Transcripts For CNBC Closing Bell 20140219

Bell here. Is the fed misreading economic slack . We will hear from one economist who says they are and that it could end up hurting the economy. And then there are the geopolitical concerns. You saw president obama responding to the escalating violence in ukraine. There are still other hotspots around the globe, middle east, syria, south america. Were going to look at whether that could end up hurting investors right here in the u. S. Lets take a look at markets now as we enter this final hour of trade. The dow is off by about 17 points. The s p 500 shedding 4 or 5, and the nasdaq is negative breaking quite a spring of gains at this hour. Whats interesting at the same time though is to look at the tenyear Interest Rate which has been on the move up even as some of the data has disappointing, bill. Look at that. 2. 73 , thats fodder for rick santelli. Lets talk about it. Diane garnet, keith fitzgerald, rob lutz, always want to say the cabot letter there. Peter anderson, and, yes, rick santelli. Diane, let me start with you. It seemed that the market was spooked by the talk of an actual rate increase with maybe a time table put there. Is that a justifiable scare for the market right now . What did you think of the reaction . I think the reaction is a bit overdone. Things are wonderful in the economy. We have sustainable growth. Earnings came out okay. But the idea of moving immediately from taper to a rate increase, theats a bit overdon. What we are seeing a lot of, theres a lot of m a activity. The truth is, this is not your dads m a cycle. Were seeing a lot of different activity now, and i think thats one of the things thats really helping the market, and if rates do start to riaise or taper, surely that will continue. Lets show this, this is fascinating. Signet is up today. In fact, all of you have been talking about this. I wonder, peter anderson, what it tells us about the broader environment. Well, this is definitely great news, and, you know, when you look back for the past five years, kelly, the past 12 months, this has been the best time in the past five years for m a activity. In fact, if you look just yeartodate, we have over 100 billion thats been done in transactions. I think thats a great sign for the Market Going Forward and i also think that the fed is a little bit of a work in progress here. I disagree a little at first with what was said early here about the fed and whether or not their comments are taken to heart. We have to be very careful when mr. Lockhart says things like that. They all have to be speaking from the same voice. I think theres a contradiction here between what the fed is saying and what people like myself in the trenches are seeing. Were excited about this m a activity and i expect more to come throughout this next part of the year. Well, it wouldnt be the first time, peter, theres a disconnect between Public Perceptions and what the feds intentions are and what theyre saying. Rob lutz, youre just back from south africa. Were all watching the emerging markets wondering when will be the time to buy this depressed area. Whats your take on that . Well, i saw some pretty constructive things in the Mining Sector in south africa, and i think their economy in general is going to grow at a fairly good clip, 5. 5 maybe over the next 5 or 6 years. But i think the key driver for south africa and you all of africa is whats happening in china, india, and brazil, and i think china is really the expectations are so low today, and particularly in the market, that you really get to the point where i think youre at an extreme opportunity. Actually a fellow named michael hart from meryl lirill lynch co this sector. Theyre the most negative they have ever been since hes been tracking the data and the cash levels are the highest. Its a good time to have some exposure to the emerging economies. I wouldnt be overextended in that group until they really recover but were fairly optimistic this is a good place to be. Were talking about violence in kiev, talking about hotspots all over the globe, and you say youre worried. The question to the point we were just hearing is at what point do you choose to make to see that as an opportunity . Well, i think theres sort of a sword of damocles type of answer. With regard to china and asia, there is opportunities. What im worried about in the ukraine is what happens when russia steps in, and how does that affect europe . Theres a tremendous amount of money flowing from europe into russia on a daily basis. If it comes the other way, we have repercussion that is are not being played into the market right now and thats what gives me pause. Rick, your turn. A lot of fed speak. We had the minutes of the minute, the most meeting out today. We highlighted the rise in the yield on the tenyear. Make sense of it for us, would you . Well, you know, one way to make sense of it is we have euro dollar futures and options, not the currency, the 90day right. If y if you look at what the implication is, it doesnt nearly show the increase this expectations for the Forward Guidance or maybe the end of zero Interest Rate policy that the long end does. We saw tenyear, fiveyear even, 10s and 30s yields move up, but thats more kneejerk reaction to the notion there could be a rate increase in a sooner time frame. I personally dont buy it. I think the euro dollars are correct, but i was happy to see it. I think normalization doesnt end with taper. I think normalization should be pushed forward. Well see how that goes, and the other thing that augers that we shouldnt put a whole lot of confidence in the notion of higher rate anytime soon is the fact that tens to twos definitely steepened a bit bu fives to tens and fives to 30s flattened. Theres still the notion that we learned japan and china werent sponsoring buying treasuries the way they were. Its still resonating in traders minds. D diane, what do you say about that . With the decision of whether or not were going to taper or begin to raise rates, certainly we are in an environment where volatility is on the rise. If volatility is on the rise, one of the thing thats key is as earnings disburse, as returns get wider and wider, its a very good time to incorporate alternative investments into a portfolio. Find the Hedge Fund Managers or find the Portfolio Managers that have the opportunity to get to take advantage of both the dramatic upside and the dramatic downside. We could see it in one day. Today alone we had a moment where we were up so high, down again. As the market progresses and the economic environment changes this rapidly, we have to make sure you have good managers in place, right . Thats key. I agree, but i think im guessing everybody actually. Peter you can actually capitalize on. And i think the fed is adding to that volume filt rather thatili but the fed is flying by the seat of its pants . Im sorry . I said the fed is flying by the seat of its pants. It has no idea what its doing thats why the volatility is there. You nailed it give that guy a kewpie doll rob, what were you going to say . Of course you can take advantage of that but the individual investor doesnt want to get scalped. Thats the thing. You have to look at quality company, quality earnings. Do you want to take the risk of getting scalped or do you want to be there to play again another day . I would submit you want the stability as an investor. You got to deal with the unexpected, and that i think comes from the ukraine. It comes from the fed. I think it comes from whatever comes out of yellens mouth. Lockhart is not helping the situation. Thats for sure. Rob lutz . I think you have to put it in perspective. This market peaked in 2000. That was almost 14 years ago, and since that time weve had a 43 gain in the s p 500. Thats 1. 6 per year. I think you have to be fully exposed to equities today and i dont agree that you should have hedge in alternative investments in a very big way today. I think equities have tremendous upside from here. You think its full steam ahead . Youre not youre going to look beyond the volatility and all that . Markets you see that one at a time. They go from i guess if i could add one last thing extreme optimism and were nowhere near extreme optimism today. That will be a couple years from now. Rick, what were you saying . Well i was looking at the nasdaq at 5,000. Everybody is full steam ahead. I find it interesting, as great a run as weve had off the bottom in 09 that was exaggerated because of the selloff, were still really not close to 5,000, and if you look at the metrics from right around 2000 where were at versus 09, you get a bit of a different feel about equities. Yes, you do. Peter, go ahead. Can i leave this segment with one last comment . Since 2008 cash has been building. We all know that, and debt on everybodys Balance Sheet has been decreasing. So youve got this incredibly coiled spring ready to be released, and i think thats all very positive. Just think, if we just levered back to where we are normally, thats about 2 trillion in leverage, and that isnt really high leverage that companies have for buying power. So you have to ask yourself the question, weve already done the dividends. Weve already done the buybacks. Now we have m a activity, and i think that all bodes well no matter what how we interpret what the fed is trying to tell us. If you look at the fundamentals, i think its all very positive. All right. Thank you, all. We even had volatility in the exchange today. Its true. That was all there. Thank you for your thoughts. Thanks, guys. The dow losing a little altitude, down 34 points as we head into the close. And, in fact, the nasdaq is up by about 0. 8 at this hour. How much slack is there in the economy right now . And if the fed does misread that, could it spark the dreaded i word, inflation . Also, shes called for the breakup of the big banks, which is former fdic chair sheila bair joining one of europes largest banks that has a presence in the u. S. . Look forward to that. Then later, why investors should be paying very close attention to the growing unrest around the globe right now. We will look at that and its impact on our markets here coming up. Youre watching cnbc, first in business worldwide. Tdd 18886486021 there are Trading Opportunities tdd 18886486021 just waiting to be found. Tdd 18886486021 at schwab, were here to help tdd 18886486021 bring what inspires you tdd 18886486021 out there. In here. Tdd 18886486021 out there, tdd 18886486021 there are stocks on the move. 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Even get 3 years interestfree financing on tempurpedic. Plus, free delivery, setup, and removal of your old set. Keep more president s in your wallet. Sleep trains president s day sale ends sunday. Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep welcome back. Some bad news for consumers. Energy prices continue to trade higher today. Especially natural gas. Jackie deangelis is at the nymex with this story. Were breaching the critical 6 mark. We could easily see 7. A couple of reasons for that. The first is while were seeing a little bit of a break in these temperatures, we are also seeing forecasts, weather mod elts saying the end of february and march could still be very frigid. Theyre looking forward to next tuesdays options expiration and saying that could cause some volatility in this contract. So watch that carefully. Meantime, the other thing to keep an eye on is tomorrows department of Energy Report on natural gas storage. Well get that for the week ended february 14th. If we see another week of drawdowns that are really, really great, double what weve seen in years past, of course, we could see these futures continue to rise higher. Guys, back over to you. Jackie, thank you very much. Well, with the release of the Federal Reserve minutes from the meeting in january about an hour ago, the fed took a somewhat upbeat view on the economy. The market reacted in a relatively positive fashion. Fed officials during the meeting considered what they call appropriate action to continue to unwind the monthly Bond Buying Program by about 10 billion a month and there seemed to be little appetite for delaying that process. For more on that and to answer the question of how much slack there is in the u. S. Economy right now, were joined by matthew slaughter, former member of president obamas council of economic advisers, now professor of economics, and fors torse torsen is here. The Unemployment Rate is falling. Does the fed need to react to that to normalize Monetary Policy or not . Its clear the threshold has been 6. 5 and now na were cutting through that, something needs to be done. The minutes we got an hour ago show theres an enormous amount of confusion at the fomc about this. Its all over the map. There is really no master plan at this stage. Whether to lower that threshold, 6. 5 , or to do something else, and theyre still trying to figure that out. Matthew, what do you think they should do . If we hit that target, its clear their inflation target were nowhere near right now. How do you assess whats going on in the economy right now . Yeah, its a great point, bill, because the signals are very mixed, and the fomc members are puzzling over that. Inflation remains pretty low. Headline inflation in 2013 for the cpi rose at just 1. 5 . So the slack in the u. S. Economy is disappearing. The big open question is how quickly is it disappearing and when will the fed have to start to respond to rising inflation pressures. This is the central question, to rsen. If inflation hasnt picked up more, that would suggest that perhaps the natural Unemployment Rate hasnt gotten higher, that perhaps theres not actually this issue about having a much higher degree of structural unemployment or changes than we thought. What does that all mean . Wages are showing some signs of going up. Every time rates do start to go up, thats generally the beginning of the Business Cycle that goes up for three or four years. Other measures have not really shown that uptrend. So far were sort of in a sweet spot where its safe to say that wages are not going up, but the worry we have is the trend on some of the weight measures is not our friend and they spill over to inflation is likely to come. You think its coming. The consensus expects, and this is really amazing, the con shen sus has for the last four months expected inflation in the Fourth Quarter of this year to be 2 . The weather, nothing has changed that. It continues to be 2 . Gdp growth expectations are such that consensus expects that. And you think thats right . We think that right. We think the consensus is right but the markets have taken the weather story. Thats a huge dissdiscrepancy about how what about the dollar . Weve been hitting multiyear lows against the euro recently. That has to be at some point inflationary here as well, right . The signs are there that were going to get inflation at some point. Whats taking so long . Theyre there. Part of it is the labor market is still healing. Remember, about twothirds of the overall costs in the u. S. Economy are labor costs. As was rightly pointed out, those have increased a little bit, but not that much. A falling dollar is inflationary. Part of the consumption basket of things we import. The challenge for Central Banks is always trying to get ahead of the inflationary pressures. When and how the fed in 2014 might have to start to move away from qe and more towards traditional tightening is a big question. Remember, when we get to june, if we havent fallen into recession and i dont think we will by then, that will be year six of the current expansion. Thats a pretty long lived expansion for the u. S. Economy. If the inflation rate gets to where you think it will, 2 , by the end of the year, this sort of plays into dennis lockharts argument today where he said that they could actually start raising rates by the middle of next year. Thats exactly right. If the consensus says that the Unemployment Rate will be roughly 6 and inflation will be roughly 2 . Thats it right there. We have arrived at the destination, if you will. Thats exactly it becomes important whether the consensus is right. When clients ask me, i dont think that this is the right thing no think about the economy this way . All im going to say is this, going back to 2009, theres a piece in the wall street journal, a couple of my colleagues wrote about it, talking about slack in the economy, talking to james bullard, and he said we cant trust our old models. We have to be aware that the fed has done unprecedented things and inflation will rear its head. Four years later, that has not happened. The consensus view has been wrong every year. Including the Federal Reserve. Exactly. I understand were talking about a 2 forecast for the end of the year but given recent history, should we be so convinced that this is finally going to be the time that pans owe snut. Is it different this time, matthew . It may be. I think the challenge for the fomc is to recognize growth may continue to be slow and inflation pressures may remain quiet or, again, that falling unemployment has been so much faster than the fed and others expected, those inflationary pressures could arrive within a quarter or two. The Consensus Forecast for Interest Rate increases still being a year to two years, may be very youoff. It will be hard to tell and well see what happens. All right. Thank you both. That was fun. Love those intelligent economic discussions. Thats good stuff. Thank you. Our pleasure. Heading toward the close. We have 40 minutes left in the trading session here. The dow is starting to head lower. Were back to the lows of the session, down almost 60 points at this hour. Now, from ukraine to venezuela, violence is erupting across the globe. Up next, well explain how this geopolitical unrest to impact your portfolio. Did you know the world could run out of cocoa by the year 2020. Hersheys ceo will be reacting to this news, plus he will give us an inside look at the state of the consumer and where is all that cocoa going . That will be later on the closing bell. Well, the rising violence in kiev is raising concerns for president obama. John harwood has the latest on that part of the story. John . Bill, president obama is in mexico meeting with his mexican and canadian counterparts to talk about trade, but he couldnt get away from the images of that spreading violence in ukraine, so he came out just a while ago and made a statement trying to warn authorities in the ukraine from persistent crackdown on these protests. Well be monitoring very carefully the situation, recognizing that along with our European Partners and the international community, there will be consequences if people step over the line. That includes making sure that the Ukrainian Military does not step in to what should be a set of issues that can be resolved by civilians. But, of course, words are about all the United States can offer right now. Theres no ep tigappetite for p boots on the ground. We have no idea how effective sanctions will be in a set of circumstances like this and Vladimir Putin and the russian authorities are working hand in hand with the ukrainian authorities to support them. Well have to see where it goes. Its a very dicey situation and it brings some parallels to syria where the United States also has very limited ability to affect the situation. Right, exactly. John harwood, thank you so much for that update. The violence overseas causing some worry for wall street in the meantime. For more on this now on how it will impact your portfolio, lets bring in alex climen and jeff cox who has a piece on this subject on the website. Alex, what worries you more, the violence in ukraine, the potential for this to flare into broader tension between the u. S. And russia and europe at this point . I think the issue in ukraine is were face an increasingly zero zum conflict. First between the president and the opposition. Second of all, between eastern ukraine, which is traditionally more prorussia and western ukraine and this zero sum standoff between russia on the one hand and the west on the other. Set within this are Big Questions about ukraines ability to repay its foreign debts. Ukraine owes about 10 billion in euro bonds and without outside assistance, theres increasing questions about whether they can repay the debt. It depends on resolving the internal conflict. Jeff, bring that home for us then. What does that mean for individual investors here in the United States, if anything . Are you going to get some sort of a safe haven play here or is there a Bigger Picture issue that can affect our markets . Bill, when you look at these things, the biggest thing to keep in mind is they dont matter until they matter. Now, what makes this matter is what if we see any further escalation that would draw the u. S. Into this, and i think its very interesting that you did see some actual, a little bit, not major, but a little bit of market weakness kind of right around the time president obama made that statement. Maybe theres a little nervousness out there. Obviously from an investors standpoint, whats happening in ukraine isnt terribly relevant and i dont want to downplay anything thats happening over there, but in terms of the u. S. Markets, what theyre going to look at more is how does this Impact Energy costs and then that starts to plead into the broader market. Alex, its interesting, to your point as well. When we think about emerging markets and what the risks may be from some of the liquidity perhaps that they benefited from in the last couple years flowing out, you can take a case like ukraine and say, well, they have to turn for aid somewhere, and right now we have huge organizations like the g20 meeting, weve got the imf out there, there are ways of potentially lending a hand to some of these markets. In ukraines case theres a choice to go to russia for some of the funds they need. I wonder if this doesnt present an opportunity or if there isnt a way to think about how to help some of these markets or just think through the impact of what this wave of liquidity is going to be. Right. I think you have put your finger on it broader theme in the emerging market economies. If we leave aside the more severe problems in ukraine, in venezuela, i would add thailand or even turkey, were seeing across the emerging market world a much more subtle increase in Political Uncertainty as policymakers who are used to years of abundance are now facing slower Economic Growth and rising political demands chiefly from new emerging market middle classes. That was the story in brazil last year. So if you look across the emerging market space, it doesnt need to be a spectacular political crisis to really raise questions about the policy response. Added to which 44 emerging market economies are facing elections this year, including five of the most fragile which will add to the Political Uncertainty surrounding the policy environments in all these places and will drive greater divergence. How much do you think our fed talks about this, alex . How much do i think what, sorry . Hour fed, how much impact does all of what you just talked about, the draining of liquidity, the impact it has on the growing economies overseas, how much do you think our own fed has to take that into consideration in our own policy decisions here . If you ask the emerging markets themselves, they would like a much greater weight to be given to the impact on emerging market economies. But i think ultimately the feds receding liquidity is exposing vulnerabilities within the economies that need to be addressed within these economies. Such an important point, im glad that you mentioned it, bill. It just reiterates the fact that weve gone down an area weve never been down before. We dont understand what the consequences are going to be and how they will impact some of the emerging markets. I think maybe theres some hope that the u. S. Could benefit from that best house in a bad neighborhood trade, but if all of these things start to get triggered, you know, you get into slowdowns domestically, then it adds a completely different dimension. Thats where it gets interesting to think about the neighborhood. Exactly. Theres a way in which all of this whats good for u. S. Growth ultimately is for export markets to be doing well, for Global Growth to be doing well. If the fed taking a step back is suddenly understanding the countries themselves have an Important Role to play in shoring up structural policy at home, but thats 10 of our economy. Were creating the very vulnerabilities that may come back to haunt us. If you bring up the question of how much does the fed care about it, if you look at the meetings that we just saw an hour the minutes we saw an hour and a half ago, there doesnt seem to be a lot of concern there. It seems like the feds major concern is how do we get ourselves out of this. Some members even talking about raising Interest Rates ahead of schedule. If that happens, what youre seeing in the emerging markets gets ak se accelerate approximated. Were seeing that live picture in kiev with fireworks going off even as buildings burn in independence square. Its just a bizarre situation that continues over there. Thank you both for your comments. Very interesting. Good to be with you. And troubling. And a reminder as we head into the close, the dow is off 63 points at this hour. The s p shedding 10, and the nasdaq off significantly after a long string of gains. We had nine in a row, eight in a row. This would have been nine in a row today up days for the nasdaq. You alluded to that big deal today, the marriage of two diamond retailers. Shares of signet soaring answer oof after saying it will be zales. Should you say i do and buy shares of signet. Scientists have created a social media lie detector to check statements on twitter. 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We inspect, analyze, and recondition each one, until its nothing short of a genuine certified preowned mercedesbenz for the next new owner. [ car alarm chirps ] hurry in to the mercedesbenz certified preowned sales event. Visit today for exceptional offers. Welcome back. A volatile day on wall street. The dow up 90 points on the open this morning even though we had a lousy Housing Starts number for january, down 16 . Maybe the market thinking the weather had a lot to do with that and once the weather improves, those housing numbers will improve. Whatever. I mean, some of the housing stocks have done well today, but right now the dow is down 66 points. Some fed speak signaling that maybe they would start thinking about raising Interest Rates, not just tapering but raising Interest Rates in the middle of next year and that seemed to spook some of the bulls. Right now the dow is down 64 points. We had a big deal though. Shares of Signet Jewelers taking off after announcing it is buying rival zales for 1. 4 billion, but is this a dream marriage for the diamond retailer . Lets brawl it out. Eric says signets rally is for real. Andrew keen thinks there are three major problems im sorry, there are major problems. Maybe there are three, well let you go ahead on this one. Yeah. I can name a couple problems with this company. One is the wleather we just talked about. Cold weather is not good. Another is high oil prices. If i was on this interview last week i wouldnt have been able to take a bearish stance. We saw huge institutional order flow. Someone came in and bought 250 of the sig march 85 calls. Those went from 95 cents to 10. So someone knew something before the deal. Obviously today i think theres some profit taking. Today is a good day to take profits. If i was long the stock, which im not long calls or the stock, i would be looking to take profits. Going forward they have problems in the retail space. We see the highest you see the highest Household Debt since 2007. The jobs numbers have been weak and the cold weather with oil rising, i think theyve problems Going Forward. But, eric, im sure youre going to point out, signet shares are rising today. Thats unusual. Usually the acquiring company will see their shares drop. Theyre up 14 today. Yeah. This is the new world in retailing. The new world in retailing is gaining growth by consolidation. What were seeing is players buying their competitors, taking the synergies out there, and the market loves those kind of deals. It adds strength. It adds eps to both companies. I think thats what people are responding to and i think they will continue to respond for the next few months. Its about a 17 multiple. The company historically trades there. I think the guidance they gave was conservative. We see gains from combining purchasing. We see gains from combining diamond buying. There will be less stores, less advertising. To us its a great merger. Very much a nice tuckin deal. Signet is the leader in the u. S. And the uk. Now they gain the number one brand in canada. Frankly, this is a dominant player. I think its going to take further and further market share in what was one of the few areas to grow in the holiday season. I wonder if this is almost too good to be true. When you have the acquirer rallying almost 20 when youre talking about the strength across this business, how k significant of a change or market Share Consolidation is this for the jewelry industry . Its the largest player in the u. S. Theyre basically adding another 80 increase in revenues from the prior year. Theyre still you combine them and theyre still 10 to 15 of the entire market because youre competing with Department Stores and mom and pops, but these guys are the only ones with the real synergies out there in terms of size. Andrew, you were heard the bullish case. They have the synergies, they have the Pricing Power as they build out the number of stores they have right now. Lets face it, youre a market guy. Look at the market response to this. They love this deal for signet right now. Yeah. Like i said, i didnt have a position coming in. However, if you look at it. Whats the next catalyst . If you look at how the stock has performed on earnings, six of the last eight quarters they have sold up on earnings. The stock just went up 20 . If theyre going to come out with earnings on march 24th, i dont see a catalyst to make the stock go up to 105. I will play bearish through march expiration. I think the stock will sell off on earnings. Thats another catalyst to be bearish. All right. Very quickly. I think when you look at it, first of all, i think when its an m a deal, you have to look a little longer term but i think there are immediate synergies they will talk about on the Conference Call and with investors Going Forward that will lead people to believe the company can earn a lot more than 100 million in synergies they talked about over the next three years. We have to go, guys. Thank you both. Good conversation there. Heading toward the close. 20 minutes left. Were kind of holding at these lower levels of the day. The dow down about 60 points and it looks like we will break the string of consecutive up days with the nasdaq down 35. Up next, well check in with dominic chu to see whats moving the markets. After the bell, chocolate lovers beware, the world could run out of chocolate within six years according to some report. Well talk to the ceo of hershey to see if this tragedy can be averted. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Are you still sleeping . Just wanted to check and make sure that we were on schedule. The First Technology of its kind. Mom and dad, i have great news. Is now providing answers families need. Siemens. Answers. Welcome back. Its certainly been a seesaw kind of day for stocks here. Yes, it has. Dominic chu, which stocks have seed and sawed the most. Well start with spirit airlines. The stock is taking off after the airplane posted better than expected Fourth Quarter profits as net income grew 110 and unit costs fell. So a better story for spirit. Facebook hit a record high in trading today. The stock is up about 25 just so far this year. Its market cap is now a cool 175 billion. Its also a good day for garmin, the maker ofg ps devices. Reporting better than expected Fourth Quarter profits saying nonautomotive products are delivering 50 of sales. A big diversification story. Eli lilly moving higher as an experimental cancer drug significantly improves survival rates in lung cancer patients. That was in a late stage trial. You have domestic steel companies, led by u. S. Steel, as the Commerce Department decline ed to levy a tariff. Lots to watch. The dow is losing about 74 points. Were almost now as negative as we started the day positive. Its been a big swing here. Same thing for the nasdaq and the s p has nearly erased all of in years losses, at least it had at the peak of the day. Will we ever see what some have called a long over do and healthy direction . A question we ask often. 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Volatility still here, guys, and for the most part some of the fed speak today kind of spooked the market when they started talking about actually raising rates, maybe as early as the middle of next year. What do you think . I think its not unexpected that the fed was going to have to talk about their Forward Guidance. Of course, theres still some confusion from the fomc statement today. Im not exactly certain myself whats going to happen next, but clearly theyre going to have to come with a mechanism thats not static. Anytime you assign a static number to the u. S. Dynamic economy, youre going to have to revise it. But this is whats so ironic. We went through this whole exercise about how we needed to have targets. Charles evans was like we have to quantify this so people understand what were doing. Theyre like that worked for a while but its not going to work anymore. What comes next . I take the same view here. Its a work in progress. Again, this is a relatively new concept for the fed. The economy has got a lot of moving parts. I do think that them calling audibles along the way is something we should expect. Its like when an analyst puts a price target on a stock and it hits it. Now what are you going to do . Were gets close to the 6. 5 bogey on unemployment lets go to the breaking news. Nbcs Pete Williams has more on what there may be a Terror Threat right now . What can you tell us . This is a new threat to aviation that involves according to several government officials flights from overseas to the u. S. Its based on new, very recent and considered credible intelligence. No indication these Officials Say of any specifically plot, but what they have uncovered is intelligence discussing trying to get explosives onto airplanes by smuggle it in shoes. Airlines have been notified. They have been told to pay extra attention to the shoes of passengers from the last point of departure from overseas flights to the u. S. What theyre told is in the airports where they have the explosive trace detectors, to use those, make sure they xray and look at shoes, both those worn by passengers and those carried in carryon baggage. They say this does not affect flights inside the u. S. That passengers on all the domestic flights probably wont see any security screening difference whatsoever. They say this is unrelated to the olympics. Id say talking to federal officials that concern over this intelligence is i guess you could describe it as moderate, but nonetheless, theyre taking it seriously. They want the airlines to know it, and the airlines are going to change their security screening again for flights from overseas to the u. S. Pete, can i just ask you quickly, how unusual these kind of advisories are . Well, these kinds of advisories are not i guess youd say not unusual. Theyre not routine, but when they get information like this that they think is important enough to pass it along to the airlines, they do it. They do it somewhat regularly. Nbcs Pete Williams. Thanks, pete. Let us know if you hear anything else. Appreciate it. I know you guys cant hear all right. Now we have breaking news, corporate breaking news this time. David faber has something for us on safeway. What do you have for us . Weve been watching shares of safeway late in the afternoon here, bill. Of course, stock trading about twice its volume. Wanted to share a couple things that i am hearing out there. The first is there is a growing expectation that on its Conference Call that will begin at 5 00 p. M. Eastern today, safeway will give voice at least to the idea that it is entertaining or considering pursuing alternatives to great value, including a sale of the company. That is an expectations out there of a number of people im speaking to. Separately i can tell you as well that people close to the company indicate to me that there have been some conversations ongoing between safeway and private equity firms recently. Now, whether that will result in any sort of a deal, of course, remains unclear. Cerberus has been noted as an owner of albertsons. Remember, the company did put in a poison pill at 10 back in the fall. Ja na was the reason for that, the activist investor, which still continues to own roughly 5 of its shares from what i hear. Well keep an eye on safeway after the bell. Back to you guys. Thank you, david. Safeway shares moving up 3 getting that news in before the close as we explore a couple different factors. Very opposite directions here. This credible Terror Threat involving airlines coming from outside the u. S. Toward the u. S. That Pete Williams just itemized may have something to do with this selloff. Were down 94 points. Well come back with a closing countdown and then after the bell teslas Quarterly Report is due out any moment. Will the results justify this stocks red hot rally. Well be looking at it with instant analysis here on cnbc. Stay tuned. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Where you think youre gonna go when your times all gone . [ male announcer ] live a full life. The new lexus ct hybrid with an epa estimated 42 mpg. The further you go, the more interesting it gets. 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This is the dow is the white, the sp dsspdr etf is the yellow. 90point rally, then the selloff midday. Kind of meandered until the close when we get this report from Pete Williams about a credible talk of a threat, a vague threat, involving commercial airliners coming from outside the United States toward the u. S. There was no one specific threat that was itemized, but it was enough maybe to cause some of the selloff. And certainly may have been a factor in moving us to the lows of the day. We didnt hear a lot of chatter about it in the last hour. I want to point out here though the decline started about 40 minutes ago as we dropped below the lows prior to that and, believe it or not, this kind of technical stuff really matters. That was about 3 10 when things started declining. Im not discounting petes commentary. I think it might have been a factor but it started a little bit before that. Tomorrow were going to get the retailers coming in, walmart is going to be reporting before the open, nordstrom. Its going to be ugly, folks. You know well hear a lot about the weather and i think its a credible excuse right now, dont you . Yes. And when you look at the commentaries, so, for example, a number of companies today, Group One Automotive for example, came out and said we had stores in the south, in atlanta, in new orleans, all throughout the south that never have closed before that have closed in january for days on end. Thats an indication that weather is definitely a factor. Walmart, by the way, already guided lower. So i dont know if well get dramatic i think theyre at 1. 60 right now. I dont think it will be dramatic but we want to hear what theyre hearing in february and all the indications for february is not particular good either at this point. Thanks, bob. See you later. Were going out down about 80, 90 points after a 90point rise on the open. What does this mean . Will it have an impact on tomorrow . And were breaking a winning streak for the nasdaq. It had had eight in a row to the upside. Today down 36 points. Stand by. Teslas earnings and a lot more coming up on the second hour of the closing bell with kelly he was and company. Ill see you tomorrow, kelly. Thank you, bill. Welcome to the closing bell. Im kelly evans on this seesaw day on wall street marked most by a lateday selloff. Look at how we finished off the trading session. The dow shedding about 87 points at this juncture. The nasdaq losing about 34 or 0. 8 . Its the hardest hit after having a string of gains. The s p 500 down to 1,828. Joining me now our very own sheila, and fast money trader brian kelly. Steph, what do you make of the marke markets . Weve had a nice recovery off the lows. Were up 6 in the s p off the lows in february. And we have to get through some things. The fed minutes, i didnt think there was anything there today. Janet yellen basically told us last week theyre very data dependent. We can parse through a few of the words that were said today but nothing material and again we are data dependent and the data hasnt been that good over the last couple weeks and it is trouble sonl because we dont know how much of this is weather and how much of it is not. Now, i could paint us a positive spin on a couple of the data points, even the empire fed yesterday with the futures orders, that was encouraging. The architectural billings index today, that was encouraging. By and large, weve got to get through more data. It is true it seems a lot easier to tell who the winners and losers are in the near term in terms of the companies, restaurants, retailers affected by the weather as opposed to the economy at large. On a day like this, the nasdaq is the one thats suffering most, granted its had the best run, but does that tell us anything here about the broader direction . You know, most people i have been talking to say no. The nasdaq has had an incredible eightday winning streak. From the lows, its the nasdaq thats been leading the rebound up 6. 5 . Search saying from a technical per speck it tispective perspective, completely normal. Almost everyone agrees markets feel a little overstretched, a little too highly valued but no one is really willing to come out there and say, look, were going to go down. So it raises an interesting question. You have to get through some of the data points. If its not the weather, not Everything Else, what is it . And earnings are over pretty much, right . We only have 10 left how can you say that when walmart hasnt reported . Well, they did kind of preannounce. Speaking of earnings were keeping an eye on tesla and phil lebeau will join us with more on that. I want to bring brian kelly in that conversation. How much of these markets is about the fed . I think a lot of today was about the fed. Im tell you, to hear stephanie link say that were in a trading range at best has got me a little concerned because she has been bullish and right for the last several years, and trading range is down right bearish for stephan stephanie. Im a little concerned here. I think theres reason to be concerned. When we look at what happened today, i think a lot of this rebound over the last week or so was because there were some people out there who thought maybe theyre going to taper the taper. The Economic News hasnt been that good. I think the minutes today and the comments that weve had over the last several days have really said that the bar is very, very high for the fed to stop tapering and what you saw today was yields going up and the stock market going down. Thats not a good combo. All right. Dr. J, just a quick remark were going to go to phil on tesla but echoing what we heard, weve got stephanie talking about a trading range. Brian kelly going im not so sure. I think what it is is anytime were watching streets burn in cities around the world, like we have seen in thailand, like we are seeing in the ukraine, people are worried. And i think that put a bid under the vix today and i think the vix continued to rise into the close because some of those terror alerts that you were talking about or at least the rumors of them. Great point. We have that earnings alert for you on tesla. Phil lebeau joining us with the numbers as the shares move higher. Theyre moving higher because these are much better numbers than the street was expecting. Tesla earning 33 cents a share x items. The street expected 21 cents a share. Revenue coming in at 615 million. Thats below what many on the street were expecting, but its the guidance that everybody will be focused on. For 2014, tesla expects to build and deliver 35,000 model s vehicles. I want you to compare that with what they did this year, which is basically 22,400. That 35,000 is much more than many people were expecting. They said if you get anything over 32,000 that would be encouraging. Why are they delivering more in they are raising their expectation for yearend production of the model s from 800 a week to 1,000 per week. Again, tesla beating the street by 12 cents. 33 cents compared to the estimate of 21 cents. Were going toon the Conference Call in a little bit. Well have more later and tomorrow. Kelly, back to you. Phil, really appreciate it. I heard sheila let out a low whistle when you read that 35,000 number. Here is a stock that everyone has wanted to bet against. Its defied gravity, defied all these expectations, and i have to say elon musk has done it again. Hes come out with these great numbers and a great quarter. Phil has been talking a lot about what to listen for in the Conference Call. Got to watch what he says about china. That could even push the stock higher. I got to point out though, stephanie, id love to get your take. This is a stock thats trading at 180 times guidance. Thats a little unreal. Yeah, but when they say, as elon musk has already said, sheila, that china could be as big as the u. S. By this time next year, that fast, and theyve just started in china, i think thats part of the reason theyre ramping production up. The question is, of course, whether or not batteries become a problem for them as they have been for apple and others. If thats not a problem, then this number might be significantly greater into 2015. To me the margin story is going to be very important. I havent seen the numbers, but did they hit that 25 margin that elon musk had actually basically guaranteed . And where does that go in 2014 . And when do they get cash positive in 2014 . Theres not a lot of competition. Theyve got the great products. Theyre expanding their products so you can make a bullish case. I want to see what the margins are. And we will have more on this. Well be joined by one of the Analysts Covering tesla shortly to answer these very questions. Its interesting, again, this comes on a week where weve already had a lot of discussion about tesla because of the San Francisco chronicle reporting apples m a chief meeting with tesla in the past year. Elon musk himself has described his shares as at a crazy valuation. Even though theyre moving higher today, perhaps he would find some kind of compelling reason to tie up with an apple here. I dont know if anything about the earnings today changes that, but its certainly going to remain a point of conversation about how apple continues to reinvent itself. Kelly, i think one of the most important questions here is whether or not apple has more to learn from tesla or tesla has more to learn from apple . Both are tremendous Technology Companies and huge innovators but a lot of people have said elon musk is the steve jobs of today. The guy is an incredible innovator. What hes been able to do with that company is astonishing. Im waiting for them to build the hyperloop. I think thats a cool product. Im going to buy my ticket. You just want to get from d. C. To new york more easily. I would love to. Here is one of the key issue was tesla. Like twitter, theres a very small door to get through. 122 million shares for a company that is top of mind for so many investors. Thats not a big door to go through. In other words, a lot of folks trying to get in and not a lot of shares. When they spoke with tesla last year as theyre rumored to have done, the m a person at apple, the shares could have been between 30 and 50 a share. Certainly nowhere near 210 where they are now. Right. We are reading a lot into these conversations. Dont obviously have the detail. Phil lebeau rejoins us with more detail. Phil . Two things that are important in the earnings letter this they have just released. First of all, they are expecting their operating margins to hit 28 by the Fourth Quarter of 2014. Also, you were talking about china and the growth there. Listen to this statement within the letter. Already the beijing store which has only been open a few weeks is the largest and most active tesla retail location in the world. You cant come out any more bullish than they are regarding their prospects in china. Remember, theyre basically starting from scratch there. So when we get on the Conference Call, there is no doubt that china and the prospect for growing sales in china will be a major focus of the questions from analysts. Phil, im curious, when they say things like largest and most active, are they give specific metrics theyre referring to there . No, they are not. Again, theyre just beginning. They shipped vehicles, they put them on a boat i want to say seven or eight weeks ago. They are just now putting them there. We have had a chance to talk with those who cover the Auto Industry in china. They are reporting brisk interest in beijing both in terms of people placing orders as well as those being known as hand raisers. Those saying im interested in buying. Remember, they have priced the model s far lower than many people were expecting in china. That may be an indication of how much demand is over there, the fact that people are saying if its coming in at that price, sign me up to buy one of those. Speaking of price, we have these shares moving up almost 10 after hours to 212. Of course, remember speaking of roller coasters, tesla is a company of its own that had challenges. It was, in fact, about the last quarter where we started to see some concern about the trajectory there, where we, of course, had the battery fires that saw shares fall quite swiftly from the 180 mark. That feels like a distant memory. And dont forget, the stock this year alone is up 35 . It was one of these leading momentum names. It really led the nasdaq higher. The question is if you were short this stock, you were probably under your desk in the fetal position right now. What do you do . Do you cover . Was this a good enough of a quarter for people to say, you know what . I finally believe this tesla story . Kelly dr. J . I was going to say my friend cass is short this stock. Hes chasing it up here. Its a brutal business. Jis going to say part of the story is masterful public relations. The way they handled that battery fire story and the way they handled a very critical review in the New York Times before that suggesting that maybe the Battery Longevity wasnt there. Elon musk and his team went out and pushed out hard against that in a way that Many Companies wouldnt do. They took a big risk there, but its really paid off for them in pushing back against some of that bad pr. Battery technology is an area important to so many areas, apple included. Olympic curling is coming up at 5 00 p. M. And get your Second Screen ready, brian and the fast money freestyle streaming live on fast money. Cnbc. Com and that starts at 5 00. A top wall street analyst will break down teslas results next. Plus sheila bair going from regulator to regulated. Her new position at a top bank raising some eyebrows. They will speak with me exclusively about her move, the challenges facing the nationsbank. Plus another cnbc exclusive. Hersheys ceo giving a rare interview. The chocolatemaker announcing a quarterbillion dollar share repurchase. How much more could you be paying for kisses . Youre watching cnbc, first in business worldwide. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back. Shares of tesla are spiking after reporting Fourth Quarter earnings just moments ago. Up almost 13 after hours to 218 and change. For more on the results, lets bring in collin rush, Senior Analyst at northland Capital Markets joining us here. Is this move justified . Absolutely. Were seeing significant upside to Gross Margins. I think the missing link here is that this is a technology story. We think that the target markets for this company should be 35 plus. Were seeing them progress toward that at very low volumes. And were seeing some tangible evidence theyre going to have more earnings power on that gross margin line than a lot of folks expected. Its precisely the Gross Margins stephanie and john were just talking about. I didnt realize fords margins are almost single digit, dr. J. When you think about 35 , youre saying teslas are more than triple . Absolutely. This is a technology story. Its our key argument, that the technology in the battery pack is very, very impressive. Collin, where do you think that margins actually can go and when do you think that the competition arrives . Right now they really dont have any and when do some of the other Companies Like some bm w or porsche or some of the other Companies Start to focus on this market . Weve seen attempts from other companies already. What youre seeing a clor fied hatchbacks from some of the German Companies with short range. This is a fullblown sedan. Its the best car on the road right now. The companies are proving theyre at least two, if not three years behind. This is a technology story. Auto companies arent Technology Companies in the same way this is. Thats why theres a lot of synergies with a company like apple. If tesla at 200 was a 250 billion company. Ifg m is 50 billion in size, how much bigger can tesla get when were still talking about a fraction of the delivers ultimately that the big guys are making . We have a lot of room to run. This can still triple or quadruple because youre generating an awful lot of cash. Its a fundamentally different margin story, and it has a different growth story than the other Car Companies out there. So we can give this a multiple. We can see that cash get generated and we think investors will be help to give elon more capitol al to invest. Elon is getting a lot of capital. No doubt about it. Was there any little bit of a red flag . Not really. What were seeing is production numbers increase. Were seeing shipments increase. The big bear story is really about sustainable demand. Seeing the shipment number go to 35,000 next year is just a starting point for them as we go through 2014. As we look at what the potential is for this company, theyre just starting to ship into china, really start to build a brand in europe, were seeing these guys are maybe a year ahead of where the street estimates are right now in terms of the trajectory of the business. Did i hear you say you think this company can triple in size . From a market cap perspective, absolutely. From a production so its going to be bigger in terms of value and size than general motors, than ford . Absolutely, without a doubt. This is Technology Company thats transforming the transportation market. I dont see why they wouldnt extract a lot of the value from those other auto companies. Just walk us through valuation and how do we get comfortable with this currently trading, you know, 168 times forward estimates . You know, you have to look into the out years. Really the values valuation is based on their ability to take a consumer vehicle to market successful. You have to look a 2016, 2017, 2018 in terms of earning power but looking at the street chiments. Estimates, i see between between 8 and 10 points of gross margin. What does that mean in earnings power for you . This could be a 25 earning stock in 2018 time frame. Youre looking at ten times number out in four or five years. Well, and well leave it with the shares moving up 15 after hours. Again, knowing its kind of a smaller float and a lot of people were short. Thank you for providing some perspective. Incredible to watch that move. We do want to update you now on the violence in ukraine. Reuters is reporting the nations leaders have agreed to a truce with the opposition and have started negotiations with the protesters. Again, more than two dozen people have been killed this week in clashes with police. Youre looking at pictures there of independence square. Through the revolving door she once criticized, former fdic chair sheila bair is here to talk her new position. Plus her reaction to the feds new rules for foreign banks and whether they go far enough. Keep it right here. [ bell ringing, applause ] five tech stocks with more than a 10 . Change in aftermarket trading. All the tech stocks with a market cap. Of at least 50 billion. Are up on the day. 12 lowvolume stocks. Breaking into 52week highs. Six upcoming earnings plays. That recently gapped up. [ male announcer ] now the world is your trading floor. Get realtime market scanning wherever you are with the mobile trader app. From td ameritrade. Welcome back. The fed raised some eyebrows on wall street this week but not because of the release of its minutes today. The central Bank Approved a final rule on tuesday that will force the american operations of foreign banks to follow many of the same rules as american banks. One person who knows both sides of that equation is sheila bair. She recently joined the board of a spanish bank with a big presence in the u. S. She joins me now in an exclusive interview. Sheila, its great to see you. Thanks for having me. Can we start with talking about whats happening with regard to foreign banks in the u. S. Whats your take about the feds new rule and how much more capital they have to hold . I am very supportive of those rules. I think its important we have standalone laugh quiddity with the u. S. Operations of these large foreign entities, many of which dont have high levels of capital so i applaud the fed. I have been supporting this move for a long time. They did give them a bit of a break, the foreign banking operations, they gave them a bit of a break on capital. They have a few years to get up to 3 . Most of them are funding their repos with 0 capital, 100 leverage. It was a little out of control. Its a very positive thing. Theyre still getting a bit of a break on capital but i really applaud the fed on this. I applaud janet yellen and dan tur r turrillo who worked really well on this. The u. S. Financial system has never been in better shape was a statement made. How high of a standard are you setting there . Certainly prior to the crisis theyre in better shape than they were prior to the crisis. There is more capital in the u. S. Banking system. There needs to be more but we have made a lot of progress and i think this is one of the strengths we have here. In europe they havent done enough i dont think to get their banks more capital into their banks. So i think this has helped our economy. But i still think we need a bit more. We need to rely more on leverage ratios and not these risk weighted ratios which are easy for the larger banks to game. But there has been progress but, no, its not enough. We were a very highly leveraged system prior to the crisis. Exactly. It all becomes relative. We could be heading back in that direction if not for some of the regulations which have been criticized by guests weve had on like dick bove who says this is just going to drive banking activity out of the u. S. There are others who echo that view. Whats your take . I think especially for capital, capital is a competitive strength, not a weakness. If you look at the banks that had the higher capital balances, they weathered the crisis much better. They kept lending into the real economy. I think as a customer youd rather deal with a bank that has strong capital. I think it is legitimate to say we must be wary that as we put stronger regulations on the regulated Banking Sector that the risks dont creep into the unregulated shadow sector. This really had happened prior to the crisis in 2008 where a lot of these risk, ai g a good example, a shadow bank, outside of the traditional regulated sector. I think regulators need to be cognizant of that but thats not an excuse to say dont regulate the banks. That says you need maybe a little more oversight of the shadow banks as well. Well see if that happens. I want to read you another quote. There should be a lifetime ban on regulators working for Financial Institutions they have regulated. You know who wrote that . I do. And thank you for bringing that up because i would like to say make a couple comments. That has been reported, and a couple things. I have joined the board of a bank based in madrid. It is regulated by the bank of spain. In november it will be regulated by the escb. They are a collection of a number of smaller regional banks throughout the country. Theyre primarily in europe and south america. Each of those subsidiaries have their own boards, their own directors. I am not dealing with them at all. In terms of i did make some comments about regulation being a lifetime calling. Again, the context of that was for our examiners. I would like to see Bank Examiners be somewhat like the Foreign Service where its something you commit to. People like me who headed agencies cannot make it a lifetime commitment unless the president wants to keep appointing us because by statute we are term limited. So i thank you for giving me the opportunity to make those clarifications. I thought about joining this board very hard before i did. I did not think it violated by principles on revolving door, and, frankly, i think a lot of the criticism has come from wall street. The Reform Community has been pretty supportive. I think its to the banks credit they would ask somebody like me who is known to be pretty independent and strong on regulation to join their board and hear my views. Im looking forward to. Its a good institution. I have a lot of confidence in the management. I wouldnt have joined it otherwise but again thank you for letting me clear that up. And i mentioned that particular line because it was from the book that you wrote and i just wonder what is your goal . What is your objective . Does it amount to some higher calling that goes back to your time as a regulator. Just thinking through sort of what is it youre trying to accomplish here . Or is it just about doing the pragmatic next thing . Its a way to contribute to a safer banking system. I like the banks model. Its consistent with what the fed is requiring of all foreign banks doing business in the u. S. , that is have your own legal entity here with its own capital and liquidity to support the u. S. Operations. It is a more stable way. I like the model. So, yes, i felt this was a Financial Institution where i could make a contribution. Its also traditional lender. It takes deposits, it makes loans. I have been a defender of traditional banking. I think some of the problems we get into are with these large trading operations, these esoteric structured products and derivatives. Those had very you couldnt understand them. We had sudden losses. Bank that is stick to their knitting pretty much stayed out of trouble and santander did that. You will have a unique lens into whats happening with regard to whats happening in financial regulation. Most people this week are talking about china in this regard and a lot of the trust products coming due this year and next year. Were starting to see small defaults. Is that all going to tumble into a much bigger credit event . Whats your view on that . I dont know. I think their regulators are very aware of this and trying to deal with it. The information is not as good as you might like to be able to really analyze how deep the problem is. But i think they are very aware of it in china. They are trying to deal with it. One of the things theyre moving forward which i have long supported is setting up a deposit insurance system in china which i think would help clarify for depositors in their banks what the government protects and what it doesnt because one of the big exposures for the government in china in these private wealth vehicles. They dont view them as being backed by the banks. Its not clear that the Bank Depositors understand that. I think having deposit insurance system in place could provide clarity. That would be an interesting move. And just lastly, your name is on the list of nominees for our top 25 people who have had influence over business and finance for the last 25 years. Well, thank you. I wonder thinking through the role that you have played in the Financial System and perhaps through from where you sit throughout your own career, who would you put on that list or atop that list . Business people and government people, people who have had an impact on business . Warren buffett is always at the top of any list. I think hes a survivor and hes done very well and hes done it by sticking to the fundamentals, investing in companies that make good products and services. I like people in the business sector who follow, you know, who focus on Customer Quality and make money by providing real value to customers. So steve jobs im also a fan of. I think Marissa Mayer yahoo is a very challenging situation but what her strategy is, to improve the quality of the experience for those who visit the site knowing that advertising revenue and profits will follow. I think Business Leaders that foy focus on customer satisfaction, servicing the customer, do the best and i think investors who invest in those kinds of Companies Like Warren Buffett also do the best. Sheila bair, thank you so much for your time this afternoon. Great to see you. Nice to see you. Appreciate it. Well round up all the after the bell action. Well talk about tesla and hersheys ceo will join us in a rare interview. Plus, when will soaring cocoa prices dent your wallet . Well get into all of that when we come back. Stay with us. Where you think youre gonna go when your times all gone . [ male announcer ] live a full life. The new lexus ct hybrid with an epa estimated 42 mpg. The further you go, the more interesting it gets. Lease the 2014 ct 200h for 299 a month for 27 months. See your lexus dealer. For 299 a month for 27 months. All stations come over to mithis is for real this time. Step seven point two one two. Verify and lock. Command is locked. Five seconds. 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Superior service, best selection, lowest price, guaranteed. Sleep train your ticket to a better nights sleep welcome back. A big push of after the bell action as earning season winds down. Dominic chu has the latest impacts. Lets start off with whats happening with tesla. With the earnings out now that they are out after the bell, the stock is moving higher after it reported better than expected Fourth Quarter earnings on Strong Demand for its model s electric car models. It said it would deliver 35,000 model s stars in 2014. Then theres safeway moving higher as well. David faber the first to report that the Grocery Store retailing chain is in talks about a possible sale of the company. Faber saying those talks include private equity firms. The Company Reported Fourth Quarter sales that came in a bit shy of analysts expectations. Its all about the possible deals. Now, thats the after hours picture. Lets turn to the next stop in our frozenomics story. Weve told you about the companies that are being hurt or benefitting from the extreme weather. We told you about how the Earnings Growth estimates have been falling among wall street estimates and their community possibly in part because of weather impacts. Just which sectors are analysts forecasting the biggest drop in Earnings Growth . The analysts at Thompson Reuters looked at all s p sectors and looked at First Quarter growth estimates in the beginning of december and looking again at what they are today. The biggest drops in growth assumptions on an absolute basis are Energy Stocks which had been forecasted to grow by earnings in terms of half a percent in december and analysts are now seeing them with a decline of earnings of 4. 5 . Material stocks also forecast to grow 10 back then. Today growth of just 2. 7 . And the biggest drop came in consumer discretionary, the retail stocks. Forecast to grow earnings at 16. 5 and now forecasts you can see there at about half that amount. So overall, the weather could have a serious impact. It remains to be seen just how much of those revisions are because of things like weather. Kelly, back over to you. And we still look forward to hearing from walmart, nordstrom, and so many others to close this off. Dom, thanks so much. Hershey coming off strong Earnings Report last week. It now announcing this afternoon a quarter billion dollar Share Buyback program. Joining us now, our own sara eisen who is with the companys ceo. Sara, kick things off. All right. Well, welcome to the program. You know, j. P. , its good to see you here especially with such a positive reception at the conference. Just off of announcing this 250 million Share Buyback. What are you seeing out there that gives you this kind of confidence. Thank you for having us. The buyback is part of our overall capital structure and program. So as we think about how we deploy capital, its really around growth. So we have, you know, very open mindset around possible m a activity as we want to be able to act in things that help us grow the company. We target about a 50 dividend payout ratio, and then we have a dividend then we also have this buyback in place that we think, you know, is positive for us, and it also shows the marketplace that youre rewarding the shareholders. Frozenomics is a huge theme on the network, on the retail companies. What impact are you seeing . The first impact we saw was over this valentines period. You know, during the valentines week, there were times where businesses were closed, offices were closed. The positive is that in parts of the country where weather really wasnt an issue, we saw very normal holiday. About 50 of the consumption in valentines day is actually selfconsumption. Thats a good thing. Gifting happens in the last couple days of the holidays. So there was one day there that was pretty tough. However, we were up about 4 versus last year. Sell through was probably in parts of the country a little bit less. But the way to think about the weather is really its an incident, and so people tend to stock up in advance of anticipating bad weather. They go back and rebuy afterwards. Its not fully lost. Jo i dont think you can focus only on the weather. Its a reality. It happened. Those of news the northeast know weve had quite the winter. But what we see more is if you look at Consumer Behavior really over the last six months, i think what were really seeing is there continues to be a bifurcation of the consumer, and theres some people who are struggling more than others. And that really comes through in the fact that theres probably about one shopping trip over the course of the last six months thats missing from the retailer. So the average basket size is about the same. Were fortunate that we continue to be a part of that basket. But thats how we really think about the weather. Its really more incidental. Its great color. Kelly i know has a question for you, j. P. Thanks. I want to jump in here from new york. Hi. Its fascinating what you say about the consumer and on a kind of related note, can you talk to us about pricing and about these perennial warnings coming from the industry that youre going to run out of cocoa. In fact, the latest from the meeting in london at the British Library predicted the exact date of being october 2nd, 2020. What does all of this mean for your industry, for your business . Well, i think that, you know, what we really see with the consumer is that as we continue to invest in the consumer with innovation, with products that, you know, are built around our core business, so our core business is up about 9 this year. Were very consumer centric. And so the consumer for us has really been staying with the category. Our category is really advantaged in terms of were available. We say we have e bewe bik what with us distribution. Were really an affordable indulgence. Were quite accessible. When people are giving up other things they may still be able to participate in this category. Its interesting because your top line growth has outperformed some of the other packaged Food Industries weve seen. I want to point this out. Brookside, it was an acquisition and this is what you call product innovation. This is something youre announcing today. Brookside is a company we bought a little over a year and a half ago. Its been a terrific acquisition for us. Weve expanded in the u. S. It was a canadian company. These are clunrunchy clusters. Its a crispy multigrain with sweetened pomegranates. Are you planning more acquisitions . Go ahead. I just want to be clear on this. Is the World Running out of chocolate or not . No, i dont think so. You know, right now theres a difference in the fundamentals of how this market is working. So consumption of cocoa is actually going up. We see a good delivery on crops this year. Its been a very nice pod count but you have other people participating in the market that they havent in the past. You have hedge funds participating. Its a way to hedge against the pound and the euro. As we see april and all coming, you could see some changes in the market, but fundamentally we feel as though the consumption is rising. Thats ultimately a good thing. Want to get you on the record here very quickly. Acquisition strategy, brookside, you have made a number internationally. Can we expect more . Were looking for things that add capabilities, things that provide us new brands, new distribution, manufacturing capability that we dont have today. So we are really looking for all of those types of opportunities that we can add to the portfolio. Very good. Always great to chat with you. Great to see you. Back to you, kelly, in new york. My thanks to you both. Really appreciate it. Stick around because the hot list is next. 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Com trading to learn how. Tdd 18886486021 our trading specialists can tdd 18886486021 help you set up your platform. Tdd 18886486021 because when your tools look the way you want tdd 18886486021 and work the way you think, you can trade at your best. Tdd 18886486021 get it all with no trade minimum. Tdd 18886486021 and only 8. 95 a trade. Tdd 18886486021 open an account and earn 300 commissionfree online trades. Tdd 18886486021 call 18886486021 to learn more. Tdd 18886486021 so you can take charge tdd 18886486021 of your trading. Welcome back. Whats percolating on the website right now. Alan wastler joining us. Does percolating have anything to do with coffee prices . Not today. Its a tesla day. From phil lebeau this morning gave us a wonderful preview piece on what to expect. Then we had a nice piece from our option actions folks about somebody made a really big bet against tesla today. And then finally to the earnings themselves. I figure between all three of those stories, i got 100 grand worth of people coming into the website just to check out tesla. Now, close behind that, another favorite subject, powerball. Were up to 400 million, right . Allen, is that the case, we have another big lotto . We put up pieces telling people who to do with your winnings. Thats the day dream category and then also things you really should know like i hope we also put up the pieces like dont play the lottery. Or is that just unamerican of me . 1 in 175 million folks, okay, its good for daydreaming and thats about it. Finally we have a rare coins piece. More and more flush investors investing in rare coins. We have a little whats it all about, how to do it, and what are the risks involved. Keep an eye on coffee prices, they are up. A double standard coming up. Why wall street executive pay is so highly scrutinized compared with Silicon Valley counterparts for making just, if not more, than their peers. 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They had notoriously long hours but at least the promise of a big bonus. Former analysts say the career track in a vilified industry thats heavily regulated where pay is stagnant doesnt justify it. Two years the absolute max for such a hostile environment. Leaving banks with the dilemma of how to stop the flight of their best and brightest to tech, private equity, and in some cases just taking some time off. Millennials care more about Work Life Balance and its hard for them to sign on and say, look, i want to devote 110 hours a week to this job for a couple of years and just give up Everything Else that matters to me in life. If you lose those to me in life. If you lose those people your firm suffers. 75 hours is the suggested work week and entry, not just exit interviews. Other banks followed suit. All at least giving back some weekends. We should note none of the banks go on the record about how theyre trying to improve the programs at the ground level. Analysts say ids not perfect but its a good start. Not until next year to whether it worked for this years analyst class. Thanks very much. I want to talk this out with the panel a little bit. Ceo pay, main street is scrutinizing financial ceo pays we have silicone valley executives say the same if not more than executives. Is there a double standard. Of course theres a double standard. I mean, just take the analogy one steph further. Talk about celebrities, athlete that is make a lot of money. Yeah. It does seem like there is. They havent spurred occupy wall street and a reflection that feel that the financial stewards making unjustified amounts of money and damaging the system. Perhaps you make the same argument about celebrities. Depends on the celebrity. Ammann. Take the ceo of google and ceo of jpmorgan, the difference is in terms of americans reaction is that americans know and use google. They know the product. They admire the company generally speaking. For making an innovative product they use every day. With jpmorgan, it is not coming in contact with American Consumers the way google is and people dont understand what it is, what it offers and has a wall street political taint to it not giving it a good reception with the bonuses. We spent five years getting out of the massive problems of the banks to begin with. Now you have the regulation an enthats not going to end any time soon. I would just point to some of these Technology Companies like google, they actually have the growth, talk about where people want to be working. They want to work at a google or twitter or facebook and you can make a lot of money. Do they deserve 100 million payout or dr. J . The stock is up 206 since november of 2008. He got 10 billion to come there in the first place. Right. Worth of google stock. 100 million, he didnt need it. But there is no too big to fail in silicone valley. If google failed, theres bing is more than happy to run the search for the internet if google were to fail. So the issue here is, i think, ammann, that the it have yol was sporked with the hand of the government underneath the banks that saved them. Theres no such hand in silicone valley. Interesting hold on a second. A switch in perspect ception of Tech Companies and reminds you of wall street and not beloved but look at San Francisco at the outrage about what the standard of living has done with the companies. Nsa and big brother. We are seeing a little bit of a pushback. Youre definitely starting to see that and localized in San Francisco because those are the folks to see the google buses on the street and where the resentment is coming from for now. But the industry in terms of Public Perception and popularity has to be careful. Googles motto was dont be evil and the public is going to judge them on that. If they get the sense google is evil, putting out products that seem creepy and weird, you know, im not wearing my google class, they have a problem with Public Perception. They dont have the problem that wall street does. Just real quick. Just go back to the point of kayla, too, about getting people to work on wall street. Bethany mclain the writer now with vanity fair start in a program that was she said grueling. One of the most instructive experiences, however, she has and has no regreets and sheila, do you have any regrets . Absolutely not. I completely agree with bethany. I was a twoyear analyst. I worked those crazy hours. I pulled the all nighters. You know what . I might have been carrying the bags with those meetings with ceos but i got to hear what they said. I got to see how they ran the company and such an instructive experience. I wouldnt trade it. All right. Thats again why the companies, theyre changing but still theres a sense of the bad old bays. Good old days . Im cutting back to 75 hours myself, kelly. I was going at 110. Ill dial it back a little bit. Thanks, ammann. Get the final tweets in. We want to know what youre thinking about. Lying at twitter. Well be right back. Could you teach our kids that trick . [ male announcer ] by not acting that way. Its how edward jones makes sense of investing. Its how edward jones could save you fifteen percent or more on car insurance. Mmmhmmm. Everybody knows that. Well, did you know that old macdonald was a really bad speller . Your word is. Cow. Cow. Cow. C. O. W. E. I. E. I. O. [buzzer] dangnabbit. Geico. Fifteen minutes could save you. Well, you know. Iwe dont back down. We only know one direction up so were up early. Up late. Thinking up gamechanging ideas, like this dozens of tax free zones across new york state. Move here. Expand here. Or start a new business here. And pay no taxes for 10 years. With new jobs, new opportunities and a new tax free plan. Theres only one way for your business to go. Up. Find out if your business can qualify at startupny. Com instead of paying too much for an ipad, i got the surface 2. First of all, it comes with office and outlook. Then, with free skype calls to phones in over 60 countries, i can talk to my cousins any time. And then, i got 200 gigs of Cloud Storage free so i can get my photos and stuff almost anywhere. Others charge for that. Surface is such a great deal. I feel like i should tell somebody. Hey honestly i want to see you be brave [ male announcer ] with nearly 7 million investors. Oh hey, neill, how are you . How edw makes sense of investing. Welcome back. Well, it is double the screen time, double the fun. You can catch the latest curling action here next. You wont want to miss a second of that. Be sure to live fast money freestyle. Melissa lee joins us now. Whats coming up . We of course, kelly, trading tesla and one of the traders here on the desk win short treasuries today. Why and what the position is right now. Ouch. A tough day for him. Thanks, melissa. Looking forward to all of that, of course. Scientists detecting a Lie Detector Test for tweets. How much do you think theres lie on twitter . You tell the truth to stranger. I like that. You cant put anything that is not true on the internet. I think experience has proven otherwise. Should we talk about whats on top tomorrow, though . Wall street reporting in the open. Nordstrom after the close and 90 through the earnings season. Priceline, with the Online Travel sites. Made huge moves. Will this one continue the trend . Again, just the priciest stock in the s p. Thank you for joining me that was going on with wall street and Silicon Valley. Lets take a quick look at the charts here. This is the reporting earnings within the hour, moving 12 to the upside. Yes, 12 up to 16 for the value right now. This company has to be approaching the high 20 billion almost 30 billion. We talked about margins to start, and were going to talk about the operating leverage potential. It is a very bigc incremental change. It could be very doable. Absolutely, im buying tickets. Thank you again, olympic curling starting right now. The highlight events dazzling sochi is the olympic c culdron. We have been bringing you all of the