Transcripts For CNBC Fast Money 20161007

Citing weak demand in aerospace. Industrial stocks falling more than 1 as the rest of the market was flat. A big warning signs as we head into next week. Could it be, guy . It should be. Ive thought honeywell is the bell its the leader in the space for quite some time. So i cant think of it as that. And then discount it on the way down. Its a big deal. Honeywell doesnt move 7 in a day. The up side, or the down side. So here we are below levels it needed to hold. I thought 111 last night. I also thought last night maybe it had to do with the way they were changing their counting procedures. Clearly thats not the case. Organic growth down 300 basis point. Any way you slice that, thats not encouraging. To be long the stock, its got to get back above 111. It was a reorder that should have added money based on how they were changing their accounting. I felt like it was a total kitchen sink eventuality. It was a really messy quarter. Tried to learn more about it today. I listened to the call, went through the presentation. I was surprised at how much the stock was down. 10 at one point during the day. That is a such a rarity for them. And the magnitude of the miss was really not that substantial. But when they talked with the different parts of the business, the Business Jets were particularly weak. And i think the thing that spooked people was they dont see that turning around next year, either. Theyre talking about 18 or 19 for that. But i really was surprised by the magnitude of the of the reaction here. I think its actually sort of interesting, but i would wait a few days. And its had a nice run. I mean, the industrial space has had a nice run over the last few weeks. They said business will get worse. Oil and gas business will weve seen the bottom. I mean, listen, i dont think Business Jets are the growth industry they used to be any more. We think about whats going on in the world in terms of corporate shaming. If you show up on a business jet, any place, people are going to look at you askew, whereas in the past, used to be a status symbol. What i would say about honeywell, its not just honeywell. Look at pp g, Pittsburgh Paint and glass, another huge industrial coding chemical company. They came out with a profit warning today down 8. 5 . This isnt just a oneoff going into the earnings season. I would be concerned about it. We had bank of america on, and she talked about valuations, not really reflecting the underlying economy. I agree with that. You brought it up. They blamed emerging market weakness, oil weakness. They blamed european weakness. They said thats not going to spill out because there is russian sanction weakness. Middle eastern weakness. It just seemed if it wasnt the kitchen sink, it was a precursor to, you know what, guys, for the foreseeable future, were in the toilet now. The whole space. That you know what this is reminiscent of . Two different companies, completely different sectors. In terms of how the stock was going into it, remember disney last summer. So last you mean the cordcutting bundle so disney is 122 stock, alltime high. Seemingly no obstacles whatsoever. They come out with a quarter that was surprising. Talking about some of the head winds they were facing. Next day the stock was down huge. That wasnt the end of it, though. Recall disney went from that 122 to 10 1k38 within a couple weeks trading in the mid 90s. A very secular shift. 100 agreed. I think my comparison is that, again, two companies that were just doing just gliding into alltime highs. Favorite. Seemingly no headwinds and all of a sudden something changes. One thing i didnt love, two or three weeks ago, this i thought they had they hadnt changed their guidance. Right. So what happened in the last did say specifically that september deteriorating. Why . Exactly, why. And that, i think, is the spook in the markets. We saw industrials across the board settle from textron to crane to ball. Also, we saw the Global Economy weaken somewhat in the late august and into september. We had a slight uptick in pmis, but the direction downward. This is not necessarily unexpected if you look at the forwardlooking indicators. Also did a spot on caterpillar saying how these were the names with the beneficiaries of this switch, of this relocation of capital. And they had a great dividend yield. So this was a place where it was quote, unquote, quasi safe. And now when you start to look at this, if we put in question a stock like honeywell, it puts definitely in question the stock like caterpillar. Are we more scared now going into earnings season . Im always scared. I mean, no does this make you more concerned . More incremental thing that can lead oh yes, look at the s p bouncing lower on the day, but this a friday on a honeywell news where the currency had a huge percentage move and the s p down five handles. The s p, unless it breaks 21. 35ish is impervious to everything we talk about. Its true im sorry. Look at what happened to oil today. When you look at the chart on the s p, you see oil was above that 50 mark. Hedges. Was banging the drum, for me the resistance was 55 in oil. There is going to be a lot lot of hedges put back on if we get up to that level again. When you start to see that tick off, its Global Growth again. Everything is in question. So what do we do here . Were on the precipice of earnings season. If youre in earnings season and lets say you dont agree with bk that things are going to get weaker, why not just buy puts. Volatility is still relatively low. That seems to me to be the most protective way to do it. Now for me, i did moves and ill talk about it in a little bit. I sold my bank stocks. Anything that you have profits in. I sold some oil today, as well. I had profits in that. Why not take those profits right now, nothing wrong with that. I agree with that strategy. I mean, i have very particular stories for the stuff i own. Why i like it. So to be able to hedge the more the market more broadly, agree, volatility continues to be low. Surprisingly low when you see things like this happen today in the pound. I think volatility should be high. Any of the industrials you would sort of pick over at this point . You know, united rentals, off two bucks today. But it was up 10 in the last three weeks before that. So thats kind of a no mans land. If it were down a few more dollars, would i buy it. I actually think honeywell is starting to be interesting. You know, the threeday rule, we always talk about, just let it puke out. Its not expected. Its interesting they mentioned options. Coming up in approximately 23 minutes is that show every friday. Options action. Dan nathan has guests in from canada, by the way. Really . Yeah. Just saying. By the way. Giving a trade, or no . Just saying that dan nathan is going to be here for options action. Sometimes i tease things. Lets move on. Last night the british pound took a dive to levels not seen in decades. This happened around 7 00 p. M. Before rebounding some of those losses. Brian kelly thinks the effects of this more is more than what investors are banking on. Yeah. Listen. I think this is more than just a flash. Thats one thing i want to say. Down 6 . The pound down 6 overnight. Some stocks triggered. If it this was just a flash crash, it would have ended up on the day. It was still down 2 , still historic moves. Heres the implications of it. This is going to have a lot bigger impact on your portfolio than something, lets say, twitter gets bought out. This is whats going on in the background. Why is this happening . Global rates are rising. This is the currency moving is simply the release valve for whats going on in the economies. The rates in britain are going higher. People are expecting theres going to be inflation there, because of the weak currency. That means some of the European Banks are going to get hurt. The british banks are going to get hurt. Why are they going to get hurt . You say, well, listen, the rates are going up, they can make those loans. If the economy is getting weaker, theyre not going to be able to offset delinquencies with higher loans. Because of that, all these banks are loaded with sovereign debt. That is their safety cushion. What youre going to say is, as the rates go higher, sovereign bonds go lower and then they have to question about their clolt. Those questions come in. Thats going to add to it. And then finally, the Global Economy is going to take a hit. I said this before, what britain did and this is going to have an impact throughout europe. What britain did is said, were in for it, we will vote for an economic shock to control immigration. And so thats what they did. Now, what does that mean here in the u. S. . To your stocks, to your stocks here . The biggest one for me is lets look at the banks in the u. S. Versus the banks in europe. Right . We already know the banks in europe are weak. Thats the orange line here. Look at whats happened with the bank stocks here in the u. S. This is xlf on the blue line. Look at this divergence. Its the largest divergence since 2012. Something has got to give, in my book. We already know that the European Banks are weak. Likely to get weaker. I was long xlf, thinking that, you know what, we might get that rate rise. There is a little short term trade here. I sold them, because this scares me. Whether or not you think that the u. S. Banks are safe, theyre counter parties. The European Bank are having problems. Hmmm. So karen, youre an owner of financials. I am indeed. Are you concerned . Im always concerned. I actually did we talked about the other day, i took a shot on some Deutsche Bank out of the money calls. I do think theyre going to resolve it. I think they have to do it sort of soon. I have regular expiration calls. And i think the leverage and potential volatility in that stock is enormous. Yeah. Totally agree on that. Today i was actually tempted to buy the straight out equity in Deutsche Bank. Because i do think that theyre going to resolve it. I felt this way from the start. I think theyre going to let it linger out there longer. But the positive headlines are definitely starting to flow. Except that i dont know if that resolution were talking about the fine here i dont know if thats really whats been ailing Deutsche Bank. Deutsche banks problems started long before this came to fruition. Deutsche bank stock was going down a yearandahalf ago, it started its demise. I think youve seen the relief rally now and i think i dont think its going out of business. I dont think its one way or another, they need to raise taxes. How are they going to do it . To equity holders . Yes, i think the stock could trade up on that. From where, though . From here, maybe. Its trading. Its not like its trading on booked value or anything like that now. Its trading on, wow, is there a fear that, you know, things could really unravel. If you reduce that fear i dont know. To me, even that qatari thing today, thats absurd. They said theyre going to up their stake in the open market. All it does it get the stock to jack up a little bit. Its ridiculous. How about the pound itself . So the pound the pound itself, i think, goes much lower. They have got a serious issue over there. Britain is probably likely going into recession. I think that goes lower. Theres other things, you know if youre here in the u. S. , Morgan Stanley has a lot of exposure. Ebay sells a lot into britain. So those are the ones i would, you know, have on my radar to say these are the most exposed to that area. Coming up, a biotech bloodbath this week as the stocks get whacked. Well tell you what one trader is buying. Plus, nfl ratings get sacked down to 11 for the season, just four weeks in. Is it the advertisers who will pay the praise . We have a special report. And financials on a tear. Could earnings next week derail this rally . Well tell you how to protect your portfolio later this hour. Of much more fast money straight ahead. With sleep number, you choose the exact firmness and comfort you want and so does your partner. Amazing sleep for all. Dont miss the columbus day sale going on now save 400 on the queen c4 mattress set. Learn more at sleepnumber. Com were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Welcome back to fast money. A news alert on mylan, up 9 after reaching a settlement on its epipen. Meg. Melissa, this just crossing. Mylan settling claims with department of justice and other Government Agencies over the medicaid misclassification or charges of misclassification of its epipen. Paying 465 million in this settlement. You can see this stock up almost 10 on this as folks worried that any kind of charges or settlement they would have as a result of this would be quite a bit more. Now, the company also cutting its guidance for 2016 to 4. 70 to 4. 90 for adjusted eps, down 15 cents. 25 cents on the top end. Also in announcement, saying they have entered into a corporate integrity or expects to enter into a corporate integrity agreement with the office of the Inspector General of the department of health and human services. These typically last about five years. Now theyre saying as part of the settlement, there is no admission of do not provide for any finding of wrongdoing on the part of mylan. 465 million settlement for mylan, melissa. So did they lower their guidance specifically in relationship to the settlement, or was it just they added that in . They are announcing the settlement, but they say that the lowering of the guidance is a result of the previously announced changes to its Access Programs for the epipen, and the upcoming launch of the generic. They do say theyre going to take this charge of 465 million in the Quarter Ended september 30th but not attributing their guidance lowering to that. Okay. Meg tirrell, thank you very much. Thanks. Big move here in the after hours session. Yeah. I mean, i guess its good from their statement, it said it resolves their issues with the government. So that clearly is good. But the space, i mean, this week was a disaster. I thought it was really interesting, which was anthem wasnt going to cover it. That gives cover to United Health and whomever to also not do it. This is specific, as i understand it, to the medicare, to its to how it classified, and so therefore what rebate level it paid. So in terms of, yes, it resolves that issue with the government, but it doesnt necessarily resolve the issue with the public. Right. The outrage and all of the hearings. But, yeah, one more thing. One one cloud gone, is you know, and the stock has gotten crushed so not surprising it bounced back some. The optics are still bad, to your point. I think we talked about this. For the last month or so, said worstcase scenario, anywhere from 25 to 50 cents dilutive to earnings. And they just came out and basically told you exactly that. Now start doing the math. They they make 480 this year. Slop a nine multiple on that, in my opinion, and youve got a 45, 46 stock. What impact on biotech at large, and you dont think of mylan as a biotech company, but waiting. And stocks down 3 this week on the ibb. So could this be a lift for overall . I dont know. No, because to me, the underlying fundamentals are still deteriorating in that you cannot charge what you used to be able to charge for these drugs. It just is as simple as that. Your profit margin is going to compress. Now, in mylan in particular, just trading it trading up to roughly about 40, that was your breakdown level. So i would be cautious on monday. Certainly wouldnt be buying anything up 9 and just be cautious. If this fails at 40, be then youve got a real problem. The threeday rule again. But there could be a scenario where its positive and you could be a buyer of mylan. And a seller of the ibb. So i do believe you can do both those. This is a granular issue. I think were closer to closure for them. But ibb still has binary headwinds and political headwin headwinds. A wild week for twitter. Could a deal happen as soon as next week . Weve got the details. Im melissa lee. Youre watching fast money and cnbc first in business worldwide. In the meantime, heres what else is coming up on fast. Are you telling us absolutely everything . Not exactly. Were also out of coffee. Think thats scary . Well, shares of starbucks are just pennies away from doing something terrifying. Well explain. Plus, football ratings are tanking, and it could take a number of stocks with it. Well tell you which ones when fast money returns. To protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this Vice President , this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. They all have insurance crafted personally for them. Not just coverage, craftsmanship. Not just insured. Chubb insured. Got a news alert on twilio. Seema mody in the news room. We are looking at shares of twilio down an extended trade. The Company Announcing what is basically a secondary offering. The amount not determined but shares will be sold by the company, which would be dilutive, as well as by shareholders. Keep in mind, this is the cloud company, truly owhich went public. Currently the best forming ipo so far this year. Thank you very much, seema mody. So this Company Goes Public in june. Which was four months ago, approximately. And now its going back to the market for more money. What do you think . I would too if i were they. No dummies over there i guess. Very reminiscent of go pro, came public, stock went up to 90, i believe. And they did in secondary and insider shares selling. I get it. I think it will be absorbed, though. Its like my kids. You give them money at first, right, theyre happy and then they spend it all so youve got to shut them down. My point is, until the market shuts them down, to karens point, theyll going. Why not . Are you a market in your house . No. Im not anything in my house. Lets switch gears to football. Are you tuning into the big game this weekend . Probably not. Four weeks into the season and ratings for the nfl continue to slide. Down 11 from last year. So will advertisers pay the price . Julia boorstin is in l. A. With the details. Julia. Melissa, the nfls ratings decline over the past month so dramatic the nfl had to explain what was going on in a memo to its broadcast partners saying its the result of a confluence of events, pointing to unprecedented interest in the president ial election. With monday night football suffering from competition with the first president ial debate. The nfl also notes, tough comparisons with very high ratings over the prior two years. But the league made a point of saying that it sees no evidence of a ratings impact from player protests of the national anthem. What does this mean for the broadca broadcastters bottom lines . Most nfl ad deals are guaranteed so they will owe to advertisers, this according to adam schwartz. Though according to the nfl, its Network Partners say this decline, quote, has not had any impact on advertising and the nfl continues to be the best place for brands and advertisers. As for this super bowl, which is not only the biggest game of the year, it also has the highestpriced advertising, schwartz says he doesnt expect the ratings decline so far to have any impact on the super bowls massive ad dollars. And fox sports president , eric shanks said in a conference this week, demand in ad pricing just for the Digital Stream of the super bowl, rivals of that top entertainment. So melissa, certainly interesting to see how that digital piece is factoring into this. Julia, thank you. Julia boorstin in los angeles. The other thing here, more broadly, is that overall espns ratings overall are also down. So its not just perhaps football. Perhaps its just a different way people viewing sports in general. Which you would think would be a ripe opportunity for Something Like twitter who already has a deal with the nfl. If they could actually pull this off, it is really the time and the place for Something Like that. Or at least advertisers and companies are going to be looking for something different. I would not buy twitter, though, based on this. But were clearly seeing huge, huge upheaval in this stwee. I think its the way people change their viewing practices. And i think its almost akin to using an analogy with dicks with golf, the thorn in their side. People dont have time to sit and watch a Football Game the way they once did. You own disney, right . Im not in disney now. I will buy back eventually but not in it now. Quick media trade. Got to be scared of disney. Disney not trading well. Stay away until earnings. Final trade. Traders got four stocks they think are going to get sacked. Grasso, kick it off. The app store popped higher today and we do the threeday rule. Setting up for me almost like a head and shoulders pattern. Give it a couple more days. I think its right for a selloff. Too hard to analyze. Too many brands. One brand was up, two were down. Samestore sales. Sell gap stores. Bk. For me, walmart for a can you he will different reasons. You look at technically the charts broken here with a lot of promise. Below 70, you want to sell. Good luck to stacy finerman, my sister doing the iron man. Yay get them stacy. Sears holding, does not want to go higher from here. Im melissa lee. Thank you so much for watching fast money. See you back here on monday. Options action starts right after this. Audi pilotless vehicles have conquered highways, mountains, and racetracks. And now much of that same advanced technology is found in the audi a4. With one notable difference. The highly advanced audi a4, with available traffic jam assist. Gnome. Hey, live at the Nasdaq Market site this friday afternoon. The guys behind me getting ready. While doing that, heres whats coming up on the show. Lets make a deal thats what traders hope a tech giant will say to twitter. And guess what, we have a way to play a potential deal for free. Plus, talk about a bank job. As many hundreds, and 50s as you can pack into it. Making a mint off next weeks bank earnings. Honey, your coffee is undrinkable. Pretty harsh. Well, so is your coffee. That is was ha