Transcripts For CNBC Power Lunch 20150901

Tyler mathisen off today and mandy at the New York Stock Exchange with bob pisani where, no doubt, its another wild day for equities. If you thought brian was messy, welcome to the first day of september. Currently sitting around session lows down 414 points. Bob, what kind of correlations could you make, maybe differences as well, with whats happening today from last monday . Well, certainly didnt have the selling pressure at important. Thats the important thing. Let me show you the s p 500. Last monday we had waves and waves of sell orders at the open. We did not have that today and i think that contributed to the somewhat orderly though down open. We got down to 2 and have been there and were drifting lower and sitting at the lows for the day. Let me give you headlines about the markets midday and show you what the internals are like. A man who had less selling pressure than last monday but no buying interest today and no bids and thats part of the problem. Buyers have got to get more interested. We got down at the open and then sideways and were sitting at the lows of the day here. Generally with weak rallies and weak selloffs. Well keep an eye on this new low were hitting in the last 15 minutes. That bears watching. In terms of market internals, reds 61 to declining and worse at the opening, 31 declining to advancing. Volume heavy, not as bad as monday and tuesday and not as heavy but still heavy for a day before labor day. Volatility jumped at the open, 2. 4 range in the vix and dow leaders, this is everything is down 2 3 kind of day so financials like jpmorgan, your Oil Stocks Like exxon, your big Global International multiindustrial stocks like general electric, and the other ones, your defensive names, cokes and mcdonalds are generally down less. I want you to keep an eye on financials and put up the sectors here. Financials are leading to the downside, as you can see. Thats not a good sign because we have very High Expectations for earnings in the Third Quarter. Were expecting gains of 9 in financials, largely on higher rates helping them out. Thats not happening right now so keep an eye on as people move on that. Look at the kbe, the etf for banking industry, what everybody buys when they want to buy the banking industry. This is a twoweek chart. You want to be careful here. That bottom that you saw. Thats the low on tuesday. If we take out lows on tuesdays in the financial sector. People will start sitting up and taking in the. Were not there yet but thats the level you want to watch the lows on tuesday. So this is good, mandy, in a sense. I said the other day you dont get a vshape recovery very often. You get retests of lows. We are now getting a retest. You want to watch the tuesday lows now in the s p and at 1 30 ill put up some numbers to show you what people watch for. This is an area, do technicals ever matter . In this kind of situation it does. If we bounce off them and start moving up in the next couple of days, oh, okay, less concern because weve had a retest and we didnt fall below it. Do you think some of the people who bought during the big dips this week might be less inclined to buy on a second dip . A lot of the people who had bought protection last week got blown out on thursday and friday so theres less people buying protection. Today they are, and when people bought those lows last week, they felt great when the market rallied back. Now if we go back down again, those people might say, uhoh, maybe i was wrong about trying to jump in too early. Makes them more reticent. Thanks a lot. Check back in with you later on. 40 of the nasdaq 100 stocks are in bear market territory. Down 20 or more from their most recent highs. Lets get to Bertha Coombs following the big movers at the nasdaq. Hi. Hi, mandy. Today only a handful were higher. The leaders, although they have fallen into the red today, have pretty much given up gains here as weve tested new lows today. Among them biogen, idec and alexion which were both upgraded with a strong buy over at raymond james. Liberty interactives. The only one that managed to hold up at this hour. Got about a dozen stocks, only a dozen stocks within the nasdaq 100 that arent in correction territory. Apple isnt one of them. Apple actually now falling into negative territory for the the year, but today its trading on moderate volume, looking at the glass half full. Its not back in bear market territory. Only about 18 from its recent high so it seems to be holding up there at 110. Among the stocks deep into bear market territory, off about 60 from recent high. Wynn reports making a new low today. Wynn has tremendous china exposure. When you look at some of the china stocks, a lot of those adrs, babo seems to be getting a bit of a bid or has for some of the day but a number of these asian stocks are down 40 , 50 and theres a number of asian ipos that are set to list over the next few weeks. Well see if this market turmoil might give them pause. All right. Bertha, thank you very much. See you soon. Meantime, oil sliding again after three days of huge gains. Youve got wti crude down nearly 7 , about 3. 30 a barrel and Jackie Deangelis is at the nymex where you and i have talked for a long time. Weve seen prices go up or down for a long time. Yeah. This kind of volatility is nearly unprecedented for oil as well. Absolutely, and the threeday rally that you mentioned, that 27 move, we havent seen that kind of action in oil in 25 years so that gives you a sense of whats happening right now, but today, as you said, were seeing a pause. More than 7 selling pressure on wti. Yesterday you and i were talking about potentially reaching 50 bucks again and now were back in that 45 level so its really a lot to take. In some of the euphoria from the headlines we saw yesterday is starting to fade. People are saying, okay, the global producers are talking about talking but they are not actually talking so we have to take a pause and see what happens. At the same time, the china worries are back on the table, and the demand side. Equation comes into play if china starts to back off a little bit. That would be a problem for the crude oil situation. Meantime, traders are anticipating this volatility, brian, to continue. Some of the ones that are the most active in the market that i speak to on a daily basis are telling me were taking a step back. Were not even in it right now. Want to see where this shakes out. Back to you. All right, jackie, thank you very much. As oil sinks lets check out bigname oil stocks that might be in your portfolio. As you might imagine, also taking a big hit in today owes selloff, Conoco Phillips down 3 and exxon down 3. 5, chevron 3 , occidental down 4 so were seeing another wipeout among the bigcap oil stocks. The question is this. Where are investors finding safety right now . Well, of course, gold getting a bid today in the market plunge. Gold up 8 bucks an ounce to 1,140. Gold the only haven, if you will, if there is one out there aside from perhaps cash. Absolutely. Gold nonetheless down 4 year to date. Got the dow back in correction territory. Are we looking at the start of a potential bear market, or will stocks still rally until the end. Year . Lets bring a Global Investment strategist from guidestone capital. Do you think such a selloff were witnessing is warranted on the chinese pmi news considering number one weve known for a very long time that the chinese economy is slowing down and number two the pmi was in line with expectations and, number three, a lot of factories in and around beijing have been closed for weeks now to clean up the air ahead of the military parade this week . I think youre right. I dont think this selloff is really reflective of concerns about the chinese pmi number, youre right. We expected that and we know china is slowing down. What were seeing is just the market retesting. It will probably retest the low we hit last tuesday. This is what happens in corrections. We dont think this is a bear market. We think this is a normal healthy correction, but it dont occur in a vshaped fashion. It takes a few months for the market to finally bottom and for the damage to be repaired, and what well ultimately see is the market head back down on lower volume so the lower volume is a good sign so it will take a few months and then ultimately well see the market move back from there assuming that this is in fact just a correction. If its going to shake out over another few months what kind of lows are we liking at here, david . We retest the lows we saw last tuesday, for sure and could potentially go below that and that put us 12 below the high we saw back on july 20th. I think thats a reasonable level to hit. You can see from a technical perspective lower lows that we could hit, but i really believe that that low is likely to be retested, and we shouldnt go much beyond that. Are you buying at all on the downside, or is it just still too early to buy . I think you want to be buying always. The most appropriate strategy for a longterm investor is to dollar cost average, to be working your way into the markets and never buying at the peak, and youre always getting taking advantage of lower prices, so theres always opportunities in the market. I think youre going to see probably some of the more defensive areas of the market, outperform going forward. I think the u. S. Sill david, just hold that thought. Im going to get back to you in a second, but we have to get to Steve Liesman with breaking news on the fed. Steve . Thanks very much. Boston fed president Eric Rosengren speaking about rate hikes saying the job target has largely been met but the inflation target for a rate hike is, quote, not as clear cut. Global economic weakness which we got this morning in chinese economic numbers could lower the inflation outlook and wage rises so far are not adding to the inflation picture. Its really a story about the rate hike path to be expected to be more gradual than other rate hike psychles because in part the financial crisis headwinds will keep them gradual along with slowly rising inflation and also keep a lid on rising rates. The big fimpact is the trajectory that he says will be slower and longer. Want to give you a quick look at some of the things that are coming up for the Federal Reserve and guys like rosengren for the decision they have to make september 16 and 17. The september 4th jobs reports, Quarterly Services indicator for the second quarter, and thats going to tell us about Consumer Spending in the Third Quarter as well. Retail sales coming up for the month of august, and the cpi on september on september 16th which is the first day of the meeting, and then the three sort of topical ideas right here. Exchange rates, Global Economic weakness and market volatility. If hi to pick just three guys it would be Global Economic weakness, market volatility and if you dont mind, chris, over this way, the jobs report would be the last and most important element. Two of those three speaking to a rated hike if the fed is going to actually hike september 17th. Mandy. I think brian wanted to jump in for a second. Brian . Still sort of shaking my head. Appreciating you seeing me in the control room. Steve, ill ask you to put your pinnator hat on, okay, because i understand the inflation story. Heres thing. Commodities around the world have collapsed because of overproduction, china slowdown and brazils economy. Does that mean that if the inflation target is not met things are bad and the fed would enraise rates or all the external factors like china and brazil and everyone else well never meet the inflation target so under that idea does that mean the fed will never raise rates . Do you get my point . Youre sounding a bit like stan fisher which is not bad company to be in in the sense that hes willing to look through that in a couple of ways. The first way is that data will work through the system and you should have bigger Inflation Numbers on the other side of it, and the other aspect of that is how much does the fed its policy real very to do with lower Commodity Prices, Lower Oil Prices . The fed was not thinking well in texas or north dakota where youve been several times creating in global oil glut. That not necessarily fed policy but some could argue it was lower Interest Rates that did it. I wonder then if inflation, and im going to exaggerate here a little, is a dead metric. Its an important metric, brian. Its really the one thing that the Federal Reserve over some medium term horizon can control. Its part of figuring out what the right amount of money and the cost of that money should be in the system. You cant say its a dead metric. What you can say is whether or not what i did was a story i believe on this show separating Services Inflation from goods inflation and showing the Services Inflation was running very, very steady at 2. 5 it is, suggesting there was no drag and no increase and that really the fed in that regard had achieved its target. Steve liesman, thanks very much for that breaking news. Sure. Lets get back to david sp k spika. I think that it was a very good debate and one of the things were focused on right now is the potential for a deflationary spiral given the collapse in Commodity Prices and slowdown in china and potential for currency and in terms of risk thats one were keeping our eye on. As far as the fed is concerned, we do expect them to raise rates at some point this year. Would that be a good thing for the market, a stabilizing factor because it removes at least one of the uncertainties out there, david . We need less uncertainty. Thats exactly whats plaguing investors right now, too much uncertainty and once we see the fed begin the rate hike well remove that level of uncertainty and 25 basis points wont have a negative impact on the economy, believe me. David spika, great to speak with you and to reiterate what was being said a moment ago, expect more gradual rate rises and lets get to dominic chu for a market flash. Another casualty of the selloff is the biotech stocks, one of the better performing groups in the s p 500 today, down 2 on the session so far as measured by the etf that tracks them. Larger cap stocks like gilad, regeneron and amgen down by more than a percent. Ibb near its first level, the fund lost 15 since its highs from back on july 20th although on a yeartodate basis, brian, still up 10 , good compared to other parts of the market. Sure is. Ford, gm, chrysler all out with their latest Sales Numbers, but is china a threat to the american car business . Former gm executive bob lutz is going to weigh in on that. There he s. And as we head out lets take a look at some of the most widely held stocks out there, jpmorgan down 4 , apple, microsoft, Johnson Johnson and 1,000 other companies also down. Youre watching cnbc, first in business worldwide. In the us, three in ten College Students drop out. But how can you spot whos at risk . The one who lives far from campus . The one who works the night shift . The one with new responsibilities . One thing cant tell you, but the right combination can. Universities are using ibm analytics to understand pressures in and out of the classroom some expect to cut dropout rates by twentyfive percent. Ibm analytics is working to make education smarter every day. Nbut your dell 2in1 laptoped gives you the spunk for an unsanctioned selfie. Thats that new gear feeling. All laptops on sale, save 230 on this dell 2in1. Office depot officemax. Gear up for school. Gear up for great. Look at some of the most widely my name is mark amann. Im a gas service rep for pg e in san jose. As a gas service rep we are basically the ambassador of the company. We make the most contact with the customers on a daily basis. I work handinhand with crews to make sure our gas pipes are safe. My wife and i are both from san jose. My kids and their friends live in this community. Every time i go to a customers house, their children could be friends with my children so its important to me. One of the most rewarding parts of this job is after you help a customer, seeing a smile on their face. Together, were building a better california. Welcome back to power lunch. Casino stocks like wynn, mgm grand and Las Vegas Sands are seeing declines as the macau gaming revenue fell in august, wider than julys 37 drop and marks the 13th consecutive monthly drop and those drops tied mostly to places like macau. Meantime, worlds biggest automakers out with their latest sales figures. Ford u. S. Sales jumping 5 , chrysler sales up 2 thanks to Strong Demand for the jeep and gm sales slip and toyota sales fell by 9 , but both of those drops were indeed less than expected, lets bring in now a guy that knows a little bit about the car business, the American Economy and potential china threat is bob lutz, former gm vice chair. Bob, a lot of debate right now about the Federal Reserve and the economy. To me car sales are one of the key metrix how the economy is doing. Easily going to do more than 17 million this year. Whats your take on the economy visavis auto and truck sales. Well, i think the economy is healthy. What were seeing is some obviously downward correction in the stock market, but employment is still good. In fact, joblessness as it was pointed out earlier is down. Average transaction prices are holding up and i was talking to the gm guys this morning and they report brisk demand especially for fullsized trucks and Sport Utility vehicles so unless this stock market thing gets a lot more serious i dont think its going to affect the economy as a whole. And dont forget low oil prices have a beneficial effect on peoples pocketbook. Its not just gas prices. Its also home heating and whatever else you use fuel for so anything made out of petroleum like alive plastics and everything is all going to go down in price adding to the Inflationary Pressure meaning that the consumer is not being squeezed and still has the urge to buy new vehicles. Okay im going to get to china, by the way in, one second but i want to ask you this direct question. Do consumers go on to a car lot and say, you know, i was looking at a chevy equinox but, heck, gas is 2. 40 a gallon im trading up to the silverado, do people actually do that because if they do thats money in the bank for gm and others. Absolutely, and thats happening all over the industry, whether its at fca or ford or gmc or chevy. People are trading up to the larger size, and personally i have a gmc yukon dinali, brand new, and that thing gets 21 miles per gallon on highway and fuel economy is almost identical to smaller vehicles, and with gas prices probably going to go down as low as 22 or even below fairly soon, there is really no incentive for consumer to buy anything smaller. China, right now relatively small for ford and gm. A couple hundred thousand vehicles a year but gm has said we think its a 35 million unit a year market. Within 15 years that would be twice as big in america. Is that going to hurt them . Well, its going to hurt for a while. This is a Market Correction in china just like it is in the United States, but i have to correct your figures. Gm does over a million vehicles in china right now, so but is that direct, or is that also through their they got all the partnerships. I was referring to the to the direct mark. Okay. That would be sub 1 million, but at any rate its big revenue and its growing, and it may slow down right now and go into reverse a little bit and have some impact on shortterm earnings but not a lot, but then the growth is going to continue because dont forget china is for all its power right now still a developing economy, and the development is all along the coast, and that prosperity or the industrialization is starting to creep inwards, and youve got your secondary cities, your tertiary cities, and all of that is moving in now with Car Companies opening dealerships father and father inland, so i think the estimate of 30 million to 35 million a year which would make the Chinese Market bigger than europe and north america combined, thats definitely going to happen. I mean, what were seeing is a pause in growth, and as we know growth in markets is never linear. Its always sort of a saw tooth pattern, so i dont think anybody is worried about it at this point. Last i cannot let you go without asking you this, okay . I know youre not with gm anymore. Do you believe Fiat Chrysler are currently in talks with gm or will eventually buy gm . No. They absolutely lack the wherewithal to buy gm. If anything, it would be the opposi opposite. But at this point i see really very little chance of that happening because gms response famous response is and i agree with it. Why would you want to take on the problems that fca has which are major . If you look at them, they have nothing in the hybrid space. They have nothing in the fully electric space except a symbolic little number of fiat 500s, and all of that requires massive investments for vehicles that you build only for regulatory compliance, so thanks to government regulation every car company has to devote a larger and larger amount of its budget to building cars that people dont want to buy and they have to be forced into the market anyway. Okay. Well, fca has not even started rolling out that category of vehicles, so i can see where they are a little bit in a panic about the future of fca. All right. Gm does not want to share that misery right new. Bob lutz, got to leave it there. Wideranging interview. Do appreciate your time. Have a great day. Thank you. Mandy . Yeah, a lot of things we like to share in this world and misery is not one of them. Almost half of the stocks in the nasdaq 100 are in correction territory and a number of names in a bear market, off 20 or more. Stocks getting hit the hardest in the tech bracket headed your way and a look at the s p sectors so far this year. Energy, for one, is down over 20 . Materials down 15. Dow still bumping around session lows. Were back right after this. And welcome back to power lunch. Shares of video processing chipmaker ambarella down about 6 as they post their secondquarter results today after the closing bell. It could be a tough report and gopro stock also as session lows, lows not seen since april and down 56 again from its alltime high and still trading above its ipo price of 24 bucks a share when the company went public in june of last year. Thats the stock side of things. Lets go to the bond market and chicago and Rick Santelli over at cme. Over to you, rick. Thanks, dom. Everybody in chicago woke up talking about bund yields which settle around 80 , they havent closed at 80 basis points since july 16th. Lets keep that july 16th date. Look what the youreio, verse the dollar has done. Its caught a bid. Of course it is, its following bunds. You know another market thats following bunds, look at tenyear yields, even though they havent quite kept up they have been awfully sticky today. 30year yields are actually higher on the session. Want to Pay Attention to whats going on in europe. China is selling, possibly. Maybe theres a lot of investors selling. As for gold, seems like a lot of investors are buying. Jackie deangelis, whats the gold close looking like . Thanks so much, rick. Yeah, we are seeing new buying in gold right now and prices closing around 1,140, a 7 pop on the precious metal. If this was safe buying in the gold trade wed see a 20, 25 move and at this point they think shorts are getting out of that trade for a moment. Inters of the other metals were watching copper very closely because of the situation in china and some of the fears there and copper is lower. Thats why youre seeing a little bit of mixed action here. I do want to mention that the dollar being lower probably helping gold out as well but as far as whats on the radar for gold traders they are looking forward to the jobs report on friday. That really is the big event to get a sense of what the fed is going to do. Now, meantime, were also keeping a very close eye on oil prices. Were going to talk about that at 2 00 and 2 30. Mandy. Thank you very much, Jackie Deangelis. Currently down 404 points on the dow. Bob, youre joining me once again. What are people saying about all of this . Trying to figure out if this is a retest and this is healthy. Show you the levels as we close here. Show you the s p 500. We got down 2 right at the open. Volume wasnt as bad as last week but still down 22 , and we were sideways throughout most of the morning. Put up the s p there, and drifted a little bit lower just before coming on at 1 00 eastern time, and were just off of those lows right now. Sectors to watch, key one in my opinion is the financials because we havent seen them downside leaders in a while and they are today. Financials, energy, telecom, tech and utilities. Put up the sectors and theres the s p financials, but i want to point out that dividend payers are especially weak today. Utilities and Telecom Stocks are weak and seeing coned and exxon and at t stocks are all notably weak and this tells me this is a generalized market selloff. The whole world down 2 to 3 , banks another one, wells fargo, bank of america, all the regional banks down 2 to 3 and remember, a lot of the regional banks dont have anything to do with china. You cant say its all about china. Really not. When you get dividend payers, get utalts down 2 and banks down 2 , thats not a china play. Thats a degroting story. The market doesnt go in a vshape. Usually you get a retest. Had a huge rally at the end of the week so theres a retest of the low. Tuesdays and mondays low was 1,867. Were a very, very long ways from that low and right now were 1926. The dow industrial low is 3370 and were almost 800 points away from those lows. I bring that up because people want to say how do we know what a retest looks like . A retest will know when youre getting close to that and if a week from now we bounce off where we are now people would say weve had our first test of the low and we succeeded. Bounced off of it. Havent had that proverbial capitulation moment, have we . No, last monday was pretty heavy selling. That was as close to real fear that i have seen since 2011, since october 2011. October. Thanks very much, bob. Right back after this quick break. Youre watching power lunch on cnbc. When a moment spontaneously turns romantic, why pause to take a pill . And why stop what youre doing to find a bathroom . Cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be Ready Anytime the moment is right. Plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. Do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use. Insurance coverage has expanded nationally and you may now be covered. Contact your health plan for the latest information. Im Sharon Epperson and heres your cnbc news update for this hour. Police in Northern Illinois say a manhunt is under way after an officer was shot and reportedly killed. The officer was pursuing people described as suspicious when he was shot in fox lake 55 miles north of chicago. Police are searching for three suspects. Chaos inside and outside a train station in budapest as authorities temporarily suspended railroad traffic, this to prevent more migrants from getting to germany and scandinavia. Thousands of migrants have already moved through hungary to northern europe. Pope francis today saying hes allowing priests to absolve women of, quote, the sin of abortion if they repent with a contrite heart. He says gods forgiveness cant be denied for those who repent and the virginia news photographer shot to death on Live Television is being held today. Guests arriving at roanoke funeral home adam ward. He and reporter Alison Parker were in the middle of a live interview when a former coworker shot them to death. A big day for stocks. Lets focus on technology and josh lipton is live in san francisco. Josh . Well, when the worry is growth overseas, you can expect tech to take a hit. That sector generate more revenue internationally than any other, so the sector right now correction mode, down 10 . Who though is getting hit the hardest . Well, the worst performers hitting that summer high, coverio which makes components for mobile data and the Software Giant behind turbo tax and yahoo in bear territory meaning a drop of more than 20 from the high. Not every stock has been under the same degree of pressure. Look at what has been working since july, nividium up 10 and seaget still well in the green and sam stovall does note that the tech sector has proven twice as volatile as the overall markets so the headline making moves shouldnt be too surprising. Stovall says he remains market wait the sector knowing Earnings Growth and valuation for tech basically in line with the broad gauge. Mandy, back to you. Okay. Thank you very much. Well, with stocks sliding on the very first day of september, is this sad news for the rest of the month . Joining us now the head of investment of portfolio strategies at Morgan Stanley and ken tubbs of Pioneer Investment management. Lisa, thanks very much for joining us today. When you see the current environment, inevitably theres going to be an indiscriminate degree of selling. Any babies thrown out with the bath water, individual stocks or sectors that you think have been unfairly punished and look good to you. Were looking for growth and looking for quality and were looking at technology and financials and looking at health care and Consumer Discretionary. Youre looking at growth watch how we were listening to josh lipton an thats growth around the world is under question. Absolutely. I mean, when Economic Growth goes down you want to potentially think about the risk to cyclicaloriened stock. When we talk about growth, were looking for secular growth so those are stories that are going to have a good trajectory despite what happens in the economy, and thats what you see in technology and some of the consumer and social media type stocks. What about you, ken . I think were in the process of seeing a major shift in Economic Leadership which is causing some problems in the equity market, and i would be focused on those sectors that continue to grow, and i think those are related to the consumer. The consumer is as good of shape as they have been for years and more jobs, beginning of higher pages and lower costs on energy, low Interest Rates, low import prices. This is all positive for consumer, so i would agree Consumer Discretionary and anything to do with the consumer, autos, travel, for example. I think those are the sectors and manufacturing will continue to be under some pressure, and i think theres an interesting divergence because about 12 of the u. S. Economy is manufacturing but over half s p earnings so the economy, i think you can draw false conclusions about the economy with the weakness were seeing, legitimate weakness were seeing in manufacturing. This very quickly, lisa. I see you like financials, one of the biggest laggards. Do you still like them even if Interest Rates dont rise this year it is. Absolutely do. One of the very interesting things about this particular selloff is that the yield curve is actually remained quite steep, and financials tend to do well in that kind of environment where the full world Interest Rates will be higher. We see that today. Its very interesting, a selloff thats very much contained to the equity markets. Were not seeing it really spill over to the fear in either the bond market or into gold, et cetera. Okay. Thank you very much, lisa and ken. You can go to powerlunch. Cnbc. Com to see how lisa and ken are playing the Energy Sector in particular. Brian, over to you. All right, mandy, thank you very much. China certainly one of the reasons for todays big drop. The ceo of the committee for economic development, former ceo of office depot and autozone and by the way cnbcs newest contributor is here to weigh n. Steve, congratulations, and puck to the cnbc family. Thank you, brian. Glad to be here. And a hell of a day you picked to have your first contribution. Lets vump right into this, okay . China is a big situation and not skrst because their economy is slowing down. They have devalued their kunce and a possibility if things get more dire they could flood the market with goods and services that would lower our prices even further and maybe damage the u. S. Economic recovery. Is the u. S. Government being tough enough on china . No, i dont think so. Brian, we tend to look at other countries as ear friends or enemies, and were not very nuances about it. We want china to be a friend. They are the second largest economy in the world. They are a big trading partner, and, look, they hold a lot of our debt, so we dont want to be an enemy, but i think we have to get tougher on them. They are accountable for what, 87 of all of the ed counterfeiting in the world, 30 of the cyber hacking. They devalue their currency just 2 in the last month, the biggest devaluation in 20 years, and, you know, this has strengthened the dollar and made us uncompetitive so we weve got to get tougher here. You know, i know were meeting with president xi coming up soon and we want to retain friendship but weve got to say theres got to be a cyber ceasefire. Its got to stop. Secondly, weve got to get tougher on all of these are counterfeiting our goods. Third, some of the economists say weve got to hold back on the fed increases, and we havent been talking much about that today, but do it in order to not strengthen the dollar further and play in their hands. So theres a lot of things that we need to do to be tougher on china. Do you think the Federal Reserve should raise rates or will raise rates in september . Because i have said for years that we need to remember the stock market is not the economy. The stock market is not the economy, youre exactly right, and whats happening here is just its small potatoes in the whole scheme of things. You have to remember all thats going on in china right now is a bubble correction. They have already gone they have gone down a lot. It looks huge but its only going back to where it was last year, and they are coming off of a a 70 pe ratio. Were sitying here at 19, a little bit above historical highs but this is small. Weve got to go back to you know, the only we keep thinking about the fed is the only tool in in our toolbox. They are going to go up. They cant go down, right . Cant go down. Its a matter of when, whether its september, december. It doesnt matter. The markets have already got it baked in. What we need is our economy to start growing again and need to start creating jobs and this is where when Congress Comes back from the recess they can take action. There are many things that have bipartisan support that they can take action on, like export of oil, like visas and dealing with the Corporate Tax situation and even giving a holiday that would give a great shot in the arm of the economy. Thanks so much for joining us. Welcome to the cnbc family. Well be seeing a lot of you soon. Great to be here. Mandy . Okay. The s p 500 heat map is a sea of red. 99 of the s p 500, i counted them all myself, they are lower today, but there are always opportunities out there on a down day, arent there . Well tell you all about them, three them to be specific. Thats still ahead. As we head out the dow in correction territory and currently off by 396 points. Not the absolute low of the day but still down by 2. 3 . Youre watching cnbc, first in business worldwide. Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place that lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim . For all the confidence you need. Td ameritrade. You got this. Hi mim raph. Tom. My name is anne. Im one of the real live attorneys you can talk to through legalzoom. Dont let unanswered legal questions hold you up, because were here, were here, and weve got your back. Legalzoom. Legal help is here. Can a a subconscious. Mind . A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . All right. Welcome back, everybody. Im Brian Sullivan. Dow down about 380 points, but discount retailer dollar tree beating estimates and revenue falling short of expectations. Citigroup adding fedex to its recommended list based on that companys exposure to ecommerce growth and chipotle being sued. Lawsuit claims that chipotles offerings are not gmo free. The restaurant chain said it would contest the lawsuit. Mandy . Thank you very much. Crudes wild swings condition. Wti right now is absolutely tanking and currently down about, let me see, we got the board there for you, down 7 , 45. 74 after a huge rally with wti jumping nearly 20 . Lets bring in a managing director of randy olenberg. A lot of people have had their fingers burned trying to call a bottom. Are you at that stage yet, or is there further to go to the downside . The market is trying to find a bookend and anything that starts with a three will cause a reaction. Saudis cant, exxon, no one can and anyone with a 3 in front of it is probably one of the bookends and the bookend to the upside is we wont see prices above the 50 mark any time soon. Do you think well remain under pressure and going into next year as well . Not out of the woods. Still have physically way too much oil on the market, inventories or supplies currently being pumped and the demand is out of the equation and looks like its stumbling a bit with the bad news coming out of china. What does this mean for the some recommendations in the sector . Too early to buy. Think you have to stay defensive. We Like Companies with strong Balance Sheets and companies that can manage and grow within their cash flow even at the lower prices of the commodity proxy names and ones that need oil prize had a strong day yesterday and giving it all back today and going to see more of that. Okay, randy, thank you very much for joining us. Very busy day. Big day for oil and a lot of other asset classes. Watch oil throughout the next 45 minutes because things have been especially volatile. Of course, the 2 30 eastern close of oil is particularly the time that we watch. That will fall right in the middle of power lunch, right, brian, so do stay tuned. Ill not only stay tuned. Ill stand right here and be on television. You do that. I will watch it all. Also on sirius xm channel 112. Take a look at dow, all 30 dow stocks are down. Cocacola the least worse, down 1. 3 and exxon mobil the worse following on the back of the oil conversation and heres whats moving at the nyse right now. Bank of america, very widely owned name and getting sold off as well. A little less widely owned. That stock down about 4 . Were going to head to break, but dont you go anywhere. Were back right after this. Here is this hours power points. August anxiety carrying over into september. We begin this month with a huge selloff and stocks have their worst quarter since the First Quarter of 2011. Tiffany, jp hunt, transport, plum creek timber and duke energy and bright spots out there if you know where to look. Sun edison up about 10 and retailer cabellas is up about 2 as well. If you missed any of the big stories in the past hour go visit our site at powerlunch. Cnbc. Com. Brian . Crude oil continuing its recent series of wild swings. Take a look at these moves over the past week, or listen to me tell you them. Yesterday we were up nearly 9 . Friday we were up about 6. 25 . Thursday, a big day, up more than 10 and today down 7 . Where do we go from here . Well, we go to commercial break and dont you go anywhere because well talk about oils wild move when we return. Stick around. Welcome back to power lunch. Take a look at the manchlgts dow and nasdaq in correction territory, the s p, the number to watch this is 1921. That would be its correction territory currently sitting at 1927. Off the lows of the day but still a very down day. Lets get some fourstar investing advice from the comanager of the villery balanced fund. If youre a longterm investor a correction is a good thing. Youve taken a fiveyear horizon on your stock picking, so thats good . Longterm horizon looking at this market as an opportunity to pie so put your Shopping List together and find companies that dominate their niche like we do and trade on multiples and buy for long term so a great opportunity, i think. What have you been buying. We like a Company Called financial engines. Its basically a robo adviser, if you will, for employees of corporate 401 k s so the last time the market went down 27 only last 4 of their assets in management. I can see that the market would sell it off. 31 in a month and great opportunity. Financial engines. Okq is a name you mentioned on our show. Did you mention that . And if you think about it lkq makes refurbished and recycled auto parts and if more miles are driven because gas prices are lower that means more accidents and more parts. Net asset value of hours hughes is 150 and when you present value it back closer to 220 so a great bargain. Do you avoid stocks with exposure to china. We like were generally small in midcap securities so by nature were focused on domestic caps so we look at all of our companies and whether its foods, and say this is a great bread company. Am i going to eat bred around the table with my kids probably not because the yuan is devaluing. If we understand the exposure we can have exposure and buy the stocks at reasonable prices. Youre a family business, all kinds of family in new orleans. All kinds of clients come in and what are they asking you and what are you telling them . They might say sell everything. That doesnt make any sense to me so if we can look through each company and start to explain to them heres what this company does and that company, in a 23 stock portfolio and were very concentrated and feel like we have a great handle on all the opportunities our businesses offer so were able to explain, that hold their hands and make sure they dont do anything like panic and thats not a strategy, fear is not a strategy and i think you ought to have a strategy and stick to it. Year to date your fund is down just a little, down about 1 or so . Yeah. Were down a little bit and market is down 6 or 7, wherever we are. Doing fine and raised a little bit of cash earlier in the summer and while the market will continue to be volatile as we go into the september 16, 17 fed meeting now is an opportunity to buy. Good to talk to you. And you should also note, heres the thing about seasonality, a lot of people say september is the worst month. For the past six years theres been one september thats been down, right, back in september of 2011, so its a bit of misnomer and gets a bad rap. I think we should ask the counting crows to redo their song a long september. You know, there you go. Got a song for everything, brian. Except for this market. My swan song. Over and out. Enjoy the second hour of the show. Will do, mandy. Thank you very much. It is now just about 2 00 on wall street. Stocks continue to sell off at this hour. Hi, everybody. Just joining us, im Brian Sullivan with melissa lee. Right now the dow is down nearly 400 points, 378 to be exact. The s p 500 and the nasdaq each down more than 2 as well. China cited as the big reason and crude oil is down 3 a barrel to back under 46. No doubt its been a bad five weeks for stocks, but to mandys point, a wall street firm recently dug out some really Interesting Data on what happens to stocks at end of the year when we sync in august. Youll want to hear it and coming up for you in just a bit. And right now its a very busy tuesday and lets back down to the New York Stock Exchange and start about bob pins on the floor of the nyse. Bob . Bottom line is we gap down 2 right at the open and essentially have moved sideways throughout the day and drifted lower and not far from the lows. Take a look at the s p 500. Volume today is on the heavy side, not as heavy as last week and still pretty heavy and we set a series of weak rallies and weak selloffs and thats the way it is. Let me show you the sectors. Im most confirmed about the financials. Dont like when the financials bleed lead on the downside and telecom and utilities are on downside as well. Thats very interesting. Take a lack at some of these these dividend payers, duke, coned, excelon, at t and verizon. Nothing to do with china. Dont sell in china. Coned doesnt sell in china. Whole market is down 2 , 3 . Look at regional banks as well, comerica, zions, sun trusts. These guys arent active in china. This is not just a china play. My point is theres whats going degrossing, markets taking on lower risk. What you want to look for here, brian, everybody is looking at old lows, but were a long way. I think it was 15,370 on the dow is the monday low. Thats almost 700, 800 points away, melissa, from where we were or where reare right now. Bob, you know what was surprising me about todays session is the typical flight to quality that we usually see is not really happening today and take a look at etf that tracks the bond market, basically unchanged even though were seeing the dow down by 400 and s p 500. Whats your take of whats going on here . Could it be selling pressure from Central Banks, maybe the chinese Central Banks or Central Banks around the world to start selling some u. S. Paper here . You asked the question and i think you answered it. I think thats the plausible answer. Im a little puzzled myself about that. Normally you should get the flight to quality. Bonds should be up in these situations. Theres been a lot of talk about Central Banks and sellers or treasuries, particularly the chinese. I think that would be a plausible explanation and when this doesnt happen, people who assume these things arent going to happen. Stocks go down and bonds should go up a little bit. When it gets out of whack other people will have to deal with that, Risk Parity Fund out there, for example. If they dont move, the bonds dont go down the way they are supposed to or up the way they are supposed to they will have to sell as well so you may get some followthrough from other funds on this. Thank you very much. Okay. Get right back to dominic chu with a market flash. Thanks to our friends on twitter, especially parkland for tweeting this out. Take a look at shares of fedex, added to the citys recommended list. Among the reason, the exposure to ecommerce growth and attractive valuations and on this particular dip investors pushed this higher and briefly touched positive territory and down by a quarter percent and fedex shares one of the large cap transportation stocks that seems to be getting a little bit, brian, of attention today. Want to bring in tom lee, founder and head of Research Found strat global advisers, very bullish at the end of the year. Price target is 20 higher on the s p 500 than we are right new and seems like a stretch. If i took you, which i dont, can i just take a moment to remind our viewers that as bad as today is and last week early was were still up 3 on the dow over the last five trading sessions. Are things that bad . Well, you know, i i think investors have are understandably dejected because, you know, weve had a series in the last few weeks of really big moves in the market that seem out of proportion to fundamental developments, and i think it really highlights the poor liquidity today, so i i dont blame investors for getting dejected, but, on the other hand, if you think what that means as youre sort of setting up into the next few months, i think some things are under way now that are going to provide us the capability to make a pretty big move and, therefore, if you think a few month out, this is going to prove to be a really good opportunity. Data is coming up a little bit later in the show that backs that view historically, but what are you seeing, tom, that makes you thing . What are the things that will prop us up . A combination of some fundamental developments and some sort of internal structure of the market but on fundamental side its very encouraging to see the move in oil because as you know oil is viewed as a harbinger for deflation, but its also important to u. S. Corporates because of the Industrial Production element of that, so the balance in oil is helpful. The dollar was a monster head wind for international profits, for u. S. Companies with international profits in the first half of this year and if the dollar hangs out here or use the future markets and modest increases the dollar becomes a tailwind in less than six months, and so what was really sort of a downside surprise becomes an upside surprise. High yield, believe it or not, rallied yesterday and is actually, you know, we have to see where tends today, but, you know, historically, however eye rally spreads, thats a divergence thats positive for stocks so were watching high yield and right now its close to posting something positive and structural things to be constructive on. Small caps are actually outperforming and that happened last october. You know, we highlighted this a few weeks ago and you look at waterfall declines, usually occur towards the end of a selloff. Tom, sorry to interrupt you, i want to get to your point about the bounce in oil that we saw, i mean, over the past three trading sessions excluding today. Did you really take that as a sign of anything as opposed to some sort of technical bounce, that traders were so off side on one side that they got caught and pushed higher to the upside very quickly . Sounds like youre thinking this is a fundamentally backed threeday rally that we saw. Melissa, again, its always hard to tell when you do whats called when you look at something over a threeday period to know what it means longer term, but i will highlight something that was pretty unique. Last week oil fell almost 60 on a yearoveryear basis, and thats only happened two other times in the last 35 years. In both previous episodes oil was higher one month, three months, 9 months, 12 months later so im not saying it marked anything significant so whats interesting is the decline in oil coincides with better price action at a time in the past that was always an important year over year decline. You know, fundamentals have to come together. There has to be a demand story and some visibility on production and supply, but it is encouraging. Tom lee, well let you go and ill button up by saying the yield on tenyear note is also up 5. 5 over one week so its not down where that would be considered a haven. Tom lee, thanks so much. Thank you. Stocks are lower and meaningfully so and no surprise that oil, to melissas point, is also lower today. In fact it is another big drop on another big volatile day. Lets get now to Jackie Deangelis at the nymex. Good afternoon to you, brian. Prices trading at 46. 62, so were coming off of our session low of 45. 22, about a buck by a little bit more than that higher. So usually in the last 30 minutes before the close we tend to see more volatility and more selling pressure. Its not necessarily happening today, but we still have about 22 minutes here to go. Meantime, weve got a weaker dollar today but oil not really getting any kind of a bid off of that. This really is pressure coming from china. Traders are worried about the overall volatility and the equity market and what that could potentially do to demand in china as well. Meantime, you know, we talked about the headlines that we saw yesterday, that global producers are talking about talking, specifically speaking about opec, but it appears opec is sort of backing away from that a little bit and just saying that theres really not anything new and the market is digesting, all of these new things together and saying, you know, at this point we could probably go lower from here. Back to you. All right, jackie, thank you very much. As oil has fallen no surprise that the big oil names are also down lately. In fact, marathon and bp are down 18 and 12 over one month perfectively, but theres been some shining spots in the oil space, particularly some of the mlps, Master Limited partnerships, the ones at the Pipeline Companies with a higher dividend yield. Look at the onemonth moves, Valero Energy partners, Holly Energy Partners and pentex Midstream Partners up 4 as well so most oil and gasrelated stocks are down, melissa, with the last 30 days, but there are dividend plays out there but just a friendly reminder not all dividends are built to last to quote the grateful dead. Some could go away. Nearly all. Stocks are off the 52week highs so is now the time to get into technology . John wilson is ceo of spratt asset management. Good to have you with us. Im going to start off with your picks. In this sort of market people are looking for areas that may not be exposed too much to a slowing china story and ones that have great Balance Sheets. For nxpi what could you see there, significant china exposure whether the end market users being autos in china or the number one chip in the Chinese Market . They do, youre right. I mean, one of the things we like about that sty is obviously the very strong Balance Sheet and reasonable valuation and impending merger with free scale which does protect you somewhat from a decline in the Growth Outlook and we think that the synergy is far better than the street priced in. Do you thinks a grasp on the suggester, originally named as a beneficiary to china because you want to be in china because they have strong exposure . Strong exposure to the iphone six, a Global Growth driver, and they have been talking about how good the Global Growth profile is there, even in china and a strongolout of the em vchips and they have a bigger global franchise that continues to move in a very strong market share position. I guess i would be most concerned about autos in china. Thats probably where they have the most exposure. But, you know, well have to see how china develops and whether car shares go into a meaningful decline. Also like apple and google and you make the point that i think is a good one that google has no exposure to china and its been sold off as hard as the other ones in recent weeks. Yeah, you know, youre looking at really three great franchises here at very reasonable valuations that are off anywhere from 20 to 30 from where they were a month ago and we think thats a tremendous opportunity. At their highs everyone was talking about they are at their highs, should have bought them earlier and now they are off 20 , 30 and people are worried they are going to go lower. If youre going to own stocks and youre looking at tech, those are three great franchises with strong Balance Sheets and Strong Capital returns programs that youre looking out a year or two that youll be very happy to own. And have you added to any of those positions in the past few weeks, john . Absolutely. We actually do things a little bit differently in our fund. We use options a lot so it was very attractive for us to sell out of the put options about a week ago and doing more of that as volatility picks up and thats the chosen way. Go below where the stock is and pick a strike price and sell at a very attractive premium and have someone pay us to own it farther down. The upside of a high volatility. Thanks a lot, john. John wilson of sprott. Once again were weakening headed towards the close, the dow back below 400. Down 418 , 2. 5 on the dow. Among the most actives at the nyse, pretty much everything out, there, not just all the dow stocks, most of them in the s p 500 and coming up three opportunities. Analysts are calling them out for you on this down day and the long promised salttic on what history says about the rest of the year when the august market is terrible. Trust us. Youre going to want to hear t. Stit it. Trust us. Power lunch will be right back. While every business is unique, everyone is looking for ways to cut expenses. And thats where pg es Online Business Energy Checkup tool can really help. You can use it to track your Actual Energy use. Find rebates that make equipment upgrades more affordable. Even develop a Customized Energy plan for your company. Think of it as a way to take more control over your operating costs. And yet another Energy Saving opportunity from pg e. Find new ways to save energy and money with pg es Business Energy checkup. Today a selloff turning the nasdaq negative for the year. Right now the nasdaq is down 1ment 5 . Closing in on session lows and some of the losers of note is netflix, almost down 9 right now. China, of course, being blamed for a large part of this volatility and who can blame it . Shanghai composite is down 26 in just the last 60 day. Larry mcdonald, head of u. S. Strategy with Society General and the stocks get all the astep youre not talking about stocks per se and i love your theory, too, on this which is that in 08 and 09 we were the center of the global crisis. After that it was europe. Have we now moved permanently to asia . The epicenter of risk is now in asia. So weve noticed weve been out with notes about credit risk in asia and look at credit default protection on korea, vietnam, the phillipines. Thats the same stuff we were looking at with grease for years, right . What does it cost to ensure the sovereign debt of the nation . Going to buy default protection. European banks were a great leading indicator and the cost of defull protection improved and two weeks later u. S. Equities rallied substantially in 2011 and what we saw over the last month is credit has been deteriorating sharply in asia and sure enough equities followed . What is credit telling you now, better or worse in asia . The other day a week ago when we rallied. Credit started to improve friday before the big tuesday rally in the United States so a week ago. So far credit is still weaker in asia. We need a meaningful improvement tightening in asia and meaningful reduction in the cost of defull protection. We need that to come down for an equity rally to be sustainable in the United States. Larry, at the same time, it doesnt really make a difference unless there is contagion, and who owns the paper thats being insured in vietnam and korea, pause in europe the difference is that a bank, european banks, u. S. Banks investors all held this. Who holds vietnamese paper and it doesnt matter if they default . Not so much the default protection on those countries. Its because the fed kept Interest Rates at zero for six years. Theres a price to pay for that. Thats not free. So 9 trillion of debt has been issued since 2007, and a lot of it is dollardenominated debt in asia and commodities and these countries are expokesed to that debt. The financial from the banks in asia are exposed to that. Quickly is a chart i put up on my new Facebook Page and had the to throw water on the whole china thesis. Thats the s p 5 up. Four times in the last four years, every year. Weve gone from 10. 6 growth to 7. 4. China slowed down for four years. The u. S. Stock market has done nothing but climb in that time. My point is why are we so scared of a china slowdown now when for four years this has been going on . Well, gdp outside the United States today is 60 trillion. Inside of the United States its 18 trillion. The world is bigger than us. 15 years ago the right now were 22 of global gdp. We used to be 40 15 years ago. Whats happening outside the United States matters more and more and a lot of economists and a lot of people watching us right now grew up in periods where the u. S. Was the big guy on the block, but right now were still a big guy on the block. Still a big guy but now fighting a gang. Yes. Not just us against the other guy but us against ten other guys. We can still hold our own though, i think. Youve got to be more global. Looking at u. S. Equities, got to be global. Think global, be global, buy local, local organic farm to table. Loco, brian. Lets talk more of chinas problems and joining us is michael shuman, a freelance journalist in beijing. Michael, great to speak with you once again. When you have a government who is arresting almost 200 people, including reportedly the head of man groups hedge fund in order to tamp down on market volatility or quote, unquote, investigate market volatility, it seems like this is a government thats lost control of what it had been controlling decently well and thats the stock market and the economy. Well, you know, the government find itself in a bine. The china leadership are probably the most powerful control freaks in the world, you know. Thats great when you want to do Something Like plan an olympics. Not particularly good when you want to reform an economy. When they are facing now is that they need to introduce very, very fundamental promarket reforms to get this economy back to hold, but that also means that they lose the levers of control over the economy that that they use to manipulate outcomes for political purposes so theres what they are dealing with is an inherent couldnt bics in policy goals, one to make the market more efficient and more produbbive and more inowe vastive and on the other hand they have the political imperative that they feel the need for political reasons to maintain a certain level of control over what happens. Thats what you see playing out in the stock market and the big question is what does this mean for chinas future . Michael, youre a freelance journalist there and worked at a lot of publications in chip. Im just curious, specifically financial publications. When you talk to your colleagues are they nervous because the Chinese Government has detained financial journalists with some pretty prominent chinese publications . Well, you know, i think what what youre seeing happen with the stock market is is emblematic of a bigger issue with china, is what are exactly are the rules, and thats something thats an everchanging thing here in china. The president economy joini a xi what you need to know about all the Market Players is whats going on in this market and whats legal and not legal . Short selling is supposed to be a legal activity here, yet the government has been going after and investigating what they are calling manipulative short selling and what exactly does all this mean and one of the problems youre seeing with the stock market and economy more generally is people really dont know what ground to stand on right now. Okay, michael. Well leave it there. Thanks so much for your time. Michael shuman in china. Another check on the market, s p 500 by 50 points, 1921 and dow down by more than 400, 414 and 16,112 and nasdaq five off its session lows down by 117 points. Also keeping a close eye on oil as the final trades cross for the day. Stick with us. The crude close is coming up when power lunch comes right back. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i looked at my options. Then i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call now and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, it helps pick up some of what medicare doesnt pay. And could save you in outofpocket medical costs. To me, relationships matter. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. [ male announcer ] with these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. So dont wait. Call now and request this free decision guide to help you better understand medicare. And which aarp Medicare Supplement plan might be best for you. Theres a wide range to choose from. We love to travel and theres so much more to see. So we found a plan that can travel with us. Anywhere in the country. [ male announcer ] join the millions of people who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Remember, all Medicare Supplement insurance plans help cover what medicare doesnt pay. And could save you in outofpocket medical costs. Welcome back, everybody. Gas prices nationwide are down again today, 2. 45 on average across america according to aaa. Thats almost 1 less per gallon than we were paying at the same time last year. Take a look at the big refiners, valero, tesoro and marathon and overall prices have been a very good thing for them. Speaking of oil, the oil market is looking a lot like the stock market. Up big one day and down the next. After yesterdays big run oil is down nearly 7 today and lets bring in kyle cooper of iaf advisers and ken sill from global hunter and dan horwicz of raymond kyle. Yesterday you said you wouldnt be surprised if the level is tested again, but what do you ascribe this incredible volatility with oil lately . Yeah. Its just a backandforth situation. Yesterday i think was inspired by the report that opec was willing to talk to other producers and other nonopec producers to reduce supply but yet thats not going to happen for a long time. At the same time, a report headlining a drop in Oil Production garnered a lot of viewership and really inspired others and if you look at internal numbers they actually increased their june crude stocks, so, you know, that says that they might have lowered demand might have lowered supply but demand was lower, too, if crude stocks were higher than originally estimated. Dont want to leave you with a bearish question, necessarily, kay, but heres the thing. When we start flipping over some of the refineries they go offline and suddenly theres a bunch more oil that goes into cushing and other storage facilities. Is that why you think there could be more weakness ahead in. Well have a very High Maintenance season and refiners have been doing extraordinarily well because the cracks have been very beneficial and that means they need to take it down and clean it up and prepare for upcoming winter. I think were in store for large crude oils in the next couple of weeks meaning product builds and it will be very interesting to see how the market reacts to what i believe would be large crude builds. Kyle, im curious, Oil Volatility index has been elevated what. Are you seeing in some of the out months in terms of whether or not we should anticipate this high of volatility later on . I was going to say some of the deferred contracts, historically, arent as evolved and recently weve seen some of the deferred contracts as volatile as the front month and that underlines a situation where, look, long term and well over a year, two, three, five years i dont think this price level is sustainable and from now this will then its a long time and doesnt look like the market is cleaning up a long time and certainly not in the near term. Ken and darren, i want you to sit tight. Ill let you go ahead. Right now though lets get Jackie Deangelis of the nymex where oil is just heading weaker into the final close. Thats exactly right, brian and thats what we were discussing earlier. Actually since i spoke to you last oil prices are down more than 1 really selling off into the close, 45. 43 is where we stand, looks like a 4 loss on the day and what started out as a pause to digest some of the news turned into intense selling pressure. Traders behind me making a joke asking who is coming back tomorrow. This trade has been really difficult and not for the feint of heart, especially after that 27 move in prices in three days. Weve not had a streak like that in 25 years, really remarkable. Back to you. Jackie, are margin calls an impact here . Absolutely. Something that does happen in the last two and three minutes and traders are squaring out their position and thats why we see drastic swings either way. Lets get back. Jackie, thank you very much. Lets get back to our guests. I understand that production has come down a little bit, but you heard what kyle had to say. If we stay above 9 Million Barrels a day for the next couple of months, do you see any reason why oil prices would rebound it is. Oh, i think thats the challenge and what kyle mentioned, too, is correct. When youre looking at the incremental refinery bill could be, it could be north of 1 million so i think all signs point to the fact that this isnt going to a slow fix. I think theres, you know, a lot of movement about whether or not from a supplydemand perspective the price were at actually achieves equilibrium in the market and i think that at least yesterdays action while we saw bullish numbers, and it wasnt just on nonopec or u. S. Supply decreasing sequentially, we also saw pullish refined product numbers and the question is whether or not yesterdays rally has the conviction thats necessary to post a recovery. We dont think that it does. I have no idea where oil prices will be six months or 12 months from now but i do know this, if they stay around this level, maybe higher, in six to 12 months, every Public Company that im looking at on my screens is not going to be there. Theres going to be companies that cannot withstand this. Yeah, i think thats true in the mp world, but, you know, the correction has been steep. You know, theres a lot of reasons for it and a lot of fear in the market. You had a big reversal last week. I think in my upon that was more Short Covering than fundamentals but most of the move down below 50 was fear rather than fundamentals. You know, its its pretty clear that most of the world doesnt work at this oil price and you cant sustain production. You know, the saudis can do it, and a few of the better positioned north american producers but generally the deep water doesnt work, oil sands dont work and too much oil that doesnt work at this price for this price to be here for a long time. Darren and with en, well leave it there. Thank you very much. Do appreciate it. Lets get a market flash with dom chu. Lets take a look at the financial sector, secretary worst performing sector behind energy. You can see right now down about 3 so far and within sector you also got the etrades of the world, brokerage side. Againworth, citigroup, hudson city banc and the s p bank ticker kbe is down 3 tracking for its down day and its worst day since midaugust. Keep an eye on financials. Keep it here on power lunch. Back after the break with more news on cnbc. All right. 36 minutes after the hour. Welcome back, everybody. Time now for trading nation and today we have to talk oil and more importantly Energy Stocks which may be in your portfolio. Rich ross, Technical Analyst with evercorp, isi and an analyst with oppenheimer. Rich, on the days that weve had and the weeks that weve had tech calling analysis becomes more or lets not important. No doubt many of our viewers are thinking chevron is down 40 in a year. Should i buy some of the energy names . Technically, what are you seeing . Brian, clearly in the short ter the price action is grim, the trend is down, but if we can step back from the emotion of the shortterm swings and we look at a longer term weekly is that right of the xl, ill give you a couple of reasons it at least keep an open mind to suggest that the bottoming process may have begun, if not the bottom itself. The first thing you see is that 42 decline off the top. Youve taken out the 50week moving average long ago, but whats important, brian, is last week we get a very important 14 impulsive reversal off lows which roughly coincide with the lows that we established at the end of the em crisis back in 2011 so thats an interesting symmetry there. Once again, the bottoming process may have begun without the bottom being reached. However, theres one stock that i would like to focus on, Conoco Phillips, a name that we like. The charts not pretty in the short term, but youre getting a 6 dividend which we consider to be quote, unquote safe. If you have a real back up into the previous break point of the 200 day, theres 30 upside in the stock on the turn, even within context of that downturn and you get your 6 while you wait. Conoco is a name and keep an open mind for energy more broadly speaking. Bottoming but not necessarily absolute bottom. A lot of smart people on network said im going to come on and buy the energy stock. So far thats been a bad call. Is now the time . Im not sure. Were in the bottoming process for the overall market and for energy it looks like a reversal or bounce within bear market. Keep getting a little bit more of encouragement kind of idea that maybe production will start to slow but thats going to take a long period of time, and to me really focusing more on demand side is much more important so you see kind of the slow manufacturing data we saw both in the u. S. And china today. Thats going to continue to drag on these areas so we would stick with the refiners. Thats kind of the safe haven. Thats been the trade within energy. You would agree with richs point on Conoco Phillips i would expect then. Refining spreads are still very healthy and the spread between wti and brent is very wide, too, so that definitely helps the refiners and where you want to be focused within energy. Andrew and rich, good commentary there, thank you. Folks, reminder, we do two additional trading nation segments online at tradingnation. Cnbc opinion come and now to Sharon Epperson with your news headlines. Brain, your is your cnbc news update at this hour. Democratic senator bob casey of pennsylvania says he will support the nuclear deal with iran saying its better for our nation and israels security. Shortly thereafter democratic senator chris coons of delaware also coming out in favor of the deal. President obama now just one vote shy of overcoming possible congressional disapproval of the agreement. The president documenting his visit to alaska with videos and picture. This video shows his view of the last frontier from air force one as he flew in yesterday. Upon arrival hes seen taking pictures of dinali, the peak formerly known as mt. Mckinley. Google has a new logo and the typeface makes it more modern looking, and the Company Calls it a simple, uncluttered more colorful logo that better reflects its better and the fda sent warning letters that distribute powdered caffein as a dietary supplement saying one teaspoon equals the amount of caffein in 28 regular cups of coffee. The powder has been linked to two deaths. Googles logo change about the only thing not being blamed for this market collapse yet, yes. News alert with dom chu. More bad news on the jobs front affecting the oil and gas patch. Conoco phillips, the big innovative and exploration company, Exploration Production company, says its going to lay off about 10 of its Global Workforce which equates to 1,800 jobs at Conoco Phillips. The Company Tells us, again, that it will lay off 10 of its Global Workforce, equal to about 1,800 jobs. Another sign perhaps of weakness in the oil and gas industry. This time affecting a very large Oil Exploration and production company, brian. Back over to you. We talk we just talked about Conoco Phillips as a stock pick in trading nation and the things arent mutually exclusive and this is why im out there suggesting oils price drop, i no gas prices are down and adds more money into taxpayers pockets, i get that, but the amount of jobs this industry has created has been understated and not recognized for years and we see this kind of stuff and this is why that oils price drop is not a 100 positive thing for the u. S. Economy or workers. No. And i would just say on balance, of course, we would bring that up, again. Were trying to figure out and economists will be working overtime on trying to figure out whether or not the decline in oil prices adds more enough money to consumers pockets to offset the kinds of jobs being lost i think thats a good point and worth noting that the stock hasnt really reacted too much. In fact, its a little bit lower after the announcement. This is one that has just reiterated its dividends, so perhaps the job cuts are not enough and youve got to wonder how i mean, it just reiterated the dividend but in general in the group how safe are the dividends given the rig, a couple of weeks ago suspended the dividend through the end of the year. Well, apparently they are safer that be the jobs. I mean, Conoco Phillips got to cut somewhere. They have to deal with lower oil. I know what they do, but obviously they are saying the dividend is safe, but well cut 10 of our workpores. I would say also right now there are companies as investors look at some of these headlines coming out, between potential job cuts, also Capital Expenditures plans and also this idea who is going to maintain or possibly cut their dividend or try to grow it, its going to be a huge point of contention for a lot of traders and investors out there about trying to handicap which of these oil and gas giants, whether they are the integrated ones, kind like exxon or chevron or exmr. Ation and production like these guys, which one is a best position to sustain the capital payouts to shareholders. And a lot of investors are looking for the payouts when it comes to some these names. A lot of smart people on this network and listen to other channels and people who say, okay, youve got to pie this name because of the dividend, dividend yield. You lose the underlying stock. They may not exist in a year. Or if you lose 0 on stock self that 6 dividend is not going to do much for your pocket, is it . Slightly reduce the 30 drop, there you go. I guess so. Glass half full. Bad news for Conoco Phillips workers, guys, thank you. The dow is down 387 points. Well take a short break. More power lunch after this. And now the latest from tradi tradingnation. Cnbc. Com and a word from our sponsor . Netnet a strong dollar is good for the economy but that doesnt mean all companies will benefit equally. Generally speaking companies that do a lot of business abroad and companies that are in manufacturing versus services, tend to be most vulnerable to a strong dollar, so if you believe that the dollars trend is going to continue higher, you may want to check your exposure to companies in these segments of the market. All right. All show long weve been promising you this Interesting Data point. Finally well bring this to you and it comes from the Investment Firm breen capital. Bad news, since 1928 when the s p has lost 5 or more in August September has had a positive return only four out of the 13 times. In other words, a bad august does usually mean a bad september. But heres the good news. The s p 500 then rallied 10 of those 13 big august swoons. Even more amazingly eight of the times have happened since 1960, and the s p 500 has rallied in the year end all eight times. Conclusion. August big drop historically suggests were in for a bad september, but history also says that more often than not and 100 of the time since august, at last for the 5 plus drop then, stocks have rallied into year end. Of course, history is not always a prognosticator but still an interesting factoid breen capital. Joining us is doug cote who joins us now on power lunch. Doug, what do you make of those statistics . Well, all you do is go back to 2010. Thats exactly what happened. Everybody was panicking from the euro crisis. August was down 5 , and september rallied and it rallied right into the end of the year. 2010 turned out to be very good. What were seeing here is welcome to the free market. This is what weve been calling normalization, and Energy Prices at 148 was unsustainable and now market forces, opec is dead, and were at the 30year average which is 40. The dollar was too low because of qe, because of unconventional policies and now the dollar is back up to, what, the 30year average. Now you have china but, doug, the dow the dow the doug is down. This is what happens. The dow is down 9 year to date, okay. If we end here, if we dont real, it will be one of the worst years in a long, long time. Do you think the four, fiveyear bull market run is kaput . No, i dont think so. I think this is normal volatility. Its normalization, and it was prout on by some artificial forces from china removing its currency peg, and all of a sudden we realized that china had Serious Problems that were exposed or hidden because of this currency peg. Now we just have to wait for the normalization process. The good news is you look at the consumer. Alltime record high in retail sales. Alltime record wealth. Consumer confidence came out big. I call it consumer, the game changer, because they are 70 of the economy. Corporate earnings, problems were concerned about, but corporate earnings also at alltime record highs so take a balanced view. Yeah. And i would advocate or advise investors dont just sell at the moment of when we first get volatility. And if your time frame is 10 or 0 years, for god sakes, the dow is probably higher and well live in caves with matchsticks again. Doug cote. Thank you very much. Appreciate it, doug, thank you. Breaking news. Auto Sales Numbers per auto data. Phil lebeau says now u. S. Vehicle sales for the month of august come in at 17. 81 Million Units sold. That is on a seasonably adjusted rate annualized. 1 million vehicles sold. July had 17. 55 million vehicles sold on that annualized rate. This is the highest run rate for a month annual liesed since july of 2005. Again, the most robust pace of sales on a monthly basis annualized since the summer of 2005. A big deal here for the auto industry. Well see if that does provide any, at least semblance of bullishness into the stock market. Auto sales coming in better than expected by many measures here. Power lunch is back in two minutes. Keep it here. No students ever photographed mean ms. Colegrove. But your dell 2in1 laptop gives you the spunk for an unsanctioned selfie. Thats that new gear feeling. All laptops on sale, save 230 on this dell 2in1. Office depot officemax. Gear up for school. Gear up for great. Freeportmcmoran, citigroup versus carl icahn because citi group downgraded freeportmcmoran. Analysts cutting it from neutral to buy. They said while freeport cut production and spending, other producers havent. The stock is simply fairly valued. Your under the radar name today, stonegate. Paul miller defending this beatenup name. Keep in mind the stock down 25 over the month. Paul miller, respected analyst likes that name. Lets get back to the market selloff. Check out the fang stocks, facebook, apple, netflix and google. Joining me are fast money traders. Do you go back to the fang stocks and think this is an opportunity . You could have said that on friday. Here we are again. I think its an excellent opportunity. Netflix below 106 which is where its currently trading. That is such incredible growth potential. Talk about international expansion. Yesterday was news about epix moving out. They are in the drivers seat s from negotiation. They want this original content to build up to negotiate better internationally. That is rolling in a way that is positive. Netflix is a real steal here. Facebook, amazon. All of them. They are in a great spot to buy them. All these stocks have limited, if any, exposure to china. What they have are major valuation issues. If you are looking for the fang defensives, its apple and google. These are the names. If i think about what the problems are for the market and want to look back to last mondays analog, netflix has the most it a risk here. Amazon traded down to, these are what traders are looking at. Fundamentals are one thing. Google looks most defensive. Now we are in the second phase of selloff, seeing 400 point swings. Are we in a market environment where people want to get smaller so its going to be the stocks like netflix and fang stocks that are winners . Today is a big vacation day for the institutional investor. The desks are light. Im walking off the desk in the afternoon. Its extremely quiet. I say the people there normally to defend this name are not in their seats now. This is a stock that gets bought up big time when they return from vacation. Growth managers want to own. Quick, the market volatility, we have ecb. Inventories on wednesday. Dave talks about the lack of volume for a week. We saw even last week people thought it was a light volume day. Big volume days you can get that this week. Thank you. Ill see you tonight on fast money at 5 00. Thanks for watching power lunch. Closing bell starts right now. Welcome to the closing bell. The dow is down more than 400 points. Im kelly evans at the New York Stock Exchange. My name is simon hobbs here for bill griffeth. The dow and s p seeing the worst start to a month in nearly four years. Declines of 2. 5 across all major averages. Look at that vix often referred to as the fear gauge. It jumped above 30 today. Its currently south of 32. That is a fiveyear chart. You can see how rare this is. Well take you through this final and often volatile hour of trading day. Weak china mac