yeah, transports yesterday, it was the two-year anniversary of the last record high, so they are 3.7% away, but up 20 for the year. it's double what the russell has done. >> a key component of any broadbased market rally. >> we'll see where the afternoon takes us. let's get over to scott wapner and "the half." >> carl, thanks. welcome to "the halftime report." i'm scott wapner. the state of the trump rally and whether it's simply pausing or ending. with us for the hour joe terra nova, stephanie link, pete najarian, josh brown. want to begin with the major averages, which after hitting more records, a bit of a spinning your wheels motion today. dow jones industrial average up 31. s&p picking up a little bit, adding 7. the nasdaq up two-thirds of 1%. the russell after he wanteding its 15-day winning streak is back at it today. the question, pete, is whether some of these leadership groups

are strarting to show signs of cracks. the materials, the financials. some groups that had run a lot. >> i still like the financials. i still like the financials. i think the materials, yeah, they are way out in front of themselves. that doesn't mean that that means it's the end. maybe they pause for a while. you can see it happening in the steel stocks, for instance. today there was also a down grade out there. if you look at the financials, the financials have been absolutely on fire, and i'll tell you, the other thing is we talk about and we focus all the time on volatility, right? i talk about volatility. here we are back underneath 13. we're in an extremely low volatility in terms of the measurement of the s&p. look at the ovx. look at oil volatility. it went from 33 to 55 in a short period of time. one month. that just gives you a little idea how much volatility you have in that energy space right now, and obviously with opec in front of us, that's part of it. there's been a lot of this building in because the range is there. the moves in oil have been absolutely extreme. >> what about this notion that some of the leadership groups are looking a little bit dicey

all of a sudden? >> sure. so i want to say something about that that i think is maybe my biggest take-away. it's that what we're witnessing -- let's just use the xlf. i can do this sector by sector. let's talk about the big banks. they had an 11% move in the four days after the election, which is an incredible move for a group that really hasn't done that in a long time. it was like this huge spurt of performance, and then it stopped on a dime. importantly, scott, it's been consolidating masterfully since then. we are now in the xlf trading exactly where we closed ten days ago. you want to see that consolidation and the constructive going forward. that's exactly what should have happened and did happen. these banks are not giving anything back. i think that's an important key. one other thing. nasdaq 100 is the only major u.s. average that did not print an all-time high after the election.

>> it's the people that want their gain taking it, and not with a huge amount to sell. >> the sectors that have led have been the cyclical sectors. as the economic data points continue to get better, and we have seen that. just today we got consumer confidence and a cyclical high. gdp. a lot of the regional industrial data series that we look at, they've also been better than expected. yes, it could be volatile. we have the job number on friday, and we have to get through italy. we could see volatility.

>> you make your list on the cyclical side. >> the state of the trump rally today is blank. what would you say? >> the state of the trump rally is consolidating exactly as josh said, and i think looking forward into 2017 the question is how exactly do you formulate your portfolio for 17 anticipating less regulation, anticipating more money in the consumer's pocket, and i think consumer confidence, the reading that you are seeing there, that's anticipating what could be very favorable in 2017. i agree with pete. >> all you -- this is a pause, not the beginning of an end. >> where i disagree is the fact that we're calling it a trump rally as opposed to a post election rally. if it were a trump rally, then you would see much more participation out of something like the drug stocks, which allegedly are saved now from hillary. i think it's just this idea -- >> initially you did. >> hold on. >> initially you did. >> i think it's this idea that the biggest thing of uncertainty that everyone was concerned about other than the fed is now

in the rearview mirror, but the trends that were in force and james mcintosh at the journal had something really key about this in the -- the trends that were enforced just accelerated on the heels of the election. the ten-year yield was already rising. you already had banks challenging their year high. i think a lot of these things were accelerated after the election. >> carrie firestone is with us. welcome back. nice to see you again. what's your take on the rally? >> i think it's a gdp rally. we've been talking about how things are getting better, the consumer is spending more, they had to revise up. we've been saying this for a while that we have had so many people go back to work. millions and millions of people over the last, you know, eight years have gone back into the work force. they're starting to make more money. they didn't want to spend the money. companies didn't want to spend the money, and then everybody is loosening up a little bit. election is behind them. i call it a gdp rally. >> despite the impressive run, market watchers are divided on the strength of the rally. let's get ready to rumble now.

senior markets commentator mike s santoli believes it runs deeper than the trump presidency. from destination wealth management, he is one of barron's top independent advisors. he has several reasons why the rally is in trouble. guys, welcome. i'm a fundamentals guy. i'll need it to your bright pam there. i think stronger dollar is going to impact earnings. i think earnings would impact stocks prices. yeah, you're going to have more money in consumers pockets, but i think when it comes down to it, i think company earnings could be under pressure going forward in the first quarter. particularly as companies start

providing earnings warnings based on stronger dollar, stronger currency. i think that's something that really needs to be kept in mind as we rally all-time highs. >> maybe mike santoli, maybe we're missing the point of the rally. maybe it's not solely based on trump's election at all. maybe it's just based on improving economic conditions coinciding with an election that's over. >> yeah. i'll guarantee you it's not solely about trump's election because as josh was just saying, a lot of these trends were underway. i absolutely think trump's election tantalized certain sector moves, and maybe you got more of an accelerated and magnified move in certain areas. by the way, the stuff that's led, the stuff that's done the best is also the stuff that seems like people were under invested in. essentially everyone was caught too defensive in general, and too defensive more specifically in areas like the deep cyclicals, and maybe the financials as well. i think all that stuff played out, but if i told you six months ago, scott, that the third quarter was going to grow

3.2%, fourth quarter is on track for 3.6. earnings recession over. top and bottom line turning higher. high yield spreads do nothing but compress even more, and we see the fed heightening in december, and the market seems okay with that. i would say, sure. i think the s&p should be up 7.5% year-to-date. why not? i don't think you necessarily need a lot of policy hopes and wishes to be built into stock prices to explain why we're here right now. >> okay. michael, you're a fundamental guy. mike santoli just listed the fundamental reasons about why we should be where we are. >> people are asking not is the rally reasonable for what's happened, but it's is this rally going to continue? my contention is that the likelihood of the rally continuing the way it has. what we don't have clear direction in terms of legislative agendas that are going to be passed, and, again,

i hate to keep harping on this, but the stronger dollar as it impacts earnings, i just think there's more of a headwind for additional increases from where we're at now. does it make sense that the market has gone up? i think it absolutely makes sense over the short-term that the market has risen, and i do think that it might not be a trump rally. ist more of a relief rally. we were expecting the s&p to go up 5% to 10% this year. it looks like it's going to go up 5% to 10% this year. i just see more head winds -- more head winds ahead of us in terms of the next leg of the rally. i don't see what the catalyst is. >> it's josh brown. so we had an "earnings recession" the last six or seven quarters. we've just climbed out of that. part of that obviously was the crude crash. i think smart people were able to say, hey, this is not a total s&p story, but part of it was the strong dollar. you alluded to it. it turned out to have been a major buying opportunity. that's short-term. long-term, there is zero. not negative, not positive.

zero correlation between stocks and the dollar. that's a bankable thesis out more than six months. we had a rising dollar in stocks in some periods. a falling dollar rising stocks and every permeantation you can imagine. why should we harp on that rather than things like earnings growth, et cetera, longer term? why should we let that dissuade us from being involved in equities given where interest rates are and what economic growth looks like it might want to do? >> if you are a long-term investor, it should not dissuade you from investing in had equities. if you are looking on the short-term, if you are looking at the three and six month time frame, strong dollar -- forget i said strong dollar. just look at it from this perspective. dollar impact on earnings. i believe company earnings are going to be impacted by the strength of the dollar. i believe company earnings are going to be impacted by global uncertainty, and for that reason i think the market is already pricing in strong earnings based on a stimulus, but isn't pricing

in the other counter variable, and that's where i think the market is really ahead of itself right now. >> we have two michaels. >> the handsome one. >> yes. exactly what strategy are you suggesting for our viewers in that environment, because i'm a little unclear about that? >> are you talking to me? >> am i the handsome one today? >> yes, you're the handsome one. >> thank you so much. i think the names that have sold off and i know this is going to sound crazy, but the names that have sold off, the dividend paying assets, the more conservative assets, i think what you do is you rotate out of some of the names that have run significantly so, some of the cyclical names, and you rotate into some of the other names that haven't done so well. the consumer staples names and even technology names. the am zbrazons of the world, t apples of the world that haven't done as well as maybe some of the other more cyclical names. i think that kind of rotation makes sense. it's a rebalancing strategy.

it's not a buy off buy on. it's a rebalance strategy. >> guys, just to jump in right there, i think one of the more interesting effects we've seen both before and after the election is consumer leverage stocks. right? there's not a real kind of direct policy story there. it's not about infrastructure. to me the consumer related stocks, the retail run that we had into black friday was much more about recognition. the consumer is in decent shape. you have wage growth. maybe there's a psychological lift or maybe the result of the election for some people. what you did see is those groups benefitting. that's more interesting to me. it's not all about just what the deficit is going to look like next year and are we actually going to build a wall. that's something to watch. >> what are you thinking about in terms of margins? i get your whole point about earnings. i totally agree. i think stocks follow earnings. i actually think that margins can actually stay pretty firm, and especially if you get better gdp growth. that's an offset to your stronger dollar concern. where are you on margins on

that? >> well, i think margins are going to be okay. i don't think they're going to be great. my contention, stephanie, is that margins right now -- the market is pricing in very strong margins, and it's not taking into account the headwinds that we're going to see in margin expansion. remember that all of this is really based on an expectation that we're going to have a legislative agenda where we're going to have more money in consumers' pockets. that's probably going to be the case. we're also going to have higher interest rates. granted, they're going from ridiculously low to very low. there are going to be higher interest rates. it's higher financing costs, it's higher consumer costs. i think the increasing interest rates story also will impact markets, and i think that's going to be a head wind for the rally. i still think you want to be in equities. you want to have dividend paying assets in your portfolio. don't get too excited about the rally. it's not going to go up like this forever. i think that you're going to see

a recognition at some point that things are not perfect. they're probably pretty good, but i think the market right now is rallying as if things are virtually perfect or going to be great. >> thanks so much. mike santoli. appreciate your time as well. all right. so what do you buy then? if you think this rally is based on fundamentals, that clearly makes the case that you think you can keep going. where do you want to be? >> well, one point that we haven't talked about yet, which relates to margins as stephanie suggested, is who can raise price? we're talking about costs going up if they're labor costs, and there are commodity costs that have gone up. remember, we're in an environment where we haven't seen inflation for a decade. now we're going to see a little bit of inflation, and there are definitely going to be winners and losers there. people who can raise some prices. whether it's on a consumer product, like netflix or apple or if ups can raise their

prices, or commodity companies can raise their prices to miners, and we're going to start to see that in the next six months. particularly in areas where there has been deflation in pricing, and i think that's a factor in the market. >> this notion that, okay, you've had this great rotation from out of favor sectors into ones that now have -- what about the thought that -- the so-called yield plays that have been dumped back in favor. >> yes, that's right. especially consumer staples. they're actually close to their average. they're not even cheap yet. they have pulled back. they do have clear issues with regards to the dollar. they don't have as much pricing power. i don't know. the staples side i think is very hard. maybe if you want to take a look at some of the telecom stocks because those stocks are still very cheap at at&t and verizon type of thing. >> the pitch is overseas.

the whole notion that the dollar is going to repeat what it just did every single month going forward. first of all, it's not the way -- it's not the way it works, number one. historically. number two, even if it did, not every emerging market, not every foreign country has all of their reserves in such a state that a dollar rally is necessarily net negative. i think that's where there are better valuations. i think it's uninvolved with the trump trade hysteria, and i think that that is where you are going to make some money. if you think about total return, dividend, plus potential upside capital appreciation. the s&p at a 24 backward looking multiple at a ratio of 27, look, you keep going up. it's not a cheap market right now. i think if you are thinking about five years and ten years, you have to be thinking international. if it's the dollar that's keeping you out of that, you are going to underperform. that's it. >> i guess the question with that would be how much of your exposure is going to be in the emerging markets? historically right now there's

not that significant amount of the percentage where you are going to move away from the s&p. you are going to put 50%, 60% of your holdings in the emerging markets? >> why would you do that? >> exactly. you are going to have to find other pockets which brings you back to the s&p, and i would say the more diversified strategy of not just classifying a particular sector and saying, okay, consumer staples. i don't like them as a sector overall. i think within consumer staples, you could find select stocks that are going to do well. >> i think that's the environment right now. we talked yesterday about smucker. i believe cvs right now. i know jim talked about walgreens. i think cvs will make a turnaround story. i think you can make a compelling argument for select equities in each and every sector, and i think that's the right strategy. >> isn't that what we do each and every single day. that's what we do. >> with less specificity. >> that's what we do. right? we don't always say, hey, i have the financials. you don't buy all the financials. there are some doing great. you look at the earnings story. if the earning story supports it

and you get the yield and you have the growth, whether it's technology or in the final sector, which i think are the two best sectors, we want to dig a lot deeper. i'm very rarely an etf guy. >> some look exhausted. >> the market with that exhaustion, though, we already know the earnings from last quarter. going forward knowing what mr. trump and this new administration is likely going to do, don't you think financials look awfully cheap still, and you get a yield. if you look at a jp morgan, some of the names that got beaten up, maybe it's wells fargo. was that oversold? probably was. look at citi and bank of many earning. way underneath its book value. there are opportunities out there every single day. >> absolutely. and to that point, instead of saying, okay, how are we going to formulate this portfolio, what do you want to throw out of the portfolio? what's the asset class you don't want to have? i agree with josh. i think the fact pitch could be in emerging markets. you want emerging markets and domestic equities. you want small caps and large caps. there's a connell pelg argument

for all of this right now. tell me what you don't want. >> i don't know if you want energy. >> you want any of the metals or materials after the one they've had? >> i think, again -- >> you want a steel stock? >> you could have made a negative argument. coal stocks are 115%. does anyone own them? no. it was a bankrupt industry in january. now it's leading the whole market. energy is the best performing sector year-to-date. the narrative answers to what you want were much better. the rearview mirror. do not work well on a go forward basis. to joe's point, when we say, oh, i don't want staples that are expensive, look, we're not saying throw the whole sector out. of course, there are opportunities. the point is it's not a target rich environment when the median pe ratio in a sector that historically sells for 13 is 23. that's all we're saying. >> on energy, i mean, i think you obviously have to be careful in the near term. we don't know what's going to happen tomorrow. it's binary.

that said, some of the stocks, some of the high quality names, they've come down now about 5% to 8%. an eog or concho or chevron. these are names you want to have on your shopping list for days like tomorrow. if it doesn't go through with opec, they're going to get hit hard, but if you have a longer term projection, like i do, i think you really want to be involved in these names. especially if you think gdp here is going higher, and globally you are going to get fiscal policy on top of monetary policy. that will be very positive to 2017-18 for the commodity sector. >> here's what else is coming up on "the halftime report." >> health check. plays making key calls in the sector. we're talking about two big names next. one getting an upgrade. the other a cut. and smelting for the stocks of steel. a chance to get, in or a sign to sell? before the break, after q3 gdp came in at an annualized rate of

2.3%, our partners at kensho report when gdp is in the 3% to 4% range, energy stocks fair best. materials and telecom have done well. the s&p has jumped more than 5%. consumer staples and health care underperform. top performing stocks and a 3% gdp world. goldman sachs, apple, home depot, caterpillar, and united health. for more on this, go to cnbc.com/pro. st shopping experiences. they're your customers. and by blending physical with digital, cognizant is helping 8 of the 10 largest u.s. retailers meet their demands with more responsive retail models... ones that transcend channels and locations, anticipate expectations... creating new ways to engage at every imaginable touch-point. it's a new day in retail, and together, we're building the store of the future. digital works for retail. let's talk about how digital works for your business.

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>> welcome back to "the halftime report." barclay's today making big moves in the pharma space. that firm upgrading pfizer to buy. downgrading johnson & johnson to hold. it's our call of the day. pete, you own pfizer. >> i have owned it for a long period of time. i wouldn't be shaking out, for instance, if they were on a downgrade of this right now. i appreciate what they're doing. they lifted the target 37 to 38. they talked about the innovation side of it. one thing you always look at, we talk about pipeline. one of the things they're focused on is the oncooling sidsid -- oncology side. what do they want to do exactly with that cash? should it be more on the innovative side or go over to the generic side? they're saying on the innovative side. that's where the right place is to be, which means are they going to do any kind of smaller acquisitions of some sort? maybe even bigger. that could be a possibly. plenty of cash on the balance sheets. there's a lot of reasons that i like what i see in terms of pipeline and the cash position right now. >> they tell me, steph, you're

bailing on -- on the downgrade? >> no. i started selling it last week. i think it's been a great stock. it's up 10% year-to-date. it's trading at 17 times forward estimates. they are about to embark, it sounds like, on a big acquisition, which would applaud. however, don't know the price or the -- i think there are other places in health care, other pharmaceutical stocks, other biotech stocks that are much cheaper and have gotten hammered. they upgrade alexion. that one i do agree with. the stock is down 36 periods yeperiods -- 36% year-to-date. >> you say you like allergen over pfizer. we want to have that conversation. >> we could. i do like allergan. that stock is down 30 plus as well. it's trading at 12 times forward estimates. their profits are not focused on the government reimbursement. they don't have as much pricing concerns as some others. they have a $10 billion buyback. i actually think that one you got to stay patient. alexion and allergan are

volatile, but they have to stay patient. >> j & and pfizer who are really in the midst of the conversation about repat yags of capital. j & j, they have $40 billion. it's over 90% of their cash balance that's overseas. i think bringing that cash back here is going to allow them to really develop and go out and initiate some growth strategies. steph mentions the potential acquisition here for the swiss biotech. talking about a price somewhere around 25 billion. yes where, in the near term. you're talking about j & j. it has had one spectacular run. it's now pulled back, i believe, from the august highs about 10%. i'm not necessarily sure that there's more down side here. i think you want in building this longer term looking forward to some of the things like repatriation of capital. pfizer, real quick, again, they are the second largest large

farm kwa company having overseas cash. they have over $20 billion. it's about 60% of their cash where it sits overseas. pfizer and j & j, they're number one and two here. repatriation. they're going to benefit. >> you also have some tax laws going on here. this is one of the few yarsz in the market where people have -- they're very high quality companies. i think there's going to be a balance in these names short-term. what joe was talking about, you want to be in the best charts. you want to be in if strong stocks that are getting stronger but are not yet overbought. i have got three large caps only in the pharma sector that meet that characteristic. santa fe, advi and merck. on the biotech side, you have insight. you have celgene and biogen. these are stocks that are accumulated while the rest of the sector are being sold off. these are the ones that involve the most if and when this sector finds momentum. >> yeah. i just like to enter

bristol-myers stock. came way down. over done because of a drug trial that i think they blew. great franchise in cancer. larger multiple. that's very attractive. >> tiffany is having its best day in more than a year today after a surprise earnings beat. is the high-end consumer back in the game, and how do you play that? plus, bullish call on duncan. a healthy outlook for a big health care name. our blitz is just ahead as well. ♪ if you're on medicare, remember, the open enrollment period is here. the time to choose your medicare coverage begins october 15th and ends december 7th. so call unitedhealthcare to enroll...

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>> welcome back. let's do the blitz now. first up, united health gave a strong outlook for 2017. that's ahead of investor day. steph, you own the name? >> i do own the name. very pleased today. revenues margins. earnings. this is just the bellweather in the group. it's up to 33% year-to-date, and it's trading at 19 times forward. i think there's better value in signa, which is down 6% on the year, but much cheaper valuations and huma as well. kind of leaning towards the other ones, but i'm holding on to them. >> downgrading for steel. not surprisingly. >> given the runup we've had, it's unbelievable. you look at something like u.s. steel in the last month.

you look at some of the numbers. i understand the downgrade. i understand the violent move to the up side. i don't agree actually because i think any kind of an opportunity to get in these names i still any there's upside. we had activity just yet. i'm still in there, and i think there's an opportunity to actually buy it on the -- >> josh, merrill goes price target higher on duncan. >> yeah. this is one of my best stocks of the year. it's up about 27% year-to-date. it's right at all-time highs. they've added some executives from being many donamcdonald's in terms of their franchisees. the company still faces a lot of competition, but we already know that. in the meantime, they're executing, and they're communicating with the street better than they have been. i'm staying long. >> joe, positive surprise from tiffany? >> well, global luxury spending is turning up. ldmh told you that. gucchi told you that. this goes back to what josh is talking about with emerging markets being the layup is asia

pacific. really we're strong on these numbers. now, specific to tiffany, the stock has had a heck of a run. trading somewhere around $81. we want to take something off. i'm fine with that. still needs further guidance on how much they're going to be impacted. obviously with the fifth avenue store. >> they're cautious about that. >> stock-specific of tiffany's. more of a macro -- more of a macrostandpoint. there are really strong evidence here that things are turning up where. >> fading all day, by the way. not a great -- >> carrie, give me your outlook on the financials. >> financials a group where there's price inflation. you have interest rates going up. that's good for them. silicon valley bank. that's a stock we like. it's in california. guess who also was in california? wells fargo. they're getting plenty of business from wells fargo customers. the venture capital community raised $79 billion this year it looks like. that's good for them. the employees and partners of those firms and the companies that are borrowing, and we continue to like that stock.

>> all right. oil is falling ahead of tomorrow's key opec meeting on reports iran will not cut production. one trader, though, is actually buying today, and we'll tell you why. before the break 52-week highs. quest diagnostic, and humana, among others. more just ahead. alpha seems more elusive today. is it because so many go after it the same way? chasing after short term returns. instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor, to seek out global opportunities. we manage over a trillion dollars this way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential

>> the delaware lottery is refusing to honor the tickets, blaming a computer malfunction. we'll keep you posted on that one. that's the news update this hour. i'm going to send it back to you, scottie. >> thanks so much. let's talk about apple now. ubs's analyst steve -- put a note out saying there may be near term down side risk to current iphone estimates for december and march. the stock hasn't really participated at all since the election. it's only up one-half of 1%. a lot of these big name tech companies vbt done well since the election. what about this? >> i look forward because i think everybody else is starting to look forward. i mean, here we are pushing on december. he is focused right on the -- right now, and i think everybody else seems to be looking at, hey, look, we're starting to

talk about the eight already. that's where everybody has focused. now, i know that six months out, but that's what everybody is looking at. you look at the suppliers and some of the news stories out there about the eight. some of the flexibility of the screen and how it's going to have wireless charging and all these other great things that potentially are there, and i think that's the -- >> are you waiting for the eight? >> i own this stock. i will continue to own this stock. >> if you didn't own it here, what would you do now? >> i would own it. i would buy it. >> ahead of the eight. >> i think if you own it, it's a cheap stock, right? we all agree that it's cheap on a pe basis. it's got tons of cash. if there's any benefit to having that cash, you bring it back. it's a good thing. would i buy it now if you didn't own it now? not in the next few months. i don't think there's any big catalyst for apple that we see. >> cheap is cheap, though. >> of course, it is. this is why -- well, that's why we own it. there may be names that over the next few months perform better. i don't think it's a screaming buy right here, but i think it's very attractive at the price. >> i am long the name. i think the stock goes higher. we've seen it trade up 20 points

from july up until the last month. it's minutes away from breaking back above its 50-day moving average. this is a stock that sometimes needs a catalyst. sometimes doesn't. very, very irradic for a giant market cap. >> breaking news regarding the fed right now. dom has the details. >> here's what we have, scott. fed governor jay powell is the latest to weigh in and seemingly point towards a rate hike in the fed meeting in december. in a speech he is delivering in indianapolis, powell says the case for a rate hike has clearly strengthened since the fed's november meeting. he also says the economy is reasonably close to full employment as well as the fed's 2% target inflation rate. he thinks also the fed's patience in raising rates has paid economic dividends, although he adds that the economy does face medium and long-term challenges against -- he warns, though, against raising rates too slowly saying it could mean more bankrupt tightening later on, so just the

latest comments coming from a voting member. this time governor jay powell. dploo back to y boo. back to you. >> we are checking in on the halftime portfolio challenge. coming up, one of our traders is up 30% this year. we're going to get his strategy next. first, brian sullivan has a look at what's coming up on "power lunch." >> coming up at the top of the hour, deal or no deal? oil tanking right now. all on new doubts opec will not get a deal done to cut output. obama care on life support. what trump's pick for hhs will mean for your health care and your money. and new data on what the wealthy are really doing with their money and why they're feeling bullish right now. "the halftime report", though, is back right after this.

>> jim levinthal leading the way. sarat in second.

stephanie link in third. jim joins us on the phone to discuss what's worked for him. welcome. congrats so far. >> thanks, scott. how are you? >> i'm good, thanks. where are you? in a cave? we can barely hear you. >> you know, it's -- can you hear me now? as the chicago song goes, another rainy day in new york city. you sold jc penney yesterday. why? >> he very simply, the month of december is terrible for retailers traditionally. about 80% of the team retailers underperform in december. it's at a great run, and we've got one month left in the competition. i don't want it hurting me. not with sarat on my back like this. >> he is right there. >> trying to look at what's worked for you. time warner has been pretty good lately. you know, for obvious reasons. m&a prospects. general motors too. you've had to defend that on this program more than any other stock than anybody else has in

their portfolio. it's been a worker for you. >> yeah. you know, it's a little bit embl emblematic of the portfolio. gm is one of them. it takes a lot of heat, but with that 5% dividend yield, that koubts in this competition, and there's price appreciation going on as well. it's been a nice single in there there. mainly this year, scott, has been a bunch of singles like that, but there has been a couple of home run balls with jc penney and norcom, and that's helped to me put up front. >> see you on the desk soon. >> thank you for the call. >> stefr, you have a huge comeback. >> i was in a really big hole for a while. >> yeah. there's something to be said for a comeback. >> jim is in a cave. you are in a hole. >> it was brutal. >> up what? you are up now 14%? >> yes. something like that. i mean, i think -- >> what's been the turnaround strategy? >> well, i think -- my strategy all year long has had more

cyclical exposure. the problem was first half of the year that wasn't the call. wasn't a good call at all. i didn't own any defensives really, and i didn't take that strategy. the reason i wanted to focus on cyclicals is because i did think they were cheap, and idy think we would see better growth. starting in july as rates started to move higher as the economic data points got better, i just started adding a little bit more cyclical names and beta. ak steel in the secondary i bought, and that's big a big driver. >> good fight to the finish. you can follow all the action at cnbc.com/pro. up next, pete is tracking unusual activity in the options market. the bullish fed he sees on the dow component that is in correction territory over the past year. he will tell you what that is. >> steph was squinting. i'm impressed. she's anticipating it. >> i know what that is. >> plus, crude prices are sliding ahead. reportedly a deal to reduce output is unlikely. the energy trade is just ahead when the halftime show comes back.

pete najarian tracking the options market as he always does. what do you see today? >> we have a name we don't oftentimes find, scott. i love seeing it, i already own the stock. disney today, look at the chart, look at the drop the stock has made. we know what has been pushing disney to the downside, all about espn, the concerns.

you look at the studio side, they continue to be incredibly strong. this say stock that started to make a move of those loews, and now pushing toward $100 a share. what was intriguing is the call buying we saw, scott. it is not always unusual activity. you take a look. the february 105 calls, over 12,000 of these were purchased today. a little under a dollar. that's a huge trade. somebody is expecting to see this stock make a move over the next couple of months. don't check back with me, but unless we start to see a huge move, but they're buying time, a little time out in the future. i'm in there as well. i'm already in the stock. i added the calls today. >> worst over for disney? >> yes, we talk ed about that yesterday with jim, going north of $100, talked about the impact of the film studio. yes, to all of it. i think pete is talking about 1 05 calls. >> i think it breaks a hundred

and keeps going. >> i think if they can -- >> dropped the mike. >> new ceo, a new ceo, announce it and the market likes it, that's positive. >> all right. look at crude now. ahead of the opec meeting, that's tomorrow, cnbc's jackie deangelis at the nymex with the futures now traders. >> good afternoon to you, scott. a big drop in crude oil in front of that meeting in vienna tomorrow. we actually went under the critical level of $45 a barrel. as we debate this every day, what do you think is going to happen tomorrow? >> jackie, i'm a buyer of crude oil. i've been trading oil for 25 years. even if opec has no intention of sticking to our agreement, they always announce something. so if they can't come to any agreement tomorrow, we're headed into the 30s. i think they do. they realize how critical this is. if we can't, it could be over for opec. >> jim, i mentioned the fact we dipped under $45. what are the charts telling us? >> i think that we look like we're going lower within a consolidation channel, and i think 43.25 is my next

objective. if i had to back that up fundamentally, i say maybe they come to an agreement or talk about an agreement, but how many times will the market believe they're going to cut production, when iran has gone rogue, what is the point of cutting production if you know they have the pedal to the metal producing. >> for more, head to the website, futuresnow.cnbc.com. the show at the top of the hour. talking to jack caffrey and he's telling us why this market still has room to run. you don't want to miss it. >> thanks so much. three hours to go until the close. we'll take a quick break and come back and do final trades next. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.

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they are the natural borns enemy of the way things are. yes, ideas are scary, and messy and fragile. but under the proper care,

they become something beautiful. welcome back. want to talk about the stocks you bought and sold recently. you bought a semiconductor name, macom. >> exactly. we owned it before. we bought it around the election. we bought it -- >> we talk about it so often on the show, macom. >> it may come up from time to time. >> correct. it is not a new company. >> i'm going to leave. >> you have to do microwave chips. but it does gan chips, in the lead for the type of chips used in cell towers, cloud storage. they -- they're a $2.5 billion market cap, 15 times 201 earn g

i ings. we like what they're doing. and we think this is the time to -- they're an acquisition candidate also. >> you sold what had been a tremendously good pick that you had made on this -- >> great call. >> miracle grow. >> great call. >> scott's miracle grow. >> that worked. that's why you're out? that's why you're out? >> yeah. i'm sorry, scott. >> how long did you own it for? >> not that long. bought it around 69 a few months before we sold it in the mid-high 80s. it got a little ahead of itself. we bought it for the right reasons. we thought they were restructuring, selling divisions, thought it was a turn around and we liked the -- the management and then it became not because of the hydroponics business, about marijuana referendum on different ballots in states and they all passed and, you know, the market went nuts with it. >> so people are looking at it now, potentially, up 1.75%

today. you had the run. you're out. you wouldn't put fresh money to work in this name? >> i wouldn't. i think it is -- i think it is a little ahead of itself. i think the story is a good story, but not cheap stock anymore. pretty high multiple stock. >> final trades. three hours to go until the close. start us off. >> we talked quickly about oil and i think one of the things that opec now presents is a situation where you can go back to natural gas. there is a lot of short-term orientation unfortunately in the marketplace now. natural gas is telegraphed throughout the year it is making a significant move or reversal of what had been a multiyear downtrend. so i think natural gas stocks are a place to look for opportunity in particular with the uncertainty surrounding oil, exxonmobil is certainly a good name. range resources. you can even look at a chesapeake that works well. apache works well. those are the type of names, but natural gas stands out. >> you can buy the rails on that too. >> for sure. and look at a name like console energy with coal and natural

gas. >> i think health care is hard to own here. but i do think the hmos are going to go high near the end of the year and a lot of that is some sort of reform to the aca. but if you look at cigna, it is 14 times earnings, down 6%, look at anthem at 14 times forward estimates, these are cheap stocks that i think will benefit, so i like them. >> the consolidation in the banks just going by xlf is healthy. rsi got up to 90 something. 70 is overbought. way overdone. now that's cooling off. i think it is setting up. the next leg higher, if it can hang in there i like the names, i don't want to be out of them. >> i look at the airline names and it is curious to see we continue to see buyers of upside. look, i'll give you one -- >> 11% in the month. >> the huge run and there is still anticipation there say little more left. i'll give you one example, delta airlines, $48 a share, buying the 56 strike calls. the 52 week high is 52. >> buffett bounce, right? >> some of it was the buffett

bounce. that part of it is over. i think people are looking at it and going, hey, look at the multiples. >> gives you a floor, though. >> no doubt. >> buffett bounce. >> part apple too. >> good having you. nice to see you again. >> thank you. >> we'll see you again soon. does it for us. >> "power lunch" is next. >> i didn't say anything. >> and welcome to "power lunch," everybody. your top story, crude crumbles. skepticism that the saudis and iranians will be able to make a deal. that is sending oil lower. a live report from vienna minutes away. obamacare on life support. trump's pick for hhs is a doctor with a plan to take a scalpel to the affordable care act. what it means for your medicine and your money ahead. and a pair of gamers hitting the big leagues. inside story of this year's ink magazine company of the year, incredible tale as a legendary edition of "power lunch" begins right now.