Transcripts For CNBC Closing Bell 20240713

Market meltdown. Hang on, everyone, this is the final hour of trade. Good afternoon. Lets have a look at whats driving the action the lack of a Production Cut deal from opec coupled with a saudi price cut sending prices tumbling down 17 on the day alone. Coronavirus fears remain front and center as global cases top 111,000 and italy locks down a quarter of its population. And the bull market chaos rages on as yields on the tenyear at a low of 0. 31 and remain at the moment below 0. 5 . Joining us for the full first hour of the show, lindsey bell from ally invest they have 7. 85 billion in total customer assets. Shes here along with our team of reporters to break down this massive market sell off. Bob pisani is on the floor of the change Brian Sullivan covering the Oil Price Collapse mike is here to look in the the market mike holland ond transports. Well get to all our reporters the dow is down 7. 25 . B bob. Important thing is the Circuit Breakers hit this morning. Down 7 . Halted for 15 minutes. Want to remind everybody that halt remains at 7 down. Now we have to drop 13 for it to drop again before 325 after that, it would not halt unless it dropped 20 then the market would halt for the day. A couple of major movers Jpmorgan Chase was down 13 . Worst decline since 2009 bank of america down b aboabout. Certain sectors rallied then drooped. Industrials. Cat pill lehr rallied after the market reopened before 10 00 a. M. Sitting off the lows of the day. Same with yuntd technology theres only one dow stock in the green today. At least most the day, walmart still remaining in the Grocery Stores in general, consumer names have faired much better. Oil market collapsing as tensions between saudi arabia and russia boil over leading to massive declines for crude prices and Energy Stocks Brian Sullivan swroining us here with more. Brutal day across the board the price of oil down 10 bucks, about 23 . If you go back in time to reverse inflation to 1991, oil is now trade iing about 17 a barrel in 1991. Thats how far that we have fallen that move by the way slamming an already slammed oil complex. You have names like apache and others down 40 and 50 today it is hitting all kinds of portfolios pretty much selling across the r board and natural gas up a little bit. Im thinking the reason that is is because the Justice Department is that if we start to slow production either or beganically, companies decide theyre not going to produce more oil or they simply run out of money and go out of business, that we will also produce then less gas because remember natural gas is a natural by puckett of drilling for oil. You had Diamond Back Energy say it is slowing down crew completions. Slow down welcome pleegseverybo expects lot more of that type of stuff. Oil not really an oil story. A jobs story and its a debt story and well have more on story at 5 00 on fast money. Sxwl thank you so much for that. Bank stocks also getting absolutely slammed today the strong correlation when panic is in the air with what yields are doing very much at play why, of course banks make a lot of money based on whether yield curve. Here is exposure for the banks to Net Interest Income citi the highest bank of america often seen as the most Interest Rate sensitive because of its High Consumer exposure and bank of america was down 37 from its intrata february pique to its intraday trough today add to that the fears of exposure to the Energy Market b and and you have a perfect storm today for the banks but here is loan exposure u to energy for the big banks. Fairly low though small regionals will need to watch out for. Cadence, bank seven. Some of the names with the highest exposure to energy and those stocks down sharply today. Unlike Energy Companies, bank stocks are still above their 2016 lows, which was the last time markets feared a sort of rates are never going to rise again or oil prices are tanking type of environment and that might suggest more downside. On the flip side, theyre a lot cheaper today on relative terms. Whether thats pes or dividend yields last year, autonomous estimated bank stocks were pricing in a 50 chance of a recession. That number today higher still here are the dividend yields much higher than in 201 at the lows when the dividend yield was about 2. 5 one other comparison thats being made is versus 2008, two big differences. Capital, liquidity, so much stronger and higher today and the epicenter of this crisis is not financial and therefore clearly a big difference none is less, can expect more downside if yields or Oil Prices Keep sliding can you touch either of those groups, energy or banks . I think youve got to stay away now youve got to let the dust settle here and theres so much uncertainty related to where yields are going the market is pricing in a 75 basis point cut. Its a miss war and we dont know where its going to stop. We know the 26 low on w the ti in 2016. Will we go below that is the question over to mike for a look at Market Trends in the s p what are you watching . Yeah, lets try to frame this when you go down if price, you dpo back this time so look at threeyear chart of the s p 500. We were talk iing last week abo the chance it had to retest the intraday lows. We sliced right through because of the oil price trap door so here we are. What i find sbresing, 27. 40 was the level we go back to. It was a springtime level. Also a technical retracement amount of the whole rally from 2018 but this brings us back to early 2019 these are levels we first hit in january of 2018. So were going back 26 months before you know, when we first got to these levels. So clearly, a lot of stretching to the downside. Weve got washout conditions aacross the market we were oversold getting to the extreme. I want to get a longer term look today, we handicapped it last week the 11th anniversary of the bear market, march 9th of 2009. So this shows you the entire length of it what i find interesting by way if we get to about 27. 08, its a 20 drop we close that. We can finally say at least on a tech statistical basis, its over so i told you we went back to 2018 look at the previous times weve done Something Like that when youve kind of gone back about a year and a half or so. So its not this unusual what is is how fast we surged above it then gave it all up so clearly, its still a treacherous situation. Just looking at a lot of the intermarket stuff. The volatility indexes and credit markets mike, it seemed earlier in the session like the Circuit Breaker helped because after we reopened, we were more like 4 or 5 down on the day now testing a 7 level what do you make of whether they helped or hindered its interest the Index Futures premarket theyre limited to a 5 loss etfs were indicate iing a 6 or percent loss if youre down six and a quarter, youre testing that Circuit Breaker. Once we did, we had a lot of purging of stocks on the open. A monday open k you have a lot of mondays where you have down day, its the most frequent day to have a big loss and to me, youve got a lot of it out of the way. I think the fact we are down 12 coming into today is is part of that reason. Also, yields did actually bottom overnight. So that helped what is it b about mondays . You have all weekend to think about it i think so lindsey, what stands out is the speed at which we have erased just what, almost two years of a rally what does that tell you how fast its happened . The speed is definitely breathtaking for sure, but it means we can bounce back much quicker, too what we have seen is it takes normally a about five months to get to correction territory then you get five months later, youre back to where you were. So two weeks i think we can potentially see it happen quicker, but theres no guaranteed. Transports plunging frank . Dow transports on pace to close at their lowest level since december of 2008 rail stocks plunging and overall imports from china which would hurt rail volumes. J. B. Hunt, those shares down around 8 . It gets more than half of its revenue from hauling containers. Airline stocks, they continue to be under pressure from reduced business and lee sure travel and the major shippers getting hit today with the Broader Market ups gets about 4 of revenue in china. Gave lower q1 guidance fedex gets more than 4 of revenue in china and according to Deutsche Bank estimates it reports earnings next week that will be a window into the health of the u. S. And Global Economy. Back to you. Thanks so much for that now u oil prices seeing their biggest oneday decline since the start of the golf war on january 17th, 1991 oil lost 33 how far will Oil Prices Drop from where they are . Ill start with you. Extraordinary moves in the oil market were down 25 on wti. How much of a sort of perfect storm or can it still get worse. What makes it a perfect storm is that this is a first real crisis in which weve had on the one hand and supply oversupply injected in the market for political reasons. Yes, theres much more Downside Risk at the moment how, why . You look at where demand is going and then you compare it to where the supply is coming from and you look at the indicators of where inventory is going to grow we think now that negative growth territory is where we are for the World Economy as a whole and were going to see negative oil demand growth. That number is an open ended number were pretty sure its going to be negative year on year, but we dont know how far negative. Lets assume we have something in the u. S. And europe thats similar to what we have in korea, italy and china hit a big hit in february of chinese fuel demand was lost if we put this same number in the economies, that could be a 12 million barrel a day loss for as much a month. We dont have that balance if the market sees that the saudis and russians are continuing to produce a lot more then theres another demand shock on top of the current one. Thats another big step lower in terms of prices. So paul, i mean it is brutal out there. If youre an energy company. Marathon oil right now, down 47 . Apache, down 46. Whats going to happen its a question of how good their credit coming into this and how much access to capital they have and the second thing which weve been pushing for for two years now u is they have to cut cap ex so what were looking for is the fastest to cut and who cuts the most weve had examples from diamond back, the fastest movers are say ing chesapeake and amongst the Investment Grade oxy both really the bellwethers were look at credit for active managers are just on the sidelines and were just letting the machines do their thing which is why you get these extreme moves. Theres no guys stand iing ther with a piece of paper and pen to control the market its quite hard to price a binary outcome risk like a Company Going bust what percentage chance, lets pick the two you said. Chesapeake and oxy what percentage chance they go under . A 1 or 20 . I think in the case of chesapeake, its an extreme danger frankly more than 50 ive got to be careful what i say because i dont cover the stock and i dont want to get ahead of myself, but its pricing extreme risk just to speak in terms offi inmt cap, still over a billion. Bp was down 20 today is there any chance that Company Goes Bust . I dont think so. I think the very biggest here, these global supermajors that have been around for 100 years are going to come through this i dont think theres any question about that. But they are in a competition with the saudi Balance Sheet and the russian Balance Sheet. Thats really where youre at. So where we think the market balances given what eds saying about demand is usemp and Balance Sheets thats going to be the deciding factor and were going to have to cut u. S. Production by as much the market needs to balance which is going to be a lower and lower price and worse and worse Balance Sheet. Some of the chatter is putin wants to put the u. S. Fracking business under water is that really whats beginning on here . Talk about the political dynamic between saudi arabia and russia and how u. S. Oil industry gets dragged in so theres no question but the Russian Companies would like to put the u. S. Shale industry under. So we have to separate out i dont know what mr. Putin is thinking, but weve had the ceo make a series of comments from the middle of last summer to today saying we dont have to worry about saudi arabia losing margaret shar market share the real elephant in the room is the u. S. And theres nobody at the b table in the u. S. And u. S. Cant have a political leader at the table because of the nature of the u. S it has to be driven down by price. Now others tried this before the saudis tried it in 2016 and 2016, as early as then how will they maintain this price cut . Theyre both sitting on war chests the saudi one is about 500 billion in cash available. Now maybe a little bigger in 2016 when they and the russians got together they are less vulnerable one is the world is cutting off from the rest of the World Economy so their liabilities are lower than saudi liabilities and hard currency, but the real significant difference, the saudi currency is pegged to the u. S. Dolladollar the ruble floats and appreciates with oil prices. It depreciates with oil prices that correlation gives it a kind of a boost when the ruble is low and the cost of production is lower and the chances of a company in ruble demom nated cross environment expanding in that environment is much greater. So id say theyre both going to struggle at 30 or lower for a long period of time, but in the shortterm, the russians are sitting more comfortable would you by any of your companies now, paul . I think we like the best in eog or particularly eog, some of the best stuff is very attractive here. One thing ill add to what ed is saying, we havent heard the last from the president here we could put in an import tariff they could stop release iing sp and stop building spr. Theres a number of things we might see. Thank you good to see you both cme Group Chairman and ceo joins us now in a first on cnbc interview. Terry, good to have you. Especially on a day like today welcome. Appreciate it tell us what youre seeing in terms of how the market is functioning after these giant moves across assets. Well, i think theres a whole lot to talk about. I mean youve had a lot of guests on today with a lot of opinions, but the markets for the most part are functioning quite well even though theyre going and the volatility is quite high i think one of the real issues that youre seeing here is this reminds me a lot after the 08 crisis when we were going to get into regulation except nobody knew what it was going to be what were seeing the complete unclarity as it relates to the marketplace. No one knows exactly whats going on as it relates to the rye ru virus. So if you want to give stabilization to the marketplace, we need to get the test kits out into the hands of the public weve got 75,000 test kits today. And for the most advanced country in the world, were not doing that so you cant have 500 cases reported here in the United States and 16 million quarantined in italy and saying theyre both correct somethings wrong here and the markets, they know that. And the markets are trying to figure out some clarity. So whatever it is, i would be hopeful that our government instead of trying to slash the rates to zero, would get these test kits out into the Public Domain so we can figure out what it is and that will help the overall market in general, knowing exactly what it is and terry, how are markets functioning . I mean not just the last couple of weeks, but particularly the last 24 hours. Clearly, extraordinary news know over the weekend when theres not much liquidity in various different futures markets. How have thinged functioned in the last day or so just fine and theres liquidity. I heard some of your guests saying theres not enough liquidity in the marketplace the bid offer is going to get higher i dont care what youre trading. It doesnt matter anything were still trading just under a trillion dollars s ps every day so theres plenty of liquidity its swrus at different price levels than it is when you dont have volatilvolatility the markets are functioning properly the Circuit Breakers kickeded in oils been a big story the input cost was between 40 and 50 a barrel the perm yan is the cheapest at 40 youre earlier guest was talking about this when you look at oil in saudi arabia, input costs are between 20 and maybe as low as 12 so it doesnt mean its going there, but their threshold for pain is a lot greater than ours and thats why its important for people to use markets like ours in order to defer some of the risks. Wanted to tuck b about the impact of trading halts. You guys halted futures last night when we see the 5 decline. What is the impact of that how does ha help or hurt the process . Especially when you have the rise of al r gor ittic trading everybody wants speed for everything they do in life, but not for markets. We want to make sure markets go nice and slow for us as we want our computers to be able to search anything in a nan o second not the world we live in so the trading is not the issue. The markets move quicker like Everything Else in life. Theyre efficient. We were down 7 this morning on the halt thats really where we halted was this morning and just in coordination with the other marketplaces, so again, i think theyre a good thing it gives people an opportunity to resasz whats going on. You saw them kick in this morning and had an upthe tick. Markets hate uncertainty and thats exactly what we have right now. So i would hope that our administration would get these test kits out to the public and everybody that does not have an md after their name stop saying wash b your hands and call your doctor you cant even get ahold of your broker, let alone your doctor. We need to make sure we know what were dealing with here gauge for us the amazing experience you have, what level of fear you feel is out there at the moment in the marketplace. We hit the Circuit Breaker oils down, vix is bovr 50 do you have any sense you feel like fear has piqued or is piquing . I dont know. Theres uncertainty and that hasnt piqued yet. Thats why whole concern we have in this uncertainty could be alleviated i dont want to see the numbers go up. No one does, but if theyre up, we should know about it then we can assess what were dealing with we cant assess what were dealing with so its really hard to say that you know the uncertainty in the marketplace or the fear factor is at its peek or is going to sell off or go up. Really quickly. When you do have the market halted, is there any concern about etfs still trading when the index is halted . This feels like were in an experimental regime with the rise of etfs and the rise theres been so much money on them youre right. These etfs are just started trading in overnight hours just as of recently, not that long ago and a lot of them are completely ill liquid. Some of them are again, we dont list them here at cme, so were very focused on our index businesses and making sure we can manage the risk. I dont want to comment too much on the etfs. There are many that are just as illiquid thank you thanks. Now to an update on coronavirus numbers and the big impact the outbreak is having on one industry in particular meg with the latest on the spread and seema is watching the Cruise Companies meg though, first to you the numbers are now topping 1 is 13,000 around the globe with almost 4,000 deaths. The World Health Organization saying the threat of a pandemic has become very real and that it would be the first in history that could be controlled director general saying were not at the mercy at this virus, emphasizing the actions taken can make a difference. He also pointed that of the 80,000 reported cases in china, more than 70 have recovered in the u. S. , the cdc warning its likely many will be exposed to the virus this year or next year and theres a good chance many will become sick. Dr. Nancy saying total cases now topping 600. Guys thanks so much for that mike, clearly, over the weekend, the nuews flow, even puing oil aside, the news flow as it related to the vie us are the news to quarantine it lew. The market kind of in a preliminary way, trying to rush to a place that try to build in a lot of these risks then seeing if you can absorb the headlines when they come it was a little worse than expected i wonder if weregetting to th point where weve been living with it for three weeks and everyone at least assumes is going to be higher numbers one sector thats been slammed is cruise operators. The grand princess ship, which has been stranded off the coast of californiaing into oakland. The u. S. State Department Warning americans with Underlying Health conditions to not travel by cruise ship as the number of coronavirus cases continue to rise thats sending cruise stocks down as much 20 just today. All three cruise lines are averaging a year to date loss of around 60 investors now taking a close look at the financial positioning of these cruise lines by dpamenning their debt to equity ratios, which above 100 for royal caribbean, 135 for norwegian. Today, norwegian entered into a Revolving Credit Facility with Jpmorgan Chase of around 670 million to provide additional liquidity. Also warning carnivals dividend of 8 to 9 may be hard to ma maintain as bookings drop sharply and costs around quarantines continue to rise we are watching that grand princess ship approach the dock in port oakland with more than 3400 passengers and crew from 43 countries. And the policies, if you want to cancel your cruise, remind us, how long do you have if you want to rebook it . What happens to the lost business it depends on the cruise line for carnival val and royal, you can cancel 48 hours before f the date of sailing, but they dont guarantee a full refund. In many cases, they offer you credit which can be applied to a future cruise. Thats really how it works you have to spend time calling the company if you are looking for a direct refund. Thank you so much for that. Now if youre just joining us u, were seeing a massive sell off on wall street the dow and s p seeing their biggest losses since august 2011 the broader indices at the moment, the dow is down 6. 5 that is off the lows were down 1700 points the low is down 2100 points. An extraordinarily large decline. The dow 30 stocks. At the bottom, dow down 20 plus and the number of companies down double digits like boeing, cat p pillar and jpmorgan. One Stock Holding on and that is walmart, up 0. 9 still to come, j. J. Kinahan will join us to talk about what kind of volume theyre seeing and what clients are wanting to sell and buy. Number of keynotes out to tell you about bank of america saying stocks have not been this attractive compared to bonds since the 1950s on a dividend yield bases and reiterated its stance on tech and health care however, not everyone is looking for bright spots just yet. Jpmorgan saying a sustained buying opportunity not likely to come the firm suggests investors keep selling into strength and reducing their positioning in stocks ubs also predicting the sell off is not finished yet. That firm pointing to key Market Dynamics like elevated risks like gold and the ten year treasury and mark zandy was asked about the odds of recession. I think 60, 65 i think its going to be difficult to avoid a dunn tourn. How deep, how severe, really depends on the administration. And congress i mean the fed is going to cut rates to zero and then it will quick to the president and the congress to come up with a fiscal stimulus package. Lindsey, where are you guys on your call for the market and whether its linked to a coming recession . The news out of the Energy Complex really adds an element to the situation were in right now. Increases the risk energy is 8 of the xha economy its a smaller portion like 3. Yeah. Yeah. So its much less of the index, but its still a big part of the economy and you have to think about all the Industrial Companies that feed into that. Industry so look, i looked back at 2015 2016 we came from a position of strength going into that that was an energy led economic slowdown there was a slowdown in investment spending, cap ex as well and we came from gdp rates of 3 and the it was cut basically in half in the third and Fourth Quarter of 2015 so that would be potentially Something Like what we see from a gdp perspective this year. Were coming from a little bit weaker stance. But u then on top of that, you have to throw the Coronavirus Impact and what that does to Economic Growth and the travel and entertainment areas. Im more worried about the Energy Complex do you feel like the market is priced in a recession i would say not fully you started at a high valuation level relative hi spely speakin. I think there are parts of the market that have gone a far distance toward pricing in a bad run. If you look at the cyclical areas, theres Something Like 150 s p stocks that are down its not like they were up and theyve all come down 18 . I dont think weve generated absolute value but to the b of a point about dividend yields. You have to figure out how to interpret this new world of ultra low treasury yields. For the entire history of markets until the late 1950s, yields were always higher than risk free bond yields. They went down for 60 years, they went below and i think were flipping the switch again unless they come up. You dont buy the fact because dividends pay higher yields i dont think that in itself, not tactically, maybe longer term, theyre going to be privileged theres only so much yield in the world, they will get supported on a valuation basis, but i dont think thats your buy trig simply because weve crossed that threshold also, mike, how many limits out there that Bond Investors arent going to be able to take their profits and shift it into dividend yielding stocks per se. Its not as simple a switch as oh, this stocks up, this stocks down, im eadjusting m portfolio. I dont think its necessarily a flow from one end to the other the its just the marginal dollar does it go more likely to dividends, dividend paying so i stocks weve got just under 30 minutes. Heres a look at the major averages down p 7 6. 3 on the nasdaq and 8. 7 on the russell. These are single day moves extraordinary. Bob pisani is here on the floor of the Stock Exchange looking at the biggest mover, but frank having a look at the biggest sellers on the north ameriasdaq. Frank. Hey, there. The nasdaq trading below 6 lower and on pace for its worst decline since august 2011. Only two stocks on the nasdaq 100 trading in green oreilly awe u toe parts and dollar tree. Tech and transports both tradin lower. Tesla trading 12 lore facing a head wind from lower u. S. Gas prices for that automaker. Apple having the biggest negative impact after reports that it sold dramatically fewer b iphones in china as this coronavirus outbreak continues now over to bob at the new york Stock Exchange and we had jpmorgan, one of the worst days. This is a day for Circuit Breaker. A wild first hour. I want to show you halliburton as an example. We had a halt at 9 33. The s p 500 halted then halted again on an individual Circuit Breaker, 10 00, for five minutes, then a third time at 10 22. Another individual Circuit Breaker halt for another five minutes to slee trading halts in one hour havent seen that i dont remember when and you can see theyre down about 37 ive been asked a lot about gold stocks today whats going on with gold stocks being down, but wait a minute, its up. This is because gold stocks act like stocks sometimes and you have concerns about slower Global Demand for gold potentially out there if the Global Economy slows down and of course youve got people out there saying the gold miners would suffer because of that guys, back to you. Thank you want to give you a check of the s p sector map every sector is lower here on wall street. Energy is by far the worst hit down 18 at the bottom of the pack after crude oil is almost 25 plunge financials, second worst performers and the low yield story. That group down 10. 6 . The ones doing the best consumer staples, health care and comm E Communications services. Theyre all down at least 4 which gives you a sense of the size and the scale of the selling that is going on i think there are ten stocks in the s p 500 that are actually positive as it stands. Less than half an hour to go before we close. Three things driving the action. The lack of f a Production Cut deal from opec along with a price cut. That Energy Sector down 18 on the day. Some individual names down 40 to 50 or more. Coronavirus fears remain front and center for investors as global cases top 111,000 but the with at least 607 cases in the United States and the bond market chaos rages on as the yield on the tenyear gets an all time low of. 31 we are above that level, but boy was that crazy to watch overnight. Still below 0. 5 which in itself is quite extraordinary. Weve got 24 minutes lets get to mike whos at the telestrator with the next installment. So many ways to try and c capture the anxiety levels of the market, heres one its a rich owe of gold prices pr ounce to wti crude oil. Goes back 20 rears theres no intrinsic relationship its not as if what should trade at, be whbut what find interests how it goes vertical this is close to the bottom of the great financial crisis here you have that early 2016 run. Oil collapsing, gold going up. So i dont want to say its the ratio of useless commodities to useful, but it shows you people are very, very worried about big picture stocks in the world buying a lot of gold and also very despondent about the lik y hood of the Global Economy doing better down the road you see a higher high in this ratio. The its going to fit ahong side a lot of other things theyre saying maybe we have the ingredients for some kind of shortterm pique in panic come up u i guess today though and in deed more broadly, its been very much the oil side thats had bigger moves yes, it has now gold did trade up to a high, but its mbeen more violent on the gold side. Thats been the sharpest ratio higher do you see this as a recession or just a sentiment gauge . I think its more of a sentiment gauge, too i think the numerator and denominator are two very Different Things so they can move quickly like wolf pointed out right now. Its really being driven by oil prices gold being flat is one of the few things out there that suggests fear isnt as broad as perhaps it could be. Or if youre selling everything just going to say theyre taking profits lets have a holook at the s 50 heat map quickly with just 22 after the session. Wow, just a a handful of stock there is in the green. At the top so many stocks in the red. The broader s p 500 down 6. 2 . Its off the lows. We were down u more than 8 . The dow is on pace for its biggest point decline in history. Joining us for more very good afternoon to you jj, how fearful have clients kind of been over the last couple of weeks and today . Well, you know whats interesting, our trading has picked up significantly as we head into march. But i think our clients have been, if you look at our imxs, theyve taken less exposure, but not panic mode theyre down about 9 in terms of overall exposure to the market they started to buy fixed income toward the end of last month as krocoronavirus picked up more i asia but talking to the folks on the phones, it has not been a sense of panic and ik the market overall, the first sense of panic i saw was last night in the overnight futures session. Over that, its been an orderly sell off what kind of names . Amazon, netflix, which both hit 52week highs. Twitter, square. Those names obviously with mr. Dorsey being involved in a lot of things i know the news came out. Activision those are the types of names were getting out of and what theyre heading for is names that are well capitalized, many traditional names. Apple, microsoft, disney, paying some sort of dividend. I think people want namesthat have sort of stood the test of time more. Mike, does that suggest its a small sample, but not suggesting youve only got a small number of clients, but theres still another way for sell i selling to come if Retail Investors havent taken part yet or are we just taking part i think you can say perhaps this hasnt quogone on long eno for there to be a full wholesale give up type trade, but did hit heavy outflows from things like etfs and the survey stuff is mixed at this point, but i think its a time, time has been a the missing element. David bailey focusing on citis private bank so i guess some more High Net Worth individuals. What have you clients been doing and what have you been telling them thaieyve added to gold and treasury in february and now were seeing them begin to move back into the market in certain areas. We saw first if asia where a lot of those clients had been buying their local mashlts. We saw today theyre buying u. S. Markets. I think that this is a particularly severe sell off relative to whats really going on in the core economy weve advised them that once markets get down to about 20 , that becomes an attractive entry point generally speaking and in some ways, these externalities, you have a coronavirus situation, which could last two to four months very significant health, economic and social issues, but when you look at the core economy going into the crisis, the health crisis, you could see how strong it was in general and we had expected an up year of about 7 , so we see clients are much more interested in knowing is this going into recession nair period or do we see this as a exogenous shock thats going to last for a short period of time of three to four months our clients are buying into the equities into different sectors of the market right at this time s p down 6. 4 stay with us if you would, we are e getting new comments coming in from billionaire investor, david teper e. Thanks, i had a conversation with him about how credit markets are functioning. He said he is not surprised that in some market bid spreads given how much volatilities. You have to have that in order for people to make money in there. He said its a Risk Management problem. Not ali quidty problem he mean theres players out there reducing risk exposure even though there may be sufficient amounts out there he said theres liquidity markets, but not for all contract sizes some of them, it has dried up. But he was able to make the sale sales and the buys that he wants to make. And again, he just scoffed at the idea of anything like the financial crisis, theres much less leverage in the banks and one other thing adding, he says the desks themselves are split up because of the coronavirus. Hensz some people are here, some are there. He thinks the situation on the desk will improve when theyre back together and i can add to that personally. I called the repo desk this morning and the guy said well, i cant tell you too much because i got one guy at home and im here so call back later is what he told me thats pretty interesting, steve. I mean ive spoken to all of banks over the weekend my gauge is roughly 10 or so of the head count theyre taking into their back up locations, but im surprised if theres a feeling out there that that has stopped the proper functioning of markets i mean clearly either way, mr. Tepers conclusion was theres plenty of liquidity. It does also though thats thigh you have to believe theres a reason people go through the pain of getting on the train to the subway to go into the office. Otherwise wed all be doing it at home any way. You have to believe theres some informational or process reason why they do that and that theres some dimunition in that when they stay home. Tep per se hes hearing it from others out there that theres some problems in functioning of some of the desks because uther spread out so and thats a temporary problem. Overall, he thought some of these issues out there were t h temporary. He did not seem overly concerned of the functioning of the market things can fall, but they seem to be falling in an orderly way for most markets any sense of whether hes buying or selling . Actually, to prove something to me, he bought, went to the process of buying a contract on the phone with me to prove how there was certain liquidity out there. But i dont know overall his book and i didnt ask him. All right steve, thank you Steve Liesman. Again, another i would say positive read, right, that the market is functioning well theres liquidity. Its not the kind of crisis style panicy reasons that we get. Absolutely and the markets have performed very well sometimes people criticize Market Structure its the sample size, but ours in january, we averaged 1. 84 million trades a day we are now march to date were averaging 2. 3 million trades per day. Everythings functioning as it should and its been in my eyes. Then you have to wonder what a 6 down day is trying to tell us is that a fundamental story . Well, were used to seeing corrections over time. The old adage, goes up the stair, jumps out the window. Its jumped out the window even more so than most days the bond market has been warning us over the last few weeks if you lack ook at tariffs last year, there were dates people set, if this doesnt happen, well do something with the coronavirus, theres no date and thats tougher for people to get their arms around. Thank you both very much for joining us weve got 14 minutes left of the session. Down 6. 5 on the s p 500 time for the last chance trade lindsey. I think when you look at the market for opportunities, what you need to take into consideration is the environment that youre operating in and right now, its extremely volatile ths theres a lack of direction and clarity. And earnings forecasts and for that reason, i started looking at gld i know mike talked ant how there are some different indicators where maybe its starting to become more overvalued, but when i think about gold, it really benefits from Central Bank Activity and thats when Monetary Policy is easy and going to continue to ease. Also when theres an expectation for fiscal stimulus to increase. Gold usually does well and when we have this amount of uncertainty for many guests come on here today talk b about they dont know where the economic environment is gold has historically been a very good store of value and it usually outperforms in a down market so for that reason. To see that its flat on a day the market is town 1700 points well you know what, the same thing happened last week it declined or two weeks ago, it declined 5 then popped 7 so i think you just see some investors really taking profits here for if its to make margin calls or just really take money off the b table and put it somewhere else its gone down significantly going into yen, swiss frank coming up, more on the sell off and how investors can protect their portfolio when were joined by jim cramer looking forward to that. 12 minutes left of the trading session. Now in the closing bell zone commercial free coverage going into the close today, ally invest, lindsey bell, mike and peter here to break it all town. Lets kick it off with the Broader Market the dow is now down almost 1700 points on pace for its worst day since december 2008 and look in to close at its lowest level since january 19. The s p 500 plunging that caused a Circuit Breaker to halt trading for 15 minutes. Reopened and now were seeing the s p fall sharply as well to the tune of 6. 3 looking at its worst day since 2011 though i think may 2010 is also in play here. That was the day we saw the flash crash. It is broad and large, mike. A lot has to do with oil and i guess a lot has to do with coronavirus. How would you put it into context . I would say its a complex correction and that you have all these differentment wills pushing the market around. I think today, you get to f further extreme. A week ago, you were able to say this market is getting oversold. 18 in three weeks its a big bite. I think it takes incremental bad news on a very immediate basis to get it too much lower unless we have something blow loose in hedge fund land but that being said, i dont think youve created frew absolute value cushion under this market because you started from an expensive spot pete, you caution before this so congrats. Where are you snou starting to turn or still not . I agree with mike if we look at it fundamentally, if theres 5 on earnings, which is at the beginning of the year for flat earnings and we look at a reasonable multiple based on what we think are equities, about 16 times youre looking 24. 50 to 2500 which would be the fundamental anchor lets call it, but we know that markets trade excessively often and it was my view as you know, i came on here bearish quite a bit when the market was in my face and i said lock, i cant buy into this rally. I think were getting close to where we are fundamentally energy of course has been in the eye of the storm today the sector down sharply to the tune of about 18 or 19 . Its on pace for its worse individual day earlier, ever, excuse me. The move comes as oil prices dived in the session on fears of a price war between saudi arabia and russia Energy Stocks taking a massive hit because of that. Conocophillips and chevron fairing bert than others hitting levels still not seen since 2016 exxon hitting its lowest level since 2004 halliburton since 2002 mike, interestingly, the majors if we focus on them here, down sort of 10 , 12 bp and shell down close to 20 that is is pretty extraordinary moves for companies that re relative to the rest of the sector have strong Balance Sheets the majors have any questions about their longterm futures. Right and theyre not as leveraged to the actual commodity price. Its a give up trade i think in energy basically says this is going to be just too hard for too much of industry were not really talking about growth were talk iing about shrinking. Talking about brufsys and all the rest of it the most interesting question market wide is whether the Corporate Bond market is sequester energy away from the rest this is a blasted out area its got to take pain. I think its an open question. But that to me is going to be a big tell in terms of whether stock market can function. The other question which relates to the stock market is even though its a small section of the stock market, these Energy Stocks, what about the Economic Impact on the u. S. Economy . How big of a dole is that if we start to see Energy Companies fall certainly its been an area of jobs growth for some time and just to take it back for a second, the reason why a lot of these enp companies have been able the to survive is because rates have been so low low rates have created a lot of capacity in enp for companies that should not have survived. Thats led to the necessity of the Global Oil Price shock so this is to me, a consequence, an unintended consequence of o low rates for far too long and even beyond where were talking about the importance of enp companies to the economy, its an indication that there are probably other areas that are stretch ed as well in Corporate Credit well beyond enp i think it also has political ramifications. Texas, arkansas, a lot of these hard hit states. North dakota they were all trump states in the 2016 election. So i mean any pain there could have ripple effects Airlines Getting crushed the Airline Index down more than 30 . Down 6 today. This as the cdc is urging people to avoid unnecessary travel. American, united, alaska and delta, all down more than 30 from their 52week highs when did these airlines get too cheap . Good question i think were going to have to see stabilization in Airline Travel the good news is oil prices coming down, too that could be a Silver Lining for them, too, but again, it gets back to the big question of uncertainty. When are Oil Prices Going to bottom what is the Economic Impact from coronavirus here and globally. When is china going to get back on its feet. When is the tenyear going to stabilize. If youre looking for a silver line, maybe a bronze lining, these stocks or some are above their lows on friday because they tanked at the open on friday and recovered, which given that they are in the eye of the storm for various times is a small bronze lining pretty small right now. I do think its a high fixed cost business that if you, i own capacity and top lines going down, its not a good story. But they also at least screen out. We might be talking about post 9 11 support for the travel industries lets move on to tech with five minutes left. Hey, jon heres a quick run down of the landscape. Really starting with the S P Information Technology index 1441 the bear market level there down 20 were not quite there yet about 20 points away but some big individual tech stocks inside and outside that index are vmware, cisco and intel have lost more than a quarter of their value. On the flip side, netflix, intuit and alibaba have lost les than 15 todays worst per foermers include tesla, shopi fy and mike ron down 10 or more while suffering least, chinese e commerce player. Video conference player zoom and oracle though that one is near the lows where its been trading for the past two years jon fort, thank you how do you approach tech now peter . Im cautious there, too valuations have come in quit a bit. Ian like netflix sfl. You have to differentiate clearly. But when you talk about cyclicals like semiconductors. Ive been making a late cycle case for a little while now and you know theyve been the poster child. What do you like instead . You know ive liked the reets. Ive liked them because my view on rates its been rates would be lower our view is that the curb would invert and for that reason, you get a tail wind for cap rates in a low r rate environment are there any pockets of tech you would be buying . Well i do think some of the Software Companies that have come in on the back of this pullback could be more interesting now given the valuations coming in but also i think just more broadly if you look at the nasdaq action in the last week, certain down days, theyve been down, that index has been down less than the larger cap s p 500 index. So i dont know if it shows investors are still willing to put their money into these sectors because when we usually come down from big sharp pull offs like this, you see the cyclical sectors bounce fast mike, what are you seeing internals . Its a watchout if you look at the new york Stock Exchange up versus down, its like more than 95 down to the side youre getting more extremes in the comprehensive selling today. Then look a new highs versus new lows Something Like half of all new york Stock Exchange stocks, more than half, made a new 52week low today. What you can say is a ton of selling has happened in a contin concentrated period of time. You cant necessarily say it is right now. Then the volatility index is up. Its telling you things are still trechous theres a massive bid in there its well off the highs for the day around 60. Low 60s, but still telling you this is an extraordinarily dice tape when it spikes and comes down hard, that tells you maybe the fevers broken chblgt before it spikes when its still elevated, be careful theres a lot of spiking. Just about two minutes to go here lets go to frank at the nasdaq. The nasdaq falling down just bt 7 . Crossing the threshold to be one of the worst days since the financial crisis chip stocks and tech stocks taking some of the biggest hits. Tesla down around 12 . Lower dpo lower gas prices another head wind back to wilfrewilfred. Just under 90 seconds left of this roller coaster session. The s p is down 7. 3 just today. Down more than 8 of the lows. 7. 4 as we approach the close. Energy in the eye of the storm here is exxon mobil. This is a giant major with a relatively strong Balance Sheet. It is down 12 why . Because oil prices have tanked theyre down u b about 25, 26 just today as we approach the close. What else has suffered banks. Heres bank of america february to today. Down 38 its down about 15 just today why . Because of the move in yields. Were off the lows of the day, but still about 0. 5 on the ten year the best performing sectors today are the defensive ones like staples and health care, still down u about 4 bring in bob. Of all the markets, we are down, 7. 5 the important thing is the test of the Circuit Breaker system today the first 15 minutes, system held up fairly well and if youll notice, things were much calmer after that. There will be a lot of postmortems on this. Its the first one weve had in the modern era, but for the moment, we passed that test. We are down more than where the Circuit Breakers hit this morning. Closing 7. 7 over 2,000 points. Back to you that is the worst point drop for the dow ever welcome to closing bell. Wilfred rejoining me along with mike take a look at this ugly, ugly day on wall street the dow closing down 7. 8 . Worst day for the dow since december 2008 and as i mentioned, the s p 500 losing 7. 6 worst day for that index since december 1st, 2008 as well the tech heavy nasdaq getting crushed. This was a broad selling day down 7. 3 worst day for the nasdaq since 2011. The russell 2000 index of small caps getting smoked. A lot of banks make up that index as well. Among the hardest hit, russell 2000, down 9. 44 on the close. Energy got hit the hardest after crude oil declined almost 25 . As saudi launches a price r war in the middle of what is perceived to be b a big shock and demand from the coronavirus fears. Oil by far the worst performing group in the market. Coming up, jim cramer joins us with his thoughts on this massive market sell off. Hell tell us what he thinks you should be doing now with your money. Joining us to talk about the market today, eric, he is multiasset cio at new berger bermen which manages 365 billion in assets. Still with us, Peter Lindsey bell first though, mike, to you on what we just witnessed today. Obviously brutal. The markets rushed toward a place to say we have to start handicapping the probable theties of a recession in this country. Certainly we havent priced that in yet the verdict is not yet in. I think you could probably look at the washout conditions and start to make a case theres been enough selling for now. If it was just an eck wii theties story. I think everyone has one eye though credit spreads are doing and just the volatility readings out there. Which suggest a certain contingent of Market Players are kind of trapped and forced hedging and theres a lot of unease and bad vibrations in the market the way it is before you get some kind of a big reversal rally, but also the way it is before the market deepens into a deeper correction. What are you looking out for . The key triggersthat would mak you turn to be more bullish again . Im looking at rates markets. The rates markets have been seeing a bearish tune for quite some time. The ten year dips to about 35 basis points rallied up to 50. It did. Intraday moved 30 basis points it was down 20, then up ten. Its really a really interesting in the rates market is what i would like to see is a bit of a steepen i steepening in the yield cur f which likely can cannot happen because fed funds is still well above the ten year im expect iing the fed to move with another series of cuts but the problem is the fundamentals vk weak for a while and the coronavirus is an extremely heavy straw on a very weak camels back so junk spreads have jumped the last two days but still below where they were in 2015, 2016 do you think we get to that level or above before the pain is over . Its interesting. I group in a world where credit mashlgts led equities. A couple of cycles i live ed through. That was the case. Now i think the equity cushion under credit spreads has allowed for a relative value mind set thats per soois cysted for a long time. If youre taking down a new issue and the company has a massive first loss cushion, youre not that worried about being repaid but suddenly as your equity cushion diminish, you say oh my goodness, maybe i dont care about that extra ten basis points i care more about whether im going to get repaid at the end of the day what are you doing, telling people to do on a day like today . Well, first of all, we were telling people this morning that they should get ready for a long haul up until thursday, friday, the sell off had been orderly. You started seeing the change thursday and friday and we identified a couple of things we thought would drive a sloppy day today. One is we observed the Oil Price Drop put the market in double jeb jeopardy because that has more of an impablgt on credpact credit we expected an ugly day r for credit and we got it hadnt really seen a big and one of the identifiers we picked up was a multithousand point drop on the dow and that would indicate we had gotten into the selling in very negative sentiment and we just got it 2027 on the dow u. A 20 drop an important support level to say were willing to get paid a lot right now. Weve got to get paid to buy equity from here what did you buy . Broad indices or stock specifics . Partly because it reflects a quality orientation. Thaths something we want at this point. Okay. Lets get a summary on this crazy day. Bob pisani o on the floor of the xhang with a crazy day bob. And the good news is the Circuit Breakers kicked in early. Addedly quidty, calmed the markets. We did end the lows of the day banks down 14. Industrials down 8 . I want to show you exxon mobil down roughly 11 on the day. This would be the lowest close for exxon since 2004 believe it or not. Jpmorgan chase down 13 or so. The worst decline since march of 2000 youve got to go back to the financial crisis to see a decline of that on a daily basis. Industrials faired poorly. Caterpillar and 3m down 5 . . Thats a four year low for 3m and dow u inc, which you can associate with a truly global codings, think that is not a typo down down 21 . Just came back about a year ago. Thats a new low for that stock. Back to you. All right, thanks another historic day as well for the bond market. Lets go to Rick Santelli at the cme in chicago rick you know, markets right now are trading some very important levels look at the 24 hour of tens. And realize that fridays low yield in tens was 65. 65. Right now, todays high was 60 and that was after a 31 print and the point is were trading 59 now if we leave gaps and we left a gap and we xwo down below the lows, which are 31 before we fill that gap, that is much more bearish for low r rates, so filling this gap is significant. Finally, you look at the longterm chart of tens. A lot is technical the minute you took out the double bottoms in 12 and 16 it accelerated. Dollar index see the year to date where it closed, it accelerated. This is important. Uncertainty is always addressed by a technical feature so you need to stay on top of them. Back to you. Thank you Energy Stocks got absolutely crushed today. Our guest downgraded almost every Production Company he covers and what he says is a potential energy armageddon. Managing director of Energy Research at Sun Trust Robinson humphrey explain what you mean. We got a taste of it today, but how much more is likely to come . Thanks. You know you hit it earlier. Its unprecedented to see this kind of pressure both not only on the supply side but the demand side. Again, here, we dont know what the fully demand destruction is going b to be nor do we know how much the supply war is going to cause supply to continue to rash et up. So standing back taking a look at that, we thought you know prices certainly could get on the 20s. We have seen that and we think they could stay there for a while. Pete, i just want to come back to what the stocks have done today do you think the oil stocks are suggesting large sways in this industry are going to go bust or it is just a move based on how earnings have to come down the Big Companies that have good Balance Sheets likely survive but the smaller x eer g that meet access will suffer and the privates will likely go under very, very swiftly talk about within your coverage, whos going to suffer most and what does that suffering meeb with the price of oil at 31 a barrel . Theres a number of names that have both maturities and the rbl redetermination comeing up u so when yu look some Large Companies, oxy has a lot of debt after the anna darko merger. As does better credit. All those have high levers with some maturities coming theyre going to have to address just for some Large Companies there whats the key oil price and the length it has to remain below before those Companies Start to feel the pressure seriously . One month where we are do we need to see another leg down and it last for another year most these companies again, theyve got to be closer to 40. So again, were quite a ways from that. To me if were down call it two quarters well into the back half of this year and were still under 40, it will be troublesome. I dont think any of my Companies Make Free Cash Flow at 40. They have to figure out other things direct quotes said its all about survival for us. Its not about valuation and i think thats very much what most of them are looking at you know the president tweeted out today on the oil prices that you know gasoline prices go down r for americans, puts money in their pocket if you look at what stocks went nup the s p, i think there were under ten of them. One was doll alreaar tree. Walmart. Clorox there is a Silver Lining for the consumer not sure though if you have coronavirus fears youre going to go out and spend this money right the buying of necessities trade will work in this environment. I still dont think that from a stock market perspective, the small windfall in terms of price per gallon is that significant because the oil intensity, thats not as big a portion of the Consumer Expenditure set as it used to be b. It doesnt u hurt. Its an off set but i dont think it really changes whats going to be a real retrenchment cycle in industry. The amount of jobs lost that the energy past was going to have to go through is going to be a much bigger impact than the couple of dollars that families are going to have to spend from the savings and oil. The favorite is the reets. Are are you the quality yields were we think that once the dust settles, you look at treasuries theres going to be such a demand for yields. Were looking at quality and yields, eets can certainly work were also looking on the bond side we think there are going to be really interesting ti ining opportunities. And theres going to be a lot of demand pr those bonds and right now, you can pick some up at a pretty good bargain. Well leave it there. Thank you so much. Neil, eric, peter and lindsey. For more on this historic sell off, lets go to its great to have you with us particularly on a day like today. Ive just saw sarah mention Dollar Generals and the auto zones go up. I want you and theres finally some yield and its great to see. Where are you looking for that queeld . Which sector in particular goif tot to tell you, i look at avi and i cant believe im getting that gift. How about back over 3 bristol just made that acquisition with cellgene. Theyve got huge, huge dost savings coming the accelerated buyback theyre doing and theres swrus so much to look about it bristol. I say like because you can buy here and if it goes down, which it could because its part of the s p, you can buy more of it. Thats what im really looking for. Im looking for situations where it can go down and you dont say ive got it wrong. It went down, good, i like that. I think thats good. I dont even mind amazon here. I think you can by amazon then some word just on the scale because holy cow if youre really staying home, thats the only way to shop jim, im looking at my dashboard here Jpmorgan Chase, 3. 85 dividend yield. I like that see you one and raise you one. How about charlie r sharp without the problem of Elizabeth Duke being the share there youve got a guy with a full slate of people he didnt do anything. I like that. 6 ill bank with charlie on that point though, jim, one big question always comes out when people say oh, it looks like its a good yield, but might that be a sign that if mike doesnt want to buy 8 of the company back, he can stop doing that if he wants to i look at Something Like jpmorgan and obviously, yes, we want jamie to which best of health, but it really is ama amazing. I think if he were back at his degrsk, he would feel, im gettg a chance i know people hate the banks i heard all day the Oil Companies can bring down the banks. Actually not true. I didnt like the fact jpmorgan did a revoefler with one of the cruise ship companies. Theyre not all knuckle heads. There are so many uncertainties on coronavirus what is the mortality rate look like what do you think its going to take for the market to be able to see out on to the other side . What is the headline or the news testing we went Fiscal Community we want a Manhattan Project to try to solve this and we want the test kits. You didnt look at japan they have not had an, theyre numbers are piquing. The main bulk are from a cruise ship i want to see what happens in south korea and id like to be able to test, test, test with the kits i know my confidence would come back i understand the president wants to tweet all is well i think you have to hope for the best and prepare for the worst you dont just hope for the best, thats a suckers xwam you mentioned thai not all knuckle heads and weve seen massive moves today even with a strong Balance Sheet with bp or exxon. But put iting those aside, when you focus on some of those smaller overleveraged Oil Companies, is there a chance that one or two of those go bust and if that is the case why are you saying one or two . Of the 37 that i follow courtesy of rusty brazil, i think fully may be nine or ten can go. Just saying im not going to sell wells fargo i would sell the oils. Now i didnt care beforehand and i know the industry felt i was a pari i just dont like them and now i really think you, well people are joining me because if its lower longer, theres no place to hide. Will the Broader Markets not follow in line with that i think that would be a mistake because these companies are no longer a big part of the s p. The occidentals, you have u to roll them. Shoes have to fall there you see the bonds trade down 25 points today the big 49 bond. The four change 49 bond. I think when that goes and you see it as the lead story in the paper and Warren Buffett lost a will the of money on it, if that happens, i think that could cause another leg down in the group. But what im looking at, remember the oil, the banks were stress tested 25, 26 for the oils i feel better about the banks than any oil company is it pan bic they, ta did the halt ts and suddenly everybodys calm. You know picking doesnt work. Weve got to wait for a, this is a different market because we didnt count on the oil problem. I want to believe the president. That if we tested everybody, everythings good. The fact is, people work at home restaurants are hurting. Theres no backstop of no interest loans for the people who frankly deserve it because theyre hard working people. When i speak to dave teper, i know Steve Liesman told him, i know he made it sound like hes hey, san begin about some things, but we feel without f fiscal stimulus and more aggressive leadership from washington, were going to run into another down day like this until we get to where powell put us in december of 2018 i think it was noabl notable there were reports that the Trump Administration Economic Team is starting to weigh measures to deal with this paying for sick leave. Didnt really come out. The question of, secretary mnuchin, he needs to come out because the president has himself in a bit of a box. If everythings so darn good like he says, then how do you offer these different programs for the small and medium u sized businesses which we know will be crushed. Any of us who have small, medium sized businesses, if we have four, five bad weeks, can we carry people these are totally legitimate we carry it. I think a big problem and the credit issues that drive jpmorgan down 14 travel lee sure and credit card are frightening people i wish they didnt, but they are. I expect another day its not so hot. Not multiple days. If it really heats up again. You guys think so . I think its hard to predict. Are you worried do you wash your hands all day all day i wear rubber gloves to work not too worried youre not. I talk cautions and im not going to unnecessarily get on a plane and im going to wash my hands a lot. Were going to listen to dr. Fauci, right royal caribbean, can you imagine if youre watch iing tht show, dont take a cruise ship its like, wow, okay, let me do some cancellation of that. Jim cramer, a pleasure. Thank you so much for joining us here on closing bell catch more of jim tonight, 6 00 p. M. On mad money. Joining us now to discuss, whos out with an oped in the wall street journal today said quote network affect as multiply a viral threat detailed how coronavirus is spreading faster than most americans realize. Hes senior fellow at the hoover institute. Good to see you. Thanks so much for joining us. I guess the first question is your take on where we are on the scale of acceptance of how serious this virus is and whether theres a lot more realization of bad news of reality to come. We dont know where we are because the United States is lagging behind on testing to see how many people have the covid19 disease now the indications are that the United States should be as exposed as almost any country to infection from china thats one of the things that the Network Scientists at Northeastern University have shown and i quoted that in my wall street piece. We are very integrated the United States, and particularly the west coast, into china and so a lot of people came here from china in january and even in february. The probability is that we dont have hurricandreds of people, is more likely thousands and applausely tens of thousands we still dont know that and we wont for possibly weeks because theres been such a shortfall in testing, but everything we know about Network Science and especially deemology tells us its highly likely that some parts of the United States will have a south korean or italian type experience. Its early in the game but u you have to look at whats happening in those countries and project forward a few weeks and manl the United States in that situation. Everyone who isnt doing that is living in the same box as trump is telling themselves oh, no worse than the flu, the jugoing to be the flu. Its wrong because the mortality rate is likely to be significantly higher for the flu and we dont have the kind of herd immunity we have to influenza. The kind of vaccinations that we have for influenza this is a new coronavirus. It is not the flu and therefore its impact is likely to be really quite considerable. Mar particularly for elderly people you mention ed the president s response its something i wanted to ask you. Because i know in all your work as a historian, and an author, youve lookeded really chosely at leadership and youve said very president obaositive thingt President Trump in the past. So what do you think is the disconnect here between what were getting from the administration, what were seeing in the markets and what the truth . The test of any president is the crisis and whats been a striking feature of this Trump Administration has been that actually the crisis took until the year of his reelection to happen if you look back just take the presidency of george w. Bush you can see two quite different effects. 9 11, which was a huge shock in some ways, comparable to the shock of covid19, led president bush to show his greatest strength, actually the response that he gave defines leadership, vengefuvengs resonated with the American People and helped them overcome that shock, but when president bush was hit by the financial crisis in 2008, he looked clueless and his pop lair ity imploded luckily for him, he wasnt up for reelection because he had served two terms or look at his handling of katrina after he secured a second term. If he had flunked the katrina the year before, if that hurricane had struck new orleans 2004, he might have been a one term president i worry that President Trump has got on the wrong side of this, that the line hes taking tweeted out again today that its just another influenza, is going to come back to haunt him in this Election Year. And im afraid its just not in line with the science of what an epidemic like this indeed a pandemic, which it is in all but name, does, not just in terms ov mortality and sickness, but also in terms of the effects it has on Public Confidence and i think when you look at whats happening not only in asian economies that have been affected, but also in europe, you see the effect of consume ir confidence tanking is really profound economically. So what about president xi . To what extent we dont get very trust wor think opinion polls out of china, but with where do you stand on how big the Economic Impact is going to be on china well the economic shock was great indeed as you could see in the pmis really unprecedented declines in Economic Activity because of the quarantine measures that had to be imposed on huibei and speed the restrictions and movement on china as a whole but the line theyre taking in beijing is that were getting back to normal huibeis getting back to normal. Its early to be doing that and theres a significant risk that you get a second wave of infections but i think whats happened is that chinas leadership bungled this in the first phase. Really denying that there was a crisis until it was very far advanced in wuhan and huibei provens but then because of they have a one party totalitarian regime, they were able to impose the most drastic quarantine that i think theres ever been in human history. What i dont think is going to happen is that western democratic governments are going to be able to replicate that, even although theyre trying in italy, its very hard for a democracy to do what they did in china. So i think the big question which as i said, is still in the re realm of the unknowns is how significant of a problem is there going to be, not just in washington state, california, but potentially in new york and other states showing signs of having the beginnings of that exponential growth in confirmed cases that weve seen in so many other countries. If you get Something Like south korea or italy, its very difficult for the United States to act like xi and quarantine the state. And that i think means that the response in democracies is likely to be less drastic and therefore less effective than the response in china. Thank you very much my pleasure and dont forget tonight, tune in 7 00 p. M. Eastern time a special markets in turmoil again, crucial viewing amid this crazy volatility lets go back to mike for the third dashboard of the day mike i wanted to give you u a couple of sectors of the market or styles of investing take a look at the invesco buy back achievers e trtf this is only over six months you see really this vertical move down. Vast underperformance. One of the things that kept the buyback story afloat was corporate debt markets being in good shape you have a lot of financials in this as well, but thats a theme that seems to have been derailed even if perhaps it was overcredited for its force on the way up and the bull market take a look, too, at the transports we did kind of glimpse those, but this i like. Goes back to 2015. Were at levels in the dow transportation average we first reached six years ago. Not that weve hit the skids on the market and the tear i haves and the rest of it youre down on a six year basis here five year basis and you even have to go back further than 2014 fedex down to a level seen six and a half years ago so youve really stripped away a lot of eck peckations for what Global Growth can produce is it enough we dont know. Thanks for that well dive into that in a moment, but first, breaking news Steve Liesmans goit ft it for. Six financial regulators urging some regulatory relief. Supervisory relief for banks for businesses and credits affect aed by the coronavirus regulators say banks should work with their customers in affected communities and to basically talk to them and try to work things out this is similar to the kind of guidance we get in an area after a hurricane or other Natural Disaster something we talked about could be u coming from the regulators a couple of weeks ago and now theyre saying work with your borrows and with supervisors to try to get over the hump but steve, bank stocks, bank of america was close to 40 from its february pique is this essentially saying banks should take the hit in the shortterm no. Youve seen these before they have done this many, many times before and youve seen these. Where what they say is if a borrower is having trouble making a payment because of the virus out there or in other cases of the hurricane, the supervisors are not going to swoop in and penalize you for not taking action on that bad credit thats in place there this is a situation where theyre saying were going to provide supervisory relief or oversight. Where you guys, that is okay for now. If we get a year from now and its still a bad credit, were going to penalize you, but were not no nw. All i would say on that, that kind of expectation sort of goes without saying its not like this is a Ground Breaking shift in support. Not that youre framing it that way any way. In a way that i think markets are waiting and looking to hear from as to whether we actually get genuine help from the government to say well make sure that is a very different story and you and other people and members of the Federal Reserve are waiting for that from the fiscal side the fed doing what it can do and i would just offer, saying i dont think they would say it apparently this is an important piece of the bhowhole regulatory framework. I think the fed is in its krcrisis playbook here and the federal government is not. Is that whats happening i think if you were to measure which who is further down the line of thinking this is important and they need to act, certainly the Federal Reserve is taking substantial actions and theyre expected to b take much more substantial actions. Steve, thank you. Our next next says a credit crisis is more likely to trigger a global recession than the current stock market meltdown. Joining us now is chairman of rabbini macro associates nice to see you. Great seeing you. What are you worried about with the credit market the stock market has a wealth effect but theres a massive month of inequality. Even a 20 fall isnt going to lead to recession. You saw what what happened in 2016 or 2018. Where leverage loans with clos, fallen angels in high grade and we have all the junk bonds in high yield in 16, spreads went from 300 to 900 in a matter of a month if they had stayed there for six months, the fed believed we would have a recession this time is worse because at bank time, philadelphia, you have only a growth fear right now about china, u. S. , now so much more serious. Chinas going down the rest of europe, u. S. Is going to go down secondly, its not just the oil market it went to 30. Right now, its below 30 the Service Sector is highly leveraged. Theyre in trouble theres more debt. You have all this liquid but solvent, but if they dont get debt relief, theyre going to be in trouble and three more years of increasing debt and leverage and compared to 16, the room for the policy response is much less than before were running out of bullets much worse than what happened in the First Quarter of 16 or Fourth Quarter theres going to be much more. It will be the stock market, but the credit crisis and were in the beginning of a complete see sure of credit market. Theres no insurance in the primary market leverage loans of high yield or high grade so worse than 201 much worse. Will it be as bad as 2008 what level of recession are you expecting . I expect theres going b to be a recession because q1 growth will be negative in china, japan and korea. U. S. U, barely 1 growth in the Second Quarter, whats happening in china, youre going to have a spread of the contagion to europe and the United States. The number will fudge down u because were not testing. The numbers are huge like in italy and korea. Were not testing. Probably already 10,000 cases so in the Second Quarter, what happens in china in europe and United States, youll have the same situation of a severe economic downturn in the Second Quarter so First Quarter because of china, Second Quarter because of u. S. And europe and b probably u. S. And europe is going to be worse because china is draconian big brother society. So most likely in china took three months to stop and reach a pique of the contagion in europe and u. S. Could take two quarters means youre at recession in q1, 2 and 3. So for sure, a global recession. Nobodys talking about a credit crisis at this point. Yes, weve seen a big move, but i mean what i hear from people is its not panic. Just dislocation theres price discovery. This is an orderly move and a lot of it today was energy related. Well, in 2016, it started a energy but in a matter of a few weeks, you had contagion from energy to the rest of the high yield. Why . Because when you take losses on energy you have to cover yourself on the rest of the value and this time around, the shock is not just on energy. You have all the high leverage firms in the corporate sectors especially in services, youre going down theres a fundamental reason and nis, its partly from high yield. A firm that useded to be high grade, but now theyre going to be downgraded to below Investment Grade its the beginning seizure in the markets the market is shut down. Its not doctor. Im not speaking about something hype thetic. Fed funds rate was at under half a percent, now were at 1 and we all have the same tools as then. Were going to use it actually another 50 basis points by march 18 and things are going to start to be bad. During the Global Financial crisis, we were at 650 then we have to do for guidance then qe and credit easing and other things like all the things we did with all the uncon eveningal things this time around around the world, the policy is more limited than before. Monetary policy is not going to be you need massive fiscal stimulus there is gridlock. Might want the tax cut or payroll tax cut and democrats are going to say fine, well do it if you raise the taxes on the corporate and the rich theyre going to pass it in the house. Its not going to pass in the is that the theyre gridlocked why would the democrats give this gift to truch in Election Year in theyre not going to do it and this implies that any fiscal stimulus in the u. S. Is going to be tiny compared to whats desirable people start to talk about coordination stan fisher, ben bernanke this morning, what does it mean . The fiscal stimulus is deep enough. Its not going to happen. So if the s p 500 down 18 or so from its highs. You think further to go . Yeah, in a typical recession, the stock market goes down 30 to 40 due to the Global Financial crisis. They gist announced, its not going to be enough so the market can rally for day or two they think things get worse the number of cases going to explode. People are going to panic then you have more and they talk about the little fiscal stimulus 50 billion. Whats that spare change 100 million not enough and so on and therefore things are going to get worse and the policy response is going to be worse than desire bable. Therefore the market goes down 30 or more. You think negative rates are b possible in the u. S. I think the fed when they do review, yes to zero rate, yes to qe we dont want to go negative for a bunch of reasons. Then the monetary is going to finance. Were fot going to get a big fiscal stimulus. What is the chance we get that one before the election. Close to zero. 200 billion no way is going to happen. Lets see what the market does maybe it can force the hand like weve seen in the past thank you. Good to see you. Prefers the title now dr. Realist. Dr. Realist we wont use dr. Duke, but you must accept youre not dr. Optimist im dr. Realist lets have a check in on the dow we finished 7. 8 it had been green most of session, but all 30 stocks negative and plenty there at the bottom of double digit decliners. About seven. A 2,000 point loss for the dow. Worst day since the financial crisis lets get the latest details on how the white house is responding to the coronavirus outbreak and the market meltdown eamon javers with us from Washington White House Officials Say that meeting with the president and his Economic Team did begin around 4 15. They told me it was underway here, so that is ongoing the president is set to be presented with some options for how to respond economically to the coronavirus. Not clear where the white house is going to land and aides were careful to caution me today to say its not necessarily guaranteed the president is simply going to pick from a menu of options and make a decision today. We will wait and see what happens when they emerge from that meeting to see if any direction is being set out upon here from the white house. Meanwhile as the spt making those decisions, a congressman who had been in contact with a president over the past two Business Days are now being selfquarantined congressman matt gates, who was with the president on air force one this afternoon has announced that because he came in contact with someone who potentially had the coronavirus, he is entering selfquarantine. That began after gates got off air force one with the president this afternoon congressman doug collins was with the president on friday in atlanta at the cdc he also now under selfquarantine. Neither congressman we are told has any siymptoms of coronavirus but thats whats swirling in the president s world view as hi he sits down today guys, were expecting a series of meetings this week, Health Insurance executives are here tomorrow to meet with Vice President pence and then on wednesday, wall street ceos will be b here at the white house the meet with the president of the United States. All of that formlating a response from the private sector in terms of what to do on coronavirus and what kind of help they may need from the federal Government Back to you. So, eamon, as the market was plumeting today, the president was tweeting and this tweet in particular got a will the of commentary about so last year, the president says 37,000 americans died from the common flu it averages between 27,000 and 70,000 per year. Nothing is shut down life in the economy go on. At this moment, there are 546 confirmed cases of the coronavirus. 22 deaths. In other words, continuing to down play the severity of covid19, the fears in the market the fears from ordinary americans. What, is anyone telling him that that is completely disconnected with what the market is telling us and what were hearing from Health Care Professionals . Look, i tried to get a question to the president in as he came into the white house this afternoon he did not stop to talk to reporters about the market sell off today. He did bring brian, the former hig bears player into the residence with him so hes having a social visit here just before the meeting with the Economic Team. And look, the president s getting a lot of advice. He sees whats on television you talk to white house aides, they say you know you just dont even need to brief the president on whats happening in the market because he sees it in real time. I think clearly the imptous behind that tweet is he doesnt want to panic. Hemts to put this in context but the danger political is that you look out of touch and you look like youre not taking this with the sense of seriousness that it deserves the president was in florida today having a fundraiser for example. Not here at the white house. Until this afternoon so all those optics matter for a white house and for a presidency and of course as we know, these kinds of emergencies public emergencies and financial emergencies can be life or death stakes for politicians in the white house. Thank you take a look at shares of stitch fix after hours. Plunging on earnings thats right. Stitch fix down just about 37 right ed board here. Revenues though a miss here. 4i 451. 8 million versus estimates of 452. 5 now q3 guidance here on revenues is a bit lighter the company saying they believe theres heighten ed promotional activity across clients wound up spending less per fix. In the Current Quarter on average resulting in lower order values than the company had anticipated. They said they have 3. 5 million active clients and coronavirus is a fluid situation theyre monitor, but no Material Impact on their business. That Conference Call kicks off around 5 00 p. M. Back to you. Thanks. Down 37 , mike gives us a taste they didnt blame coronavirus, but gives us a taste of what the action is going to be around earnings season. Yes, maybe an extreme example, but this is not the kind of market where you have kind of a show me story stock that hasnt yet proved it can sustainab grow. Just want to bring some other news the italian Prime Minister giving a live address announcing that the restriction zone will be extended to cover the entire country. No longer just a red zone in the north of italy as it had been. The entire country is right now quarantined in that restriction zone i mean, mike, we talked earlier in the show. Clearly the oil news was a huge part of story over the weekend i think seeing a western democracy move to the sorts of draconian measures we had seen in china had been a big piece of information we had seen over the weekend. The entire country that is quite astonishing. Right and the fact that everybody here knows in the u. S. Cases are going to go up were just on the front end of this spread. But the idea that it could get out of hand and that were going to be liveing with this drum bea for a while i think is a significant thing. Now at some point, i keep saying, the market is swrus going to overshoot to the downside to price in a pretty dire scenario. That might be a little bit worse than the probable. So we just dont know where we are in that process right now because we dont have enough numbers in terms of tests to have the, to draw the curve and to say we know what were looking for. The italian stock market today, dropping 11 . You know the idea of that loss to Economic Activity but to that point, the dow jones is down 8 yeah i guess so just enormous moves. China was only down 3 again, china stands out as really not having fallen anywhere near the level you might expect given the likely Economic Impact but again weve talked about all sort of sectors thachb hit banks and Energy Stocks the most and clearly, if youre look down a whole country, its understandable why those sectors have been suffering. Makes other European Countries rethink those open border and just to come back to what we talked about the way in which u. S. Banks have been hit Deutsche Bank fell 46 to the close. Has had a strong had a very strn december into january before that similar types of movers in european markets similar types of sectors taking these extraordinary moves globally around. Lets check in with the travel stocks which have been in the eye of the storm trivago getting hit the hardest expedia all down it could hurt tech businesses like facebook and google thanks for joining us, laura talk us through it the likes of facebook and google, perhaps more linked to the coronavirus. Travel advertising, this is their peek period for advertising 70 is online, 70 of that is in search google is the big loser there in march and the june quarter facebook is not only exposed to travel, but cpg, like the James Bond Film being pushed off those four categories that are showing lower advertising demand are 45 of total digitizing in the u. S. And 30 globally. Do you think its already in the stocks, laura . No, because i think people are underestimating that when you have a revenue down draft, they are 70 margin dollars, theres a bigger profitability hit than people are thinking, you probably saw that microsoft, facebook, google are doing the kind and humanitarian thing, theyre going to pay their hourly workers who arent going home when you assess these stocks youve covered for so long, do you think about the price to earnings multiple relative to the rest of the market and adjust whats reasonable at moments like now when fear is spiking . When will things are calm that can be argued to be justified. Does that go out of the window at a time like now or does it apply . It goes out the window right now, because we dont know where the bottom is. When we get to a bottom, when the coronavirus numbers stabilize in the u. S. , china or offshore, we can look at the corrections and start putting money back to work right now theres so much uncertainty about the damage that coronavirus is going to do to consumer demand and to the Market Access like can you raise any money in the equity or debt markets right now . We have to see where those relative valuations are, once it bottoms in, and consumer demand starts returning is there any name thats insulated from this, twitter i didnt hear you mention for instance no, i would stay away from all add driven stocks. We like peloton, people arent going to a gym as coronavirus fears escalate its a subscription business, once you get one of these peloton bikes for any reason, you dont ever get off of it, we really like peloton as a defensive play in this market. But are you going to go out and buy a peloton if you dont want to go to the gym . Is that whats happening i think people in our demo might be. There we go i mean, we did see a move in the stock on that. Laura, thank you so much for that lets send it back to mike for his final dashboard of the day. Markets kind of fully in the mode of trying to handicap how much of an economic slow down we get globally this is goldman sachs, its meant to be a leading indicator of global gdp. In february, this is as of the end of february, it was barely above zero were talking about global, thats a steep slowdown, the world grows faster than mature economies like the u. S. , so that is basically foretelling of First Quarter print under 1 i guess the question right now is, maybe bond markets have adjusted to account for Something Like this environment. How long would it la have to last that that type of near zero growth level for stock markets to really adjust thats unclear right now, i think thats what a lot of people are focused on right now. We were sort of okay with this idea we had a pause, if its something longer than that. I think we should come back to this announcement from italy. The italian Prime Minister says on top of what we said earlier, the whole country is now in kwauren teen all italians should stay home, think of the common good and combat the coronavirus cancelling all public gatherings, all sports matches i mean, the market was down 7 or 8 today, you look at that and say what level of news headline do we need to create another shock to the down side thats pretty extraordinary, and it will also raise that question what will other leaders do if they dont want to be blamed for not being cautious enough. I think this is an astonishing move well have to interpret to see if thats an outliar response or not. I do know theres a lot of commentary that italy has the oldest population and it does the deaths have all been 60 and over in italy. I do think maybe that has something to do with it, but its frightening i get that they have an aging population its not like the demograp c demographics are attractive in many places. I do think the theme weve seen is to try to ease the pressure on Health Services in the short term and hope that they can manage it that way but so far only italy taking action and their numbers are much worse so far. Thats going to be a tough one. To that point, were saying the fed could announce what can they announce . Its almost lose lose. Deutche bank has collapsed 40 in the last months theres always tools in that toolbox. Not sure there is summoning something up from somewhere else maybe lets look at how we finish the day on wall street as we said already. Record decline in points for the dow ever in percentage terms, both the dow and s p 500 worse declines since various dates since 2008 7. 3 on the nasdaq incredible numbers. Will tomorrow bring more pain or relief bob pisani is looking at some etfs. We dont have a lot of direction, futures are still trading here, look at the s p 500, spy still trades, closed at 274, 23. I see the last trade at 274, a little below that right now. Lets call that relatively unchanged. The Dow Jones Industrial average closed at 238. 72 now trading at 238. 20. Very very modest decline from the 4 00 close 193. 57 is where that changed you see there, 193. 30. Very modest decline so far, i agree with you i think these comments on the italian heads of state in italy are remarkable at this point and still not seeing the dramatic move though here. Do you think that was priced into the market that were expecting it to extend no, i dont i agree with your point here these are rolling head linings, were trying to get used to this on a daily basis the only good news, we had that initial shock with the Circuit Breaker and it served its purpose. The purpose was not to change the headlines, it was to slow the market down for 15 minutes gather liquidity it did lift even though we closed at the end of the day what are we watching overnight. Kind of reminded of a saying, markets panic until policy makers panic maybe thats the next thing were trying to hook ourselves on to. Over this phase weve been able to say multiple times. I think perhaps not all the real policy response people are wondering about is congressional fiscal what do you look at overnight, mike. Asian markets and yields the treasury did have some lift throughout the day its been a real suckers game to try to call the final buying climax in treasures. Thats something to watch, they do trade more or less throughout. Obviously were not going to get a bottom on coronavirus stories. The market will be much more impressive i think that might help provide some kind of short term were all going to be watching over the next hour, fast money which is about to start. Brian sullivan with us today the shocking oil move down 25 yeah, you guys have noted the biggest one day slide since 1991, again, not to be little it or be labor it people say who cares about oil thats good, right gas prices are cheaper the problem is, as youve talked about. Its really a debt and a credit story, its an oil story as well, oil a small part of the stock market, but a much larger part of the credit markets absolutely, brian it could become a debt and a credit story, thats the key question for the banks they fall sharply like the Oil Companies. As yet, unclear whether they