Transcripts For CNBC Power Lunch 20160711

Leading the rally today, tech, discretionary, industrials. Meanwhile safe havens are biggest laggards in the market. Dom chu looking at the stocks that got us back to alltime highs. Dom. Its an impressive run, but remember were just where we were a year ago. First of all know the s p 500 since that time up about 5 the last time we saw that record high may 20th intraday 2015. Since then the utility sector, defensive ones like you talked about gaining the most in the s p. Meanwhile energy up the least in that amount of time as well. Something to watch out for as we move from record levels to new ones today. Look at points stocks individually done really well. First of all ulta salon, up 67 just since the last time we hit a record high, beauty products, personal Care Products a big part of that story. Another one, second best performing stock since then, one that we all know about, its amazon. Com. Those shares up by about 78 since the last time we saw record highs. So amazon continues that big march higher. Again, a very, very large stock to watch here. One of the big leaders from last year. And then the biggest performer in the s p 500, current members, a Semiconductor Company known by a lot of investors as one who makes hardware for video game consoles, high powered graphics chips for computers, nvidia shares up by 145 since that last record high. So, tyler, just some names that have helped power gains in the s p 500. Back to you guys. That is how to double your money and then some. Dom, thank you. Meanwhile, earnings season kicks off today with none other than alcoa comes after the bell. After four straight quarters of declines in overall corporate profits, could this quarter be the turning point for those profits overall . Bob pisani live at the new york stock exchange. Hi, bob. We have a good chance at ending the earnings recession. Heres the problem, tyler, a lot has to go right for this to happen. First, look whats happening, again, the key point is whats happening in the q3 point of the earnings cycle, not q2. Only four of ten sectors in the s p 500 are expected to be positive in q2. But by q3 eight of ten are expected to be positive. So sectors like tech are supposed to be doing a lot better. Energy and telecom are the only two going to be negative in q3. So heres what matters right now. First, we obviously have to have some stability and improvement at least in the Global Economy. But look elsewhere. The dollar has behave. If dollar goes up, as it has gone up post brexit, multinationals are going to have a problem. Second is Interest Rates. Interest rates should rise gently to help the banks, but not so much as to hurt other sectors. Thats a pretty tall order. And finally, theres oil. Oil is very closely correlated to the price of Energy Stocks. And analysts are modeling in stable to higher oil and stability in production. Just look at what theyre expecting from Energy Stocks not only in q2 but q3 and q4, the numbers go up because theyre anticipating prices of increases in oil and stability in production. Well, that may happen, but thats a tall order. I guess my point here, tyler, is im not bearish. Im just saying oil has it to behave, Interest Rates have to behave, and the dollar have to behave on top of those Global Economy doing well. Maybe it will happen, but its a pretty tall order. Back to you. And bob pisani has to behave. Which well take care of. Nah. S p hitting new highs, hopes for earnings season. Are we on the verge of a market breakout . Are we in it . Joining us is scott clemens, chief investment strategist and matt roddy, gentlemen, welcome. Scott, let me begin by asking you. Bob just sort of outlined everything that has to go right in terms of earnings even though were at 21, what is it . 2130 something or 2140 on the s p 500. A lot of people are saying that kind of feels to them like the top for the year. What do you think . It does feel a little bit pricey. And it does for a lot of the reasons bob laid out. Theres no question that sentiment has turned for the better. A good jobs report, brexit wasnt the immediate catastrophe we thought it was. Et cetera, et cetera, those are things that fundamentally effect price, value is driven by earnings. I share bobs suspicion caution that Second Quarter earnings reports will be as good as topdown analyst estimates expect. What do you think about europe right now . I know you had some ideas maybe there were some bargains over there. Do you feel that way, or have those been eaten up . There are certainly opportunities there. We find them its selective, but more in the multinationals if you will unfairly punished by concerns surrounding brexit, whatever form that ultimately takes. Very much a bottomup top selection type firm. Fewer on the ground now than maybe three or five years ago, but theyre there. So, matt, youre of the view where we end 10 higher for the year equities. I assume your thesis is earnings comparisons will look better in the second half of the year and Interest Rates are quiet . Yeah, thats my take. I mean, were up about 5 , well say, so we have another 5 from there to go, over 10 . When you think about where we started the year down 11 , thats a pretty good recovery. I think when you look out and see commodity producing earnings, get better year over year and stop taking so much frft year over year earnings and the s p 500, youre going to see justification of that multiple. Which is a little rich. Its 16. 5 times the market times the earnings and market is typically 15 times earnings. But when you think about it where bond yields are so low, corporate debt getting great refinancing deals on that side, high yield spreads have come in so not worried about liquidity. I think the market looks reasonably priced. And as Earnings Growth comes on board, youre going to see the market carry higher. I saw a statistic before i came in when it takes s p a year to breakthrough alltime highs, 95 of the time one year out the market is significantly higher to the tune of almost 20 a year. So, matt, youre not afraid of the yields falling all over the world, which to some people signal something deflationary perhaps. Youre not worried about that . Or is that just another reason to buy stocks since you cant get any yield where you normally could . I think the domestic low yields are a little bit of a, you know, being caused by the low yields and the rest of the globe. The rest of the globe does have some problems and thats why their yields are where they are. Thats why the dollar is where it is. I think ours is a phenomenon where everyone is looking overseas to the United States saying i can buy high quality debt and high quality stocks and pushing both of those higher. Im not terribly worried about the domestic markets. And i actually see a lot of value in the International Markets as well. You know, scott, you say theres a lot of uncertainty between now and excuse me, and november 8th. Id push back on that. I think theres a certainty. Theres going to be a new president. Its going to be one of two people in all likelihood, trump or clinton. Right. And Interest Rates are no longer it would seem to me the uncertainty that they were. We know the certainty of the brexit now. A lot of things have come more into focus. Tyler, i think thats right. I think thats why you see the markets today trading heading towards an alltime high close. Ill only observe given the accommodations of some continuing challenges on earnings, and i hope those are put to rest during the Second Quarter earnings season, but time will tell, and valuations that are relatively elevated. That does not mean that the end of a market cycle is eminent, but it does imply that prices are likely to overreact to external stimulus. I think the volatility weve seen for the past several years now is likely to continue throughout the rest of this year as well. Politics just being part of the driver. Right. But other things could go bump in the night as well. Scott, thank you very much. Scott clemens with Brown Brothers rockland trust. Go to powerlunch. Cnbc. Com right now to see how scott is making money in what he describes as a narrowly led market. We were talking about low yields, news alert bond market 3year auctions up for auction. Dom chu. You got it. So, michelle, we have the results of that 24 billion worth of threeyear notes up for sale here. The yield there 0. 765. The bid to cover ratio 2. 69, meaning 2. 69 for every dollar of bond up for auction. The 10year auction average was closer to 2. 92, again, thats the smallest bid to cover or demand gauge weve seen since july of 2009. Direct bidders accounted for about 15. 8 of the total auction compared to recent average of 11. 9 , indirect bidders, which is a group that includes foreign Central Banks 44. 7 compared to the recent average of about 50. 3 . So an interesting here for 3year note yields in terms of this particular auction. Well see if it plays out differently with the later auctions this week, 10s and 30s, back to you. Yes, we will. Thanks, dom. Speaking of Interest Rates, there are so many fed speeches this week its going to be tough to keep track of all of them. Thats why we have steve liesman. What do we think of replacing santelli on the bond report. Rick is gone for a week and youre just ready no, i thought dom did a great job. Very capable of what they do. Exactly. Exactly. So this is a big week for fed speak. Let me start off with what the consensus is. The consensus is that its going to be kind of a cool summer, but perhaps a hot fall for the fed when it comes to what happens take july off pardon me, and they take and start to reconsider jobs, reconsider the data and Interest Rates in september, october. Lets look at all the speakers we get. The question is all these guys and gals, and women, stick to the same script here . We have essther george spoke today. She spoke rates are too low. That was a headline we got from her. She didnt dissent last meeting. Loretta speaks at 9 30 tonight eastern time in australia. Then we have dan speaking on shadow banking but then theres jim bullard whos a voter, hes speaking as well along with kashkari and mester again. Well see if they stick to the same script. The scene will be changing during the week because then theres Economic Data and key Economic Data coming out this week. On wednesday we have the beige book, thats going to be very big. Along with import prices and jobless claims. What are you pointing at . Im pointing at the screen, look at the screen rather than the wall. Thats great. Ive been trying to get around the cameras. Right. Friday is the big day. Retail sales and inflation, obviously the fed targeting 2 inflati inflation, not getting it. But the consumer has been running at this hot 4 clip. Yes. Can we bring back that other wall graph that shows all the speakers. Theres nonfarm payroll. Thats the threemonth average just so you know how economists are thinking about this variability, 11,000 in may and 287, theyre averaging it and come up with 147. They think smoothing it out. You learned that in economics at wesleyan. I dont know big liberal arts schools. The graphic like this raises a question, are they talking too much . Do they talk too much . This looks like confusion for the markets to me. Thats what i see in that whole thing. Im sorry, i have a slightly different take coming from your intro, this is full employment for me. Its hard for me to criticize it. It is important though, and you bring up a good point for the market to keep this in context, what were looking for is the committee consensus, a change in the consensus with a little more attention to voters. We watch centerists like williams, williams has been out there big on june. Guys like bullard and lockhard, if they say we need to move sooner rather than later, thats a change to the market where the center is going. When is the meeting . Its the week after. Then theres september. And then theres september. We have in between sdwl. And then theres one right before the election . We were just going over there, exactly, theres a couple chances. What was the aba, Three Chances to make two or Three Chances to make three. Only went up to a 23 chance of a hike fed funds. The market is way out there. Yeah. Again, two for two there, ms. Lee, because another interesting point, is the fed comfortable with the Market Pricing . Do they feel a need to bring back flexibility to act if they need to. Great point, melissa, and michelle. Thank you. I thought dom did a great job. He did a great job. He did. Of course. In the next 48 hours the United Kingdom will have a new Prime Minister, actually she already seems to have taken over. Didnt she come out and make her speech . Theresa may. Power lunch is back in two minutes. Welcome back to power lunch. Im Bertha Coombs at the nasdaq. The nasdaq composite slightly below 5,000 this year, but hitting the highs of the year today. 5,007 is the number to watch. Thats where the nasdaq closed out 2015. We have hit a new year high and powered by nearly 200 new highs on the nasdaq including chinese stock, chinese stocks today roaring back with a vengeance among the big leaders here on the nasdaq despite some negative headlines on baidu and some of its advertising. Nvidia one of the big movers today, nvidia, amazon, comcast among the stocks that have helped lead this movement up so far this year on the nasdaq. Big stocks hitting alltime highs. Back to you guys. Thank you, Bertha Coombs. Kimberly clark shutting down operations in venezuela due to a slumping economy which has created significant consumer inflation as well as good shortages in the country. Shares higher by just 2 . Mizuho with a buy rating, analyst citing valuation and dominant market share is the reason. Comcast Universal Pictures scoring a number one hit at the bok office this weekend with the release of the secret life of pets. Shares of comcast higher by 0. 4 , comcast is the parent of Nbc Universal as well as cnbc. Okay. So in just about 48 hours from now the uk will have a new Prime Minister. Wilfred frost taking a look at who exactly this person is. Wilfred, we heard from theresa may. Shes confirming she will be. The current uk Prime Minister, david cameron, has confirmed she will take over for him on wednesday evening. Of Course Development earlier today, andrea ledson, the orr account pulled out of the leadership battle. Heres what cameron had to say earlier. Im delighted that were not going to have a prolonged conservative leadership election campaign. I think Andrea Leadson has made absolutely the right decision to stand aside. Im also delighted theresa may will be the next Prime Minister. Shes strong, competent, more than able to provide the leadership our country will need in the years ahead and she will have my full support. So who is theresa may . She was born in october 1956. Shes the only child of an anglican viker and his wife. Educated Oxford University and worked for a while at the bank of england. Shes married to a banker, though the couple are unable to have children, she also has type 1 diabetes. Became a member of parliament in 1997 and became home secretary in 2010 when the conservatives returned to power under david cameron. She backed remain in the recent brexit referendum and always maintained a tough stance on immigration as home secretary. Thus, shes seen as someone who can unite both sides of the conservative party. Here she was speaking moments ago as it was confirmed she would be the next Prime Minister. My case has been based on three things. First, the need for strong, proven leadership. Two, steer us through what will be difficult and uncertain economic and political times. The need of course to negotiate the best deal for britain in leaving the eu and to forge a new role for ourselves in the world. Brexit means brexit. And were going to make a success of it. The focus now turns to who shell appoint in her cabinet and what timetable shell set for withdrawing from the european union. By the way she will be the uks next Prime Minister by wednesday evening. Guys. It seems odd, i think, from where i sit that the choice would be someone who voted to remain or who supported the remain side. Explain that one to me. Well, its a very fair point to make, tyler, but the important thing in a conservative leadership battle is to get down to the final two candidates you need to get the support of the members of parliament. And twothirds, roughly, of the conservative members of parliament did back remain. So the support was much greater amongst people in parliament for fheresa may and also seen someone who did not betray david cameron. I bring it back to the other point, shes always had a very tough bit of rhetoric towards immigration. And she wasnt v supporting remain. In the wall street journal advocating much lower taxes and try to make the uk even more competitive than it already is. How likely is she going to want to follow those policies hes outlined there and promising to wall street today while hes here . Well, very, very good question. Well have to see if she has the same policies if George Osborn maintains a seat in her cabinet. That remains to be seen. Certainly he was expecting that the next Prime Minister would not be in place until september. So very Quick Developments earlier today when Andrea Leadson pulled out and ultimately until theresa may is in place and appoints a new cabinet, what hes doing here today becomes far less important. All right. Wilfred. Im just amazed. We thought we werent going to get a new Prime Minister until september and, bam, here it is not even the end of july. And by the way the ftse 100, new bull market there. Thats right. Wilfred, thank you. Wilfred frost at the nyse. Final gold trades crossing for the day. We have the metals close on deck. Thats when power lunch returns. When a moment turns romantic why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the 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, or adempas for pulmonary hypertension, 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 and a 200 savings card. Welcome back to power lunch. Im melissa lee. Final gold trades. Lets take a check where we stand. This is interesting on a day when the s p 500 is hitting new record high were seeing bid in the metals complex and gold. 1356 even where we are right now. Bank of America Merrill lynch reporting they saw the largest inflows on record in precious metals. Were seeing that continue this week. Metals complex, silver, copper, palladium and platinum all higher on the day. Michelle. All right. Lets look at whats going on with the bond market on the back of the weak 3year note auction we told you about at the top of the show with dom chu. You can see the 10year 1. 429. Were off the lows weve seen in the 10year, 30year still hasnt broken. 5year yield is just above 1 . Its the new game that is sending nintendo stock soaring and also generating controversy. Were talking about pokemon go. Its cool. What did i say . I know, pokemon go next. More than an apparel company. Weve always been an innovation company. Using technology is a critical differentiator. Changing the expectation that the consumer will have for what a sports brand should be for them. This is where were going to need a big, bad, technology partner. Bring in. Cue the bell. Sap. Under armour is a live business. We can anticipate the issues and needs that youre going to have using live data, to really understand the needs of the athlete. To make better decisions that meet our consumer where they are. The right place with the right product at the right time. The days of the eighteen month supply chain are something that we are quickly putting in our rearview mirror. With plans in place right now to cut that by as much as twenty, to thirty, to forty percent. So what sap really does for the under armour brand, it truly allows me to run our business endtoend. Wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong insurance company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. And if you have more than one Liberty Mutual policy, you qualify for a multipolicy discount, saving you money on your car and home coverage. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Im sharon epperson, heres your cnbc news update for this hour. A judge ruling that Sumner Redstones former companion will not be granted a new trial over her lawsuit that challenged the 93yearolds mental competence. This happened after a hearing this morning on her petition claiming new evidence in the matter. Former indiana democratic senator evan bayh has decided to run for the open senate seat vacated by retiring senator dan coates, giving democrats a victory increasing odds to win back the senate. Bayh resigned in 2010. Walmart starting today will offer Free Shipping on all online orders with no minimum purchase for five days. Amazons prime day is tomorrow. George spieth withdrawing from the rio olympics, leaving golf without its four top players when the sport returns to the games for the First Time Since 1904. Spieth citing health reasons, jason day, Dustin Johnson and roy mcilroy previously review citing the zika virus. Thats the cnbc news update at this hour. Back to you, tyler. Thank you very much, sharon. The s p hitting new alltime highs just an hour or so ago. The dow and the nasdaq, the dow very close to an alltime high up 119 points at 18,266. Nasdaq had been above 5,000, which is roughly where it ended last year. But its slipped just a little bit back below that. Bob pisanis the new york stock exchange. Hi, bob. Hello, tyler. Steady as she goes. Lets take a look at the stock market midday here. Lets talk about momentum from the jobs report on friday, and of course we had some issues with the japan elections propelling stocks to new highs here. Breadth 3 to 1 advancing to declining held that way the whole day, volume call it light to moderate. New highs advancing but stuck short of a breakout to get excited about it. Were still doing okay. Volatility right on the low end there 13 or so for the vix right now. New highs i keep pointing out when you see Big Industrial names on there, raytheon, honeywell, lockheed martin, all them, good sign for the overall market here. They are joining other stocks. Of course the consumer names that have been there almost every day throughout the year, stocks like pepsico, johnson johnson, colgate, walmart joining as well. Well say just short of levels that would get me really excited. Lets talk more about that, bob. As you pointed out back to alltime highs. However, the s p has been grinding around that 2100 level for like the last two years. Is this the time when the s p will finally break out meaningfully higher . If yes, how much higher can it go . Check out what one strategist said this morning on squawk box. I want to see consecutive fridays, so two weekly closes in the s p 500 above that 2100 level. That would convince me weve broken out and then you can arrive at some pretty impressive upside targets. What is that number . 2400 what . I know, sounds crazy. Thats what i mean. From the channel you can arrive at that. 2400 . Lets see if managing director at Tjm Institutional Services agrees, or jack bouroudjian, founder and director of ucx. Jim, what do you think, is 2400 possible . Heres the part i disagree with, the fact she said crazy. Its not crazy at all in the world we live in. German 10year is negative 1. 6. The french 10year is positive 12 or Something Like that. I may get numbers a little wrong. Absurdity happened all over the globe. Everything we used to invest in for yield has been systematically crossed off and now a few precious things are left, one is u. S. Stock market, one is u. S. Treasury. Stock market is the only place left to go. I also love what she said about closing twice over two weeks to see if this is real and not just a head fake. I like everything she said. So, jack, jim makes the argument, there is no alternative. When you cant make money anywhere else because yields are going lower so dramatically, youre willing to pay up a lot more for the stock market. Or, jack, do you worry that is the scariest reason. Unbelievable. Is the bond market signaling kaboom . When somebody tells me theres no alternative, that is probably the scariest phrase that i could ever hear. Look, there are so many things going on. And a lot of big ifs for that 2400 number to be hit. Look, if we dont go into a recession, if earnings continue to go higher, if we dont see an election that just drives the markets crazy, a lot of headwinds out there. Quite frankly with all of those headwinds youre looking at alltime highs. Today is not the day to judge to that. Remember this is 457 day. Jack, the basic equation for somebody out there is like, god, how am i going to get some yield here . Im going to get 1. 4 , negative in germany, why not buy the utility even if its expensive . Paying me 4 . This is why. And jimmy and i might not agree on everything, but well agree on this. When you start to treat the stock market like the bond market, there are fundamental flaws with Capital Market structure. I agree with everything jacks saying. Theres hugely fundamental flaws and its hugely scary, but its not going to end today and its not going to end tomorrow. What id say to people is continue to rebalance, use protection, but you have to make hay why the sun shines. I agree with what hes saying. I think theres a mild fundamental argument about the u. S. Economy, that was a blockbuster number on friday, again, its one number. Id like to see more of that, but lets say our economy is limping along. And he says recession, i say big deal, recession will be met with more liquidity. Big deal. Youre going to throw more money at it like theyve done in the past. And companies cant buy back their own stock. Theyre going through a blackout period. I dont want to interrupt this, this is fun. I mean, this is enthusiasm. I love it. So if you want to find yield somewhere, where do you go . Well, i think you got to find growth. I think you go to the u. S. Stock market and the overall yield is what 2 . That was my question, where do you get yield . Theres no yield. There is no yield. Im not going to the utility market. Thats the problem. Utilities are overbought completely. I guess if you can say i needed yield id buy a u. S. 10year at 1. 4. Thats right. Like a tech stock like microsoft our cisco that does give you yield . I do like those best of the things were talking about because they are theres a lot of capital risk. Of course. And people going further and further out the risk spectrum thats why i think theyll settle on things perceived a little risky but stayed and dividend paying as well. Jack, ive never noticed this but your tag is gop 800, is that some sort of sub. Stands for, my first name, which is a proper armenian first name. Hes also a screaming republican by the way. Thats a happy exit. This year i think im a little quiet about it. All right. He once was what was it . What was your first name . Hagop, it is, thats my name. Before he was jack. So many famous armenians in the world. Bouroudjian, kardashians. All right. Shares of nintendo, switch gears here, thanks to pokemon go, its taken off like a rocket and also generating some controversy. Julia boorstin is live in los angeles with the story. Julia. Well, melissa, pokemon go is a new free augmented reality nintendo app, uses smartphones, gps and cameras to bring pokemon characters into the real world on your phones screen. People can then chase them. Shares surging 25 in tokyo trading today following a 10 jump on friday when the game went viral, adding 9 billion worth of market value to the gaming company. Its helping nintendo recover after the disappointing delayed launch of its first mobile game last october. Now, after launching wednesday, pokemon go catapulted to the top of the itunes app chart on friday was the most downloaded and the highest grossing app in the countries where its available. People pay for ingame addons. Now, the game is so unexpectedly popular that servers have crashed and players have crashed into things as they walk around staring at their phones. There are even reports that teens have used the game to rob other players. Now, analysts are mixed. Nomura with a neutral rating saying the rally looks excessive, nintendo does have to share revenue with the developer. Jefferies say buy more bullish this is just the tip of the iceberg for nintendo. The apps engagement is striking. There are nearly as many u. S. Android users of this game as of twitter, according to new data from firm similar web. Guys, back over to you. I mean, theres another stat, julia, that was staggering, that is the average number of minutes per day that a pokemon go users spends which is 43, which exceeds whatsapp. That has to fuel the market. Thats right. Questionable for a game like this, yes, a great sign nintendo is figuring out mobile gaming. But the question is how long is this game going to remain popular . These things can sometimes be fads and can be here and there. And so well see if this one sticks around. But it certainly shows that nintendo knows how to license the right kind of properties, create the right kind of mobile app for this next generation. I mean, augmented reality, this is just the beginning of augmented reality. One way or another pokemon has been around for a long time. 20 years. My older son was a freak for it. But they were cards back then. It was pokemon cards. Reinvented. Julia, thanks. From catching those pokemon to ultimate fighting, the ufc the most recognizable name in mixed martial arts is going to have new management at a price of 4 billion. Robert frank has the details. This was a very good investment. Yeah, from ultimate fighting to ultimate wealth creation. Check this out, ufc sold to a group led by Talent Agency wmeimg, a lot of letters there, a deal that will net the billionaire brothers billions in cash. Now, Las Vegas Based frank and lo renz o bought for only 2 million. Sale price of 4 billion would value their stakes at around 1. 6 billion each. Now, of course that windfall is probably going to be less since they had a lot of debt, they have to pay taxes, other considerations there, but im told its still a tenfigure paycheck. Before the deal each of these brothers net worth around 1. 6 billion now much of that closer to 4 billion to 5 billion is liquid. In april they took their Casino Company red rock resorts public. That netted them and their families over 400 million in cash. Red rock used to be called Station Casinos and founded by their dad frank jr. That went into bankruptcy in 2009 after the brothers took it private. Now that company has a market cap of 2. 6 billion. These two brothers are equal partners in all of their companies. Theyre extremely close. They workout together every morning at 7 00 a. M. They attend meetings together. They own multiple yachts and planes, both huge art collectors. The question now is what will they do with all that cash . Now, frank is still the ceo of red rock, but theres talk of them making a bid for the oakland raiders, which is considering of course a move to las vegas. Now, nfl owners cant own a casino, so im told lorenzo would probably be the lead guy on the nfl bid, and then frank would stick with the casino business. But think about this dad started this with slot machines in 1976 now a 6 billion entertainment empire. Its a great country. Are they related to the guy we have on tv here . Tillman is their third cousin. Their dads were first cousins. They are third cousins. Wow. But a lot of billionaires. Entrepreneurial family. Yes. Amazing. Theres a new real estate opportunity taking thanks, robert, by the way. Taking new york city by storm. And its not what you might expect. Tell you what it is when we return. More ahead. Welcome back to power lunch everybody. Im tyler mathisen. It is that time of year again. We get ready to reveal americas top states for business for the tenth time. Tenth year in a row. Scott cohn started ranking all 50 states for competitiveness and other characteristics back in 2007. And every year he likes to keep us guessing. He joins us now from we actually dont know where, scott . Reporter i know where. But we are getting a lot of interesting guests. And you can get in on this, the hash tag is top states. A lot of interesting guesses as to where we are. In a moment im going to give you our first of our many diabolical hints as we lead up to the big announcement top state for business tomorrow. There is a serious study behind this and its been consistent over the last ten years looking at ten categories of competitiveness. But the weight that those categories carry depends on how the states are selling these things. So the more states are talking about it, the more weight it carries in our study. The idea we want to hold the states to their own standards. So the way this comes out this year, workforce is worth 400 points. That includes the educational level of the workforce, is it a right to work state, are people migrating to the state, things like that. Cost of doing business, includes taxes, wages, utility costs, office rent and incentives as well. Infrastructures, roads, bridges, ports, airports, anything to get your people and your products to where they need to be. Economy includes the job growth, the Economic Growth, but also the state finances. Thats worth 340 points. Quality of life, we look at air quality and the environment. We look at crime, we look at things to do. We also look at inclusiveness and discrimination protections especially in this day and age. Technology and innovation, things like patents and research grants, education from kindergarten through college. We look at business friendliness, look at the regulatory scheme in each state. Cost of living and access to capital, both Venture Capital and Small Business lending. You can read more about our methodology topstates. Cnbc. Com. And now here is your first diabolical hint, where am i . Americas top state for business. The first hint is, one stop shopping. One stop shopping. What could that possibly mean . Again, your guess hashal is top states and the top state revealed tomorrow right here on cnbc. Are you in the top state now . You cant answer that . Reporter no, i can answer that. I am in the top state. You are in the top state now. Okay. Is that a real background or a fake one . Reporter oh, its real. I wouldnt do that. Im just clarifying. Its so scenic and lovely. Reporter im trying to be fair, yeah. Doesnt look like kansas to me. We can eliminate kansas. We have 49 to go. Not alaska. Could be alaska. What kind of one stop shopping do you do in alaska . Could arkansas . Where is that mall . Mall of america in minneapolis. I dont know enough about mountains. Do they have mountains in arkansas . You sound like a geography fl flunkies right now. Im thinking including the ability to buy weed and that could be colorado. Where did you come up with that idea, tyler . Based on scotts reaction i say no. Scott saying it was such an absurd shot. Scott, well see you throughout the rest of the day. Well see you tomorrow. Reporter i get all kinds of reactions. All right, if you sold in may, folks, and went away as the old saw goes, you might be missing out on these hot stocks. The stocks that are sizzling this summer. Thats ahead on power. Youve wished upon it all year, and now its finally here. The mercedesbenz summer event is back, with incredible offers on the mercedesbenz youve always loed for. But hurry, these shooting stars fly by fast. Lease the cla250 for 299 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Welcome back to power lunch. Im melissa lee. Nasdaq trading at 2016. Bertha coombs with more. If you sort of tuned in for the First Time Since december 31st, youd think, wow, were just flat here. The nasdaq actually needs to get above 5,741 to break even for the year. Outperformed major averages so far in july up more than 3 for the month. Heading above 750 a share. Some of the most beaten down sectors have been leading post brexit comeback thats given us that round trip. Biotechs not the leaders today nonetheless they are up better than 5 so far monthtodate. When it comes to the biggest gainers, giving us back that 5,000 level today really in the mix of techs and consumer names. Nvidia up 58 yeartodate hitting a fresh alltime high tod today. Bank of America Merrill lynch upped its price target, retail er ulta along with intoit, some of the old leadership has been a drag including names apple in bear market territory from its 52week high, microsoft down 5 yeartodate and google still negative yeartodate. Michelle. All right. Thank you. Still negative yeartodate despite the move weve seen in stocks. Thank you, ber that. Walmart offering Free Shipping on online orders with no minimum order for five days, shares of walmart today higher than a little more than half a percent. 74. 23. Kinder morgan selling 50 stake in southerneastern pipeline to Southern Company for 1. 47 billion. The company will use the proceeds to pay down debt. Shares of Kinder Morgan right now higher by more than 4 . Elon musk now teasing a second part to his, quote, top secret tesla master plan. Longtime tesla watchers may remember part one was, quote, build an affordable tesla. So whats next . Musks mystery tour, she said. Well bring you the latest straight ahead here on power lunch. Welcome back to power lunch. Theres a new real estate opportunity taking new york city by storm and its not what youd expect. The demand for senior assisted living in midtown manhattan has seen a sudden surge in recent months. Lets bring in the president and ceo of health care reventus. Guys, great to have you with us. Great to be here. Jonathan, ill start with you. Seems like midtown manhattan wouldnt necessarily be the obvious choice to build a senior center. What are the demographics here driving this . Well, i think the first and most important issue is that the super Luxury Condominium Development movement that weve been chronicling over the last five years has been played out. And developers have to build something from an economic standpoint, new development condos at the high end of the market has been overplayed. So now what were seeing is alternatives. Theres been a lot of hotel development. Were looking at assisted living as another opportunity. Right. Now, the hook to this story so to speak as we journalists like to call it is that theres a property that used to be a t. J. I. Fridays and its going to be converted into this luxury senior assisted living complex. And the monthly rent is staggering, its 20,000. You are, debra, in the business of building these homes in specifically new york city, are you seeing the demand to support a 20,000 a month senior assisted living facility . Yes, well, 39 Senior Living communities in the Greater New York area including the only licensed building here in manhattan. And atria, our care provider, has been operating that building and has been in new york for 20 years. And it is a robust market. Theres over 100,000 seniors in manhattan. Very limited apartments with the kind of care and services that seniors need. And it clearly is a product whose time has come given the aging of the population. And its a wonderful alternative for Senior Living. What is the highest rent at your facilities . The highest rent at our community is about 18,000. Oh, it is up there. It is. And when you think about it its a tremendous Value Proposition for seniors and their families. My parents were in Senior Living in pittsburgh. Right. But when you think about the amount of cost there is to keep up a home. Sure. And then also pay for services that many seniors need, particularly over age 85. Right. Its a tremendous bargain for seniors and their families. I was going to ask because if you take a look at a luxury one bedroom rental in new york, thats easily 10,000, 9,000, depending on the property. Sure. And that doesnt include medical care or food. Right. There have been rentals in manhattan well over 100,000 a month. 100,000 a month. Yes. This is uncharted territory in terms of rent paid. Last question, are you worried already weve seen a softening in some of the luxury developments, are you concerned this is coming to market at a time when were seeing softening across the board . Actually i think its logically the right move in the sense the super luxury, the very high end of the Development Market already peaked about two years ago. Were just now accepting it, or coming to the realization. All right, guys, thanks a lot for joining us. Appreciate it. Michelle. All right. Melissa, its 2 00 p. M. On wall street. The s p 500 is trading above its alltime high. The question now, will it close above its alltime closing high of 2130. 82 . Did you write that down . Were at 2140 right now. If it does that, its definitely going to happen. Tech, financials, energy among sectors leading higher today. But which sector to look to for leadership for the rest of the summer . Lan don dowdy looking at the sectors that get hot, start with number five, landon. Hey, michelle, thats right. Summer is officially in full swing. While some investors follow the proverb sell in may and go away, that might not be the best course of action. Looking back over the summer since 2010 there are five s p 500 sectors that tend to heat up as the weather gets warmer. Well call them summer sizzlers. And of the top five sectors telecom comes in at number five. Frontier communications has nearly 8 return on average with more than 80 of trades positive. Now, when you think of frontier you probably think of internet and phone services, but it also provides solar energy to residential customers. Verizon also heats up with an average return of about 1. 3 . The Telecom Company sizzles positive trades 50 of the time. Michelle, tune in tomorrow for the number four spot. We love a good list, landon, thank you. Consumer discretionary the best performing sector last week, up again today as markets rally. But its been lagging the overall market. So what do you do now . Is now the best time to bet on the consumer . Vice chairman of aerial investments bullish on Consumer Discretionary stocks and chief Investment Officer with Wedbush Equity Management is a bit more cautious. So, charlie, tell me why youd buy here at this point when it comes to Consumer Discretionary stocks . Well, you have to be careful about overgeneralizing. We would overgeneralize and say all consumer staple stocks are expensive as people have rushed looking for safety. The good news is Consumer Discretionary names, a lot of them are considered economically sensitive. So people that are worried about the economy have pushed the price of some very high quality names down. So i wouldnt broadly buy every Consumer Discretionary name, but there are pockets of real value. I see tiffany, for example, which by the way right now has a yield of almost 3 . Its trading at a p e 18 times trailing earnings at this point. 18 times trailing, probably 16 times forward. People hate it because of the strong dollar. And thats a temporary problem. Tourisms probably going to be down in new york. But longer term tiffanys just one of the great businesses there is with Gross Margins over 50 , operating margins over 20 . Youre not going to replace tiffany with the internet. All right, steve, you dont like Consumer Discretionary . Or is there better value elsewhere . I think theres better value elsewhere. Consumer discretionary despite its performance this year if you go back to the market bottom in 09 has outperformed the market by almost 40 . Broadly as a group theyre trading at over 20 times earnings, almost five times book. I just think that and broadly the dividend yield is closer to 1. 3. I just think there are other areas of the market that are better places for your money right now. Such as . Well, i would be looking at some of the financial areas like some of the publicly traded private equity firms. Theres some shipping names and lng and crude shipping that i think look incredibly cheap right now. Some of them trading at less than three times earnings. So those are the kind of places i would be looking for. Id be looking for dividend yields more in the 3, 4, 5 range, but i think theres going to be a great run for yield now especially with the 10year at 1. 4. Hasnt there already . I feel thats all anybodys done. Well, but theres a lot of areas that you look at that havent really moved that much yet. And if you go through a lot of stocks, youll find significant yield still available. And i think theres going to be maybe the quality wont be quite as good, but i think youre going to see a move to yield big time in the next couple of months. Charlie, stanley, black decker and board warner are two names. By the way, didnt sound like you disagreed a whole lot with what steve was saying, but cherry pick within Consumer Discretionary. Why these two particular names . Well, thats the point. You cant generalize about Consumer Discretionary because you have names like amazon in there which make all the numbers look funny. If you go more name by name, Something Like Stanley Black decker is 16 times, borgwarner ten times earnings, highest quality auto supplier in the business and trading at depressed level because people are worried about volkswagen. You get more risk return in discretionary than you do even in financials. Financials we agree are very cheap, but theres a lot more risk. Discretionary gives you that return with moderate risk. All right. Charlie and steve, thanks so much. Thanks for having us. And for more on the sectors driving this market, lets bring in dominic chu. Again, so markets at record highs. We want to take you back to what happened the last time it happened 520, may 20th of 2015. If you look at the leadership, its a different kind of leadership this time around. The best performing sector since that may 20, 2015 record high, utilities, you can see there a nice move higher for utilities up by about at least 2. 25 thats wrong. Thats the wrong chart. Thats technology. But utilities are doing a lot better than they have been over the course of the past year. Thats one of the best performing sectors out there. Take a look at some of the other ones weve shown out there for sure on the defensive side of things. Technology 19 gain to the upside here since the last time we saw those record highs. Meanwhile, energys been the worst performing sector since that last record high as well. Even though we can see the crude prices down about 13 here. Crude prices taking a tumble theyre below where they were last year. As for the stocks that have outperformed, remember, eight current index members have gained at least 50 since that last record high. The top three, health and beauty retailer ulta salon, you can see up by 67 . Internet retail giant amazon. Com up you can see here a nice whopping 67 77 here. And nvidia, a computer chip maker also more than doubling in value in that timeframe as well. 140 to the upside. Last hour we showed a different timeframe so numbers are off, but want to make sure you saw those particular sectors and tocks help lead the way higher. Thank you, dot cm. Lets turn our attention to tesla. Elon musk tweeting, hes, quote, working on a top secret master plan part two and hoping to share more later this week. Tesla rallying to the tune of 4 . How do you play the on the cnbc news line tesla analyst at oppenheimer, market perform rating on the stock. Colin, great to have you with us. This follows of course a string of bad news. There are two inquiries into car crashes allegedly that used autopilot. They missed their delivery guidance. And then there was the solarcity deal. Is this some sort of gimmick to bolster shares and to give investors hope . You know, not sure exactly whats happening here. What we do know is that, you know, earlier in the year elon and the full Management Team emphasize they were focusing on generating cash flow and what weve seen since then is a quarter of okay results in the first quarter. Understandable miss, but not a great result here with the q2 deliveries. But then a real shift in strategy as theyve decided to expand production or accelerate production on the model 3, change course and buy solarcity and now this mystery event. Which were waiting on and really arent going to speculate on. I think weve seen a really significant shift in what theyre up to. I wouldnt call it a gimmick, but, you know, something that we want to wait and watch and see what theyre talking about and see when these guys actually start generating real operating cash. Right. Its not as if past master plans have been pie in the sky stuff. I mean, the model 3 was part of the first master plan, so it could very well be something that the companys actually working on. I understand you dont want to speculate, but what do you want to hear . Do you want to hear more about the vision of tesla plus solarcity and what that could be in the future . Absolutely. And we want to look at return on capital. So our objection to solarcity acquisition and we downgraded the stock after that was announced is really the use of capital at tesla. We thought they had better uses of that capital than buying solarcity. Were going to wait for some details on that deal, but i think thats the real metric that we want to look at. How much are they investing and whats return on capital . Colin, did you think the crash was meaningful when it comes to something that should have been reported by the company . Do you take elons side or fortune magazines side . The stock sold off really hard initially, recovered all and then some. And today its giving the ceo benefit of the doubt based on this tweet. I think this sort of crash was inevitable. You know, at certain level youve got a new functionality, which is changing, you know, operator behavior. Our view is that there was at some point going to be a problem that was going to have to involve regulators and theres going to be more regulation. I think in terms of whether it should have been disclosed or not, you know, im not going to come down either way. But we eventually expected this sort of event to happen. I think most investors that have been involved in tesla look at this functionality and say this is a massive departure for how people are operating motor vehicles. And theyre going to have to regulate that in a new way. And i think this is just the precipitating event to that process beginning. Colin, i dont have the numbers on the top of my head, but my understanding is that tesla has very aggressi ivive targets for increasing their run rate and the number of cars they manufacture in a given year from today to 2018 or some such. Do you think they have a chance to hit those targets . And what happens if they dont . So our sense is that these are very ambitious targets. And if they get part of the way there, that will be a major success. So as were modeling out production for them, were giving them credit for about 60 of those targets, which we think is in the realm of it being achievable. As we talk to investors, i think theres a very mixed opinion about those numbers. I think folks that are long, you know, definitely have a far more conservative view of what would be success than the target that teslas put out there for, you know, kind of their pie in the sky or Blue Sky Vision for what could happen. All right, colin, thanks for phoning in. Appreciate it. Colin rusch of oppenheimer. Meanwhile s p 500 making new highs, Technology Leading us higher today. Can it continue to lead the market . We will talk tech coming up on power lunch. Well, the tech sector leading todays market, but it has been a volatile year so far. Recent rally putting the sector back into positive territory, so is now the right time to buy in technology . Lets bring in doug mckay, and david katz, cio of matrix advisors. Doug, is this a rally set to endure or one you can fade . You know, we are in a growth starved world. Theres no doubt about it. And i think tech is one of the rare areas where you have to be careful like any sector that can grow outside of what the Overall Economic cycle does. So i think with a fiveyear time horizon absolutely i think theres good areas within tech you can buy. And you like what you call Growth Technology as opposed to mature technology. Give me some examples of the former and some examples of the latter that you wouldnt be quite so high on. Yeah, when it comes to tech i think about it even Warren Buffett hasnt invested much within the tech sector, save ibm. And thats because Tech Companies usually dont transition well. New technologies come about and displace the old ones. And so right there is an example of a value tech name or an old tech mature tech name as ibm. Its one of the few companies that managed to transition well versus Something Like a facebook, Something Like an adobe, Something Like even a google. Little more mature but still growing above rates at the overall economy and certainly not dependent to the same extent on Economic Growth for their success. David, why dont you distinguish your take on tech from dougs. And i think one of the distinguishing things is youre particularly wary of overpriced tech. Not that doug isnt. Right. But theres a lot of technology thats been exceptionally hot over the last year. A number of companies are north of 50 times earning 00 times ean amazon. Generally in the past when you buy something north of 50 times earnings you can get hurt in any sort of downside period. So wed be wary of those. We do like the fact you can buy some Old Technology and some hotter technology. So we take a barbell approach. Things like a microsoft and a google on the hotter and more growthier side, and then on the duller side a thing like a Te Connectivity or qualcomm or apple selling less. Theres a lot of opportunity. We expect a lot of volatility. Its not going to be clear selling until the end of the year, but we buy on dips of any sorts of companies you like. We were buying google a few weeks back under 680 or so. We wouldnt chase here, but if it dips again wed be adding money. I want to come back to doug in a minute on apple and google, but let me get your thought there, david, on apple, which has been selling at a discount to the market for a long time. It has been, but once it gets to the 95 level, its really so attractive that we think Better Things are going to be happening. You think the new iphone 7 is going to generate a little excitement. And basically we think the companys buying back a great deal of stock, theyre paying a very good dividend. When youre talking a stock with under 10 times earnings and reasonably good prospects and huge amount of cash, we think Better Things are going to be happening. We think if you wait until sales really turn up or see that the new iphone 7 is going to be hot that the stocks going to be 20 higher. You guys both like google maybe for Different Reasons or for different roles in a portfolio. Doug, let me turn back to apple and your thought on it. Is it old tech, new tech, neither . Its kind of in between tech. Right now its priced as though its old tech. And its p e is in line with its peers, peer group. But i still think apple has got a lot of innovation. I still think theyve got a huge upgrade cycle ahead. May not be with the iphone 7 but certainly the one after that. Dominant market share. I just dont think you can count apple out of the innovation game. And so i am a buyer of that, but clearly its a different type of growth experience than say a facebook. I think we have a better feel for what the total Addressable Market is for smartphones these days. Gentlemen, thank you very much. Thank you. All right, folks, the dow is up more than 100 points right now. The nasdaq briefly topping 5,000. The s p 500 alltime highs there. Coming up in street talk, weve got several analysts say stocks you may want to avoid. Thats next on power. Time for Analyst Recommendations soft tocks you need to know about. Viacom catching a downgrade at wells fargo to underperform. Clearly boardroom drama and ceo Phillippe Dauman may be forced out. While there may be a Corporate Governance event, doesnt seem anyone will come in and be able to turn around in a year. An event. Second stock yahoo, downgrades from buy to hold. Keeping a buy rating for alphabet, facebook and twitter, pivotal says yahoo has 3 market share and its falling. Pivotal places a 3. 5 billion value on the web company excluding cash. Firm says the risk for web Publishing Companies include high degrees of rivalry, increasing Capital Needs to compete and also government regulations. And declining metrics also makes it a problem for yahoo to find an acquirer. Valuation gets driven lower and lower. Every day. Third home builder gets a downgrade Credit Suisse cutting from underperform to neutral. June traffic overall worrisome suggesting nearterm challenge for builders despite pullback weve seen in mortgage rates. Overall Credit Suisse getting more cautious across the sector going into earnings season also downgrading toll brothers. Meanwhile double downgrade, meritaga also giving downgrade. And fourth one is Halliburton Jefferies adding halliburton to its franchise pick list. Halliburton has 28 outperformance yeartodate and jefferies believes halliburton will benefit from leading u. S. Completions position. Cost Savings Initiative and also more limited Competitive Landscape outside of north america. Firms new price target is 56. Which would represent appreciable upside from here after gaining a percent. Not a bad upside. No, really good, considering. All right. Final stock of the day, twitter. Suntrust downgrading the stock to a neutral given user growth and monetization challenges, guidance and estimates are reasonable, not overly conservative but catalysts just havent materialized. Series of catalysts including moments, periscope logged off users but needs more evidence to see traction. More interesting of course this has been rumored as a takeover target. Analyst who we have on the network very frequently says m a will happen. It just wont happen this year. It doesnt act like it either, right . I mean, if it hasnt happened so far, people wonder when is it going to happen. Right. Yahoo where you worry about the valuation falling every day. Right. There may be a reason for that falling stock. Speaking of falling, oil is falling again today. Prices are down 8 over the past one month. Overall though crude having a great run this year. Prices are still up more than 20 . A number of big Cap Oil Stocks rallying recently, so should you buy in . Thats next on power lunch. This just got interesting. Why pause to take a pill . Or stop to find a bathroom . Cialis for daily use is approveto treat both erectile dysfunction and the urinary symptoms of bph, like neeng to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is hlthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertsion, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side eects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical lp right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any sptoms of an allergic reaction, stop taking cialis and get dical help right away. Ask your doctor about cialis and a 200 savings card or any sptoms of an allergic reaction, im sharon epperson. Heres your cnbc news update at this hour. Lawmakers gathering on the steps of the massachusetts statehouse to celebrate the signing of a new law that protects transgender people from discrimination. It guarantees that those who are transgender can use restrooms and locker rooms that correspond with their gender identity. Incoming british Prime Minister theresa may says shes honored and humbled to be chosen as britains new leader. She also said brexit means brexit, and she will make a success of it. We need a strong, new, positive vision for the future of our country. A vision of a country that works not for the privileged few, but that works for every one of us because were going to give people more control over their lives. And thats how together we will build a better britain. Ukraine and canada signing a Free Trade Agreement during the canadian Prime Minister Justin Trudeaus first visit to the european country. Canada is home to a sizable ukrainian minority and has been a key backer for ukraine during its twoyear separatist war. Tourists visiting the eiffel tower were turned away after authorities closed the famous landmark following a night of violence. French police fired tear gas to disburse dozens of people trying to enter the alreadyfilled fan zone at the foot of the tower to watch the final of the european championship, which france lost to portugal 10. Thats the cnbc news update at this hour. Back to you, melissa. Sharon epperson, thank you. Lets get to dom chu for a market flash. Amazon. Com shares in todays record day for amazon and for the s p 500 overall, amazon has now taken over the number five spot in terms of overall market value in the s p 500 with a 356 billion 456 billion valuation with the overall company. The reason thats important because it overtakes berkshire hathaway, the scope is whether or not these markets can stay at record highs with leadership coming from places like amazon. Com. Remember, weve talked so much, melissa, guys, about whats happening with the overall markets and the fact telecommunication stocks and utility stocks have led the way higher during this particular run. Meanwhile, last year we saw a lot of the growthier names, the facebooks, netflixs, amazons of the world do that kind of heavy lifting. Well see if this time around this kind of momentum can be sustained. Of course there are a lot of nay sayers out there that say amazon has come very far very quickly, guys. That and at the same time though, dom, there does seem to be a perfect storm going on. It was just on friday exceeded 350 billion in market cap for the first time. Today even surpassing that level. And then as we approach prime day and then into earnings season a lot of analysts are getting more bullish especially surrounding aws, Amazon Web Services and the gross margin estimates, them saying that they might be too conservative. And thats the thing about amazon. Com is a lot of analysts out there are trying to figure out whether or not that web services division, we know its one of the Fastest Growing ones out there. We know its not exactly the biggest one within amazon. Com, but it still represents a growthier aspect to the overall market. Whats interesting, again, after this is the next bo bogey that gets overtaken. Its a big leap. Thats a big leap. Its 390 billion to get to that particular level. But then youre talking if its not already in rarefied air right now, its very much very close to it. Amazon. Com to get to 390 for exxon mobil, beyond that all you got left, right, is microsoft, alphabet and apple. Of course apples 535 billion. So theres quite a bit of ways to go there. But still just gives you an idea of the size and scope of some of these rallies here. For amazon its going to be about whether or not a bearish thesis can be made for a stock thats had all kinds of momentum throughout the course of last year and certainly now into this year. But again, to michelle, to melissas point here, the idea that Amazon Web Services maybe is a big driver for this particular stocks gains, guys. Dom, an important milestone today. Dom chu, thank you. Our next guest says buy on exxon. Lets tell you about the final oil close trades of the day. Oil right now 4477 lower by 1. 5 decline of 65 cents when comes to wti for delivery in august. Oil sliding again today after coming off a rough week. What does this mean now were back below this 45 level and no longer bumping up against 50 . Lets talk to oil analyst with s p Global Market intelligence. Hey, stewart. Hi, good afternoon, michelle. Do you believe the rally in oil . Do you believe the move in oil can hold 45 now that its come back from 50 . Not really. Weve been pessimistic on oil prices for a while, even throughout this rally. I dont think its supported by fundamentals. If you look at the estimates from ben tech energy, part of global plats, theyre looking for 41 on average in 2016. And 52 a barrel in 2017. Were still awash in a lot of crude oil. But you agree with those numbers . Yeah, i think those seem reasonable to me. Okay. So youre not talking 25 oil or 28 oil. I mean, i think a lot of people would be happy if you thought the bottom was 41. Oh, sure, but to get to an average of 41, i think we are, you know, anticipating a bit of a relapse back into lower levels to get to an average of 41 for the year skbl how low . Somewhere in the 30s, i think, seems reasonable. We just have way too much crude oil swimming in the system. Theres over 500 million barrels, excuse me, in commercial inventories. Its about the highest level weve had since 1930. Global demand is not especially attractive. So you have a buy on exxon mobil, as i mentioned. Market cap of 390 billion. You have a hold on chevron. Explain to me the two different viewpoints there. So theyre both integrated oils, but if you look at the Free Cash Flow from exxon compared to chevrons, exxon is far and away better at generating Free Cash Flow. Chevron has an awful lot of balls in the air right now. Theyre trying to grow their production significantly with the ramp up in asia. Theyre trying to protect their dividend, which is a higher yield than what exxon is yielding, and theyre also t trying to streamline operations and make them more cost effective. Thats an awful lot of things trying to accomplish at the same time. And from a risk standpoint i think exxon is a safer bet. And, you know, with what were seeing with the Global Economy, i would rather play defense than offense. And that to me says exxon more than chevron. All right, stewart, thank you. S p Global Market intelligence. Meanwhile, tensions between the u. S. And china escalating as the two sides are in territorial dispute over the South China Sea. Seema mody joins us now to explain the conflict and why its so critically important economically. And theres a huge event coming up in the next day or so on this issue, right, seema . Thats exactly right, michelle. Its a region that represents geopolitical and economic performance. Take a look 5 trillion of trade takes place across the South China Sea. It makes up half of Global Merchant shipping. And also onethird of the worlds oil shipments. In fact, japan and south korea receive the vast majority of their Persian Gulf Oil through the South China Sea. But this long standing territorial dispute in this important region has resulted in an intensified conflict between china and its asian neighbors, the philippines in fact a u. S. Ally, has taken china to a court accusing beijing of violating International Law by taking claim over waters, and specific islands within the South China Sea. The ruling is due tomorrow. And a former state Department Official telling cnbc that an unfavorable outcome for china could result in the country further increasing its military presence and push president xi jinpings regime to declare an air defense identification zone, which washington warns would be a provocative and destabilizing act. Thats why were watching it so closely. The timing of course this ongoing flare up comes as whats already a difficult period for china. The leadership in beijing is under immense pressure to turn around its ailing economy. And the pressure building the South China Sea just adds one more worry to xi jinpings list. But of course the big test will be how china responds to the ruling from the hague tomorrow, which is due around 5 00 to 6 00 a. M. Eastern time, melissa. And the issue is chinese dont even necessarily believe that they have to listen to what the hague says, whatever they say when this ruling comes out tomorrow, right . So far theyve been dismi dismissing the whole case altogether. They havent even actually recognized it as a formal process. Thats why, again, the way china reacts to what the hague rules tomorrow will be so crucial. Perhaps will isolate beijing further from its asian nations, or perhaps provide opportunity to renegotiate the territorial dispute in the South China Sea region. All right. Thanks, seema. Lets get to dom chu for a market flash. Speaking of the chinese region here, check out shares of some of the Biggest International casino gaming stocks out there publicly traded in the u. S. Wynn resorts, las vegas sands, mgm all outpacing the market in terms of gains today. This after a number of Research Analysts across wall street cited signs of improving Gaming Market in macaw. They theyre looking at figures in the first ten days of july which have shown better trends than in the past. Perhaps some optimism. Remember, melissa, a lot of these casino stocks have seen rough times over the past 12 months on anticipation of weaker revenues in macau. Whats so fascinating about some of these calls, dom, there was concern too much supply and ubs saying its more positive on specifically wynn as well as mgm because they both have new Properties Opening in macau over the next couple of months. So the supply is good, right, if the pie gets bigger and people actually go there to spend their money on whatever casino activities they want. That whole crackdown on the junkets, possible corruption, all of that put the brakes on it for the past year and a half or so. Whether or not it turns right now is going to be about china and its Economic Health and whether people are really going back to macau. Its a huge gaming hub in whether or not casinos can capitalize on possible growing pie thats yet to be seen. Thank you, dom chu. S p 500 on track to close at a new record high 2131 is the level we are watching. So which stocks will lead the markets even higher, big caps or mid caps . We have both sides of that debate coming up on power lunch. Of the 21st century, the earth needed to find a new way to keep up with the data from over 30 billion connected devices. Just 30 billion . A bold group of researchers and computer scientists in silicon valley, had a breakthrough they called. The machine. And its been part of ery it chaednew technologyever. For the last 2 years. Everything . Everything this year, Hewlett Packard enterprise will preview the machine and accelerate the future. E star trek beyond. You cook with incredible toostylingredients. S. You make incredible meals. Fresh ingredients stepbystep recipies, delivered to your door for less than nine dollars a meal. Get your first two meals free at blueapron. Com cook. The mid caps are on a tear so far this year up nearly 16 since the beginning of february. Thats compared to just 10 for the s p 500 in the same time period. So should investors reduce exposure to large caps in favor of mid cap stocks . John man lis a chief equity strategist with wells fargo funds. He says yes if youve got the appetite for risk. And Mark Spellman of alpine funds likes large cap stocks. Well kick off at the mid cap discussion and you, john. At a time when markets are essentially at record highs right now and were seeing a shift towards the more cyclical sectors of the economy, is there a reason to be in mid caps over the large caps . Or should you be in the underperformers in the spectrum . Well, depending on how far you go back for under performance. I think mid caps will outperform. I think things are changing. Theyre not particularly cheap, but expectations for growth are kind of low. Theyre expecting parody growth with the s p 500, which is unusual. And historically i think mid caps have had better risk adjusted performance. Because they have a bit of the liquidity of the large caps, a bit of the inefficiency of small caps, just havent done well until recently because the earnings werent growing. I think thats changing. Okay. The sectors you like are Consumer Discretionary, health care and information technology. Can you give us any color . Some of these sectors are very broad. They are very broad. I think the American Consumer is getting better. Okay. Thats our norm. Were natural buyers. Whats happened for the last seven or eight years has been an unnatural state. And i think after that time after the wounds have healed, after the savings rate is up, after the leverage is down, better job prospects, better housing prospects, were starting to spend and i think thats kicking off the whole rally. It doesnt hurt the large cap sectors, but i think as people become less risk averse theyll down the size scale leading me to mid caps. Do you think the economy is improving and thats whats driving the stock market . I ask you this because i know this is mid cap versus large cap discussion is maybe you want to be in the russell in the small caps if you believe theres something going on with the economy thats sparking growth. Well, thats a tough one to argue one way or the other. Historically mid caps have more liquidity. Its really hard to play small caps. They are small. Its just that. So why not pick up the advantages they have by migrating down, sure, at some point in time small cap will do better than mid. But i like riliquidity. Mid cap stocks in general dont have yield. How is that going to play in this environment where everybody wants yield . Its yield, yield, yield, almost at no cost. Well, i want Something Else to get yield. Simple as that. Im the old guy who really wants yield. How am i going to retire . That doesnt mean i cant make money for a couple years in mid cap stocks. I have a portfolio, managers have portfolios. You can have a number of funds in those portfolios. So the yield is a very positive thing. Its not entirely undiscovered at this point in time. And i think what happens i look for something that seems to have opportunity that usually outperforms but hasnt until very recently. It hasnt outperformed because of earnings. I think thats changing. When things change, the results of those things change. And in terms of these sectors are these relatively undervalued versus other mid cap stocks . Theyre okay. I mean, its more the momentum. I think the earnings momentum will be more positive. I think the American Consumer spends more, that helps Consumer Discretionary. I think technology is just becoming more and more a part of our lives every single day. I think that helps and health care, im getting older. We all are. Every second, john. And used to think about health care is the perfect industry. Create addicts and keep them alive ten more years. Well, that says it very well, john. Thank you. Leave it on that note. John maey, wells fargo, tyler. And to Mark Spellman now of alpine funds. You just heard what john said about the mid caps, are you going to make the case for the Large Cap Companies . Mid caps have been outperforming them. They hadnt for a while, but lately they have. I think melissa made a great point about one of the things large caps have going for them is the income component. You now see the s p 500 with a 1. 5 times the yield of the u. S. 10year treasury, thats unprecedented. And what were doing today in our Alpine Rising Dividend Fund is not only trying to combine yield but looking for stocks that are going to continue to raise that yield going forward, to really bolster the income moving forward for investors. S p 500 about 4. 8 for the year, mid caps up a little more. But on a total return basis as opposed to just the price, that would be what youre arguing there. How much of the total return on large caps do you expect to get from dividends as opposed to Capital Appreciation . Well, this year depending on where youre at i wouldnt doubt to see it at least 50 . But again, i would concentrate not just on the big chunky yields, because some of those from a financial standpoint might not be there. But if you look at a name like cvs health, its a 1. 8 yield. However, they just raised that dividend 23 just earlier this year. And 27 last year. Thats a great tailwind to have for an investor whos yield starved at this point. Youve got a kind of interesting parlay. One choice im aware of is cvs health, pharmacy company. The other, also a retailer, is target. Cvs bought the right to operate targets pharmacies, target was the seller there. Yeah, i think it was a smart move on targets part. Not an area of expertise for them. You know, basically, tyler, what we did is we go through the devastation and the Retail Sector and we come across target, which we think is probably overly punished. Still has a little bit of question mark about this quarter. However, even then we think the downsides going to be limited. Thats a 3. 6 yield. They just raised itd. They have a 10year plus track record of raising their dividend. We think that stock looks impressive here. Short term you may have a difficult quarter, but we think this is an 80 plus stock even so. I find cvs an interesting company. I worry there are too many cvs stores, frankly. They are the gap of the drugstore business. Number one. So talk to me about allay my fear there, number one. Number two, talk to me about the division of revenue between their retail side and their pharmacy management side. Yeah, the pharmacy management side is obviously becoming a bigger and bigger piece and is a large part of the side. That business is under a little pressure with generic pricing which is deflationary lately. We think thats going to level off. If you look at the schedule of generic drugs coming online in the next couple years, its going to be billions and billions of dollars. Were comfortable with that side of the business moving forward. And its going to give them that Free Cash Flow we look for in the Rising Dividend Fund to increase that dividend consistently for a number of years to come. Mark spellman with the alpine funds, thank you, mark. S p 500 at alltime highs, but have valuations got ahead of themselves . The trading nation team tackles that next. Record high today. Are stocks beinging overheated . Lets ask. Boris, valuations are a bit heighter than the last time stocks were at these levels. Specifically if you look at the socalled safe haven, much higher than the broader indices, does that concern you . What is actually leading us at this point . I think its fascinating. For the last five quarters year on year, earnings have been down, but the technical side were at record highs, as you said, and every time weve had that three months forward weve been higher. At this point i have to go with the technicals, for a couple reasons. The main reason is bond yields are just so low. Its still a very, very high. Youre basically saying theres no alternative. Is that what youre saying . There is no fundamental case for this level and theres no fundamental case for saying the stocks already higher three months from now, but they are. The fundamental case basically is that bond yields continue to go down, stock prices continue to go up. Thats a key factor. The do the charts support this . Absolutely they do. This overall market is not short of amazing. If you think about the bad news, the corrections, the pullbacks, you look at the advance decline line, if you also take into consideration that theres 25 fewer stocks today above a 2 stock price, this market is a lot smaller than it was back in 2000. So it was money comes into equity markets, fewer places for this to go. Were seeing the market breaking out, and those that have been negative are going to have to come back and rethink their overall thought process. We took out 2100, 2115, took out 2135, and opening ourselves up for another we think theres another so higher to go. We see it technically and fundamentally, but 2350 at year end has been our call for the spire year, and were sticking with it. Boris, when i hear craig say this is an amassing market and you say theres no play to go higher, because bond yields are going lower, that makes me nervous. Here what you do if youre nervous. You can just exit out your stock positions and a longterm leap on the s p. Its in an option form, and if stocks have a young but on the fundamental basis, what keeping you up ought night . A crash in sovereign bonds, thats the one thing that will destroy everything. Thats the bun thing as long as bond yields stay low, were in a benign environment. If the bond yields tend to percolate upwards, yes, stocks will get crushed. Thank you, guys find more at trading nation at cnbc. Com power lunch will be right back. Now a word from our sponsor. While exportdriven Companies Often struggle, because their products are less competitively priced abroad, consumers will benefit, because imported products already cheaper. Because the u. S. Imports more than it exports, from an economic perspective, a strong dollar is an overall positive. Will your business be ready when growth presents itself . Our new cocktail bitters were doing well, but after one tradesw, we took of all i could thabout was ours deadlines racing towards us. A loan would take too long. We needed money, now. My ax card helped me buy the ingredients to fill the orders. Opportunities dont wait around, my ax caso y have to buy the ingrbe ready for them. E orders. Find out how american expres cards anservices can help prepare you for growth at en. Com. S welcome back to power lunch. The best performing of the major u. S. Indices for stocks right now, but 0. 8 per to of up side, but still below where it was on a record territory. Among the winners among the nasdaq is 00. S a couple chinese enter net names there. On the composite, back over to you guys. Higher by 39 points. Is we have been grinding around the for two years. Is this now finally the breakout moment. 2350 by year send. Thats another im as skeptical of that, as i am as there would be all ton miss driving cars on the road. I think thats going to be happen. Timplgts im not sure about the , youre more confidence as bot had mentioned theres a lot of things that need to behave in order for the second half of the year to be better. For earnings, the u. S. Dwlarless a huge one. If it happens, it happens after the election. Basically youre sitting here and i cant get yield anywhere else. Lower yields go, the more youre willing to pay for stocks. If you think that yields arent lower because of theres a recession coming or deflation, just manipulation you better have the profits starred to come through this quarter and pick up in the third. What if the bond market is telling you theres a recession coming . Well, thats right. The one bright spot is we are seeing some selloff in tlt. We are seeing yields come up. Thats the treasury bond index. Etf. We havent seen that in a while. Youre going to talk about it on fast money. Absolutely. Closing bell starts right now. Dont move. Welcome to closing bell. Im bill griffeth. The s p on track as you heard to close as a record high today. We are in report territory right now. Weve never been this high at this point. And you knee we were going to ask this question is this rally a buy or a sell right now . That is the question. Some Money Managers and strategists, well getting their take throughout the next couple hours. And financials, interesting sector, normally a market leader, but they have been dragging so far this year. Were going to talk to former fdic chair sheila bair about