Transcripts For CNBC Power Lunch 20180202

Lunch. The crypt o hits the fan im Tyler Mathisen the dow down and off to the worst week in two years. Energy is getting walloped apple shares on pace for the worst week in more than three months bond yields, this is the story, folks of the week. Maybe the story of the year. The 30year bond yield now above 3 highest level since march. The benchmark ten year jumping to a fouryear high above 2. 8 Steve Liesman is the man and he is joining us for the hour thanks, tyler im steveliesman we begin with the market, selloff concerns about Rising Interest Rates a big reason why. Bob pisani is at the New York Stock Exchange where weve just crossed the down 400 park. We bottom but the bad news is were not rising were sitting near the bottom and paralleling the 10year yield. We hit the highs about 2. 85 that was about 10 00 eastern time and that was when the market essentially stopped going down you could see it moves sideways. Take a look at the s p 500 and weve been moving sideways since 10 00. But were still sitting essentially at the bottom for the day. Take a look at the sector. The reflation trade, the industrial and materials, semi and energy, all weak banks which would benefit from higher rates are better than everybody else but still down. Health care is i Market Leader but still not as bad as the other sectors. So the bottom line is rates are a bit of a problem for stocks. The velocity of change, the phrase weve been using is accelerating the yield going from 2. 5 to 2. 8 in three weeks, faster than people anticipated wage growth with the new numbers. Highest level since 2009 an it is good news for workers but giving trade are we accelerating to a bound side is there a bottom here. No, not yet and we dont know where the tenyear is going. So the question is what is the real freakout mode. Were only 2. 5 from a historic high on the s p 500. That is not a lot. But the debate now is, is this the catalyst for a deeper correction i think the answer to that lies with the bond yields right now a. Until we get that, were not going to have an answer to whether that correction will be deeper bob, thanks and it was a healthy jobs report that started spooking the market this morning and compounded the market dilemma just how high the rates need to go and that jobs report was better than expected, up 200,000 with an estimate of 177,000, a slight revision and average hourly wages were up, 2. 9 year over year and the unemployment range unchanged and the Participation Rate at 62. 7 strong job growth and strong Economic Growth and rising rates puts incoming fed chairman Jerome Powell in a predicament out of the gate. Here is what i call the powell predicament. The tax cut stimulus and really increasing deficit spending and pumping money into the economy were below what fed the fed considers full employment. Inflation is expected to pick up and asset values are high. That argues for higher rates and on the other hand, you have a supply side aspect if there is greater capital spending, no inflation the Balance Sheet is declining that is also tightening financial conditions and it appears given the Unemployment Rate there is still slack in the labor market powell would be unlikely to raise hikes but the Economic Data and the Interest Rate market could force his hands. Isnt that what were seeing today. We saw the likelihood of a rate hike go higher the one in 2019. We dont have to guess about it if you want to put it up in the back but were looking at a 90 chance of a hike in march and 61 in the june. Thaer calling that up. And 54 in december and that is the third hike and now a new chart that im now for the first time showing you, this is the probability of the fourth hike only 11 in november 20 in december. An it is not going to be the fourth hike but it is the last contract we have a probability for. January 19, 60 chance we go to the 2. 25 and 2. 5 range. Thank you very much bob, thank you and what do investors do right now . Lets bring in jim mcdonald with Northern Trust and jim karen, Portfolio Manager with morgan stanley. Well call it jim glass. Jim mcdonald, let me start with you. What do you make of the market here and where do you think it goes well so tyler, it is funny that a month or two ago everyone was worried about the yield curvin verting and weve taken inversion off the table and have a healthy steepening three hikes priced in which is what the fed wants to do so i think this is a normal correction with good earning and stable inflation were still constructive on stocks. Jim, 2018 is not 2017, is it . No, it is not i think what were seeing is a rerating in the growth rate, in the u. S. Economy so it used to be the fact that we couldnt grow much about 2 and now it is becoming more commonly believed that we could stay above 2 . 2. 5 growth even maybe even higher than that. So i think it is pretty natural. Why not. Why arent interest why havent Interest Rates rise as much as they currently are right now. And by the way, rates are still low. So i dont really see this as a material problem unless tenyear treasury yields get to 3 and stay above 3 and that could take a material upgrade in growth into 2019 and into the later years. So for right now, i see this as a healthy correction i think yields need to be higher i think we need to reflect the sentiment that the fed may continue to hike Interest Rates. There may be a fourth hike even this year. So i dont see this as a problem yet. Only if tenyear treasury yields get above 3 and stay there and we see Inflation Expectations down the road. That is when it is a problem. Jim mcdonald, i think it is fascinating that investors point to the 3 level. Weve seen a massive move and the velocity in the ten year yield that has investors spooked. Were not far off and who knows where it stops that is the question here for investors. At what point do you see this in terms of threatening the valuation in the market, starting with equity risk premiums here . It is hard to have a specific point in mind as far as the level of rates i think maybe more importantly do rates move more than the fact is expecting the history does this tell us they are . The move that weve seen this week and the move in rates, doesnt that tell us that maybe they are moving faster than the markets had anticipated. Well so this is a very short period of time but to your point there is an extra hike priced into the market weve adjusted that. The markets come down about 3 from its peak. Unless we have a second leg, if it worries about inflation, the market got priced into the Interest Rate structure and the environment well see over the next year and that is not going to be bad for the equity markets. Isnt this just a case of when the when the facts change, i change my opinion. And the story here is that when you go back and look at the spread of the tenyear over the two, what you find is that the question is not why are rates so high now, it is why werent they higher before . When you look at where we were, you only go back to november jim karen, we should go to right now. You only go back to november and you had a spread where it is now all weve done is return to normal and the feds will process this not that now is the aberration, but when it was low that was the aberration. That is exactly correct i dont think the fed wanted a flatter curve. The fact that the two tens occurs has reached 70 basis points what were seeing today is rare. Which is a steepening of the yield curve as Interest Rates are rising that typically doesnt happen. Typically the current flattens with Interest Rates rise and what were seeing now is a repricing of better growth risks of maybe potentially higher inflation risks. So were seeing a return to normalcy well see restoration of the turn in the curve which is a discounting for potential inflation into the future. I think this is healthy. Im not alarmed by the movement in rates i dont see it above 3 . Im not alarmed. I think this is a return to normalcy i think you are right. Lets take 3. 4 is on the table. Is it time to mention the word five is it time to think the fed may move as much as 125 basis points that is the tail of the i think the market has got three in and it is thinking about four and now the question is to be more aggressive in a 12month period go up as much as 125 basis points and maybe that is just crazy talk. I think five hikes would be very detrimental to the cycle. That would be very detrimental to equity or high yield. I think four is possible and would you be okay. Five would be the big surprise. Jim class is over thanks very much it is not we have another jim. I know we have another jim. But breaking news we have our first look at the stash tash rapid update for the First Quarter of 2018 and it is a healthy one. We have six economists answering our survey 3. 3 is the average for the tracking forecast with a wide range which you would expect because there is little data for the first part of the quarter. 2. 3 to 5. 4 and gdp tracking at 2. 6. Atlanta fed, 4. 5 . That is the number mel is is shaking her head. And i read your tweet yesterday why the fed have to back pedal on this. Steven stanley is 3. 7 moodys who puts forecast the forecast for cnbc and look at that High Frequency economics on my left and bank of america at 2. 3 so is the market right in pricing more rate hikes this year lets a bring in the top economic forecast, what is his name jim oef sullivan. I think once a quarter is reasonable theyve moved five quarters in a row if you count the Balance Sheet in september so i have them going four times this year and not stopping there and tipping into 2019. So i have another three in 2019. And i think to step up from once a quarter you do need some is bad inflation news so we havent gotten that yet but it is possible. I want to separate this discussion of the market and everybody wants to talk about the market and the affect of high Interest Rates on the market and i want to talk about it on the economy. One thing bob pisani emphasized is the issue of the velocity of the change is the velocity of the change bad for Economic Growth . I think it is probably partly the change as well as the level. But i personally would probably put more emphasis on the level but i would broaden it out to financial conditions when the fed is looking at this and they see the downturn in the Unemployment Rate and it is already low enough to put pressure on wages an the message is theyve got to slow down to the bond yield and credit spreads [ inaudible question ]. Right now bond yields have backed up. But for all of the excitement on the stock market, were still up 5 on the year. And Corporate Bond is not they are as low as in 200 when you look at financial conditions sh the dollar is down and financial conditions, were about to get a tax cut the signal of this is the feds probably should be stepping it up because were getting 1. 5 unemployment growth. The labor force is growing less than 1 a year unemployment will keep falling. So maybe steve is not crazy when he says five. Maybe your forecasts for four, there is risk to the upside in a in terms to the risk hike. As you continue into 2019 and the last cycle was very measured but it was a quarter point. So that was eight a year so four a year is incredibly gradual by past standards and they could step that up if they needed to. Again at this point, i dont think they need to because the markets dont even for the year four would be more and that is the direction were going and they need things to slow down. Unemployment growth is too slow and too strong. Let me get two quick questions in first one, if i remember your research, it is the First Quarter numbers are lower than the rest of the year yep. Do you think that will and if this is low, what is high well, ultimately of course the feds mandate relates to the labor market and inflation and not gdp and inflation. So if gdp is 4 and unemployment is not falling, that is fine and if unemployment is falling, they cant deal with that. And at the low end of the forecast you are that is technical i think the trend is close to 3 . Because of the weakness of the First Quarter. Initially now come july when they do the annual revision, there is talking about opening up the books to seasonal adjustment system and you could have a weak q1 and then it gets resized. If you talk about seasonal adjustments ill never get invited back to fill in. Just very quickly. What is your out look for the year. I have 2. 8 for the whole year 3. 5 for the Second Quarter and 3 for the third and tailing off to 2. 5 in the Fourth Quarter. Last year was 2. 5 and the expansion is average 2. 2 so this is a step up and even 2 is enough to bring the Unemployment Rate down so i think that is the most important issue here from the feds perspective. Unemployment, even though it is flat this morning, we keep getting the unemployment growth and it is clear unemployment keeps falling and not just average earnings but the eci number and the unemployment cost index is showing for the Unemployment Rate is starting to put upper pressure on wages. That is my second question so you just answered it. Another jim but not least. Last but not least. Great to have you. Thank you. Big day for bitcoin bouncing back seema is at the crypto desk. Bitcoin is seeing one of the worst weeks since april of 2013. In the span of six weeks, bitcoin has fallen nearly 60 since december 17th when it hit that high of 20,000. Traders say the recent volatility is driven by Retail Investors. Many of whom were firsttime buyers of cryptocurrency around the Holiday Season and are now trying to get out. Were also seeing low volume in the Bitcoin Futures market which suggests that this is more of a retail driven selloff versus institutional. Now a widening regulatory crackdown continues to be a source of concern. This week india announcing it is banning cryptocurrency and traders are turning attention to next week when s. E. C. Chairman jay clayton and Jay Christopher giancarlo will testify in front of the Senate Committee on banking and housing and urban affairs on Regulatory Oversight of virtual currency. But regulation hasnt pushed everyone out the door. Two long only funds that i spoke to say the rollout of the lightning network, it is a technology that is said to make bitcoin easier and faster to use could be a catalyst for the price of bitcoin but it is still jell to yet to be determined when it will be fully implemented. Back to you. Doing my best Brian Sullivan van. Were at the board. And the oils now 765, up 182 from a year ago. Weve been teetering back and forth. Add and subtract a few but the addition of six is on the higher side with production topping 10 Million Barrels a day. With production still rising, a lot of weight on the shoulders of demand trends to pull through. Back to you. Sunday is a huge day for dominos as americans will order millions and millions and even billions of pizza while watching the super bowl but june 30th is also a huge day for the company. And that is when ceo Patrick Doyle steps down what is next for mr. Doyle and the company . And we continue to watch the markets. A big selloff on wall street now 380 points may not be what they used to be. But it is still a lot. Ise dow down more than 700 point th is week power lunch returns after this so a few years ago, me and my wife were actually saving for a house. But one day we were sitting there and we decided that, you know what . Something needed to be done about what was going on in our innercity. Instead of buying a house, we decided to form this youth league. What is he doing wrong . He should shed the block. Exactly. Its volunteer, we dont get a paycheck. Its one hundred percent from the heart. Football shaped my life and im praying that it will shape these kids lives as well. The countdown is on until super bowl lii and that means big business for dominos. Shares are up more than 20 over the last year. Up 16 in just the last month alone. Here for a power lunch exclusive is patrick, the president and ceo of dominos. It is great to see you. Thanks. Appreciate it. And i read you expect to sell 13 million pizza slices and 4 million chicken wings. And that is just on game day what is the leadup to game day is like at your various restaurants and what the inventory level is and when you procure the ingredients. Procuring the ingredients are going and the team is training and getting ready for it this is not just the super bowl for football players, it is for us as well it is a very big day one of the five busiest days but even more importantly, it is really compressed. Basically all comes in at about in about two hours that were incredibly busy. So all hands on deck everybody is in stores everybody who works in any store is going to be there for the couple of hours. And it is fun. It is this great high energy thing. So people look forward to it they love taking care of the customers. But were going to be really busy. Do you go in and give a pep talk or make halftime adjustments . What do you do what is your day like. Ill be out i always am. And i come in also in here where were doing thedigital stuff but it is interesting. The half time pep talk we dont need because it is really busy until after halftime and then it stops. Do you know second by second because of your ability to track orders, how well youre doing on that day . Yeah, we do. So you know we do we actually have we have a graph up on the wall it shows last year and the exact same minute. And i would love to see that and be there in the war room. Because the food is good, i know that yep it will be. So walk us through that two hours. How much dough and how much doe . How much sauce and cheese and how much cheese . So well do well do 25 to 30 more than on a typical sunday but again, it is all really compressed so that is the whole thing about super bowl that makes it exciting, not only is it a big day, but it comes really quickly so youre talking about a couple of million pizzas. In two hours. A couple of million pizza how many pizzas per minute. A thousand orders a minute. Are there states that you would anticipate either buy more or pizza or wings and do the teams geographical locations and where the super bowl is being played educate you as to where the orders will come in. Yeah. So it will be broad. This is a very high interest game we want it to be a close game. Because the closer it is, the longer it goes the winning team, the party will continue so whether philadelphia or new england win, the stores in that area it will continue to go big for them through the night the team that doesnt win, may slow down a little bit more quickly. But it is a high interest game and so we think it is very strong those particular new england, so boston and philadelphia will be very busy and so will the twin cities. Just want to point out to our viewers, were down very close to the session low on the dow. It was down 426 and now down 420. Patrick, let me turn to the broader Business Climate as you see it number one, and get you to comment on that. But two, get you to comment on the new tax law. How it may affect your business and whether you are raising wages, whether you are paying bonuses. What are you doing differently because of the new tax law or because business is just good . Right so look, the overall environment is very good right now and certainly the new tax law plays into that. It increases the return on investment for every company you are looking at your after tax return on investment and so that is improving so we will ultimately our investor day, we talked about our estimate for capital expenditure, the highest weve done wages, it is interesting, youre seeing as you just with your previous guest talking about kind of the wage pressure out there. And it certainly is there and it is a healthy thing when the economy is going well, when it is getting harder to hire people and you compete for people and so were looking at how do we do that more and more effectively and i think that is ultimately a very healthy thing for the economy. Patrick, youre stepping down as ceo in june so this is your last super bowl. Youve already denied widely that you will go to be the ceo of chipotle, but have you put any thought where you might go or could we see a ceo role at a private equity firm or start your own business . Any plans here yeah, i am 100 focused on the dominos until june 30th and then my wife and i are going to put our feet up for six months and figure out what we want to do next and where we want to be and how all of that plays out. Well put off to the back half of the year. But i want to make sure were in great shape here and that ive done as good of a job as possible to hand off the reins to rich allison as our next ceo. So im completely focused on that and after that is done, then well start thinking about what is next. Okay, patrick thanks very much im wishing overtime, which means 7 million overtime is outstanding we can do overtime that is a good thing. So pepperoni please thanks so much folks stocks are near the session low, the dow falling will 430 points and a lot of action in the bond market are yields are spiking we head to the pits and much more on this big selloff when power lunch returns. Ink . I dont like it. Oh. Nuh uh. Yeah. Ahhhhh. Mmmm. Oh. Yeah. Ah. Agh. Ddd. No. Hmmm. Uh. Huh. Yeah. Uh. Huh. In business, there are a lot of ways to say no. Thank you so much. Thank you. So were doing it. Yes. Start saying yes to your companys best ideas. We help all types of businesses with money, tools and knowhow to get business done. American express open. Hello, im sue herrera here is your news update for the hour the Justice Department hosting a summit on strategies to combat Human Trafficking. Jeff sessions said fighting it is a top priority for the Department Human trafficking is a violent crime. Trafficking victims are often threatened, beat ep and drugged and isolated, deceived and manipulated psychologically in order to make them dependent to control them and to keep them captive. It is hard to comprehend this level of cruelty but Human Trafficking remains far too common Tobacco Company alt rhea is giving employs a 3,000 bonus with the winfall from the tax cuts the Richmond Times dispatch reports the payout to 7900 workers totaled about 24 million but they posted a 10. 3 billion profit, almost half in the Fourth Quarter as justing to the reduced tax rates. And flu season is bad. There are signs it might be starting to slow in the west the cdc reports 48 states have widespread flu activity, down from 49 states the week before because oregon was taken off the list your update to date. That is the news update. Back over to you. We do want to check on markets which are down sharply across the board were just off of session lows the s p is down 1. 25 and down 3 for the week. Today it is at 2787 and a point off the session lows Goldman Sachs and apple leaving the dow and exxon and chevron dragging on the do you and energy is the worst performing sector every single stock in this group is down. Materials are also sharply lower. Lets go to the bond market ri Rick Santelli tracking the action and there is action today. There certainly is. If you look at this, we are down two basis points on the day. But more interesting, were up only two on the week you look at 24 hour tenyear note yield and they are up on the day. They are up 17 basis points on the week look at a one week of the dollar index, it is Still Closing for the week, if it stays here, around 89. In negative territory after the runup in rates that weve had. It is truly amazing as to the motivations of traders and foreign exchange, the euro still reigning supreme if we look at the yield curve spread and if you look at tens minus 30s, referred to as the nob. It is still flat 23 basis points, but not true when you get to ten to two hovering below 70 it has steepened, because of what i mentioned when i first started out how much thetwo year and ten year have diverged this week and finally if you want a barometer for nervousness creeping into the fixed income and credit space, look at the etf. It is now hovering at the lowest yield since the last time we were nervous about it in march of 2017. Thank very much. Ill say the proximate cause of the selloff is what is happening with bond yields i think it is fair to think about what is happening with the nunes memo that spooks market in the sense that some people spin this out to a constitutional crisis, well see this memo is now out. I think well talk about it later. But the idea that there could be resignations, maybe when this passes well know that it is only bond yields but you could spin a bunch of very negative political outcomes from the release of this memo and i think it also is something on the minds of others. There is more to get worried about. Thanks a lot. President trump declassifying that controversial memo we will tell you what he said about it and what it means plus 200,000 jobs added in the past month unemployment at 4. 1 stocks selling off everything you need to know about stocks and the economy, everything you need to know is coming up on power lunch. nadia white the moment a fish is pulled out from the water, its a race against time. And keeping it in the right conditions is the best way to get that fish to your plate safely. dane chauvel sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. tom villa we took our world class network, and we developed devices to track environmental conditions. This device allows people to understand whats happening with the location, but also if its too hot, if its too cold, if its been dropped. Its completely unique. dennis woloshuck if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. Who knew a tiny sensor could help keep the food chain safe . Welcome back to power lunch. The controversial gop memo has been released and President Trump weighing in. Lets go to eamon javers at the white house. That is right we have some reaction from the president just a short time ago. Right after he declassified the memo but before it had been released publicly some very tough words here from the president of the United States here is what he said the memo was sent to congress who was declassified and congress will do whatever they are going to do. But i think it is a disgrace what is happening in our country. And when you look at that, and you see that and so many other things, what is going on, a lot of people should be ashamed of themselves. So what have we learned here is the key claims in the nunes memo it is just been made public by the House Intelligence Committee. We learned that the steele dossier compiled on behalf of the dnc in the Clinton Campaign formed a key part of the carter page fisa application. That is the application that Law Enforcement makes to spy on carter page who was affiliated with the trump campaign. The fbi did not disclose the memo that the dnc or the Clinton Campaign had been funding steeles efforts to the court that was issued the fisa warrant so that means ultimately the fbi should have, im told by sources, included any information that it had in terms of steeles methodology, who he was working for, where he was getting paid, what his ideology was and all of that should have been caveated in the fisa application and the nunes memo said it wasnt so well have to wait for some answers here on why exactly that happened. We had a statement from the fbi before the memo was released expressing concern here. They said we have grave concerns about the material omissions of fact that fundamentally impact the memos accuracy. So there are questions about what might be missing from the memo from the fbi perspective. Was there earth eviden other evidence used as part of the fisa application so reaction from the fbi since it has been made public but we do have a reaction from the Fbi Agents Association which put out a statement saying fbi special agents have not and will not allow partisan politics to distract us from our solemn commitment to our mission. So a lot of in degree swirling and questions now being raised in terms of what exactlythis memo has revealed and whether there is any an effort to release the democratic counterpart to this memo which the democrats say debunked the content of the memo that was just released today. Back over to you. And as you point out, it is not clear whether there was other evidence in this application for a fisa warrant that may have been a part of it, presumably of that other evidence might be included in a democratic memo. Does that democratic memo have to be approved for release by the republican majority on that committee it does and the majority has already voted not to release it. The white house though said that if congress decides to release it, they would be happy with that too they say theyre in favor of transparency here at the white house and one of the questions is could they release it though. Because some of that information may be classified. There could be a secret russian source or a Technology Collection effort that they dont want to admit they have. That they cant reveal in putting out that information. Very quickly. Refresh my memory, chairman nunes who is the person who released this memo and who with his staff wrote it, is the same fellow who earlier this last year recused himself from the russia investigation because basically he was sharing evidence that had been given to him with the president before taking it to his committee, am i correct on that . That is absolutely right. Last year he was involved in an episode in which it appeared that he was working too closely with the white house on working on a sort of information that the white house wanted to put out. So nunes recused himself from the investigation. But it is an odd situation because he hasnt been removed from the situation and of course this investigation is the most important thing the House Intelligence Committee is working on and he remains the chairman of that committee. Thank you very much eamon javers on the north lawn. Stocks are sinking the s p is just about at session lows right now bitcoin quite a comeback the latest on the bounce coming up on power lunch. Today, a focus on innovation in the Southern Tier is helping build the new new york. Starting with advanced manufacturing that brings big ideas to life. And cuttingedge Transportation Development to connect those ideas to the world. Along with urban redevelopment projects worthy of the worlds top talent. All across new york state, were building the new new york. To grow your business with us in new york state visit esd. Ny. Gov. To grow your business with us in new york state sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. All right. A better than expected employment report today with 200,000 jobs added in january. Unemployment rate right where it was a month before 4. 1 but the jobless rate for africanamericans did go up to 7. 7 almost a full percentage point jump from december joining us now, mark mory from the urban link and former mayor of new orleans and ron christy from christy strategies and former special assistance to president george w. Bush. We will set aside for now this memo that is for folks to deal with and what is mattering is this reading on the economy and the jobs picture right now mayor moria it is good with the exception of that blip up in africanamerican unemployment which may be sort of statistical noise. This is why i think what we need to be focusing on to really have the great economy we all want to have on working on those who dropped out of the labor force. Helping them get the skills and the training they need so that they could get back in the labor force. And what the black employment picture shows is that last month was a aberration or that in urban centers the Unemployment Rate remains high. So while the average is low, we still have pockets and components of america when the Unemployment Rate is still too high so this is directionally a continuation this is the 88th month. Of course most of them under president obama. Now the last under President Trump. This economy continues to grow on a consistent basis. If you look at you didnt have the benefit there, mayor, or maybe ron maybe you did or didnt, of looking at that bar chart that we just showed of africanamerican unemployment and this most recent month does look like a bit of an outlier. Steve you may want to chime in but ron christy, i would like to get your thoughts on where the economy is now historically the First Quarter is the low growth quarter but this one the atlanta fed it is a 5 quarter or better. Good afternoon to you, ty i think it is a good snapshot of where we are in america right now. I agree with mayor, weve seen consistent job growth for several months now an it is a good indication that Consumer Confidence is up. Business confidence is up. And as it relates to the africanamerican Unemployment Rate, look, we havent seen in 45 years that number dip in 7 we saw it at 6. 8 last month which is a great step forward and the number this month is an out liar and i have a hard time believing it will tick up a percentage point but this gives americans a lot to feel confident about and my goodness, i sure hope the atlanta fed is right if we could get 5. 4 growth this economy is going to take off like a rocket ship. Isnt it wrong, though, to expect that the big issue here, which to me is the gap between black and white unemployment and some of the work i do which im sure, mark, youre familiar with, the idea that black Unemployment Rate when it comes to College Educated africanamericans is going along what the Unemployment Rate for high school educated whites. Which speaks to me the systemic issues so i agree a better economy is better for everybody, and especially better for the people who are the most disadvantaged in this regard but it doesnt get a systemic issues that are out there, mayor. No, it doesnt. And i think you put your finger on the point that even though black unemployment has in fact come down, it is still higher across the board than white unemployment is. Which indicates the issue of systemic issues in the economy, exclusion and some discrimination some issues of access to those jobs we have to address that because growth is good but weve got to make sure that the growth is enjoyed by all segments of the american people. So ron, as we look at a selloff that is now quite steep. 446 points worst day in months for the market worst week since well a long time ago obviously for stocks. Two years ago, in fact what do you think what do you think is causing that. The idea that is that Interest Rates are going up or that we have a continuing resolution in washington coming up next week or a daca issue, why in. I dont think it is a daca issue. Think what you just put your finger on is the Issue Congress has failed to exercise the responsibility to have a budget in place by october 1st what does that mean for businesses businesses need reliability. If they cant rely on the government to put forth a appropriations and to have a steady series of appropriations going out the door, you cant govern by continuing resolution one week here and two weeks there. The markets looking for more reliability and thus far congress has failed to deliver upon their responsibility to do the bidding of the american people. Let me get your super bowl picks. Ron, you first new england patriots. 35 the Philadelphia Eagles 21. Mayor, i know you were heart broken by the saints but im a eagles fan, being a graduate of the university of pennsylvania, eagles 27, patriots 21. There you go. A spli mayor, ron, thanks. Good to see you we want to bring your attention to the markets, we are sitting at session lows right now so were watching this very closely for you. The s p 500 down by 1. 5 right now. Meantime, wild ride for Cryptocurrencies Bitcoin itself plunging below 8,000 bouncing back. Cleso coit a bottom or bigger dein tme were all over this. Power lunch will be right back each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. Roller coaster day for cryptocurrencies, losing 125 billion in total market crap on fears of regulatory price coin manipulati manipulation we have the host of cnbcs africas crypto trader which is the only show devoted to cryptocurrencies hes also an investor. You said you thought wed see 7500 we did, basically. What was it about that level ive been tracking bitcoin from last year and we went from 7500 up to 20,000 in anticipation of the futures. The futures were like a nonevent. The event was the momentum play with people getting into cryptocurrencies so you had Retail Investors getting into cryptocurrencies for possibly all the wrong reasons. They got into it because of the fear of missing out. They got into it because they wanted to get in to make the money without understanding the technology and the markets went up. Then the markets started to come down and everyone didnt understand the technology turned around and said hold on, what did we back here so is 7500 the level at which weak hands got in and now theyre shaking out, so 7500, does that support . I think they got in high but between 10,000 and 7500 was the exit point for them and i think what you can see now is that the market is recovering a little bit. So im expecting the market to hover here for a little bit. A little bit nervous then im expecting some kind of something to bring up a green candle and that will start the momentum back up again. Its been a terrible week for bitcoin. You said you believe bitcoin is a store of value is it still a store of value if it goes down with every other asset class . Its being seen as any other risk asset out there which is being sold off. Its a store of value but theres not mass market adoption yet and as we get mass market adoption we can expect it to become the universal store of value. But i always say if were going out to run a marathon, weve parked our car and picked up the goody bag, we havent got on the the start line of cryptocurrencies its very hard to open an account, its unscalable so yes there is a new digital gold, a new Digital Store of value, i think bitcoin is the store of value but the game hasnt started yet. I wanted to ask you, do you think governments ult t may will sit by and watch bitcoin rival their currencies the euro, the yen, the dollar . I think when you start discussing currencies, that becomes different and i think in time yes governments are going to have to accept a new form of Digital Currencies and who knows what that will do. But i dont believe that bitcoin today as it stands is a currency i believe today bitcoin is a store of value. Hold on if i started off the year and agreed to work the year for six bitcoin, i was making 120,000 now im making, what, 50,000 . So as a store of value for my labor, the value of bitcoin got cut more in half so it isnt storing value for me. It has. Because if you started off last year for with bitcoin you would have started at 900 now i look at your board, i dont see stocks that are in the substance last year. Ron, great to have you with us. Thank you. Market selloff gaining momentum the stocks taking us down. Blue jim cramer will join us his take on the big selloff and the eaesgl the second hour of power after this break me and my wife were actually saving for a house. But one day we were sitting there and we decided that, you know what . Something needed to be done about what was going on in our innercity. Instead of buying a house, we decided to form this youth league. What is he doing wrong . He should shed the block. Exactly. Its volunteer, we dont get a paycheck. Its one hundred percent from the heart. Football shaped my life and im praying that it will shape these kids lives as well. Like you do sometimes, grandpa . And puffed. And im praying that it will shape these kids lives as well. Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. If you cant afford your medication, astrazeneca may be able to help. When it might be time to buy or sell . With fidelitys realtime analytics, youll get clear, actionable alerts about potential Investment Opportunities in real time. Fidelity. Open an account today. Welcome to power lunch. Stocks are tumbling right now and are at around session lows, the dow falling as much as 463 points, nasdaq having the biggest drop in two months apple one of the big drags here. Its on pace for one of its worst weeks in three months. Weakerthanexpected iphone sales fuelling concerns. Check out other big names hitting lows procter gamble, General Electric among them. Courtney reagan is joining us for the hour here. Court . I am courtney reagan. Despite all the strong earnings, the major averages heading for their worst week in two years we saw the selloff at the beginning of the week, its happening again. Bob what is driving the selloff today . Right now in particular . We are roughly paralleling ten year yields inversely. Were 2. 5 to 2. 8 this is an intraday, the highs towards 2. 8 and above stocks hit their lows look at the s p 500. Weve been moving up again towards the highs were breaking down to new lows in the s p 3500 this is rate driven. Its declining to advancing stocks thats not a good number volume is borderline heavy volatility were at over 15 on the vix, thats near a six month high were halfway through earnings season and the number has been terrific about 15 Earnings Growth were seeing overall thats the best weve seen in quite a while. Fourth quarter revenues, almost 8 theres your numbers for earnings estimates nearly 8 . Folks, they used to say you dont have revenues and therefore its cost cutting, not any more revenues are back and on the First Quarter i want to emphasize numbers are continuing to go up from 10 to 14 and guys we are getting double digit Earnings Growth for all four quart quarter. Is there chatter on the floor about the role of the gop memo playing into this selloff . I think it was a bigger story yesterday when there was rumors around the fbi might resign over th that i wash the markets and if you see todays action and watch what that ten year is doing, when the ten year reaches new highs the market reacts. Thats whats happening today. All right lets talk more about todays selloff with mad moneys jim cramer who joins us now from minneapolis. Welcome, good to have you with us thank you for putting me on the show. Fantastic, great to see you explain what youre seeing in todays market and whether you think the market is overreacting to whats out there . Well, i dont think its overreacting because weve been up so much i think one of the things we see is bob gave a great rundown of earnings people thought you know what, it doesnt matter, you have good stocks, you have unbelievably good stocks and i think were in a lot of weak hands right here. We have to flush them out and then well be fine. And the specific earnings that youre referring to i guess are alphabet and apple that werent good enough or that there were internals within those reports that werent good enough were not used to having forecast cut this quarter, whether it be tax reform, whether it be the dollar has gotten weak, whether its the repatriation weve heard this is a Good Opportunity or this isnt as good an opportunity as another what we havent had is, wow, numbers come down, does that mean we have to sell people seem to forget when numbers come down its not the end of the world but it feels like the end of the world today. And it doesnt feel like its over that said, we will be oversold at this pace by monday tuesday and people who havent bought anything should be thinking. There are a lot of bargains created along with things that maybe not that attractive. Whats on your list, jim . I do not think that dow dupont was nearly as bad as the market is saying we have ed breen breaking things up you had a good quarter, there was some pull through. Heres the stock thats down five straight points what are you thinking about . Youre thinking about a breakup of the company i think thats terrific and i think when we look at that, we say wow, you know, ive been waiting and waiting and waiting for a price break. Look at estee lauder that was an amazing quarter. The president has clearly distinguished his company as the ultimate luxury good stock in this market. Cant get out of its way because of the futures so you have to take advantage of tableau data that stock will be up much more if it werent for the futures. I like stocks that are doing well in a bad day. Walmart being the classic example. Look at that stock. How about stocks doing well on a bad tape . Im thinking of amazon they said this is the tom brady of the internet, to use a super bowl theme here. But its up sharply. Amazon is a safe haven in this market, jim . I think amazon is a company that we realize has great Revenue Growth and it has to be one that has great Revenue Growth that isnt necessarily pumped up on steroids. I mean, i think you had advertising going great. I think obviously prime can be raised a lot because retail is so good. Amazon web services, we know google cloud is good we know azure is good. We dont get a breakdown but Amazon Web Services is fantastic. I think the stocks i see these price targets melissa of 1600, 1700, i think theyre right. I think the stock should be bought i think the stock will be up 150 points if the futures werent down. Jim, youre in minneapolis. Should we just eat the beer in the wings or should we look in the stocks and Companies Selling them to us on sunday its difficult after listening that brady analogy for me to not think of a couple stocks that people arent thinking about that have good Performance Records and may surprise to the upside going back to some of the ones i bumped into Brian Cornell in the green room, dont you love that, bumped into someone in the green room theres a stock ive been waiting for that one came down. If kohls came down, these are the opportunities. But target united health, how many more days are you going to be worried about the troika of buffett, dimon and bezos if that was a Profit Company run by amazon i would still sell unh down here. Minneapolis is a sleeper city, isnt it, jim, in terms of the number of corporations based there. Big ones, united health, target, medtronic. Many others, 3m. Best buy. Youre so right when i was growing up thats what pittsburgh was like there were just 20 companies in pittsburgh and they were the dominant companies, the headlines, even during the vietnam war you would hear about companies with so much steel being used, so much mechanics, so much industry now you look at this is the ultimate town for the id say the 21st century we talk way too much about silicon valley, not enough about a 3m or medtronic. Medtronic, theres a stock, geez, if that comes down a little more, how many right things are they doing . Dont forget, abbot bought st. Jude and were just seeing now the fruits of st. Jude which was another great company. I think best buy is fabulous, really well run, surprised a lot of people, big short position. They know what theyre doing when you want to do your house better you go to home depot and then best buy. By the way, home depot, that came down, that would be another gift. A company that courtney, best buy, knows very well a statistic that im sure you know there have been only three quarterbacks in the history of the super bowl who started the super bowl having started three or fewer games for their teams during the year, foles will be the third. The two prior guys both one. I knew him from college and i said geez, that guy is pretty good i dont cry anymore about football although obviously sunday night if we dont win it will be a different story but nick foles was fabulous and then the arc of his career is a shame theres a hard knock where jeff fisher picks up the phone and says i have to get rid of foles. Hes a human being with dignity and its no wonder he almost thought about getting the business business is football and now the rejuvenation story is not talked about so much because foles is a team player a lot of the great eagles dont want you to know their names and they wear masks, underdog masks. Apart from brady and a couple of others, there arent a lot of players whose names you do know. Were at 456 down now. Do we close lower or higher . I think this 500 level, down 500 tends to bring in some buyers i was looking at the oscillator, we came in not gnat oversold i think down 500 and i think people will say lets start picking, lets find something. Lets just stop thinking, you know what . Whoa is me, money will be worse. People should be looking and when people look we nut a bit of a bottom i know friday afternoon is a frightening time theres nothing frightening out there. There really isnt if apple is frightening, i mean, we should be very afraid of everything jim cramer, fly eagles fly. Good luck sunday. Oh, thank you thank you so much. Right . You should have had that on the whole time. Thank you guys. We have great signatures here look at that heres some people who have real names. All right, maybe theyre not famous yet, thats to be happening saturday. Maybe theyll end up with some rings, too. Thanks, jim, have a great time now over to codominic chu. We are just near, just hovering off the lows of the session so far with the low down about 460 points were now about 3 below the record high levels that we saw just one week ago today. So 3 lower on the dow from record highs, 3 from the s p 500. The losses are exacerbated on perhaps a bigger degree by whats happening in energy and technology we know energy is moving a lot on the heels of the chevron and exxon earnings from earlier today. Also Lower Oil Prices in spite of whats happening with the rest of the market we values the u. S. Dollar and strength is take its toll on oil prices as well the one thing i would point out is that per courtneys retail side of things, Consumer Discretionary stocks are holding up relatively well theyre slightly lower on the day and we know why, because amazon says doing heavy lifting on the upside on that front. Back over to you. Dom, thank you. Dom chu. Joining us now is the managing partner with cornerstone wealth and peter costa, a cnbc contributor. I want to start off with you, peter, whats the view on this selloff . What wins out . Down 500 on the dow investors step in or are people too spooked by rates going close to 3 i think its more about rates than anything else and like was said earlier, theres an inverse relationship. You see the yields going up, stocks going down. Normally the equities have gone on their own path but the last couple days its been all about rates. That will continue i think we will hit down 500, maybe a little more. Today. I think depending on what the close looks like, its very possible there will be people looking for bottoms and i think theyre probably going to get that bottom on monday or tuesday. We keep saying this but these are fresh session lows at this point that were sitting close to i want to go to you. A lot of investors say 3 is the magic level. 3 is the level which being invested in stocks becomes problematic. Given a move in treasuries that weve seen in yields in just a day, 3 levels just a few days away at this point, isnt it prudent to take money off the table . Well, exactly the way the yields have been moving we have a 25 movement from the beginning of the year so is it time to take money off the table . I think the opposite i think probably just like cramer was saying a few minutes ago, there will be opportunities in this market you look at i think weve been as investors does it not matter that rates are rising this trajectory in their view is it not problematic to valuations it does it starts to show the valuations starting to certainly not an undervalued market anymore in some sectors were well overvalued large cap growth and were seeing it with energy selling off and some of the Technology Sector selling off today. I think weve been looking from catalyst to give us a correction or pullback and with inflation and Interest Rate movements, the story of good news is not being its bad news for the market right now i think it will be a temporary pause and a good time to look for opportunities, whether it be with financials, selective on technology, maybe looking at materials because weve got tax reform through but with when the president spoke about infrastructure spending, that could be another big stimulus to our economy and we havent seen that come through yet. Peter, whats the volume like there . Do you feel any quickening of the pace zero. Zero . Yeah, zero. I mean our clients are on the sidelines, theyre waiting, watching, theyre starting to pick some spots on the bye side which i think may be early im looking for more on the down side today probably monday and tuesday as well. I just think the market needs to wash out a little bit. I think we need to get down with somewhere roughly close to the 50 day moving average. We get there, test it, if it holds i think its and youre looking at three to six months there will be opportunities galore for somebody who has that kind of constitution. Jeff . Do you think maybe the backdrop for dip buying is a little bit different this time . I mean with the backdrop of the tenyear yield where it is, about 2. 8 , with the backdrop of the dollar going higher, with the backdrop of selling around the world and across Asset Classes are you maybe more mereful this time around to say its time to buy this dip . Its a good time to buy it may not be lets go all in. This may not be over as we inflation fear and whats the weve got new fed governor powell in place, the language from the fed meeting was still maybe became a little more hawkish in the notes so we know rates will go up three times i think earlier in the day we were talking a lot about maybe four or five times i think that will be another big factor to look at. How many times does the fed need to raise rates given the economy growing at the level its at and the feds main job is to either quell inflakes or deal with an overheating economy. Weve got low inflation thats still starting to peak a little bit, were still not at two. Were seeing the overheated economy as were seeing everyday this week. Its a time to buy on this but maybe dollar cost average in, all a great strategy to remember and we sometimes forget as the market has been running straight up right now. All right, guys, going to leave it there thank you so much for your thoughts jeff carbone and peter costa. Were heading for the worst week for the markets in nearly two years. Which stocks are fuelling the fall plus well head to phoenix where sully is sitting down with Charlie Ellis and phil miller. Well get their take on the bitcoin plunge, tech slide and isart selloff. Power lunch will be right back the dow is down by more than 500 points at this how shall, almost 2 of declines, lets get more on the selloff with art cashin from Ubs Financial Services art, this appears to be accelerating into the close. Were seeing there is no safe haven, everything is selling off across the board. Well, you started out, as you aptly noted earlier, that the pressure upward pressure on yields that puts general pressure on the market secondarily theres some vulnerability in the fang stocks, alphabet and apple not coming in as well and then this afternoon weve had the problem with the release of the socalled republican memo. It has served to dissuade buyers people wont know whats going into resignations, thewill therb calldowns . Why take the risk . Ill wait until monday to buy. Were seeing in the United States that this follows whats going on around the world. Do you think there might be questions around this global stock market rise that weve been seeing. The great rally of 2018 is suddenly under question and thats another thing that puts a little pressure, people looking, gee, is this an Inflection Point . It was day after day almost hour after hour and now suddenly weve had a week where weve had a couple land mines go off and that i think has raised some doubts and raised some caution theres yields here and problems with the Central Banks elsewhere. For example, the yields in japan have been moving up, the bank of japan pushed back and the yields moved back up again so theyre having difficulty keeping yields under control around the globe and thats a concern. Art, we havent seen many 1 daily moves in 2017, four or six or Something Like that, let alone 2 days like we are staring in the face right now. But youve seen plenty of them how do you think about them . Well, i think that you dont want to get too distracted by this this is not a 1987 crash or whatever but it is a market that was clearly overbought, way ahead of itself on the relative strength basis, way ahead of its moving averages so it was entitled to a bit of a pullback. You dont always like to see it come in one or two days but weve had a very bouncy week i would put in order lets wait until next week lets see what happens on the political front which is very important. This memo, et cetera, goes by and its not a major event in washington you may find people come in and say those prices are relatively cheap, ill start nibbling away again so next week is when you want to look at things it is friday. The final hour of trade means a lot everyday but particularly on a friday what were seeing action like this what do you think we should watch in this final hour of trade . If volumes havent picked up and theres no one big catalyst thats going to end one way or the other, how do we position for this final hour . Well, whats going to be critical is what happens with the socalled market on close orders well be looking at them shortly. Right now theyre leaning to the south side, i would caution the viewers to be careful with that because it can change in a matter of minutes. It can resflers a mverse in a mf minutes but well monitor that to see if it builds up to, as i say, 700 million or a billion to sell and that will put final pressure on the market in the ultimate 15 minutes. Art, stick around were going to bring in Brian Sullivan who is covering an investing conference in the phoenix area well have guests s is in just couple of minutes. Sully, welcome you have been struck by the level of optimism in the crowd where you are. What has today done if anything to that optimism not much, tyler, im in phoenix, arizona we just wrapped up a panel with bill miller and Charlie Ellis. Theyll join us in just a couple minutes. Very good timing to hear from these ygentlemen who have 80 years collective Market Experience with higher rates, with the Political Drama but with corporate earnings in cash flow still up. We just wrapped up that panel. Were getting ready, theyre going to join us here. To answer your question in a short way, tyler, the optimism is still there but well find out what may or may not be concerning these guys. Still a lot of optimism in phoenix, arizona, at an investing conference more power lunch, well roll up with bill miller and Charlie Ellis right after this all right, well stay right here as we watch the dow so art, a little less optimism is a healthy thing right now they were infatuated. Its the best january since 1987 and unfortunately i was beginning to hear things that i heard in 1987 and that was when the Senior Partners would tell the juniors okay, theyre getting too high, sell into the strength, cut back on your position and after a while, the young kids would look at each other and say hold old fogeys dont know what theyre talking about, you have to buy strength, not sell it. Thats what culminated in the crash of 87 so were only in the second month of the year but that kind of that heavily optimistic talk is what im starting to hear. When you said the words it was the best january since january of 1987 i wont oh [ laughter ] and i remember it, you remember it, it was rates again, wasnt it art. Yes, it was and it was rates and currencies. It was a concern about secretary baker picking a fight with the germans over the Deutsche Mark and the dollar. And a new fed chief. Who was in the air when the crash happened so he couldnt even be contacted. It was quite an amazing couple days. The comparison is uncanny. Now im getting spooked. If were making historical comparison comparisons. Bill miller made this point, history says that when we have a great january, the year goes well we know that 100 of the time since 1950 if were up more than 4 the year is up with an average gain of 22. 5 for the s p 500. However when we have big januaries, february tends to underperform history is not a good guide, but if youre looking back you say good januaries can often mean poor februaries. Im sure art has that in his giant brain somewhere. Back to the 87 analogy, not only was van very good but after a slightly bumpy start, february turned out to be pretty good so well see how this february goes, whether it will be in with the rank and file that brian is talking about or whether it will replicate what it did in 87. Right now the dow is down by 552 points this shows you in terms of the steepest losses are being seen by fang stocks apple, for instance, is more than 10 off of its all time high hit just recently. Thats where you had most of the air underneath certain stocks in the leadership groups. I think context matters for how well understand this a week ago almost everybody would have looked at this market and said its overbought, overheated, overloved, it needs a pullback this is what a pullback feels like. Can we bring up a reit etf . A reit etf that sounds like control room chatter cross talk, mike but we take your point in other words so many people were calling for this but that it would be good and healthy for the markets and here we are. Its like saying i need a cold shower but man when you step into that cold shower, its cold and what is going to happen when you have one of these pullbacks that everyone says we overdue is there is always a headline you can latch on to its obviously yield so i dont think you want to shake it off one of the things about january was this rare combination of an economy running hot and financial conditions that were still extremely loose and at least right now the market is suggesting okay the economy seems pretty good. Maybe slightly less loose financial conditions down the road if bond yields keep going we hadnt had that 3 pullback in since the election, essentially and earlier today you went to the absolute you went to the absolute tick, down from the highs, bounced then came down again, didnt hold, thats a technical thing. I know you said the jury is out when it comes to this selloff, but it seems like there was always this tendency for buyers to come in when we had these pullbacks, there were very few pullbacks because they didnt last for too long do your worry perhaps that dip pieing might not come back in full force because of the backdrop in which this is happening, namely 2. 8 rates as i says before, its not the rates necessarily that are dissuading them. The buyers are being dissuaded by the political atmosphere. The release of that memo, media speculation that it might result in the resignation of that the fbi had or the assistant attorney general, you got the weekend talk shows coming up so if im a buyer im going to say wait a minute, why am i taking this risk . I can take another look on monday so i dont want to commit any heavy money here and you can see the volume is very light and the reason were having this selloff is that the markets are thi thin. Mike, peter costa and jim cramer said they would not be surprised to see the market go down 500 or below that weve now come back off that 556 down point and so what are you feeling . Yeah. I hoonestly think it could go either way from here i know that adds very little value right now. But basically this market has been operating on wider scales than we were getting used to last time. If this pullback needs a flush in order to kind of basically put a punctuate it, then we havent gotten it yet. Maybe today is the start of it yet but theres nothing that says its telling us more incremental information this afternoon about the underlying fundamentals except that people got too excited, there was too much money rushed into stocks in january chasing this rally and some of the froth is getting skimmed off in a hurry so i dont know how that process plays out in the next hour and a half. Guys, thank you so much art cashin and our own mike santoli. Eaantime, well take a quick brk, the dow is down and the s p is down. Stay tuned re facing 20 billion security events every day. Ddos campaigns, ransomware, malware attacks. Actually, we just handled all the priority threats. You did that . We did that. Really. We analyzed millions of articles and reports. We can identify threats 50 faster. You can do that . We can do that. Then do that. Can we do that . We can do that. Take a look at the markets off session lows but the pain is still deep for the bulls the dow is down by almost 2 , thats a loss of 510 points. S p 500 down by 1. 6 and the nasdaq down by 1. 3 on the dow apple really giving it a wallop there down by more than 3 off the back. Lets check in with whats happening with apple because with this moon that weve seen today hovering just about it right now, apple is now about 10 away from the record highs that hit just back on january 18, you may recall back then the highs we saw about 180 and change for apple shares, right now at 106. 03. Given this move, some folks like to call it correction territory when a stock holds back by 10 from its near term highs apple one of the biggest drivers of whats happening with the markets over the course of the past week. Tyler, the most heavily weighted stock in the nasdaq, nasdaq 100 and, and s p 500. The nasdaq has done a lot of damage thosing to five tech stocks dong a number of these markets. And when you look at the numbers yesterday from apple, i remember talking at the end of last year and one adviser warning that what you need to watch out for where the numbers come in but theyre not as good as some people thought they should be and when prices get as high as they are, a market that is vulnerable, this is a textbook kpal neptex textbook example apple made almost a billion a day. I mean, of course, but you put into context with the overall markets, as you see the i mean, apple is a dow component as well. Weve dropped about 900 some points from the record highs weve mean the dow. Apple is a decentlyweighted component of that because its a tripledigit price stock in a priceweighted index but even in the moves weve seen here, the proportion mat move moves in the s p 500 have been much worse the dow has shaved 70 points out of the 900 that weve seen from the record highs weve gotten over the course of the past week so apple doing its part but even when the stock is priced like that, the least bit of disappointment can have a real impact. I got my profits and revenues mixed up it was a billion day in revenue in rethe most recent quarter dom, thank you very much Brian Sullivan standing by with two nova scotiaing legends. Perfect day to have this gentlemen on the phone Charles Ellis and bill miller, miller value partners. Thank you very much. We were just chatting in the break about what sort of may be the cause of this selloff, youre debating Interest Rates, i know its thing into give man of the market right now. You told me you dont believe this is an Interest Rate driven selloff. Why not . Its no secret that Interest Rates are going up, have been going up and will go up so europes well call it 18 months behind where the u. S. Is but the fed has been very clear about what the policy is i think its more the case that we have the lowest volatility in history last year. We had 3 correction we had a the market wont be up 7 every month and usually a very strong january is followed by a down february and i think theres heightened political sensitivity. I stole your stat, i think you probably heard that. But were down 500 were not down 500 apple down 10 from its highs, the number of stocks are down 5 and 6 , people will wonder why it cant just be history dont you think theres some cause . No. I just think its the ebb and flow of the market i think the fact that stocks the markets been so stable the last year peoples sensitivity to decline is probably greater so it feels worse than it is usually over the last 100 years weve had several 5 drops in the market within one year typically so i think this is just trivial. And charles, youve been in the business 50 years. Youve written 16 books. Youve seen pretty much every kind of market cycle that weve had but some would suggest that is this time is different because you have Central Banks worth about 15 trillion to 20 trillion in holdings you have Interest Rates which are artificially depressed for so many years. Is there any historical precedent to the kind of market we see today. Certainly not but in the general thing there is always terribly interesting things going on, very important trends being worked out and smart people paying attention, figuring out what does that mean for prices in individual securities its the same old same old same old. Whats the most important thing going on right now for the macro market globally . It is rates . Is it Central Bank Involvement is it investor euphoria . As you ask the question, i have to tell you, i think the most important thing going son that Retirement Security is not being given the attention it needs because people are living longer than think did before and they dont understand how much money it takes to be financially okay during their retirement thats important honestly, the starts of questions you would like me to give, i have to tell you, for me they are details. People want to retire, the market has been very strong, given valuations, given rates, given Central Bank Involvement, is the market fragile right now . No i dont think so when youre in these declines, if we go down 500 points for five more days in a row, people get increasingly agitated. In the beginning of 2016 remember the market down 15 in the first six weeks and then it rallied significantly the rest of the year and all of the stuff it was worried about that took it down 15 , macro worries about russia, about china, about the fed tightening, that proved to be just noise. And i think that right now the most important thing going on in the market right now or in the world from a macro standpoint is global synchronized recovery thats the first time weve seen that in many years but earnings are going up, cash flows are going up i think the greatest risk that people face in markets is they fail to understand a very important things which the economy almost always grows. And earnings almost always go up we have recessions and stocks go upmost of the time and so the risk to peoples longterm Financial Health is being underinvested in long bull markets and not the drops they get in bear markets. Even with the crash of 87, the financial crisis of 2008 if people stayed the course theyd be fine. And your big chings has always been in your book you talk about this index revolution you cant beat the market all the time, but you know as well as i do that when you see a day like today its hard not to feel emotion as an individual im losing money today you only lose if you sell. Whats your advice to the people watching us here to how to handle volatility like were seeing over the last couple days the best thing you could do is have teenage children and realize how extraordinarily interesting sometimes exciting positive interest, sometimes angry, sometimes funny as hell interesting they are and then realize, yeah, because theyre going through a dynamic period in the economy, were always in a dynamic period in the market were always in a super dynamic period but over the long term those kids will be fine adults and they will have their own teenage children which will drive them crazy, too. Ignore the tantrums yeah. It appears to be not a huge tantrum but a bigger than weve seen tantrum. As the british like to say, maintain calm and carry on. Should we maintain calm and buy on would you be a buyer into this weakness i think its better being a buyer into weakness than one into strength which turns into weakness i saw a great chart that had to do with bitcoin but it was novice traders trading activity so it showed a long flat period in the market and on top of that it says dont buy, dont buy then it showed a pike up like this and it says buy, then it drops down and says sell so its a classic thing when something is going on i think people can they ought to be prefard for volatility. Heres one of the concerns that we have around indexing and etf buildout that weve talked about and ive written about it, charles, youve touched on this around the edges which if you take the five biggest equity etfs there are five stocks which are the Top Five Holdings in all of them amazon, apple, foo facebook, alphabet and microsoft. So people buy these etfs thinking they are diversified when in reality theyre buying hung stoc huge stocks which move the markets based on their market cap. Is there a market risk to the oversimplification of investing. If we sell, were selling the biggest things which cause the most weighted average move in the markets. Did that make sense at all not to me [ laughter ] at least youre honest. But you know what im saying, right . Is there a risk to people flushing everything because they think theyre diversified . Instead of selling one stock theyre selling the whole market. I would wonder why are they selling at all somebody is. The question is why would anyone sell because other people are selling . That makes no sense to me. Fear begets fear. The amygdala causes fight or flight. And is that fear and psychology condition to making money or market or losing . I would say losing somebody is selling. Well see how that works out for them. Hopefully my point made some sense. How about this more basic, everybody the last couple years seems to be piling into the same thing. Does that worry you . If it were so it would be concerning but i dont think its so. Why not i dont see crazy stuff like we tend to make rude remarks about the dutch and tulips fine and then something gets bitcoin, its one of those phenomenon, times people are excited because the price is going up then other people are saying the price is going up but im looking at something in a different way people get excited because the price is going down. Real investors ought to look at the underlying business, not stock price and they should be happy when stock prices are coming down giving them a chance to buy at lower prices, higher value. When you said people are piling into something, what people piled into from october of 1981 to july of 2016 was bonds and thats where the bubble is if theres a bubble and the 35 year bull market in bonds is over and were in a bear market, and its a benign bear market but thats the bigger issue which is that people will lose money in the socalled safe asset for many years to come. But youre a believer that higher rates will drive people out of bonds and into equities so why are higher rates being blamed for the last couple of days or any market weakness . You think higher rates are good for stocks up to a point because theyre signaling faster Economic Growth and as long as inflation stays low, that will be good for stocks the worry and its a real worry is that the fed overshoots and the economy weakens and turns down but the last worry we had was in 2013 during the socalled taper tantrum when rates went from 166 to 325 in about four months. Yeah. That was the only year that was the only year when they went into u. S. Equity funds so 275 on the ten year seems to be the breaking point. So above 275 is people start losing money in bonds, i think that money will find its way into caps and stocks. Lets talk about bitcoin. You are a longterm believer, youre not selling bitcoin, correct . You still own it im not a longterm believer, im a longterm observer and what i observe in bitcoin is the same thing you had in every great boom from the Railroad Boom to the electricity boom to the radio boom in the 1920s to the internet boom which is real fundamental innovation which then has to attract a lot of capital to fund the ecosystem and thats all ive invested in bitcoin, a lot of bitcoin, but its not the case i say im a rahrah bitcoin person. Is there any correlation between bitcoin and the equity market you have mean . Bitcoin, stock . Is is there any correlation between the two . Are they completely separate Asset Classes . Well, they are separate Asset Classes. Uncorrelated. They historically are not well correlated, yes, yes. Bill mueller and Charles Ellis, thank you for your time we had a panel, we had this interview. Very timely day to have so much investing wisdom on. We appreciate it well take a short break our special coverage dow down 540 points. We have more of this selloff stick around lets begin. Yes or no . Do you want the same tools and seamless experience across web and tablet . Do you want 4. 95 commissions for stocks, 0. 50 options contracts . 1. 50 futures contracts . What about a dedicated service team of trading specialists . Did you say yes . Good, then its time for power e trade. The platform, price and service that gives you the edge you need. Looks like we have a couple seconds left. Lets do some card twirling twirling cards e trade. The original place to invest online. The dow is down 533 points the last time we were down 500 points was the day after brexit. S p down 00. Nasdaq is down by 112 points or 1. 5 decline its shaping up to be the worst week for the dow and s p since january 8, 2016. For more on this, lets bring in krcnbc contributor jim yurio a familiar face for cnbc viewers. Anyone thats spooked, what is your message about what were seeing in the market with the dow down 550 points and the tenyear at 2. 85 its funny is that we knew this day was inevitable. But when it comes, its still relatively shocking. I think in the back of everyones mind whos been in here a few years, think to yourself, is this something thats as meaningful as we saw in 07 and 08, this is a garden variety correction this rally was built on two things one, an economy thats improving. Yesterday the atlanta fed came out with revised forecast of 5 plus for gdp and q1. Its also built on this overarching back drop of low rates. When something comes in to question that, theres going to be growing pains this mornings number we saw a pickup in Hourly Earnings, and a fed response saying, we have to keep an eye on that. That might change the way we do things and the market took that, in my mind, we might hike faster than we had in mind. This is perfect. We need a shakeout and thats what were seeing right now. You can still maintain your bullish stance in general because you think things are fundamentally strong from an economic point of view and corporate point of view when were looking at the earnings and still like a little correction here. What about getting it all at once were going to get it all at once we always take an elevator down. Thats the way it happens. To hedge yourself was relatively cheap. When we talked before, i heard brian talking about when selling begets selling and takes on a life of its own. That happens because as the market rallies, instead of people repositioning and rebalancing, people just get more and more bulled up. We say here, you know, bulls can make money bears can make money pigs get slaughtered that means when you go in too heavy, all of a sudden the market starts breaking were not breaking because of a little inflation were breaking because everybody is looking at their portfolio saying, oh, my gosh, i had too many stocks. I got to get out of some and rebalance. Thats when the last 25 points in the s p is just because, you know, were cascading lower. Has nothing to do with the fundamentals that pushed us this morning. Thank you very much really appreciate your point of view, as always. As the dow is down about 545 points here. Thanks very much. Lets get more on the selloff. David sieberg is with callan company. Whats it like on the desk right now . Theres nobody panicking, nobody saying, take this order and sell is it i want to get out. No question, you know, theres a calm about this sort of pullback i think more of a buyers strike than anything. This is a buy in weakness. No question right now. In my opinion, you just look to buy quality names you want to stick with look at google, for instance id be buying that stock aggressively with both hands apple gets downgraded by the top analyst on the street today, its off less than 4 . Look at the s p 500 . Earnings, 50 of the companies have reported earnings so far. I think 75 better earnings surprise and 80 better revenue surprise so, you look at earnings are going to be ratcheted higher and youve got a market that just sort of fell in here and collapsed 3 from the highs. Got a lot cheaper. You step in and buy stocks. Do you think the narrative has changed . What we saw today and the past couple of days is what is good news for the market is actually bad news when whether he got that jobs report, it was the wage number and the growth there that really spooked the markets into thinking the fed could act faster anything that comes in hotter than expected from now on seems like it could be interpreted very badly our focus has been on fixed income and bonds you have to remember here, okay, we havent really had fiscal policy for almost a decade in the United States, so were using the the Trump Administration is using and the senate and house are using countercyclical fiscal policy at the end of an Economic Cycle so, we hl average Hourly Earnings today, a surprise but we havent even had the impact of tax cuts thats probably a First Quarter event. So, were looking at a parabolic shift in bonds i mean, we could be touching 4 , 3. 5 , by the second, Third Quarter of this year because wait. By the second or Third Quarter of this year we could touch 4 on the tenyear yield, thats what youre saying it could be april cup of coffee it wouldnt be long. Definitely 3. 5 theres just you have to remember, this is the most important point. Theres a trillion and a half dollars on this planet that has moved into passive asset management, risk parody, these people are long bonds, theyre sheep. They have no idea theyre actually long disinflation so, if you have fiscal policy for the first time that triggers inflation of some kind, even a small amount, all of 5, on 10, 20 of that money is going to i want david to react to that point because its an interesting one. You have fiscal policy going one direction, looser, and you have Monetary Policy going the other direction, tighter where does that send yields and what does that imply for the stock market i love larry. I think its extreme to say were going to reach 3. 5, 4 this year. I do not think this happens. I think this recent spike in yields is an overreaction based on positioning i think you look at shorting in treasuries right now, its massive. Youre in a situation where you had a lot of repositioning, if you will, ahead of the 2018 bond issues and i think people are set up now in a way that maybe is a little more extreme. I say, i think were going to come back, retract in yields i think it doesnt really start to impact the equity market until we get to 3. 25 i think thats a ways off. Ireally just dont see a scenario where the fed screws this up. I mean, you get a fed that basically, you know, handpicked by this administration theres no way this administration, you know, with, you know, being the equity market is their benchmark is going to handpick somebody thats going to screw this up. I think were in a position right now where you can take this and buy stocks on any weakness and continue to move. Guys, thank you Larry Mcdonald and david, lets bring in kelly evans and wilfred frost who joins us for the closing bell. Were off the session lows, guys, but its going to be an interesting hour ahead. That was just in the last couple minutes, too, that were almost down 600. Thank you, guys, very much we want to get right to bob pisani whos on the floor for latest on this selloff, which has continued to pick up steam throughout the session today wilf, no sign of it letting up at all