current short fall of inflation from 2%, the committee will
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carefully monitor progress on its inflation goals. the actual path of the fed funds rate will depend on the economic outlook as informed by incoming dat yach data. since the last meeting in march, essentially the open market committee sees an economy where labor market conditions have improved further even as growth at economic activity appears to have slowed. growth in household spending has moderated. although households real income has risen at a solid rate and consumer sentiment remains high. the housing sector improved further. business fixed investment and exports have been soft. market based measures of inflation compensation remain low. survey based measures of longer term inflation expectations are little changed. the committee currently expects -- this is the overview now, with gradual adjustments and monetary policy, economic
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activity will kplaexpand at a moderate pace. there was a dissent as far as this latest statement. the voting against the action. esther george who preferred the meeting to raise the target range for the fed funds rate from .5% to .75%. >> thank you very much. so this is what we have become in about a collective 100 years of business journalism. we are fed word counters. this is as far as i can tell almost a cut and paste of the march 1 with the exception of the economic activity appears to have slowed as the second sentence in the first one, the rest of it is almost exactly the same. >> i'm looking for the global bit. >> they used global one time. >> so they reduced that a little bit here, right? >> they did. there was a 50% reduction in the world global. two times in the march 1. >> that is coming off the boil.
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and really that second parra graph that they said global and financial developments pose risk. that is out. that is something they can do in terms of creating a very gradual backdrop to a change. remember, theoretically, the federal reserve is in a tightening cycle. >> by not mentioning global as much, that seems to be hawkish in and of itself. is the way -- i mean with the markets right now are interpreting it, by the way -- >> they took it out first time. is it in there at all? it is in the second one. right. they say indicators and global and financial developments. it's in there once but a changed way. otherwise, brian, i want to spend this time to agree with you. it is similar in that regard. i think you're right. but the market should expect. this we'll get to scott in a second. the fed in the absence of two things, one is worsening economic data and, two, in the absence of sort of lowering inflation, the fed is going to
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set the stage to do another rate hike. it's not going to pull the trigg trigger. it's going to give you fair warning. this is a step in that direction and a step i expect. >> it is fair warning for june? >> if the data come around, let's say you get another strong jobs report. let's say, look, scott, one of the big questions for investors, this is what is interesting about this discussion. it goes beyond just the fed. it goes directly to investing at this moment. we saw how -- i can use the word sucked in terms of earnings? yeah. >> so the question for everybody right now that has to do with both the fed and with investing in the market is do we get that second quarter rebound? i'll remind you of the work we've done here at cnbc on the first quarter weakness that has to do with seasonal adjustments. that may or may not be the case this time. we have the nice second quarter rebounds, real, real pain in the earnings place in the earnings department. and if that comes back, then there is investment proposition.
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there it could come along, you know, with another quarter point rate hike it with. >> i want to take tout markets here and see how we're reacting to this statement. the s&p 500 are just two points below where we started going into the fed decision. where are we seeing the most interesting moves in the market? if you peel back the layers, in the bank stocks. take a look at the s & p bank index. that's where we saw the spike higher. the kbb is at etf and it's up by more than 1%. that was a definite spike higher on this. immediately, when i just took a look at the screen, the immediate interpretation is there is a hike and it's coming. >> let me give you the normal caveat. be careful about interpreting the markets interpretation of the fed. >> of course. >> in the first couple minutes. right now, there are no human beings running the market. it is allal garon antibiotics. >> you have a human right here. >> let's get to the human down at the new york stock exchange. >> he is really human? >> i believe so. >> i'm not sure.
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i am not sure. >> dom? >> i'm a robot, guys. >> we know that, the way you work. simon, i'm sitting next to simon hobbs. i think we agree that i'm a robot sometimes. i don't know if i'm really. there. >> hey, hey. >> simon is yelling at me right now. i'll say this, though. to your point about whether or not it's computers and what not trading it, a lot of professionals tell you the first few moments after this release or before a release are really going to be about order positioning. so the kinds of volatility that you see, the up and down movements, you'll notice say ten year yields, five year yields and also the price of gold, we saw immediate knee jerk reactions and now are moving towards generally where we were in those markets before the release actually came out. so, yes, computerized trading has something to do it with. also people put their stop loss orders or profit orders, that has snog do it with as well. when you take a look at where the markets stand overall, the dow is higher going into it. and now it's, yes, modestly higher after a few minutes here. 15 points to the upside. the ten year yield, 1.88%,
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generally speaking around where we were when that release first came out. so the market reaction here has been muted. i'd be interested to see, you refer to the bank index etfs whether or not we see the spikes higher maintain that way. >> and as we're speaking, dom, if you look at the intraday cla chart, they're giving back that gains and we're seeing that interesting handoff to the high yield through the dividend payer stocks that have been leading this market higher so far. if the dividend yielding stocks are moving higher, then maybe there are some doubts, you know, amongst market participates as to whether or not that hike is coming in june. >> i think the question we have to ask ourselves about june is will the fed take into consideration the brexit in the week to fall? >> that's a good point. >> i think if that -- if the surveys are showing this is close -- >> so they hold off. >> they will hold off. they will not want -- if the markets have a lot of turmoil in
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europe, i think the fed will be loathe to consider reversing itself. >> but they can't say that. >> no. >> janet yellen says ifening glanld leaves the eu, you may have to -- >> you could imagine the brains at the fed fashioning language that makes it clear that they're worried about potential global political developments. that is a wink and nod towards brexit. it's a kiconcern of theirs. if the polls were to go the other way and show that britain was to stay, june could be a potential oportune time. it should not be -- i hope it's not trading with the idea that the fed is never going to move. if that's the case, then the market is potentially way offsides. that's a danger. >> final thought before we go to rick. >> you think, steve, before we get to this june meeting that they'll have enough data to take action or do you think that if
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the economy were starting to look stronger that they might very well just use that as the opportunity to signal the july was on the table and live for a bit? >> they can do that. you have two jobs reports. you know, all of this thing that we're doing at cnbc and the federal reserve banks are doing about the gdp now stuff is giving us a better real time tracking as to where the potential gdp numbers. it doesn't change the problems in the gdp number. i think there are better tools out there to know where we are at this moment. i think it's possible they could have that data. it's got to be definitive. the fed told us, it's not going to make a mistake, you know, with a marginal movement in the economy. we have to be back on this 2%. >> they have to be bok on this 3% growth path. >> i know we're going to rick. the brexit vote is -- i hate that word, by the way, june 23rd. the fed meeting is june 15th. the latest poll from the telegraph shows a 5% swing between leave and don't leave. with stay leading.
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>> by the way, utilities and telcom close to session highs after this fed decision. >> let's look at the yield on the ten year note, scott. thank you very much. 1.90, up a little bit. it was 1.89 and change heading in. rick santelli is in chicago. hi, rick. >> hi, tyler. the reason computerized trading moves markets is because the fed isn't a guidance counsellor anymore. this sun employment number friday. the reason the markets do that, it doesn't matter if it's computers or people is because we're looking at a fundamental release of information that is market moving and has to go through the system like any other number. but it's the trend. jobs pri, we have a lot of information in the market that doesn't prove to have a long lasting effect. dollar index is where it's at.
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it was down and then up a quarter of a cent. now it's unchanged. fwhaut activity looks like base ond where the stock market is now, that is at the epicenter. this on going less strong dollar is key. it's telling us no matter what janet yellen says, the markets right now are not fearful that anything imminent on the tightening is happening. twos were at 84. they're back up to 86. yields, they got up to 192. they got down to 187. i think after it all simmers, all the markets and rates are going to be at or higher than they were before the announcement and the dollar will be lower which will leave stocks for a grand performance this afternoon. back to you. >> rick, is it negative or positive? how are they interpreting it? >> we could play the word game. >> we have a passivist fed. they're going to stay status quo
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or create this is a close call. we may go next time. we may go next year. we may go sometime. i don't know. i keep it simple. the election is in november. if there is any tightening, it will happen after. th that. >> let's not worry about the foulst fed. we're on the highs of the day. the smashgt making it dovish. the dow and s&p 500 is at the highs. the dow up is 60. let's turn now to bill gross of janice. all right, bill, before we get to some investing ideas and thoughts, do you agree with the discussion we just had which is that while they'll never come out and say it explicitly, the federal reserve behind closed doors is talking about a potential british exit from the eu and is worried enough to keep things on hold in june? >> i don't think so. not that it's not important. i think that the fed is focused on global market conditions to
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the extent that brexit affects. that i think what they have in the radar are the employment numbers as opposed to real economic growth. this quarter for almost the second quarter in a row were close to the flat line. the jobs market is doing better. so, you know, as long as jobs keep going at 200,000, you know, a month, i think that the fed is well on its way to a june hike. >> what i like you about, bill, you've thrown your hands up at the fed as well. you're outperforming most peers because you look around the world. you look at brazil and mexico and deep near the emerging markets. should we be focusing more on that and just sort of, like, throwing up our hands at the fed
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and the u.s. here? >> well, i think we should be focusing, as i mentioned before, on the fact that, you know, basically financial assets are yielding nothing. we know that in the band market. the fact that we're seeing today in the stock market, they're clearly is a yellen put. we're seeing emerging market rallies, for sure. they're acknowledging that the fed is the world's global central banker. to me that, should keep hikes at a minimum because of the high debt levels of emerging market countries. >> you've really gotten specific
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with ideas. keurig and green mountain. i don't think i ever heard you mention an individual stock. keurig has done well. you've been on brazil. any new investment that crossed your table that you love since the last time you and i spoke? >> i don't think investors can buy this now because the london market is cloised. there is a situation between miller beer and busch which is buying miller. you know, on the london market at the stock symbol is sab. they can buy it tomorrow morning. you know, the price that busch is paying is $44 a share or in term that's a little different. it trades at 42. a dollar dividend along the way over the next six months, you know sh it's a 5% to 6% return type of vehicle. this situation they've already raised, you know, 50 billion to 60 billion in the global bond
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markets. i think it's a pretty safe arbitrage type situation which is sort of bond like. >> it's an odd spread. there is headline concern over will the deal get done or will something be sold off? you're betting it will. that is a 5% or 6% spread and a bet you're willing to take? >> that's a good analysis, brian. yeah. there is risk in terms of disclosing the assets. they're selling smaller beer companies and still up to, you know, regulatory approval and certain areas. i think this is a done deal. this price is not going to go up in the next five seconds after i mention it because it's relatively large. it is an etf. they mngsed bank preferred stocks. of course he should. but i like them, too.
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pff is an etf that invests in bank prefers. the volatility is relatively low compared to the stock market. i think that's a decent investment that janice is holding at the moment. >> okay. interesting ideas. the spread between sab and coors, i'm going to ask you just because we're asking everybody this, bill. i mean, do you have an under/over on fed rate hikes this year? >> let's say the market only anticipates one. it's 30 basis points, brian. that's what the market says. usually, i like to differ from the market or disagree with the market. but i think in this case, one hike is probably where we're at. the fed wants to normalize interest rates. and they did it once.
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what is normalization? basically, in their view at least it's a 2% fed funds level at some point, at some future date. can they do that? can they get there based upon this market put and global market conditions with situations that are emerging markets? he i don't really think. so they want to try. i think over the next six months and the balance of the year, yes, we're going to see one hike and probably not two. so if you're asking for an over/under relative to two, i'd take the under. >> take the under. going with the market you like beer deal spreads and preferred bank stock etfs. bill gross, real pleasure. thank you. >> we have breaking news. >> guys, we've got no official confirmation but multiple news sources are regarding that ted cruz is going to announce today
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that his running mate in the campaign will be carly fiorina. now keep in mind, ted cruz is very unlikely to be the republican nominee and need a running mate. but this san attempt by ted cruz to try to expand his support. he is really down to the wire trying to stop donald trump who swept the primaries with very large majorities last night, trying to stop him nind iin ind next week and it's a hail mary play to get people to take a fresh look at him against donald trump and see if there is some segment of people attracted by the idea of car lie fiorina. there is a very unconventional move but reflects the difficult position that ted cruz is in right now. >> can you remember a case where anyone ever tried this before? >> yes. in 1976 when ronald reagan was heading into the republican convention, trailing gerald ford and delegates, he named richard sh wiker from pennsylvania as his running mate to try to
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broaden his support. it wasn't successful. gerald ford won that nomination. this has been done before. but, again, it reflects the very difficult straits that ted cruz as well as john kasich are in right now trying to stop donald trump. >> your memory and knowledge of history amaze. john harwood, thank you very much. >> let's go back to apple. they posted the first ever decline in iphone sales. first revenue drop in more than a decade. has tim cook been innovative enough in the absence of steve jobs and he is more of a strong manager than an innovator? let's bring in bill george, senior fellow at the harvard business school. bill, let me begin with you. my recall is that mr. cook came out of a supply chain background. that that's where his real strength was. innovation?
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maybe not so much. the watch, but that's not a lot, bill. >> yeah, the pressure is really on tim. he needs an act two desperately. he is a supply chain guy. you got it exactly right. he has plenty of innovators under him. but i think he needs to stop just in krementally designing and come out with that breakthrough. this is where the secrecy is getting in the way. they should have tipped the market about this and let them know. don't go to the sky forever. we need to know what is coming. he's been very vague about vr and cars to me -- apple is really going to the car business, wow, that's a huge deal as opposed to teaming with tesla. i think there is an opportunity for an apple tv and i've been
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very surprised. if you have products that are complimentary, it works. why not an apple tv? i don't just mean shows on apple. >> a brand itself. >> bill mentioned and critical is a fair characterization of the lack of communication of a heads up about how just how troubled the numbers were going to be. do you think -- do you agree with that, number one? do you think apple has peaked? >> no, i even wrote about the fact that apple stopped innovating. the last big thing they did was nine years with the iphone. since then, they made it bigger and with the ipad and smaller with the watch. all this he keep doing is playing with the size. on the point he just made about apple getting into the car business, here's what apple needs. it needs an elan mus being rubbing it. what if apple bought tesla? it has the apple car and it
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makes the ceo, it has a real visionary. and tim cook is the person that does the execution. that would be the way to get apple and tesla both to the next level up. >> now that is a bold game changer. and he said, mr. cook in a statement today, said we may look at deals bigger than those we've done before. i'm not saying this is on his radar screen. but what a move that would be. is there, and i want to come back you to, bill, is there enough room for innovation that isn't incremental in their core product, the iphone? in other words, prior versions have gotten better. they've gotten bigger. the cameras are better. the screens have got -- is there that much more room for innovation there? >> not in that device. they need to now, you know, that is a 10 year old device. they've done everything they can with it. and sam sung, even blackberry have similar or better ratings than the iphone does.
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that is the biggest slap in the face you could possibly have. black berry almost ranging te r same as the iphone? time to move on. elan would transform this company as much as steve jobs. >> we have stanford and harvard on the east coast. he has just thrown a long bomb here about buying tesla. how does that sit with you? you got about 30 seconds, bill. >> i thought that is the most creative idea i heard in a long time. i think it's a brilliant idea. and they need to make this next step, this next breakthrough and, boy, he gets it. and that would be a way to get the apple up. they haven't spent a high percentage on r & d, tyler. he's been very slow at doing. that i think there is plenty of opportunities and other
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entertainment products that they need to go into while they're doing the big thing. they need to stop getting distracted by the department of justice and get back to innovating. i do think he needs a partner. i think that's a great idea. >> fantastic. "power lunch" will be right back. thanks, guys. [ soft music ]
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27 minutes after the fed
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decision, three minutes before the oil close. take a look at what is going on with wti. these are session highs right now. 45-43 is the level. after the fed decision, the interpretation of investors is largely that the fed statement was pretty dovish. we saw weakening of the u.s. dollar. the dollar index we saw strengthening and the commodities index as well. take a look at what is going on in the sectors of the s&p 500. we're seeing that dovish interpretation filter through no what sectors are performing best. we have tell come higher. the dividend stocks are doing well today. telecom. we have much more "power lunch" after this break. got a nice lo. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you.
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with twenty-five percent more base horsepower. once driven, there's no going back. hi, everyone. here is your cnbc news update that hour. a development in the paris terror attack case. the lawyer for the bomber says charges have been filed in connection with the deadly november attacks. the 26-year-old was captured in belgium after four months on the run. he was returned to france today. >> the fbi will not disclose how it accessed a locked iphone used by one of the san bernardino, california, terror attackers.
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they don't have enough technical information about the software vulnerability exploited to make it public. spacex ceo announcing plans to send a dragon capsule to mars by 2018. he is dubbing the spacecraft red dragon. he is also behind electric carmaker tesla is using dragons for international space station runs. and organizers of the rio games getting the olympic torch today with the opening ceremony just with 00 days away. the ceremony held at the stadium in athens. the flame reaches brazil next tuesday. that's the news update i have my very own rio hat. there we go. that's the logo. all right. "power lunch" is back after a quick break.
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take a look at shares of apple. it's off the lows for the day. still down more than earlier in the session. the day after posting the first revenue decline since 20036789 tim cook spoke on the earns call addressing the quote, busy and challenging quarter. his iphone salz fall, a lot of people speculating what is in the pipeline for the growth strategy. tim cook feeling confident that
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india is a really great growth opportunity. he's optimistic about china over the long term. alyssa carol is branding expert and brian buckwald is he could founder of consumer research firm bemoda. great to you have us with. i'll start off with you, alyssa. what is apple doing? is apple marketing and branding its products incorrectly or does it not have the right products that resonate with consumers now? >> so one of the biggest issues with apple is that apple has really established its brand based on the otherness in the category. they've always been seen as the option that was simple, innovative, and really more than anything aspirational. but at this point, they're losing that excitement that products had and they had a plateau in term of the technology they're bringing out. we're seeing less and less new features which is shortening that upgrade feature cycle and people are not having the same drive to buy the new products. people are holding on to phones
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longer and i pads. >> so there is no innovation right now. >> absolutely. i know you think that it being able to come out with the new features would give them more talking points. that's what people come to apple for is that exact same kind of innovation which they're really losing. >> does the cool -- it's the cool factor. >> absolutely. >> and a little less cool right now than maybe they were five, six, seven years ago. brian, do you gr we that? let's pivot to china and the company's challenges there. they still seem to be doing pretty well in china. even though the economy is down a little bit. what do you expect going forward? what is the biggest concern they might have in that country? >> sure. sure. i look at china really as a microcosm of the larger apple story which is rapid growth, high profitability, aspirational consumer base. now they have a relatively large entrenched base in china that is now waiting for the next great upgrade or product.
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the product is losing certainly a little bit of luster. i think when apple thinks about what comes next in china, i bucket it into two primary areas. first, are they going to do something new? are they going to reignite that desire to own an apple product, to make that aspirational middle class desire it? that's tvd. the secretaryish sue what going on with the government right now snt government in china likes to allow american businesses or western businesses to get just large enough. we've seen some movement over the last couple months that might make us question where some of the apple's vertically integrated strategies in terms of services and software and payments might actually be a hindrance in china rather than an accelerator of growth. >> recently the government in china pulled back on apple as license to sell books and movies through the itunes store.
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if that's an inducer to sell new hardware, apple is competing big players in china liwho also hava relatively vertically integrated strategy. they're selling similar types of products and services. what happens if apple can't compete? >> alyssa, when you take a look at p will's china strategy, do you see how they're marketing themselves out there as a problem as well? to brian's point, they're starting to look more and more like competitors when you take that ecosystem part out of the equation. >> yeah. i think that, again, coming back to the aspirational elements of apple here. what they need to do is re-estabilsh some of that luxury that people used to associate with the apple brand. that's always been the differentiator. they're a little easier to use. they're sleeker. they have the design principles that sam sung and some of the other companies have not been able to achieve. they need to align themselves with the influencers we see.
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you know, here they're aligning themselves with millennial infli influencers. >> we're going to leave it. there thank you so much. brian? >> all right. so let's talk tech with a trading nation team. aaron gibbs and technician with strategic research partners. does microsoft last week and april toll day scare you, scare s & p away from technology stocks generally? >> number and actually, when we look at a lot of the technology stocks, even for the nasdaq 100 to the average stocks so far has beaten the estimate business 6%. they haven't been missing. we really see a lot of the recent misses as very much as the outliars. one thing we saw with apple is they noted the slowness of revenue growth coming out of china. but actually we've seen a lot of consumer discretionary and tech
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names so far in earnings season report strength coming out of china. i see these as outliars. and earning seasons looks to be pretty good. tech and overall for the younger companies. so we're not scared off yet. we've got some really good growth numbers going forward. valuations are not cheap but not rich either. >> okay. chart the qqq tech etf for us, please. >> well, i think what is most important is in light of some pretty decent numbers, the stocks have not responded that well. we're always a little nervous when things don't go up on good news. and the qs peaked two weeks ago. they have not participated with last leg up for the s & p. we're starting to see some signs of exhaustion there. and it's not just apple. when you look at this index, only 50%st stocks in the qs are above the 200 day moving average. when we look at the name, whether it's expedia or netflix,
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there is some missing piece that's lee was a little uncomfortable about the index. >> okay, through go. erin gibbs is not as concerned. thank you both. for more trading nation go, to our website. next up, we're going back to iran. a very cool story there with michelle caruso cabrera. i'm on a tug boat in the persian gulf off cark. there is where 90% of iran's exports leave through. coming up on "power lunch," a behind the scenes look at the iranian oil industry. you both have a
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to iran now. we have a rare western journalist visiting that country.
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even as today iran's supreme leader blasted america saying the u.s. created people to be scared of iran to discourage people from doing business with that country. michelle? >> that's the ayatollah khomeini complaining, tyler bshgts fact that iran did a deal with the west over its nuclear program. it lifted nuclear sanctions. they're not seeing a lot of economic benefit. not a lot of foreign companies diving back in here because whether it comes to banks, there are great concerns about doing business in a country that is accused by the international community of engaging in money laundering and engaging in the funding of terrorism. so maybe that part of the deal has not worked out. what has worked out is that iran is able to sell a lot more oil. they are exporting one million barrels per day more than at the height of the sanctions. we traveled to the place where they bring in all that cash. this place is iran's cash machine. it's the island of kark, 25
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miles after the coast, dedicated solely to shipping oil. 90% of iran's crude exports leave from here. cnbc was given rare access to the island as the country prepares for increased exports now that nuclear sanctions have been lifted. these tanks have the capacity to store up to 28 million barrels of crude at any one time. but they also serve as a political billboard. oil and geo politics go hand in hand. that's on full display here at this iranian export facility. take a look behind me. persian gulf, written in english in very large letters on this storage tank. why? the export manager tells me every single time a tanker pulls in, he wants them to know that they are in the persian gulf. the name of this body of water is disputed by saudi arabia. they call it the arabian gulf. while the rest of the world calls it the persian gulf. this is what the tankers are here for. slick black crude. >> am i allowed to touch it? >> the head of exports from the
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oil company opened the spout for us. and then took us out to sea on a tug boat. this is where all the international oil tankers pull up so they can fill up with iranian crude. the iranians are hoping now with the lifting of the nuclear sanctions they'll be filling up a lot more tankers than they have for years. before the toughest of the sanctions were imposed by the west, iran was exporting more than two million barrels a day of crude and other petroleum products. the an sanctions pushed them to 700,000. the workers insist the sanctions were never a problem, instead calling them an opportunity. it forced iranians to learn how to make their own replacement parts. for example this turbine meter from smith systems of corpus christi, texas, the iranians say it was installed in 1984. once american companies were prohibited from doing business with iran, they could no longer get the replacement parts. so iranian engineers
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manufacturered them themselves. on the walls of the room, photos of the severe damage suffered in the war in the 1908's. outside, a tribute to the first victim of that war. side by side with the former and current leaders of the country. ayatollah's khomeni and komanehi, the first and second clerics to rule over iran since the revolution in 1979. yet another reminder that politics and oil are deeply intertwined. that same ayatollah who is complaining about the deal so iran just this week the oil minister announced that he thinks they're going to be back to their presanction levels by end of june. that would mean theoretically that they're back to their opec quota. so it's raised the question in the market, if iran does get back to those levels, does that mean they finally be willing to make a deal? remember they're the ones that scuttled the whole -- brian's
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whole trip to ckutar. >> thank you, michelle. coming up, "street talk", the five stocks we think you need to know about. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of the at&t network, a network that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t. which allergyeees. bees? eese. trees? eese. xerox helps hospitals use electronic health records so doctors provide more personalized care. cheese? cheese! patient care can work better. with xerox. that's it. how was your commute? good. yours? good. xerox real time analytics make transit systems run more smoothly...
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all right. imtime for "street talk"
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analysts' recommendations on the stock. that's is the pff, why are we showing you that one, melissa? >> i don't know, tell me. >> you can see that tickup. and rolled that out on the air. to "street talk," first up l-brands second call in a few days, deutsche bank starting with a buy and $95 target. the analyst cites five quick things number one, subsector, whatever that is, two, superior comps, 3, margin, four, entry levels, five, the stock levels. upgraded the stock from a buy to hold for $90. next step, gilead ahead of the april reports. a top line beat increasing its estimates for hepatitis c virus. because of potential of va
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money, veterans prescriptions are tracking down 5%. quarter on quarter. >> stock three is take two, bmo capital markets outperformed with a $46 target. they say the video game software is undergoing transformal changes mostly with games. you don't need the cartridge anymore. just blast it. >> for your atari. >> you get my point. you distribute it over the web. the weber thing. analysts there say the stock is undervalid. $1.2 billion net on the cash sheet. sonic the hedgehog that. >> next up, blooming brands there is trouble in the space with chipotle and buffalo wild wings. blooming brands up more than 1%. raymond james is reiterates it's
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outperforming. up $1.21. the stock could take a breather here given the run. and it's there's a potential for significant share repurchase. >> 38. stocks follow, what is the best restaurant stock this month? >> i don't know. >> bloomin brands. who would have thunk it. an upgrade from wells fargo. they raised the target. the company is doing great. i only bring it up a second time because it's up, i don't know, 8% since we talked about it a few weeks ago on a different upgrade. and wells fargo is getting on the total systems train. that's "street talk" for today. coming up next, we're taking you inside an $85 million mega mansion. this just got interesting. so why pause to take a pill?
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luxurious even by l.a. standards. but it's what's on the inside that makes this place one of a kind. >> as you walk in the door, you're greeted by the focal point which is this chandelier which goes from the ceiling and drops down ton this tree table that's got hundreds of thousands of crystals in it. >> the price tag for the chandelier, $1.5 million. the living room is covered with 450 laser-cut polished steel garlands, all twisted by hand. price tag $750,000. also has a gigantic movie theater, with a smack and popcorn bar. >> that house was priced at $85 million. now, it just actually went up to $88 million. 30,000 square feet. and you know, this is one of the most amazing, most expensive houses. >> melissa doesn't want it, she says it's too flashy. >> i'm a simple -- simple person
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sflp. >> bcbg, you know what it sondes for good style, good attitude. >> you know what bv stands for? bon voyage because the show is over. >> "closing bell" starts right now. ♪ hi, everybody, welcome to the "closing bell" i'm kelly evans at the know. and i'm bill griffeth. you know, the tech wreck is real and not just because it rhymes. results from netflix, alphabet, microsoft, apple and twitter have all disappointed. and investigators are going to wonder whether facebook is going to follow suit or buck the trend tonight. we'll tell you what to expect from the social network when it reports its earnings after the bell tonight. apple is the biggest loser on the dow. over 100 million shares have traded. it's down


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