Good afternoon, glad you could be with us on hour one of power lunch. Im Tyler Mathisen the dow on track for its first fiveday winning streak of 2018 after that historic january. The dow, that index along with the s p on pace for the best weekly gains now best weekly gains since november of 2016. The nasdaq on track for its best weekly gain in nearly three and a half years now Cisco Systems rallying on its earnings beat, teva pharma soaring on news Warren BuffettsBerkshire Hathaway is going to take a stake there and trip advisor is higher. The company be buy back stock and gave an upbeat forecast. And for more on these markets, lets go down to the New York Stock ExchangeBertha Coombs is here today standing by. The dow trading above 25,000, the s p above 2700 the nasdaq recovered three quarters of the losses trading above 7200 the fiveday winning streak is putting these indices on pace for their best weekly gains in forever. Take a look at the mass in dnasq its up over 4. 5 , thats the best weekly gain since back in october of 2014. Thats a huge recovery considering where we were last week its been those megacap tech names which weighed us down, fell into direction down more than 10 from their all time highs and have made a really great rooefr look at apple up 14 low of that low of 150 a share. Back with 5 of its all time high amazon within 3 of the all time high near 1500. Up 15 from the lows alphabet has been the laggard, 8. 5 from the lows and that remains near correction territory. One of the things a lot of things, these recoveries make you feel considering we have moderate volume and steady uptrends feel like maybe weve hit a bottom but look at this chart this is the volatility index versus the s p intraday today they look like mirror images, dont they when you see the volatility spiked up there to 20, you saw the s p fall into the red a bit as its recovered, the s p has come back so its like the flu, tyler, ive been saying this volatility spike weve seen. It takes about two weeks to get over this horrible flu this year, michelle, but in that second week you start getting a little bit better, its not as violent. Dont need as many kleenex, thank you, bertha. Exactly. Bertha mentioned the inflation data the markets dont seem too freaked out about it today even though weve had several reports pointing to inflation heating up Steve Liesman joins us with more steve . Heating up in the flu we are happy to introduce the inflation thermometer, its become so important to markets that we have this new way here well try to put it into context. Heres the inflakes thermometer looking at the data month over month. Lets start first with what are we going to start first with i think the core Producer Price we got this morning. Its in the middle, well above expectations but not out of line with volatilities. Minus 0. 1 so well put in the the middle the next, the empire state, that was hot, 48 plus 12 points, the hottest prices paid reading for the Empire State Manufacturing index weve had in five years. Philly fed Manufacturing Index prices paid. We got that this morning, too, hottest in six years, 45 and hottest was the core cpi that was the hottest in 11 years. Sol thats those are the three we got today plus the one from yesterday but lets look at the year over year and you can see theyre more moderate. The core cpi running about 1. 7 , 1. 8 the core ppi is hotter over time on a yearoveryear basis so tyler, well keep watching this stuff. Put it into the thermometer and give people an idea of where we are relative to past inflation as well as where we think its going from here. I like that thermometer, steve, thank you very much. What a difference the week makes, the dow and s p have recovered about 60 of the points they lost at the peak of that early february selloff. The peak being the the trough being february 9 the nasdaq has recovered about 75 of its point loss and all three are headed, as we mentioned, for a fifth straight day of gains if the current trend continues. Is the rally back on track lets bring in the chief Investment Officer with janney, montgomery, and scott. All three of them. And michael jones, chief investment and chairman with riverfront investment group. Michael, ill start with you you say an important allclear signal has been passed in just the past 24 hours. What is it and what does it tell you . I think yesterday was the critical signal for Equity Investors because you got some pretty tough news for the narrative that droif the selloff. You got a disappointingly strong inflation read and then you had the tenyear treasury break through 290. If you think about the theme of the selloff, it was inflation driving yields high cher means equity prices have to drop yet the market was able to recover from its early selloff and close up more than 1 . Good news for the economy is bad for bonds but its increasingly being seen as good for equities and that means were through this correction in my opinion and weve had a nice normal pull back. Hes put the stake in, he says the correction is over. He says the bear market is in bonds not stocks do you agree . I do agree. I think perhaps weve seen the worst of this corrective process occur within the last couple weeks however its not unusual to see a retest not necessarily take out the lower lows weve already had but nonetheless challenge investors who think its used at this juncture so i would think if we get a pullback to the 2600 or something. We know today weve seen pushback at the 2720 level around the 50day moving average suggesting investors may digest some of this violent bounce weve had in equity prices before we can continue to see equity prices advance. Were still bullish on stocks over bonds so in that respect i concur. So michael, you did put the stake in the ground saying you think the correction is over but has anything changed what are you investing in . Do you use any of the inflation data weve seen to make you reallocate or do anything differently . Its a great question because i do thing something has changed but its not the wiggles in the cpa or wage gains what has changed in the last few weeks is the outlook for fiscal policy in the u. S. We have a clear blueprint for the budget and the budget deficit is going to double from last year to next to about 1. 2 trillion thats a lot of fiscal stimulus to drop on an economy already growing at 3 and unemployment is at 4 its likely to force the feds hand to move faster than they would have liked on raising Interest Rates and importantly is youll have to fund in a world the Central Banks are no longer funding deficits, you have to find real buyers for 1. 5 trillion to 2 trillion in incremental treasury ebt. So all that sounds bearish for the stock market where you were bullish. Its bearish for the bond market without question. So Interest Rates will rise sharply. That doesnt worry you when it comes to the stock market . Not in the least. Until you get Interest Rates up above 5. 5 , theres really no correlation with pes in the market and all of this stimulus is also on top of a lot of great tax policy for earnings so youll have more than enough earnings to offset any winds from the bond market. Mark, you concur basically that Interest Rates are going higher so you say avoid Interest Rate sensitive areas, tell me which ones and tell me which areas you are leaning towards in this environment. Tyler, its the fab four if you will, its the four lagers already and we havent waiver t ever that theyll be under pressure so it will be Real Estate Investment trusts. The second so the seconders we like are more economically exposed. Those include financials, industrials, software technology, select Consumer Discretionary and even energy which we think is fundamentally supported by increasing demand around the world gentlemen, thank you very much, we appreciate it. There is some disagreement. Well have somebody bullish on the second hour of the show. In the meantime, President Trump addressing the nation following the Deadly School shooting in florida. Amm eamo eamon javers is live in the white house. The president said to answer hate with love and answer cruelty with kindness, the president framed the issue as one of Mental Health concern, he said the United States must take action on this heres the president. Its not enough to simply take actions that make us feel like we are making a difference. We must actually make that difference. Notably the president did not mention gun control or guns at all in the course of his remarks at the white house but his treasury secretary Steve Mnuchin keeping on capitol hill did. Heres what he had to say. I will say, personally i think the gun violence is a tragedy what weve seen yesterday and id urge congress to look at these issues. Do you propose us to do something . I assure you appreciate the severity and the tragedy and i will speak to the president and the other cabinet members. The president staying out of the tricky politics with gun control in this country. President trump comes to the presidency with the support of the National Rifle association and gun rights advocates so it makes it even more difficult, political waters for him so interesting to see that division between the treasury secretary and the president. Thank you very much eamon javers on the north lawn. Boeing stocks have tripled can that company grow fast enough to push the stock even higher well hear from the companys ceo. And should you change your investments now that Interest Rates are rising weve been talking about that a lot and we will hear what one hedge fund is doing right now. Power lunch will be right back experience lexus Safety System plus standard. In the 2018 lexus es and es hybrid. Lease the 2018 es 350 for 339 a month for 36 months. Experience amazing at your lexus dealer. Welcome back to power lunch, we want to highlight the s p and nasdaq which hit session highs. Nasdaq up 1. 25 . Bowing the biggest gainer in todays dow coming after cisco, which had a nice report and apple. Jim cramer and david faber spoke with boeing ceo on squawk on the street. Theres so many squawks i cant keep them straight its squawk on the street. We produced a record 763 commercial aircraft. This year weve guided 810 to 815 aircraft by the end of the decade, well build more than 900 airplanes a year so you can see its significant top line growth. Passenger traffic around the world, we see new passengers entering, that will drive that growth every year we have a hundred Million People that travel for the first time in asia investors have noticed boeings growth potential. The stock is on fire, already up about 20 in this very bumpy year its more than doubled over the past one year and tripled over the past two but can it keep flying so high i think what youre seeing now is the market is responding to what is fundamentally a very strong airplane market, Aerospace Market globally and the fact that were delivering on our commitments, we had promised production rampup, were now delivering on that rampup and you can see the profitability thats hitting the bottom line as well so its efficiency in our production line, efficiency in our supply chain. So you got topline growth at the market, bottomline growth so just the Investment Community catching up to a certain extent. Thats part of it and part is the recognition that this has changed from being a highcycle business in the past to a longterm sustained Growth Business and i think thats changed the attitude and perspective on the street. So thats boeing ceo laying out his case where does the stock go from here lets find out with guy adami and carter copeland. Guy, it wasnt just the plane orders that will be so consistent over time because so many more planes are needed in the world but also talked about defense spending which is going through the roof all over the world and, by the way, theyre involved in Rocket Science and thinks theyll be first to mars before elon musk everything is working for this company right now. Which makes them from a cyclical stock to just a stock thats slow and easy wins the race and if you look at valuation, 21 times forward earnings, giving the guidance they just gave and given about a 20 eps growth you can see how youd get to a 430 stock. So although the move has been quick for a 200 billion company, its not unjustified with their cash flow, with their margins and, quite frankly, with their eps growth. Carter, you heard the ceo make a case that the stock has fundamentally changed to one that is cyclical to one that you can depend on for steady growth for a long time. Do you buy that . I think to a certain extent we do. Look, theres an incredible amount of growth here but whats more powerful behind what youre seeing at boeing is not just top line growth, dont get me wrong, the airplane market is fantastic. We saw airbus report this morning the stock is up almost 10 . Theyre telling me the market is great, too, but whats going on at boeing is a transformation in the profitability of this company. This is the airplane business made about 5 , 6 margins for the last 50 years. Boeing did 10 last year, theyre guiding to 11 this year. They target 15 by the end of the decade, we think they can go to 16 or 17. How how is that growth sustainable really it comes down to a fundamental shift in the model, right . The way the airplane business is the way it works is you invest billions of dollars to lose billions of dollars in the hope youll make billions of dollars and so for the last 30, 40 years youve had good programs and bad programs and they average out to a mediocre return but at the beginning part of this decade, boeing decided you know what well take our two cash cows, the 737 and the 777 and put new engines on them. We wont develop new clean sheet designs, well take the risk down, give our customers what they want and well go build new planes at higher prices on production lines that are already in place and a work force thats already capable of making those and so youre no longer averaging a good plane and a bad plane to get a mediocre margin, youre shipping everything out of production lines at a high margin and as you grow that business and grow that number of airplanes on a fixedasset base, its massively powerful to the bottom line. So dennis hits at that, but i dont think it gets to the real point here which is this is a 2. 5 standard deviation move upward in margins for a business thats had pretty stagnant and moderate margin levels for 50 years. Guy, when you look at the tenyear stock, if the control room can bring that up again, talk about a move. The stock looks almost parabolic on a tenyear chart. I get all the good things, i hear about the increase in margins. But like david faber said this morning. When everything sounds so good right. Dont you get nervous . I do. Then you look at the middle of the ten year chart, theres a middle two or three years where this stock basically went sort of sideways. The moves only really happened in the last year and to carters point, yes i get nervous when i wake up in the morning number one so i would be nervous about a company of this size moving to this magnitude but now you say wait a second, the street is catching up to what boeing is. Its not just a commercial airline company, not just an Aerospace Defense company, there are a lot of things going on here when you have that kind of cash flow, half a trillion dollar backlog and valuations that in this market are somewhat reasonable 21 times forward earnings you could see why this stock still has some runway to the upside. This is mr. Wonderfuls favorite stock. Who is that oleary Dennis Oleary mr. Wonderful. Mr. Wonderful picked it, carter, he won the stockpicking contest based on what boeing did and he keeps coming back to their avionics business and their services business. And Free Cash Flow. Look, i think boeing is extremely forwardleaning in their posture and how they want to leverage their ip and leverage their market position looking at the Services Market and looking at insourcings more of the stuff that they do is meant to take a business that has a lot of ip, has a big market position and say, hey, are we getting paid for the risk we take and are we getting compensated for what we know and i think thats a big shift in behavior from what this business was for 30 or 40 years where it was about making the next airplane, the next cool airplane so now, you know, the incentives have changed, the way these guys get paid is based on revenues and earnings and cash. That only changed 18 months ago and you foe what incentives drive outcomes. If they pay the organization to drive higher profits and cash, youll get higher profits and cash. Carter, really quick. Guy thought 420 a share what do you think . I think thats a completely reasonable number if what weve talked about in terms of making this a less cyclical business, 500 is not out totally in the cards. Thats a 6. 5 Free Cash Flow yield on the numbers posttax so i think theres a lot of upside room in this stock. A lot of bulls on this stock. Thank you, guys. Makes you scared, i can see theres fear in your eyes. After a huge move like that and youre telling me i can get anymore. I dont know. Im not telling you anything. Who am i tollt tell you anythig just opinion on power lunch. All righty. What changes should you make to your portfolio right now if any . Up next, the cio of double line capital will tell us what his firm is doing and mcdonalds announces changes to the happy meal. Thats fantastic move. Its going to make it healthier and youll be happier. Its impossible for me to be