Transcripts For CNBC Power Lunch 20140924

Premature tightening and the fed needs to guard against getting back into the zero or lower bound once it were to lift off. He says the fed should not repeat mistakes. Once the said does lift off, evans saying the path of increases should be kept, quote, shallow for some time. Even says the fed could allow, quote, modest overshooting of inflation, letting the inflation rate run above that two percent target for some time. Inflation breakout, he says, is not likely in todays economic environment in part because theres a good deal of slack that remains in the labor market and he sees that in wage growth being modest and in the number of involuntary parttime workers who had says keep a lid on wage growth. Charles evans, a dove sounding little more dovish in the last several days while the hawks, tyler, sound a little more hawkish. Back to you. Steve, ill take it. Before we bring in bob to talk about this, heres a check on the market reaction. We gained a little bit on those remarks, not a lot but now were up 94 points. We were up 89 before the headlines. The s p 500 is up just under nine points, the nasdaq up 27 and the russell 2000 is in the green by about five points. The tenyear note, the yield right now is at 2. 54 . The transportation average is up 28 appointments. The commodities markets getting hid hard today, down 4 on gold and crude down about 70 cents. It seems we gained a little on those comments. As you heard, charles evans, a well known dove and he didnt disappoint. Moved up about two points. Everything he said in line with dovish tendencies in the past, inflation breakout not likely. The rate of increases should be shallow for some time. The biggest risk is premature tightening and he brings out 1937 when the Federal Reserve raised rates because the economy slipped back again. Theres the tenyear. Not a lot of move. We were 254 prior to mr. Evans comments. Still at 2. 54. Let me show you a couple of market things. The ipo today, citizenss financial is priced at 2150 and opened at 2150. Also were seeing oil stocks, again, notably weak today. A twoyear low. Back to you. Bob, thank you very much. Well check in with you again in a little bit. Bob mentioned citizens. Its not the ipo today. Dominic chu is at the flash desk. Discount food retailer smart and final stores is holding off after surging as much as 11 percent this morning. Med lef management down ten percent almost. Finally, this is the standout. Cyber arc software is soaring nearly 50 as investors look for a piece of that hot business. Tune in today to the closing bell 3 00 p. M. Eastern time when the cast of the closing bell will interview the ceo of cyber arc. Again, closing bell today. Back to you, sue. Dom, thank you very much. Breaking news in the bond market, the fiveyear note went off the board. Rick is tracking the action. How did we do . This is a cminus. I probably should have given it a dplus. We need to leave a lot of room for auction that may get messier down the road. This was somewhat messy. 35 billion fiveyear notes in the hands of new ownership as of about four minutes ago. The yield 1. 80. The bid side of the one issued market, 1. 795. Tald off a bit. The bid to cover at 2. 56 well below the action average and the lowest bid to cover since december of 2013. If you go to directs at 8. 8, thats the softest on that area since july of 2013. A c minus what leaves the last of the supply to come tomorrow in the morning of sevenyear notes. Yesterday an a. Thats why you need to watch. Apple, samsung, now blackberry unveiling a new smartphone. The big question for investors in the latter company, will it help revive the struggling hand set maker. It is taking a build risk with the design. The new phone is called the passport and is the shape of a pass passport. Will it save the company . Go to cnbc and vote and tell us where you vote. Hi, john. Ive g reporter ive got it here the passport. They are almost exactly the same size. Ill put my vote in now. No, this phone is not going to save blackberry and theyre not even trying to say it will. The company is sticking its future on secure software. This sort of acts as a salesman for that. You can see theres a touch screen here. Theres also this keyboard and the keyboard is touch sensitive and affects the screen. The key feature in this phone perhaps, a couple of them, one, the has the Amazon App Store on it so any app that you can download on the androidbased kindles and fire phones also will download onto this phone so it runs blackberry 10 apps as well as android 4. 4 but a blackberry key feature is called blackberry blend and allows the phone to be accessed through a p. C. Or tablet, even on ios. Blackberry is pushing an app that will allow you to deal with messenger, the contexts, the pictures, the calendar items on this phone. Its an interesting play. Its secure in the sense that those things dont live on the cloud but the device and you can access them through the internet. Stay where you are. Were going to lock in the vote. Will it help save the company. 49 say yes. 51 are with you, john and they say no. Were following the iphone 6 having a bending problem. Users claiming the phone easily bends after being in their front pockets. Dawn covers mobile devices and joins us now. Dawn and john, welcome back. Dawn, these reports started to come out that people are putting the phone in their front pockets and were finding that the phones were bending . Yeah. Some of the reports began cropping up on these apple enthusiast sites. There was one account of a guy who claims he had his iphone 6 plus in his front pocket, droif four hours to a wedding, danced all night, came home and the device was warped. So one enterprising reviewer decided to see if he could bend the device with his bare hands. So he went and took an iphone 6 plus and applied some serious pressure to it. You can see his handshaking as hes doing the test. He did succeed in bending it. Beyond these anecdotal accounts, we have no idea how widespread of a problem this is. Has the company commented . No, the company isnt anything anything on the record. If the customer does happen to have a problem and they call support, theyll hear that this sort of damage if it occurred in normal use, not putting it in vice grips, that it would be eligible for replacement under the warranty. Apple hasnt said that but thats what Customer Support is telling individual customers when they call. John, do you have any reaction to this . Who is going to try to bend a phone intentionally, particularly a brand new one that youve just paid good money for. But on the other hand if you sit on the phone in a confined space and it gets warm and bends, that could be a problem. Reporter let me address the technical aspect. I got an email from an expert in displays and was talking about the longterm damage effects if a phone bends a little bit. He says for moderate bending from a slight bend in a pocket, its something not an issue because the phone will retain its overall shape and the display will be fine. However, if its bent extremely or over a period of time, it could damage the display in this case. What i think is the bottom line is that the use case for the iphone 6 plus is a little bit different from your typical smartphone. This is maybe a little more like a tablet. Its not quite as portable. You can tell that if you pick it up and hold it. Some people often with larger hands say, hey, this is absolutely perfect. I love it. Some others say, boy, this is unwieldy, too big. You have to be careful how you carry this phone because it is longer and based on an Aluminum Structure which will bend and potentially retain that shape. We appreciate you being with us. Sue . Were up better than 90 points. Stocks rebounding today. The dow attempting to hold a threesession losing streak and up about 90 points on the trading session. Do we move higher longer term. Scott collier is ceo of Advisors Asset Management and mark is president of Intrepid Capital funds. You think longer term conditions in the u. S. Are favorable to higher prices but youre seeing signs out there that we might be in for a correction . Tell me about that. I do. I think that weve had some divergences recently. We see the russell 2000 really people talking about a death cross where those prices really are kind of rolled over. We also see margin lending. It was capped and began to decline in january. And then finally weve seen high yield diverge from the s p and those tend to be highly correlated with equity prices. We would expect a little softness but in the longer term we think this bull market is still very alive. Mark, longer term you like the market as well, correct . Well, scott is singing my song. If you look at the russell 2,000, its all five percent. The last couple of days theyve thumped it pretty good, probably a point and a half down. High yield, you had outflows and high yield bonds in july and they are coming back out in september and those are precursors to what could happen to the s p. Weve been through a benign period in the last three years, no volatility. Were five and a half years from the bottom of march of 2009. Things are long in the tooth and prices in general are pretty high. I think that caution is warranted and thats the way we look at it. Are you putting protection in of any sort, and where are you putting capital to work where you still find value for your shareholders . Thats a great question. Were not using derivatives to hedge. If we cant find an absolute valuation discount, well resort to cash, both the equity and debt markets. Three names that i think offer a discount to full value at this point are a firm run by howard marts, distress debt investor, oak tree capital, really interesting business. Theyve got 35 billion in incentive oriented partnerships. Theyre largely over their hurdle rate of 8 percent where they earn incentive fees. A lot is passed through shareholders. So its a high but irregular dividend and they also help fund double line capital which is on their books. Mark, where will you put money to work today . Scott . Im sorry, scott. Thats okay. We would be putting money to work in emerging markets. We think specifically some of the brazilian names and potentially in china, we see value there. We are not using derivatives as protection. We would be in cash the same way for protection. Were always invested. Its kind of like a restat whether were fully invested or less than 100 . Right now we are seeing value in emerging markets, specifically in brazilian names, energy and miners and producers. Thank you. Appreciate the conversation. Ty . The f35 aircraft, most expensive military program in u. S. History, now a warning that the sky high cost may be unrealistic. More even than predicted. Shares of lock heed which makes the f35 right now up a buck 75 at 17806. You can see yeartodate up 20 . That as the republic of south korea has final liesed the deal of 40 jets for delivery in 2018. 20 gains for lock heed so far. Jane wells covers defense for us from l. A. The f35 is the most expensive ever, perhaps topping a trillion dollars over the next half century so the pressure is on to bring down costs. The Defense Department says its got a plan. But the Government Accountability offense says the plans estimates could be way off target. The gao says the pentagon, quote, has not fully addressed several issues that have an effect on affordability, adding that cost savings do not include things like reasonable assumptions about how much fuel will be consumed and the cost of replacement, saying real costs could be billions higher. Forget the cost of buying the actual jet. Gae says sustainment is about 70 of a cost of a total program and that even officials inside the pentagon say the current strategy, quote, is not affordable. Maintaining the fleet at full strength will cost significantly more than the current combined costs of maintaining all f15s, 16s and 18s. The pentagon tells cnbc, this is a 56year program, still barely out of infancy and a lot of being learned. Quote, many of the assumptions made by gao in extrapolating costs over the life of the f35 program did not reflect ongoing process improvements or fail to account for learning and feedback that will improve efficiency and its launched several cost saving initiatives including using existing supportive services. South korea formally announcing its buying f35s. This makes them the third foreign country behind japan and israel to purchase the jet. Thank you. New data about home sales and mortgages, the real read on housing right now. Plus looking for opportunities to make money in this market. We wi Morgan Brennan knows where to look. Financial sector has enjoyed a rally this month but theres one group of stocks that has lagged. Can you guess which one . Analysts say it could present buying opportunities. Were going to have those names and all that information after the break when power lunch returns. While every business is unique, everyone is looking for ways to cut expenses. And thats where pg es Online Business Energy Checkup tool can really help. You can use it to track your Actual Energy use. Find rebates that make equipment upgrades more affordable. Even develop a Customized Energy plan for your company. Think of it as a way to take more control over your operating costs. And yet another Energy Saving opportunity from pg e. Find new ways to save energy and money with pg es Business Energy checkup. Showed you video of a man running barefoot from court . Michael lucarelli did return, pleading guilty to charges related to insider trading. In an emotional moment with the judge he admitted that he had a drug problem and could not recall which company he was trading while he was on drugs. He exited court in a much different fashion today. His shoes were on. His lawyer saying, quote, a very decent man made a bad mistake for which he took responsibility this morning. Dominic chu, news alert. Tyler, from one courtroom to another, those familiar with Reality Television probably know the name michael, the situation, sorenntino. They are expected to appear in federal court this afternoon to face indictments alleging they did not properly pay taxes on nearly 9 million worth of income. This according to u. S. Attorney paul fichman. Again, mark and michael are charged with counts ranging from conspiracy to defraud the United States, falsely filing tax returns. They face counts for failing to file a tax return, period, for the year of 2011. Again, just to put this in context for the time and the penalties that could be at stake here, the conspiracy and false filing tax return counts each carry a maximum of three years in prison and 250,000 in fines. The count charging michael sorention carries a maximum of one year in prison and 100,000 in terms of fines. An Interesting Development for a celebrity in the reality tv world, michael, the situation and his brother mark facing charges for allegedly falsifying tax returns on nearly 9 million of income. Back to you. Well be following that one. Thank you very much. To the health and housing right now. New home sales surged to their highest level since 2008. Diana is here to put it in context for us. It was a big number, no question, and it was a good number. The analysts are poking holes in it already. This new home sales number is based on signed contracts in august, not closings. It has a huge margin of error and is often revised. You also have to put it in context. Take a look if you will. August sales up 18 from july, up 33 from a year ago. Were at a 504,000 analyzed pace. Here comes the but. We are pay below the 1. 2 million unit pace for the peek. New home sales are up just two percent yeartodate from the end of 2013. You can see that Home Builders didnt react with quite the euphoria you might expect. Thats because kb home missed by a lot in Third Quarter earnings. We saw Weekly Mortgage applications fall again and running 30 below historical norms. New home sales, its a good number, which most expect will be revised. Financials losing ground over the past week but theyve been rallying over the past month or so. Theres one group though within the financials lagging this year. Many analysts say its a buying opportunity. Morgan brennan joins us breaking done the sectors. Theres one group of stocks that has lagged that recent rally and thats the insurers. While financials are up about half a percent this month, Insurance Companies are down almost one percent as this grouping enters what analysts call a more volatile period marked by softer pricing and more regulations. Analysts also say that Rising Interest Rates will help these Companies Earnings next year and beyond because they like to invest in longterm assets. Some of the biggest laggers could have some of the biggest gains. Lets take a look. Gen worth financial, the industrys worst performer is down about 15 so far this year. Its mortgage Insurance Business was hit hard in the housing crises. On average, Analysts Expect that this stock could rise 34 over the next 12 to 18 months. Checking out another one, aflac, that is down 13 yeartodate. Thats thanks partly to its Japanese Business where the weakening yen and consumption tax hike have weighed on it but Analysts Expect an 18 increase in that stocks price. Another one, prudential financial, thats down about one percent so far this year, pressured as well in part by its japanese operations. Analysts again are expecting a 13 plus increase in that stock price over the next year to 18 months. Finally, check out travelers. Analysts predict only about three percent gain for travelers, but guggenheim says investors should keep an eye on the pace at which book value grows. Thats r. O. E. Thats the best way to value Insurance Companies and travelers has one of the highest. Lastly, as rates begin to rise vince lu says keep on eye on the yield curve because a steeper yield curve will have positive affects on earnings moving forward. Thank you very much. Dominic chu joins us with a market flash. How about financials to technology. Heres a stock ive been getting a lot of tweets about recently, especially today. Look at shares of go pro, the maker of action cameras on a fourday winning streak. Its hit a record post ipo today. Over 78 a share. Shares are near session highs right now and theyve more than tripled from their ipo price of 24 a share, meaning the company is now worth a whopping 10 billion. Wow. What a trajectory that stock has been on. Thank you. The fed, the economy and your money. Forget the first rate hike. Theres one other thing that investors need to worry about and well explain what it is. Plus making money in marijuana. You think you want to open a pot business . Think again. What every budding pot entrepreneur needs to know. And we want you to join the conversation. Should marijuana be legalized by the federal government . Go to cnbc vote. This is a burrito made with chocolate, soybeans, and apricots. What kind of chef comes up with this . A chef working with ibm watson, on the cloud. Ingredients are just data. Watson turns big data into new ideas. And not just for food. Watson is working with doctors and bankers to help transform their industries. Today theres a new way to work. And its made with ibm. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Welcome back to power lunch. We are seeing a nice rebound here for the dow jones now up about 92 points off of its session high. After two days of losses in the dow, we are seeing a nice little win for today. One notable area of weakness throughout the market is the energy sector. Energy stocks are the worst performing in the s p 500 toda. , you got big names like transocean, diamond off shore with regard to riggs. Range resources and noble corps as well. A nice day for the overall market but Energy Stocks taking it on the chin. Bed, bath and beyond. I like the bed department, the bath beyond but t bath but the beyond is where i really do my business. The home goods retailer giving an upbeat forecast for the full year. Walmart pushing further into financial services, launching a mobile Checking Account for its customers that will lieliminate some of the fees charged by banks. Reports walgreens may sell a majority stake in its Infusion Services business. According to reuters, the deal could value that unit at about 1. 5 billion. Sue . Stocks posting some gains today. The dow up big. The nasdaq and s p 500 higher for the first day in four. Gold is getting ready to close and its been under pressure, you can see down 2. 40. We have Team Coverage for you. Bertha, were going to go to you first. Yesterday a lot of traders were concerned about that death cross happening with the russell 2,000. Today were seeing a rebound, a bit of buying there when it comes to the small cap and big at the nasdaq as well. Thats leading the way higher. Were getting a nice boost in terms of caps from bed, bath and beyond. The expectations raising expectations. Deloit seems to be boosting retailers at the nasdaq in general, saying they see Holiday Shopping up four to four and a half percent. You can see them moving higher. Biotechs are really the big sector. They get hit hard when people get scared and today they are leading the way higher. You actually have vertex at a new high and ma tell is the big loser. Disney is going to go with hasbro for frozen dolls. Ma tell getting frozen out. Back to you. Thanks bertha. The gold market is getting ready to close. Jackie has the action for us from the nasdaq. Good afternoon. Gold is getting hit a little bit today under pressure. Weve got that stronger dollar. Certainly the biggest factor, the dollar at a four year high. Geopolitical fears spiking golds yesterday. That seems to be yesterdays news. The 1220 level was key in terms of that and 1185 is the new level were watching. Thanks, jackie. Lets check on Interest Rates on the back of the fiveyear note auction. Sue, when an option didnt go well that probably is something that to tell the market for and indeed as you look at today you see the old guy sold off, moving the geo up, catching up to the new guy. You can clearly see september 5th of last years 185 high close is what the market is resting against and seems to find resistance. Sue talked about foreign exchange. Jackie talked about whats going on with the dollar index. Heres why. Look at the euro versus dollar. Back to you. Thank you very much. Take a look at this oneyear chart of a stock price. Ponder it. Now look at the statements right next to it. Here it is, a little quiz, folks. Was the best time to buy that stock in september . True or false . Did the share price increase about 50 over the year . What does the chart say . Its a sample question from a test given to hundreds of thousands of 15 year olds around the world and it has become that test, a yardstick, for evaluating the quality of School Systems. The u. S. Routinely underperforms despite outstanding most other countries on education. Do you know the right answer . Well give you that and the man behind the test next. And you can join the conversation. Why does high spending not correspond with higher u. S. Test scores . Why dont we do better . Go to cnbc. Com vote. [ male announcer ] automotive innovation starts. Right here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a newly redesigned cabin of unrivaled style and comfort. The allnew cclass. At the very touch point of performance and innovation. At the very touch point of performance and innovation. Take and. Exhale. In. Aflac and a gentle wavelike motion. Aahhh ahhhhhh. Liberate your spine, ahhhahhhhhh aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. Find out how fast aflac can pay you, at aflac. Com. Whenwork with equity experts who work with regional experts who work with Portfolio Management experts thats when expertise happens. Mfs. Because there is no expertise without collaboration. Welcome back to power lunch. Were on the floor of the new york stock exchange. Dow up over 100 points. The weakness is in the Energy Stocks. Brent was 115 a month ago. Right now 96. This is a twoyear low. Lower demand, more Energy Efficient cars. The u. S. Is a big producer. This is putting pressure even on domestic oil stocks but particularly Exploration Companies are weak again tonight. This is part of an ongoing process. The important thing to remember is if youre an investor in oil its not good. But lower oil is good for the u. S. Economy and good for the consumer. We cant say that often enough. Thank you very much. Before the break we asked you a question from a test given to hundreds of thousands of 15yearolds around the world. So which statement is true . September was the best time to buy. Thats true. But the stock price did not increase 50 over the year. So that answer is false. Every three years the pisa survey tests kids in math, reading, science and more. Over 500,000 15 year old took the test in 2012. It has become a yardstick for evaluating School Systems throughout the year old and the u. S. Routinely underperforms in it. The u. S. Ranked 27th in math, 17th in reading and 20th in science. Yet, we spend more per student than most countries do, 115,000 tuesdays annually. So why doesnt that translate into better performance. Andrea slieker is the head of the program at the oecd. Why do you think that high spending does not correspond with higher u. S. Test scores . Go to cnbc. Com vote and cast your vote. Andreas, why are we underperforming . If you look at a high performing Education System in east asian or europe or canada, they spend their money differently. They prioritize the quality of teaching over things like the size of classes for example. If they have to make a choice, getting a better teacher rather than a smaller class, they go for that. They also are typically better in aligning their resources with the challenges. They are good at attracting the most talented teachers into the most challenging classrooms. They get the best principals. And we do not do that . No, exactly. The United States typically has quite a regress sieve spending pattern. Basically students in better areas often have the better teachers and resources. The students who need more resources get less offered. The third factor, the United States actually spends a lot of resources on things that do not arrive in the classroom. At the end of the day only what happens in the classroom can have an effect on learning outcomes. So most high performing Education Systems typically spend a smaller share of resources for things other than teaching. Whos doing it best around the world . What countries are outperforming . Well, actually, the east Asian Countries do all very well and they have actually seen rising performance in recent years. Finland is great performing but you cannot forget canada. They have seen remarkable results and in some areas actually improving results. Its all across the globe you can see Education Systems that have High Performance and also provide quite equitable performance in terms of ensuring that students from all social backgrounds do well and they have actually provided good value for money in many cases. Theres a lot of controversy here in the United States about whether standardized exams really matter, whether they actually reflect what a student knows because the kids are under a lot of pressure. They tend to, some of them, freeze up in those exams and the criticism has been it does not reflect what the child knows. If you look at global exams and high stakes exams provide very important signals. They tell students what matters, they tell parents and teachers what matters. So i wouldnt be so dismissive. I think theyre powerful in ensuring for example that theyre focused, coherent, rigorous, demanding, so of course if you put too much weight on them they have negative effects but overall in most high performing Education Systems would have more rigorous exams than you typically have in the United States. High school exams can be very tough. Do those School Systems also balance the academics with the cultural experiences . One of the criticism of the Asian Countries is that the kids are in school for a much longer period of time. They dont do any outdoor activities, any extracurricular activities, its all academics. Theres also a high rate of suicide in some of those countries among kids. I think that criticism is true. Theres a lot of pressure on kids to succeed academically. But you could argue that probably the truth lies somewhere in the middle. The United States has gone to the other extreme. You enter into a high school and you can see all the sports trophies and what does it tell the student thats good in math . Its probably a question of balance. Andreas, thank you so much. 21 of you said basically why does high spending not correspond with high u. S. Test scores . Poor teaching 22 , poor parenting 28 and testing over learning was 24 . Interesting. Dominic chu is with us now. For those of you apple users who are trying to upgrade to the ios 8. 1. 0 operating system, we are getting reports that when the update is complete some u users are finding that their Cellular Service has been turned off and the finger print identification may not be, windowing. Tech crunch looked at this and there are social media reports about this. Take a look at this at analyze says cellular was killed for me as touch i. D. Phone is basically useless. Also like at some other tweets as well. This says great, my touch i. D. Is broken, also again, i jumped on the ios update. Bad move. Now i have no Cellular Service or touch i. D. Again, it appears as though from multiple reports and also from the tweeter sphere, the social media universe that upon upgrading to the ios 8. 1 operating system, that there may be a situation where Cellular Service on the phone is turned off and also the fingerprint identification may or may not work. I would just say that we have one of our Newsroom Associates here who did do the update, and he said that he found the same thing, that his Cellular Service was again not able to work. So weve reached out to apple for a comment on this. No Immediate Response yet from apple, but tyler, we will get back to you with any sort of reaction from apple or any of those developments on this story. Back to you, tyler. Dominic, thank you very much. While wall street is fretting over the timing of the feds first rate hike, the real concern is Something Else and hell tell us what it is when we come back in two minutes. Who do you work for . Your boss . Yourself . Your parents . Your family . At baird, what matters most to you. Matters most to us. As an Employee Owned firm, our Financial Advisors have the freedom and resources to realize a plan to fit your familys unique needs. Well listen. Well talk. Well plan. Baird. Hello. You can go ahead and have a nice flight. Re. Music plays music plays traveling can feel like one big mystery. Youre never quite sure what is coming your way. But when youve got an entire company who knows that the fewest cancellations and the most ontime flights are nothing if we cant get your things there, too. Its no wonder more People Choose delta than any other airline. Machines will be sprayed to be made. And making something stronger. Will mean making it lighter. One day, factories will work with the cloud. One day. Is today. Competing when it comes to endowments. Harvard is still the largest in the world at over 34 billion, but it came in with a return this year of 15. 4 . Really nothing to sneeze at. Lets get a shot of this. This is vintage power lunch right here, old school. Why do you always use the word old . Old school. How about seasoned . Fed watchers are working to predict when a rate hike might come. New Research Shows that the number of rate hikes, not when, may be the better market indicator. Our cnbc contributor ron insana joining us for a deeper look. So its not the first the first hike is not the deepest . No. If you look at the work of edsund gold, they used to talk about a technician who studied the market from the 1930s to the 1970s, extraordinarily precise individual, he came up with a rule called three steps and a stumble. The market tends to be lower as you move farther out on the calendar. From 19 when you raise rates three times and go out 18 months the markt on average is down 17 from the third rate hike. From the third rate hike on . Yes. Is there a difference this time potentially because were coming off such a low floor . We dont know except we have one percent as the floor of the last rate hiking cycle. The fed raised rates 17 times over the course of a couple of years and starting with the third rate hike, if you looked over 18 months the market was considerably lower than it was before. This is what we need to watch. I still happen to think the fed goes later rather than sooner and i think there will be a lot of reasons for that inflation still falling. It is that three steps and a stumble that people need to worry more about. Than the timing of whether its may or june. Yeah. Quickly, is it different this time because theres so much more transparency at the fed and theres been so much more talk from the fed, communication from the fed . It could be because when we first started doing this the fed didnt even tell you it raised rates until after it did it, so now were going to get the teaser before it even moves. Because were at zero there would be heightened sensitivity. You can find more on rons piece an cnbc. Com. Up next the hurdles entrepreneurs are facing opening up marijuana business. Join the conversation at cnbc vote. The power returns. We have a trple digit gain in the Dow Jones Industrial average. Back in a minute. Teacher of the unteachable. You lower handicaps. And raise hopes. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. pro nice drive. vo well played, business pro. Well played. Go national. Go like a pro. I lochecked bag. Free with my united mileageplus explorer card. I have saved 75 in checked bag fees. Priority boarding is really important to us. 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Find new ways to save energy and money with pg es Business Energy checkup. Could mean less waiting for things like security backups and file downloads youd take that test, right . What are you waiting for . You could literally be done with the test by now. Now you could have done it twice. This is awkward. Go to comcastbusiness. Com checkyourspeed. If we cant offer faster speeds or save you money well give you 150. Comcast business built for business. Headlines for you now. Morgan stanley downgraded from overweight. The price stock is at 34 down a third of a percent. Buffalo wild wings citing up almost three percent. Star bucks said it will buy the 60 that it doesnt already own in a deal valued 913 million. Do you want to be a pot entrepreneur . Its turning more difficult to set up shop to sell medicinal marijuana. Join the conversation at cnbc. Com. Well let the vote run a little bit. 80 of viewers say, yes but tell us about the difficulties. Getting in on the can bus industry isnt so simple. While theres tons of cash to be made if all 50 states legalized cannabis today, they would collectively pocket more than 3 billion a year in taxes but they have an uphill battle to climb. I think people dont understand the risk that you take. Personal Bank Accounts are shut down. Its not just that i cant get a business account. It was almost impossible for me to refinance my home. It affects every aspect of your life. One of the big issues is pricing the product. In new york city state for example, the department of health is setting prices. This has some concerned that if the prices are too high, buyers may once again look to the black market. Expect to be audited and know that you cant deduct business taxes. Our third issue, legality. Its a huge concern. Medicinal marijuana is technically illegal under federal law. Thats why there are such tight headlines for entrepreneurs so they dont get under water. I imagine all of these states are very closely regulated. In the town i live in new jersey, i believe theres one dispensary. Theyre hard to get the license for. Thats why new york state is taking the next 18 months to set regulations. Thank you very much. Lets lock in the vote. There you see its lopsided. 83 of cnbc viewers who responded today said that the federal government should legalize marijuana and only 17 said no. We have a big rally on our hands on the markets. Lets get you caught up. The dow is up 123 points. The s p is up about half a percent or about 12 points on the trading day. The nasdaq composite is up 40 points on the session and thats the biggest percentage gainer of the majors. In terms of Interest Rates and some of the other factors that we follow, the tenyear note saw a yield of 2. 54 after that fiveyear note auction. Its 2. 55 so we have seen the years old move up a tad on the trading session. It has been a bumpy week for stocks, today a little bit of a turn around. That will do it for power lunch. A blowout number on new home sales. We say what it all means for the beaten down Home Builders. Quite a situation for the jersey shores the situation. Well talk about it. And announcing the rollout of go bank today. Were going to talk to them about the pros an cons. It begins after the break. This is kathleen. Setting up the perfect wedding day begins with arthritis pain and two pills. Afternoon arrives and feeling good, but her knee pain returns. Thats two more pills. The evenings event brings laughter, joy, and more pain. When jamie says. Whats that like six pills today . Yeah. I can take 2 aleve for all day relief. Really, and. And thats it. This is kathleen. For my arthritis pain, i now choose aleve. Get all day arthritis pain relief with an easyopen cap. Housing stays hot as stocks break their losing streak. This has the fed starts to splinter and we may finally have reached peak app. Well also talk about whats going on in the markets. Look at that rally. More in a second. A huge housing headline helping us move higher, new home sales jumping by 18 last month. When you consider how badly a lot of the Home Builders have been doing lately, they sure could use a headline like this. They absolutely could. This was a big one. As soon as it came out, the reaction was that this is either, quote, unbelievable or one analyst even called it noise. Everybody is pointing back to may when we saw