And welcome to power lunch on this monday im melissa lee. Wall street in a Holding Pattern ahead of the fed stocks carrying out modest gains. Nasdaq the biggest winner at this hour. Communications services specifically, the best performing sector, led by facebook, netflix. We have much more on netflix ahead. Its all about the fed this week policymakers getting ready to meet tomorrow. A decision on Interest Rates set for wednesday followed by chairman powells News ConferenceSteve Liesman is here with more on what investors should be bracing for. The period of the feds patience could be coming to a quick close. The word first appeared in the january statement and was taken as it was on hold. Now patience is not long for the feds statement. We expect the statement to drop the word patient, which implicitly implies a hike, and albeit with noncommittal language heres are the probabilities we have been following. Still something of a bid on a rate cut this month. I guess you guys are going to debate that. Its 20 usually its zero when were sure theyre not going to cut. 80 for july, and 96 for september. By the way, all these prices will tell you theres a 50 chance of three cuts by december the fed will strive both not to upset a market that has baked in rate cuts, and at the same time, not precommit to one it will acknowledge economic weakness and low inflation, but stall for time until the weakness is confirmed or contradicted by the data all right, steve, thank you Steve Liesman. So fed chair powell has a big decision on his hands, to hold or to cut. Whats wall street investing and what should investors do from here joining us, jim paulsen, chief strategist with the luthal group. If he had to guess, he thinks the fed will cut rates this week and matt deziac is ceo of fixed income strategist with merarerr and bank of america. You say the bond market is screaming at the fed to cut because of a risk of deflation, which is certainly incipient in many countries around the world. Absolutely. The market has been clear. Youre seeing strong disinflation across the board. If you look at japan, the forecast from their markets is inflation of a quarter percent for the next ten years europe, germany, theyre down at about 70 basis point inflation for the next ten years its clear the market thinks disinflation is coming that has brought german rates down to negative 25 basis points we have seen the ten year go from 3. 25 last year to just under 2. 10 right now why is disinflation or deflation so worrisome well, right now, were at a place where the fed wants the economy to continue. They want the labor market to stay strong. They want to keep people well employed they want to keep the recovery going. In order to do that, they have to make sure that the economy continues and they want to make sure that if anything, they err to the side of being conservative we expect a dovish bias coming out of the meeting because they dont have a lot more ammunition right now, so they want to keep the recovery going, and theyre going to be careful to make sure they accomplish that steve, you want to jump in . The question becomes whether or not they use the few bullets they have now, and how they use them theres some discussion right now if you are going to shoot, shoot to kill. Which is another way of saying go big or go home, which bill nelson, a former fed staffer out with a piece, saying do 50 in july and go back on hold, which is wow when was the last time we had a 50basis point drop . Someone said it, i forget who it was, but i went back and said did i hear you right the idea being is when you dont have a lot of ammunition to use what youre going to use very effectively use the elephant gun. The elephant gun. Jim, what would the Market Reaction be if the fed cut by 50 basis points in one go you know, actually, melissa, i think as long as they explain the why and they didnt explain it in a panicky fashion like they thought if we didnt do something here soon, were going to head right to recession, theyre more of, you know, insurance cut, and were going to insure the sustainability of this recovery, and look, i think they can make a great case if youre the fed and you say which is my biggest risk, is it inflation right now or is it recession . I dont think its even a debate and they can make that case. And they can say look, were going to fight the biggest risk in the room. And were going to fight that. And if it picks up, we get better, well take one back. Whats the big deal . If i could add a caveat to the idea, how to use the elephant gun how to use the elephant gun without scaring everybody. Right thats the question and thats maybe what you might do is say, were going to do 50 here, going to hold. And then just its not a series of cuts coming we feel confident 50 is enough to get us where we need to be. Right, and one of the issues the fed has created for itself is they havent given themselves that kind of optionality we saw that the back end of last year where powell said were not even close to neutral yet. Were getting there, and were at neutral at that point last month, hes saying transitory about inflation if you look at the last 11 years, the only thing thats been transitory is getting to 2 every time we get close, you go back down. Inflation has only averaged 1. 6 , and their target is 2 by saying he was patient last month, hes now kind of painted himself into a corner a little bit where its hard to switch right away we think theyre going to use this meeting this week to change the tone to dovish remove patience, and then look to cut later in the year our forecast for september, but theres a risk for july. Jim, what should i do with my money . Is it time to put money back in the stock market aggressively if i havent done so already or what you know, tyler, i think if i look ahead to the end of the year, i would be looking to add risk im a little worried if they dont cut tomorrow that we could have negative reactions where the tenyear yield goes below 2 , and the stock market comes off, because even though i think the stated thing is theyre not going to cut until july, the whisper numbers is theyre going to cut if its disappointed the whisper numbers they cut tomorrow, jim . They cut this week yeah. Thats the sort of market expectation . I think thats the whisper number thats my guess. I think the official probability is out there, but the whisper number below that is theyre going to cut gist what are we waiting for, for another 30 days to cut this . The data is kind of out there. I dont think its going to change a lot i think if the fed comes out now, we avoid that i would be adding risk in here i wouldnt be buying defensive stocks i would be looking more to those that are being given away. There just seems to be a lot of fear in the market let me close it off, steve, with a question for you. Is there a risk if the fed cuts on tomorrow or even in july, that they are then seen as knuckling under to president ial pressure huge risk the president has created this risk, and powell is going to have to simply explain it, if thats what they decide to do. What i was going to say in support of jims argument was, if youre going to if you have a few bullets to use, getting back to what we were talking about earlier, one way to use them effectively is to surprise the market. Then you get a big pop in the market, and you get the most juice out of your what you have there, your oranges, so to speak, that you possibly can now, there is that bid, and i think its met entirely, that 20 probability bid. Youre the one who owns all the june futures, right . Mipa. We have to leave it there we have traveled so many different metaphors during this segment. I mixed a couple of them. Im going to hear from my english teacher. Jim, matt, thank you very much, and Steve Liesman. Thanks to you. To washington now, and a trade panel holding a hearing today into the plan to tariff 300 billion worth of chinese goods. Kayla tausche is in d. C. Hundreds of companies and more than 50 hours of testimony are taking place whats unique about this weeks hearings are most witnesses plan to say the same thing. That tariffs are bad and shouldnt be applied to the remaining 300 billion in chinese imports, which sweep up most consumer goods. Executives from best buy, hp, even irobot are set to make that case over the next week. And to argue that if tariffs do go forward, their companies or products should be exempt. President trump has been unphased by these arguments in the past and he says those businesses should just move else where, but mark carota, president of bra maker leading lady says its not that easy very difficult garment to make, so many operations theres 25 or 30 operations on this garment sewing so many different places on here that it is just not done easily at any factory, in any part of the world. He is one of the witnesses in the hearings they go through next tuesday, seven days of comments will follow by law, so the first date that President Trump would be allowed to introduce these tariffs, melissa, is july 2nd. He said theres no deadline. Thank you kayla tausche. Meanwhile, wilbur ross says President Trump is ready to proceed with tariffs on the remaining 300 billion in chinese goods if a trade deal is not reached. Heres what wilbur ross told phil lebeau at the Paris Air Show this morning. Very hard to put a time table on things. I think that we will eventually probably make a deal but if we dont, the president is perfectly happy with continuing the tariff movements that we have already announced as well as imposing the new ones that he has temporarily suspended. Secretary ross downplayed the prospect of a deal being reached at the g20 meeting in japan later this month lets bring in stephanie miller, newly formed research and Consulting Firm based in d. C stephanie, great to have you here on set. It doesnt seem that there are many preparations under way right now for any sort of meeting between President Trump and president xi how do you read those tea leaves i think a lot of folks are skeptical that that meeting will happen i think thats a reasonable expectation, in my opinion, i think president xi has the complete power here in the dynamic of who gets to choose whether the meeting happens. I think its the chinese i dont think there is a lot that are compelling them to the table. I think President Trump is really emboldened to continue pushing forward aggressively with tariffs in that environment, im not sure that president xi wants to sit down with him. Are these hearings that are going to last seven days just happened to coincide with g20 in japan, it seems like that was meant to raise the pressure on the chinese. Thats not working at all. No, i would have to think that it was intended to do that, and it probably does a little bit. When you think about all the powers china has through its government, it can control monetary policy, it can spike demand for labor, spike demand for products theres not really a lot that folks in washington i have talked to that think that president xi feels like hes in a weakened position in some way, so despite maybe the administrations best efforts at trying to raise the leverage, i dont know if its going to work he may, though, feel in a slightly weakened position given whats been going on in hong kong would you agree to that . Absolutely. That is quite a level of unrest, right . And so my thought process is, how, if at all, does that play into his resoluteness or his willingness to meet with the president , where he really probably now more than ever cant afford to seem to be caving absolutely. Thats a good point. I mean, i think it was President Trump who says he intends to discuss hong kong with president xi if he does meet with him. President xi has to at least appear hes willing to have this be a transparent negotiation, transparent conversation, whether its about u. S. Trade or whether its about hong kong and sort of the unrest over there, so maybe that will compel them to come to the table i would not necessarily be surprised if they meet i dont think theyll reach some sort of agreement at the meeting. The hearings that the ustr are holding, theyre interesting, theyre focusing on industries that would be directly impacted, indirectly impacted and theres another way the chinese could exert their power, Holding Things up in the course of doing business in china and fining companies that operate there. We haveen that with ford thats the belief behind the ford fine. Do you think the administration looks too narrowly at the amount of leverage the chinese have yeah, i do think that the administration feels probably more confident than they should. But i also think, you know, how else are they going to feel . In this country, most americans really do not like how china has behaved on an international level. So the president and the administration are given a tremendous amount of latitude to try to be tough. What are they supposed to do just back down its not in President Trumps psyche its not in americas psyche so it makes a lot of sense what they have done it works with his base, as you pointed out. And even with moderates quickly, the odds of the final tariffs going into effect, in your view are i would say probably plus 50. Probably not high conviction, but more than likely, in my view stephanie, great to have you. Coming up, two big deals sending stocks higher today. Well tell you whos buying and what theyre getting theres a hint of two of them that are involved here you would have to figure tim cook firing shots at Silicon Valley tech under fire from within. Power lunch will be right back soaring today, as you see there, by 20 a share, as the Company Agrees to be taken private by a french billionaire kate rogers has all the details. Thats right, so after 31 years as a publicly traded company, suthbys announced it signed an agreement to be acquired in a value of 3. 7 billion. Its owned by the french media entrepreneur and altease founder who is also an art collector under the deal, sothebys Share Holders will receive 57 per share in cash. Thats a 61 premium to the stock price on friday. Today, the stock, as you mentioned, up nearly 60 on the news sothebys chairman of the board said the deal has support from the board and private ownership will help continue the auction houses path of growth and success. In a statement, the ceo said Patrick Drahi is one of the most well regarded entrepreneurs in the world, and i want to welcome him to the family. This acquisition will provide sothebys with the ability to accelerate Growth Initiatives of the past several years in a more flexible and private environment. The deal is expected to close in q4 following shareholder approval thank you very much kate rogers. And another big deal to tell you about. Pfizer buying Array Biopharma for more than 10 billion. Meg has this story array makes targeted cancer drugs. Thats a hot yara of Cancer Research that was in major focus at a conference. It involves identifying the underlying causes of cancer. Pfizer is paying 48 a share for array. Thats a premium from where the stock closed yesterday the total value is 10. 6 billion. For that, pfizer gets an improved array of drugs. Array is known for these targeted cancer drugs and has licensed several out, including to loxo oncology, which was acquired by eli lilly earlier this year for 8 billion the news has also generated investment excitement, helping drive up shares of other targeted cancer companies, and helping the xbi get on pace for its best day since the end of february you know, this idea that theres going to be a lot of m a in this broader space had been going on for so long, and there are a lot of quote unquote cheap companies in pharma in general, yet its these very targeted companies that command a huge premium that are getting all the attention at this point. Its showing these drugs really do work when you figure out the right patient and the right drug when you can do that, you can cut down on side effects and get Better Outcomes for patients so thats very attractive to cancer companies. Meg, thank you. Coming up, with most of the attention being paid to the u. S. china trade drama, a major moment coming this week for relations with mexico. Thats coming up plus, Communications Services leading the s p 500 today. Netflix is one of the best performing stocks. Trading nation is ready to trade it and chill next on power lunch. Free access to every plat. Yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. No hidden fees. No platform fees. No trade minimums. And yes, its all at one low price. Td ameritrade. With licensed agents available 24 7. Its not just easy. Its havingawalrusingoal easy roooaaaar its a walrus ridiculous yes nice save, big guy good job duncan way to go [chanting] its not just easy. Its geico easy. Oh, duncan. Stay up. No sleepies. Welcome back to power lunch. Im mike santoli at the New York Stock Exchange netflix rallying today, but check out its moves for the year the streaming stock stuck on pause since january, and its tightest trading range ever, according to bestoke trading group. Katie and john are your trading nation team to break down netflix today. Katie, how does it look . A little bit of a sideways action pretty good distance below its former highs how does it set up for you netflix really needs this oversold bounce because it preserves support at the 200 moving day average thats defined the bottom boundary of its trading range. Theres a couple things working for the chart. Its in a longterm up trend we look at reinches in long term up trends as continuation patterns, and of course, strong support and a strong tape. We need to see some kind of breakout, of course, from this range for a positive longterm technical catalyst, but netflix is oversold after having underperformed its at this proving ground right now in its chart john, do you think netflix can prove itself here . Obviously, theres been some rush of enthusiasm for disney, as it kind of unveiled its streaming products but nobody says this is a zero sum