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tv   Squawk on the Street  CNBC  August 19, 2016 9:00am-11:01am EDT

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>> oh, i'm sorry. you're going to be here next week at all? >> one day? >> monday. >> we will see you. okay. >> take a quick -- >> back in new york. >> quick final check on the markets, futures are down. have been down most of the session. down just over 50. even though they managed a small gain yesterday. we'll see you next week. see you. hope you feel good. hope everything works out for you. it's tough. i see it. very difficult. thank god. make sure you join us on monday. "squawk on the street" is next. >> thank god it's the women who do this. ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen, mike santoli at the new york stock exchange, david faber and cramer are off but we will hear from david in a moment. weakness in the futures as the dow puts together its first back-to-back gain since july on thursday. retail earnings capping the week
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with news of the viacom settlement. europe is in the red. to the tune of about half a percent. oil stud stedsy but on track for the strongest weekly gain in four months. our road map an end to the saga at viacom. fell leap du monde stepping down. faber will join us with the details of what the company may look like. >> the stock market and election. why equities may be the tail wagging the dog of donald trump's poll numbers. >> the latest from rio as it appears the ryan lochte story enters the final chapters and usain bolt takes home another gold. viacom expected to announce a settlement with sumner redstone to end the battle over control of redstone's media empire. terms would result in du monde stepping down as ceo and would receive a $72 million severance package. it appears to complete shari redstone's victory in all of this and sets her up for deciding a lot of things going forward as the company needs to focus on repairing the paramount
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situation, ratings as we said good buy to larry willmer this week. >> the cable network's business is the biggest piece of the whole company even though they're talking about selling a take in skrooviacom and that's broken -- >> paramount. >> i'm sorry, paramount. stock up 40, 50 cents. modestly positive just to get it out of the way. seemed like it was a matter of time and a particular dollar figure that got it done. >> we've been talking about this saga for a long time. with david faber who joins us this morning on the phone with more on what we expect to hear today. david, what the future weeks and months may bring. good morning. >> good morning, carl. we have been talking about it for a long time. these things always seem to go i'm on vacation when they come to culmination, but as i said months ago, really, at this point, a settlement is something that should probably have been done in the best interest of the company in part because they've been on pratsing in an inability to make decisions when it came to doing things outside of the
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company itself. distribution deals and all sorts of things really were kind of paralyzing the company in a way and this puts that aside. the deal that is going to be put in place will involve adding those five members to the board shari redstone nominated some time back. the board will immediately go to 16 mebz. fe felipe du monde will drop off. he's been authorized to pursue the transaction for paramount she's been discussing, sale of a 49% stake at a high surprise to a chinese buyer. two interested parties. it still remains unclear if and when he does present that to the board as to whether or not that board is going to be receptive to it, particularly in the part of shari redstone and her father. indications that had been made to me is they simply do not see it as a smart move to sell a significant move in the studio. he will have that opportunity
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and he will be able to do that. felipe will step off the board on september 13th and three other board members will step down as of the annual meeting in january all of which means that, of course, the company will have a 12-member board controlled by national amusements and the trust. nobody can challenge that again. and finally, tom dooley, coo for a long time, will be the interim ceo but he wants the top job and my understanding is, he certainly will have an opportunity to compete for it if not be the frontrunner for that top job when he's dealing with this new board which by the way i should also add, thomas may will be the chairman of, once felipe steps down as chairman on september 13th. that's the news we got right now on it. >> david, it's sara, you mentioned the paramount stake. another question analysts are writing about this morning does this mean anything for cbs the other company they control and the constant chatter that the
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two could recombine? >> it's certainly going to be a lot of talk about that, sara, i think. as there already has been for the cuouple of months. as i've reported it's a possibility but my understanding at this point is, it's not front and center right now. while it's something that shari redstone and the board members could push for, given her control now, their control that is, of the trust and nai, and a ta -- nothing stops that from happening in the future. my sense is they're focused on putting in a full-time ceo, maybe tom dooley, perhaps somebody else, having a board composed the way they want it to be and trying to right the ship, trying to put this company back on better strategic footing. and then down the road, if they want to try to really look at a cbs transaction that's something that could happen but not something that i think people should expect to see in the immediate future. as in, you know, he'll step down as interim ceo september 30th,
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dooley and immediately they'll initiate potential talks. that is not what i'm hearing at this point. >> finally, david, sort of puts a cap on all the drama we've seen at media entities in general, stags, igor at disney, aisles at fox, now this, i noticed value, bought a little fox between august 16th and 18, about 2 million shares. does it feel like some of these entities are seeing so much drama they've become good value plays? >> it's possible. i mean, as you well know the performance at viacom in particular has been poor. and has been one that investors have been very upset with. that was really the problem and the narrative that would be put forward by felipe all along. it would have been one thing if he was at war with his controlling shareholder and had a good track record and a good stock performance to argue as to why he should not stop down, but that was not the case, carl, as you know, which made it very
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difficult for him to make that argument over time. you know, we'll see at this point. i think investments will take a clear look at this company, earnings power, plenty of good brands, but there's also been a lot of missteps and there's a great deal of potential difficulty in sort of righting the ship to get those must have, again if you will, those brand, those networks being must haves. we'll see. and yeah, it's interesting to see the drama involving families that these companies as you know, these media companies do have tended towards being family fares in the -- affairs in the past. some have handled it well. >> david, enjoy the weekend and tail end of your break and we'll see you monday. >> i'm on vacation next week too carl. >> talk about burying the lead. all right, man. >> brace for more media news if he's on vacation. >> we will keep the seat warm for you somehow. david, thanks for calling in. >> all right. take care, carl.
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>> david facebober. >> from the beach. >> viacom up 2% in the premarket. look at a broader stock market poised to open lower after a week of what has been choppy trading and mixed earnings. as investors again focus on the timing of the fed's next move. for more on the markets bring in chad, portfolio manager at stifel and jason pride director of investment strategy at glen meade. we mentioned the choppy movements, small movements and i think we're going 29 days without seeing a plus or minus 1% move but holding on to gains near record highs. what does that tell you? >> absolutely. central banks so dovish, negative interest rates with roughly 25% of the sovereign debt market on a global bases and where are investors going. moving down the quality spectrums going into equities trying to find yields, trying to
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find return. we would stay balanced within one's portfolio but we would be somewhat more cautious about individual positions to take here. >> what does that mean, balanced? what sectors are you recommending? >> balanced portfolio, 50% in equity, 5% in gold, 45% in bonds, latter the bond portfolio, assuming as a base case scenario over the next 18 months you will get perhaps two rate hikes. perhaps right after the election and then another one for 2017. but no more than that. that's our base case. >> so jason, your take after what you heard from chad, do you agree? sort of neutral on the markets here? >> i would say we're probably in a fairly similar position, but the way that we're kind of positioning with the clients and recognizing the environment is we think categorizing ourself as uncomfortable bulls. bulls because we're still in the economic expansion, but there's
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a lot of caveats that come with that. the growth is slow, we're in the later stage of the expansion, valuations on u.s. equities are relatively high, yet nevertheless, the expansion continues, the advantage to be in equities over bonds is there, you need that full equity weighting and positioning wise, we're basically keeping that waiting but tilting in a defensive manner within that equity position using option, sort of positioning that dove the volatility along the way and basically trying to avoid positioning our clients in negative yielding assets or assets basically going to deliver negative returns. we think that's the strategy to have right now. and basically to stay with that, recognize you're going to be uncomfortable with it, but it's the right thing to do. >> you know, chad, one of the things that's gone on in the market very recently is the kind of reflation sectors, like energy and materials, even the rail stocks breaking out to a new recent high. so that seems like the market
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saying maybe the dollar has backed off and we actually have a little more of a cyclical feel to what's going on in the world? >> so that whole cyclical excitement is happening because people are thinking that there will be global fiscal stimulus in 2017. from china, from the eurozone, from the u.s. i don't believe that to be the case. i think that's going to -- that's unwarranted. we still believe global growth will continue to decelerate, china growth will continue to decelerate over the next 36 months, so we're under the belief that the commodity complex is going to see lower lows. and that you're going to see the commodity complex surf up and down based off of that overriding factor of base case of that hey, fiscal stimulus is coming, it's not. >> global equity allocation is largely domestic? >> largely domestic. the assumption is that the dollar will start to increase if val as the federal reserve starts to slowly raise interest rates and that the growth here
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is going to be far better than, of course, the eurozone as well as i'm sorry, as well as potentially the emerging markets. >> i wonder, jason, how critical that view is of oil and the dollar to your equity market outlook? what we've been seeing this week at least has been opposite from what chad's predicting, higher oil, 7% gains for crude and a weaker dollar. >> yeah. i think there's two nuances here to consider. oil is a little unique piece because it went through a fairly large detraction or a decline in value and now it's gone through a rationalization of supply that perhaps provides underpinning support. that's unique in the commodity complex for oil and probably provides that upward move to it. the other thing that i would consider is that, you know, i kind of agree with the host or with the other guest in regards to the trajectory of these economies and some of the earnings growth, but at the same time when you look at a devaluation disparity between domestic and international
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securities it's relatively wide. look at over a longer term time frame, those valuations will probably end up converging at some point in time and that u.s. growth, you know, it's wide, but the growth is not that fast and the international economies are still in positive territory. >> all right. we've got to leave it there. looking ahead to jackson hole next week on the markets. chad thank you from stifel and jason, thanks to you as well from glen meade. >> when we come back a number of movers to get through. gap, foot locker heading in opposite directions and also ahead, andrew ross sorkin's live update from the olympics in rio including the latest on the controversy surrounding the u.s. swimmers robbery story and the statement from the u.s. oc. another look at the premarket. nasdaq is in danger of losing that eight-week winning streak, would be the first since 2010. we're back in a minute. equals great rates. it's a fact. kind of like bill splitting equals nitpicking.
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more gold for the fastest human. u.s. olympians hitting a magic number in the medal count but the controversy surrounding the four u.s. swimmers resulting in an apology from the u.s. oc. andrew is live in rio with the latest wrapping up the crazy week. hey, andrew.
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>> hey, thanks, carl. you are right. the fallout continuing after four members of the u.s. swim team, including ryan lochte claimed they were robbed over the weekend. that story now not true. rio police officially declaring there was no robbery. saying instead the swimmers were involved in an act of vandalism on a gas station. now the u.s. oc apologized to the country of brazil for the actions of the for athletes saying the following in a statement. it said that behavior of these athletes is not acceptable nor does it represent the values of team usa or the conduct of the vast majority of its members. it continued to stay we will further review the matter and any potential consequences for the athletes when we return to the united states. it went on to say, and this was important, for the people locally here, on behalf of the united states and olympic committee we apologize to our hosts in rio and the people of brazil for this distracting ordeal in the midst of what should rightly be a celebration of excellence.
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bringing to close what has been quite a soap opra, guys, but we should mention as part of this two of the swimmers involved, gunnar bentz and jack conger taken off the flight home, we talked about it u.s., the u.s. late wednesday had their passports returned to them by brazilian officials after providing statements to the police. they left rio last night. ryan lochte had returned home while the fourth team member, james feigen, reached an agreement with brazilian authorities as part of that he will be allowed to return home after he will pay an $11,000 payment to a charity here in brazil. he was in addition to ryan lochte the only one who signed one of the sworn statements earlier. this may be the story that's dominating the headlines around the world, but exactly what the team had said, let's not forget the major accomplishments by all of these athletes in rio at the olympic games. it was an exciting night last night. i want to show you video, usain bolt, who turns 30 is one of the
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athletes, the fastest man in the world blowing away the competition in the 200 meter field winning gold, 19.78 seconds, won the last three 100 meter and 200 meter olympic titles and bolt has eight career medals going for his ninth this evening when he returns the 4 by 100 relay. and let's show you more video because his hometown could not be any more excited. check this reaction out. bolt's bar in the capital cityf kingston called tracks and records, were quite excited. >> awesome. awesome. phenomenon. i say awesome. [ inaudible ]. the greatest of all time. >> the u.s. won its 100th medal of the 2016 games when dahlia muhammad took gold. it marks the fourth straight time the u.s. has won 100 medals
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or more at a summer olympics. then the u.s. women's basketball team last night. defeating france, 86-67 in the women's basketball semifinal. there will be advancing to the gold medal game against spain on saturday afternoon here. the u.s. will be going for its sixth straight gold medal. i was at the game and it was pretty extraordinary. we should say this is the 48th straight olympic win and they were drowning three-pointers, guys. pretty incredible stuff in rio. >> hey, andrew, what's been the reaction in rio to the controversy? are the athletes talking about it? i asked you about the sponsors and they're sort of in a wait and see mode. but clearly, this is going to be a big story. >> the sponsors have been in a wait and see mode. the athletes have been frustrated. i should say we talked to athletes throughout this week, some who came on camera, many probably most who wouldn't, in part, i think because there was suspicion about ryan lochte's story, some of them knew him and
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really weren't sure what was really going on and were trying to withhold judgment but frustration i think across the board and then locally if you look at some of the papers here, this morning, given the news, additional frustration but, you know, there is a statement now out by the u.s., apologizing. we will see whether that placates and makes amends a little bit for what's taking place here. but we'll see. we will see. and also, by the way, one other note, the u.s. competing to host the olympics in 2024 and a conversation about whether this little episode will impact that. we will see. >> all right. andrew, thank you. we'll see you later in the show. andrew ross sorkin in rio. when we come back, the turnaround continues at applied materials. the stock is up 76% from its lows of a year ago. and then later, an exclusive with the ceo on what is working for this chip equipment maker. taking a look at futures here as we head to the opening bell.
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under pressure, dow futures down 50, s&p down 5, nasdaq down 9. more "squawk on the street" from the nyse straight ahead.
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that's what we're working on right now. ♪ energy lives here. ♪ ♪ gap falling in the premarket here, but off the lows of the morning. the apparel retailer issuing full year guidance that became below what wall street was expecting citing weaker sales overshadowing quarterly earnings beat. the ceo says while he's unsatisfied with the pace of improvement at gap, he does see signs of progress. guys, i went to the conference
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call on this one because it really is a tale of three retailers here. the old navy brand, you hear better tone, flat comp sales with better than it has, banana republic comp down, and the gap brand down 3%. trying to improve the fashions but jury still out. >> a lot of talk for a while about the ownership of ath let ta how that could be an interesting play and doing pretty well in terms of direct ecommerce sales for a while company wide. i think gap has exasperated the street for a while. the improvements seem temporary, playing defense. but expectations are low enough in terms of street ratings, only 9% of all ratings are buys right now. basically three out of the 33 analysts that cover it have a buy, 8 sells. i feel like all these stocks, the old apparel stocks trade very cheap but stay cheap whether kohl's, macy's, gap.
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>> banana down 9 did get people's attention. we will get the opening bell in a minute. to buy t[chains draggin]
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. you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in about a minute on this friday as we once again deal with a session yesterday where we didn't move 1% either way. as sara pointed out, we've done it once in the past 29 sessions. that is a muted sub 1% move. in january we did it almost every time the first 29 sessions of the year. like the polar opposite of how we began 2016. >> and polar opposite of last august, this tremendous spike in volatility after a long period of months where you had really suppressed movement in the markets, so that is how it works. the pendulum does swing that way. the big question, though, is options expiration today, maybe after that, you kind of unleash a little of the market's energy into next week. so far not yet. >> we have sector performance worth mentioning. energy the best performing
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sector on oil's rise. telecom getting hammered. down 3% on the week. on just a little bit of a rise in bond yields. >> oil now, within striking distance of 50. up 22% from the 39 we had just on august 2nd. stunning. the opening bell. the s&p at the bottom of your screen. at the big board the humans of new york campaign, and the head strong project helping veterans of iraq and afghanistan with mental health care. over at the nasdaq, memorial resource development corp, an independent natural gas and oil company. so i mentioned earlier, oil is on track for the biggest weekly gain in about four months. lot of discussion about, again, production levels, bloomberg has a piece looking at how saudi arabia and iran are pumping a million barrels a day more than they were than the original freeze proposal in january. >> yeah. >> markets, hard to make sense of where the market is. >> i think the story line really
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does start to, you know, get fit into whatever the market action has been. it's been a technical move. it's been a lot about where hedge funds are positioned in crude. very rapid moves. you don't usually see those kind of, you know, 20% decline followed by the 20% recovery in that compressed amount of time. >> another factor which is the dollar, has been -- >> absolutely. >> weak. when the dollars weaken commodities rise. the dollar looking at a 1% loss for the week which just shows you that investors are not buying this idea that the federal reserve is going to raise interest rates this year any time soon. the dollar is a bit stronger but lower for the week against most major currencies. >> that comes after williams, all these nonvoting members like williams and caplan saying they would like to see it happen sooner rather than later. as far as jackson hole goes, b of a with a note saying it hasn't been a market mover in a decade. you saw that. >> a decade might be a stretch.
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i actually think that bernanke kind of previewed qe there and said this is something we could do. there wasn't really a policy prescription. i think it's true it's got an lot more attention -- gotten a lot more attention than the news would warrant in the last few years. >> maybe because that's hard to get a signal right now from where the core of the fed is when they should be raising interest rates. there's not a consensus as we learned from the minutes this week, some want a rate hike now, some want it later. the chair is the most important member of the fed so we want to hear from her on whether she's satisfied with this move that we have seen in core inflation a bit higher and certainly better job data. >> she didn't go last year. >> that's right. >> so she's there and making an address on friday, so that's exactly the tone will matter a lot. >> we mentioned gap earlier, foot locker your gainer on the s&p to start the morning. 94 cents, beats by 4 cents. comps up 4.7 ahead of expectations. we talk a lot about foot wear
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makers adidas seems to have their act together, we know about nike's dominance. >> the best performer in the dow. got a note overnight they're having a good olympics. 70% of the track and field winners were wearing nike and, of course, the brazilian and the american medalsists in rio had to wear those nike outfits. they're getting a lot of brand exposure. hard to quantify. got the free boost from michael phelps on the cover of "sports illustrated," the under armored sponsored athlete. >> another actually category people like besides athletic foot wear is cosmetics. estee lauder stumbling and slashing guidance as well down 2.8% at the open. it's had a relatively decent run. i do think people generally like the idea that the people keep spending in the category but it seems like they want to temper the outlook for the year. >> it was the guidance that was a little bit disappointing. makeup did well, though. mac and smash box, killing it. 12% higher fragrance.
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hair care, skin care higher. the fragrance strength, joe malone called out in terms of that. overall 7% revenue growth strong for consumer staple, consumer package company, didn't live up to expectations. >> i think it's where it was priced ahead of time. it kind of gets categorized in the very safe, steady stocks even though it's not a high dividend yielder. >> people still trying to make ceps of deere this -- sense of deere this morning, 1.55, beats 94 cents. they raise -- they cut their guidance in may and now appear to make up for that over the course of the year, but when agis down 11 and construction is down 24, it's essentially all price and cost cutting. >> that was the story. the stock responding positively up 4%p with. when the ceo sam allen first quote includes a global farm recession that's been a headwind for business, helped by costs and expenses falling 10%, gross
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margin expanding 23.3%. that was, what, two points higher than the previous quarter. >> reprised on the news today but overall an amazingly choppy performance. i'm not sure the market really takes heart in va kind of swing in guidance -- in that kind of swing in guidance. i don't think it shows they have a handle because of the inherent nature of their product on how orders are going to be. >> we will keep our eye on cxw, these private prison stocks as you saw yesterday, absolutely eviscerated, down 35%, not the low of the day, 28 times average daily volume, conference call i think is going to be happening, the company is disappointed in justice's recommendation. as somebody said on twitter, it's rare that you see a business model adjudicated -- i mean legislated out of existence in the middle of a trading session. >> one executive action and although you did have people
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coming and defending the business model on some level and basically saying this isn't like the revenue goes away instantly. it's not all of the business. >> because federal and state -- >> this doesn't require the state contracts to break. maybe it could be the start of a trend, but this is specifically the federal contracts with these private prisons. >> and there are other businesses they have in terms of, you know, kind of immigrant transitional housing, things like that, people being detained for other reasons. so it's not great news. and also, i think people have a distaste for the business and why hold on if there's that much uncertainty. >> tough media coverage out of mother jones this week. right now, dow down almost 80 points. check in with courtney reagan on the floor on this friday. >> hi there, good morning to you. the dow down about 78 points. s&p down below the 2180 mark, about 8 points or so in the early going. it looks like we could post some small gains for the week, but we'll see how this trading session ends up. as you know we've had a lot of action, sort of dictated by fed
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speak. both from i should say more than two, john williams dudley, lockheart, all talking about rate hikes this year potentially in september, potentially further out. we know that janet yellen will be speaking at jackson hole, not theres last year. she will be there next week and that's where a lot of the market eyes are starting to turn. and if you take a look at what happened around the world, asian markets were mixed. european markets lower. actually decidedly so in some cases. and part of that is being dictated by our fed speak. but as well as what's going on with oil prices for both crude and brent. you can see italy down more than 2.6%. spain down nearly 2% there as well. now we've got a lot of earnings movers this morning and sort of a friday grab bag. farm equipment, we've got prisons and retail. let's start with john deere. you can see shares spiking 4%. as you were talking about a mixed report, a really, really strong earnings beat, there is some cost cuts that are involved in there and some other metrics that maybe are a little
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uncertain going forward. investors are liking what they hear out of the farm equipment maker and shares are higher by 4%. we got to check in on the corrections corporation of america. you were talking about what's been going on there this week. we are seeing a little bit of a bounce back so far this morning. we know the stock fell 35% yesterday, 28 times normal volume. there's a long way to go here. maybe some of the initial reaction was a little overexaggerated and the stock is moving higher again. but let's move on to retail and take a look at some of the sports retailers. foot locker had a very good quarter and then on the call, third quarter comps are up mid single digits, betters what analysts thought. you can see shares bouncing higher up by 6%. we'll see if they say anything more on the call about what is going on currently. but they had very positive comps across all categories in the second quarter as well. hibbet sports, still a player in this game and shares are on the move this morning but the opposite direction of what we
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saw from foot locker. down almost 3%. earnings beat, but light comps and elevated inventory, something that wall street has been watching is these inventory levels how it impacts sales trends going forward. take a look at gap. there's a lot to talk about here because this company is very big. it is international. which is not what we have from all of the specialty apparel makers. margins were better for the gap. analysts like that. they're very good at operating. the inventory was controlled, but there is a long way go for gap. we know the sales trends are not positive. they still report monthly and we get a little insight going forward with them. if we can end on roth stores. off price, a sector we often include with tj max, the outlets, still a group that is gaining share up more than 3.5%. home was actually the strongest category that we often think about ross for apparel, they did have a nice margin gain and
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analysts are liking what they saw out of ross stores again this quarter. back over to you. >> thank you. let's get more on today's movers, specifically in the nasdaq. head up town to bertha coombs who is there live. we're also watching the weekly performance numbers to see if nasdaq can continue its hot streak. >> up seven weeks in row the last time it had done that prior to this instance was in 2012 and now it's looking at potentially a six-year record. the last time that it was up eight weeks in a row, fractionally lower. if we're able to make up this deficit the nasdaq would be fractionally higher for the week. it's really been a story about the large caps. small caps have been pretty strong this week and actually are still reporting a weekly gain, but the move up to the record levels has been about large caps. apple has been performing, now up for the seventh week in eight, although apple today is starting the day off in the red. apple and the number of other phone makers and carriers expected to be named in an fcc
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robo call task force. if you're among the majority of people who hate those, apparently they will take some action to try to keep you from getting the ones that claim your credit card is overdue and you have to pay them. chips have also been a really big part of this rally for the nasdaq. chips are also looking at an eight-week winning streak. applied materials really the big mover there. better than expected earnings. boosting its outlook and it's really about the chip equipment for making mobile chips. and finally we're also seeing a boost here for sumner redstone's world if you will, viacom shares moving higher on the prospect of a settlement there. and activision going along for the ride. back to you. >> thank you. let's head over to the bond pits now, rick santelli, at the cme group in chicago. good morning, rick. >> good morning, sara.
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one week chart, we're closing a bit higher than the low 150s last week as we hover at 1.56. that's not really the story. take the chart back to the july 13, and you can see we've somewhat been in a range, even though there's sub-1.50 yield there. what's interesting today is the 15th, 1-5, trading day of august. all 15 of those trading days even though today isn't over have settled the 10-year in the 150s as we settle the 1.56, odds are probably do it again. if we look at a one-week chart of gilts, the uk 10-year, yields have climbed a bit. this is very important to pay attention to even though it's subtle and look at it since august 1st see what i'm talking abou about, the notion of the pound stabilizing, really does show it's getting a little traction and it really looks like a very good double bottom to pay attention to. we talked about that yesterday.
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if we look at the dollar index, many are this week, it's been a rough week. one posterchild for an easy assessment of what investors speculators are thinking regarding central bank policy, specifically the fed, nothing highlights it better than the notion we're down 1.25 in the dollar index this week. carl, back to you. >> all right. rick, thank you very much. rick santelli. we talked about oil prices a few moments ago. jackie deangelis is at the nymex. hey, jackie. >> good morning, carl. prices hovering around the flat line here bouncing between positive and negative territory but still over $48 a barrel. remember after a big move yesterday, this isn't surprising to see it even out a little bit. maybe even some profit taking. but the catalyst remain the same. we have to watch the weaker dollar that is supportive of a higher crude price and opec anticipation. seems to be a different view on the street that higher prices closer to 50 the new normal for oil and this is here to stay and we may get owe peck action.
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one of the reasons people are looking at is the fact that saudi arabia may be coming to the market in september looking to raise about $15 billion in debt. this had been reported back in may, but this is the timing for the deal at this point and why this is important is it shows you that the oil addicted countries really are suffering. they need the money to keep their reserves higher. and at the same time, it also shows the fact that they're over subscribed for the deals, that there's appetite for it. that may be the time that saudis step up to put a production freeze in place to keep these prices elevated so the deals do get more subscriptions. something to think about when it comes to september and what's going to happen on the sidelines of that energy conference. back to you. >> it's going to be here before we know it. thank you so much. when we come back, stocks meet politics. chart watcher tom mcclel lon on what the charts are telling us for the race for the white house. he's forecasted the last four presidential elections. don't go away.
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father's day, father's day, father's day, fn, fn, fn, philippe dauman, dauman, dauman, dauman, philippe dauman, fe lien, fe lien, fe liephilippe,
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- omg. you are so funny. in the time it took me to type that, if i were driving 55 miles an hour, i'd have driven the length of a football field blindly. not funny at all. don't text and drive. the more you know. . forget about the polls is the market a leading ipd cater
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for election results according to a new report which says stocks can move as much as a week in advance of traditional polling data. here's their chart from 2012 based on a dow jones industrial model which predicted the outcome of the past four presidential elections. tom mcclel lon, editor of the mcclellan report joins us this morning. good to have you back. >> good to be here. >> take a nice hard look at the chart once again and tell us what we need to be watching? what are we looking at? >> the fascinating thing i found out when i looked at this in 2000 was the stock market movements tend to show up about a week later in the poll numbers. sometimes it can be a little bit longer if there's a longer poll duration or a little bit of a polling lag. currently we're looking at the poll numbers lagging by eight days or a week and a half and in 2000, people forget that romney was ahead when the stock market was up but as the stock market declined in october the mood
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changed and the poll numbers changed and obama ended up winning by almost three points. as an echo of the decline that had taken place in the stock market a week earlier. >> do we know what's behind the causation here if, in fact, there is any? >> well, both the stock market and the pom numbers are reflective -- poll numbers are reflective of the public move. if the stock market is up and the numbers are great they like who's in office. if the stock market is down, they hate whoever is in office and blame the incumbent party for whatever is going wrong in their life or in the stock market and so the difference is that the stock market can reflect that change in mood much more immediately than poll number which takes people getting phoned up and tabulating the results. there's an inherent lag in the reporting of the poll numbers where mood can change on a dime and get reflected almost immediately in the stock market. >> so tom, be sort of extrapolating that out maybe through a couple months, a lot would say if the incumbent party is set to lose the market is
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likely to weaken up say in september, october, leading into the election. how does that -- how do you remove that factor from the general static of seasonality in the markets, and all the other things that might be moving the market? >> well, you have the relationship almost right except that the market leads the poll numbers. it's not as though people look at the stock market and then decide what to think about the incumbent. they're thinking two things simultaneously. it's just we don't get to detect it right away. when with you have the typical september to october decline part of normal seasonality and i expect this time, that tends to make the pom numbers go against the incumbent. we're seeing the same relationship here in 2016 where if the stock market goes up and clinton's poll numbers improve, in the stock market goes down trump's poll numbers improve. when we had the brexit decline that's when trump was doing the best, the stock market was down, everybody was worried, the world coming to an end, the financial
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markets would collapse and didn't like the incumbent. as things return to normal they like the incumbent more and we will see that same dynamic playing out. >> i wonder how the market can measure the mood of the public when there's not a lot of participation right now among the retail investor and among the general public in the actual market. there's a lot of anger out there and yet stocks are at record highs. >> sara, that's a really good point. but everybody still gets to hear it on the news. hear it on the radio or the tv the dow down 80 points and they think bummer the world is getting worse and it infects the mood as they hear it but it also affects the mood as people are expressing it. investors are like everybody else if they get a mood change they will change the way they buy or sell. so the real great insight is the stock market tells nous advance what the -- tells us what the change will be reflected in the poll numbers later about what happened to the public mood. if we see the decline in october i'm expecting i would expect the
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election results will get more interesting and not see the big lead for clinton that we're seeing right now. >> finally, tom, doesn't it seem weird that i mean what if boeing has weak orders, you have 30 stocks in the dow how do you account for outliers in the narrow population? >> it -- 30 is a small number generally compared to the overall stock market but it's a statistically relevant number. boeing can't move the market by itself and really as people flee out of boeing, but they're still optimistic they'll go into something else and the market will stay as reflected by the indices will stay in the same place. really only two things that move the market, the first is how much money is there, and the seconds is, how much does that money want to be invested and the latter part reflects the mood which changes and vacillatinged a shows up in the poll numbers. people can read more about this on my website, a special report on the home page. >> it's good stuff, tom. glad we got you on. thanks for getting up early, tom mcclellan. up next a milestone for one of the biggest names in technology.
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"squawk on the street" will be right back with the dow down about 95 points right now.
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that moment 12 years ago today, google went public. pricing its $1.7 billion ipo at 85. 42.50 on a split adjusted basis. bought the stock back then and held on you're happy. gains of about 1700%. company now reorganized as alphabet up as we said way up from the debut and in the video, marissa mayer, tim armstrong, eric schmitt, google, say what you want they've gone on to big things. >> without a doubt remains one of the -- i mean that business card you hang on to if you were one of the early core. what i remember from the ipo is the two sided feelings about it. one, this is a massively overvalued company from day one. that was the feeling because we were only three or four years after the bust the internet boom. and the fact that google did leave a lot of money on the table in its ipo because of how
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it did it with a dutch auction, not a regular underwritten offering. >> aamazing it's been that long. obviously talk more about that through the course of the morning. when we come back, pulitzer prize winner jim stewart on everything from the viacom saga to roger ailes and fox. or: in the forest. kubo: wow. narrator: so grab your loved ones monkey: don't even. narrator: and explore a world of possibilities. kubo: it's beautiful. narrator: visit to find the closest forest or park to you.
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♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, wilfred frost. david faber is off and will remain off for several days apparently. market is down about 94, the biggest drop for the dow since july 5th. a sense as to how muted the action has beenp on that day down 108. >> our road map for the hour begins with a truce in the works. reports that sumner redstone and viacom are reaching a settlement and will be saying so long to the company's ceo. philippe dauman. we have the details straight ahead. >> donald trump unveiling his first ad targeting hillary clinton. the latest from the campaign
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trail including the latest on chairman paul manafort. and the olympics in rio coming to a close this weekend, so what happens to the olympic village? we'll take you to rio to find out. but first let's get to the big news of the morning, on the viacom saga. viacom and controlling shareholder sumner redstone agreeing to terms of a settlement, sources telling our david faber, this ends the battle for control over the media mogul's $40 billion empire that does include viacom and cbs. as part of the agreement viacom's ceo philippe dauman will leave and roughly -- and receive roughly $72 million in terms of a severance package. replacing him is viacom coo thomas dooley. the settlement would call on dauman to stay on as non-executive chairman and board member until september 13th. that gives him time to present his board proposal to sell a 49% stake of paramount. the deal will end legal battles in multiple states over whether
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redstone has the mental capacity to make decisions. we've got much more on this story later in the hour and talk to pulitzer-prize winning "new york times" columnist jim stewart who has been following the saga. wilfred, the stock is up about 2% potentially some relief that uncertainty is over. >> that stock is, but the rest of the markets are seeing a bit of red to end the week. we were fractionally higher at the close yesterday for the week as a whole, albeit with sector differentiation, telcos suffering down 3%, energy up 3%. but as you can see we are now into negative territory for the week as a whole, around half a perce percent. the nasdaq continues to outperform, down only 0.3%. let's discuss markets a little more. the chief economist of pantheon macro xhi economics and david is the chief investment officer with wedgewood partners. very good morning to you. thanks for joining us.
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david, if we start with you your notes seem to suggest you're skeptical of the recent market highs we've been hitting. is the pullback the start of something more significant? >> yeah. i think it might be. i think the markets at recent highs just a week ago were i think they were getting to a point of maybe some cross roads. what's the next leg up going to be. is it going to be driven by a renewal of earnings growth on the corporate front which is probably unlikely. we've been in an earnings recession for five or six quarters. or perhaps even lower yields. the certainly the yield oriented sectors have been doing well. an insatiable demand for dividend yield but we're pretty high valuations here and there seems to be a conundrum. it's a tough environment where the market is seemingly completely disconnected from the growth rate of corporate earnings and that looks like it's going to persist into the third quarter. >> ian, various bits of commentary from the fed this week, whether in written form in
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the minutes or from sound bites from various fed members. we didn't see much reaction on the equity market front, more of a reaction from the dollar and the bond market. what's your main takeaway from the different comments and what does it mean for equity markets? >> i'm reminded when i first started -- >> i think the key there -- >> ian, go ahead. >> i think the key word was different. we've got a split fomc with opinions all over the place, as there's no real clear steer coming from the committee where half of the committee is very worried that unemployment is too low and inflation pressure building and the other half of the committee worried about the opposite. overall kind of dueling opinions which come out in the speeches and papers. what markets are look for now is maybe for fed chair yellen next friday at jackson hole to come down with a definitive verdict. after that we will have a clearer picture of where the fed is going to go. in the short term going nowhere. i don't see them raising rates
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in september but i am concerned as we get into the fall with the market as david said very high valuation we're in a real risk of renewed expectations they will hike rates at the end of the year and next year as growth and inflation picks up and a problem for a market looking pretty stretched. >> and ian, you felt this week that some of the comments from the fed's williams has been missed, in particular what he was saying about inflation targeting? >> yeah. he gave a speech on monday where he suggested because the natural rate of interesting, the rate that keeps growth and inflation stable has fallen so much over the last few years the fed should raise its inflation target and didn't give a number but looking at the charts he proposed at the speech seems to be suggesting he thinks an inflation target of maybe as high as 4% would be appropriate. i got to say this terrifies me because what it would do if the fed raised the inflation target would be effectively to tell everybody they can't raise rates for the foreseeable future, it's completely off the agenda given
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the inflation at the low of that level and the danger it would depress everybody because these very low interest rates have killed savers' incomes, distorted capital allocation because no one is incentivized to borrow money to take risk and scared people. when the fed is telling you the economy is terrible every six weeks what will you do. you will not borrow money to invest or undertake speculative business ventures. you will save more and be cautious and that's exactly what we don't need if we want the economy to grow faster. so i really wish he hadn't given that speech. i don't think it's the mainstream view here but it's a worrying idea that they might be thinking about raising the inflation target and effectively signalling, you know, no rate hikes for the future. i hope they don't. >> david, it is fed speakers, i'm wondering how important you think all of the fed speak and the fed path and the signals are going to be in the coming weeks and months, or should investors pay more attention to the earnings backdrop, the fact that oil is back around $50 a barrel, and where are you taking your
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cues? >> i think the stock market is attached very directly to whatever is coming out of the fed and unfortunately i think that's going to continue. again, we've had a terrible environment over the -- heck, corporate earnings the growth rate peaked in the first quarter or the second quarter of 2014 and it's been down ever since and here we are just marginally off all-time highs. i think the market is hinged to fed speak and unfortunately, for stock pickers like ourselves at wedgewood, it makes it for a tough environment. >> guys, let me interrupt briefly. we are getting breaking news on donald trump's presidential campaign. we get to eman javers in washington. >> that's right. carl, paul manafort, who has been running the trump campaign until recent days, is now resigned according to the trump campaign from that campaign effort. you remember that manafort was pushed out of a leadership operation earlier this week. he was key to the campaign late in the summer but then steve
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bannon and kellyanne conway were brought in this week as the top officers running the campaign. paul manafort being confirmed from the trump campaign that he has resigned entirely. the initial plan was to have bannon and kellyanne conway come in and sort of take over operations with paul manafort continuing in some capacity. man na forpafort is out entirel >> a statement coming in, i'm very apressuretive for his great work helping to get us where we are today and in particular as guiding us through the delegate and convention process on a day he's going live with ads in four key states, visiting louisiana, and then expressing what he called regret last night in that speech. >> yeah. this examines on the heels of a real striking change in tone from donald trump last night in the speech in north carolina in which you're right he said that he has regret for some of the comments he's made, he's not a professional politician and sometimes you don't choose the right words and he particularly
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regrets cases where there's been personal pain. trump not saying specifically what he regretted or offering an apology but a difference in tone with the campaign leadership clearly there was not a role here now for paul manafort going forward in the trump campaign. that's why we're seeing this resignation today. also, manafort had become a lightning rod given his political work in ukraine, attracting a lot of attention as exactly who did he work for, what did he do in ukraine, that becoming a distraction for the trump campaign over the past several weeks. they clearly decided they didn't want to hear any more of that news as well. we will see what happens to paul manafort in terms of his career but trump putting his political candidacy in the hands of steve bannon and kellyanne conway no i'm wondering, time is ticking here. less than 90 days to go before the election. how unusual is this to have a campaign shakeup like this and are the polls indicating anything different or showing the wide gap between the two?
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>> it's too earl throw see if the pivot last night holds, if donald trump is able to read speeches off the teleprompter and stay on message the way he did last night. we'll see whether polls move if he's able to continue to do that over the coming days. look, it is not unusual in political campaigns when the candidate is behind, to have a campaign shakeup. but this is the second shakeup that donald trump has had in just a couple of months here. we saw cory lewandowski pushed out at the top of the trump campaign earlier in the summer and now we're seeing paul manafort leaving entirely. so there is a history here of tu put at the top of the trump campaign and comes down to donald trump himself, though, what kind of a candidate does he want to be going into november 8th. who is he really and what kind of a president of the united states would he be if he's elected. >> he says he's mr. brexit. >> yes. >> soon call me mr. brexit which people are trying to decipher. thank you so much. eman javers in washington.
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a look at china's tech ecosystem, joined by hans tung and a major settlement as sara said, viacom and redstone, that saga taking a turn. we'll talk to jim stewart of the "new york times" in a minute. there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be.
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getting breaking news out of the olympics and this ryan lochte saga. to andrew ross sorkin in rio. >> hey, carl, we have a statement from ryan lochte, the first time that he has spoken
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out since this situation. seems to have been resolved with his three other teammates. two of which are already left the country. a third of which is paying an $11,000 fine, a donation if you will, to a charity here in brazil. let me get right to what ryan lochte has to say this morning. he says, and by the way issuing this on instagram no less, saying i want to apologize for my behavior last weekend for not being careful and candid in how i described the events of that early morning and the role of taking away from the athletes fulfilling their dreams. i waited to share the thoughts now until confirmed that legal situation was addressed and it was clear my teammates would be arriving home safely. he goes on to say it's traumatic to be out late with your friends in a foreign country with a language barrier and have a stranger point a gun at you and demand money to let you leave, but regardless of that behavior or anyone else that might, i should have been much more responsible in how i handled myself and for that i'm sorry to
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my teammates, my fans, fellow competitors and sponsors and the hosts-this great event. i'm proud to represent my country and accept responsibility for my role in this happening and have learned some valuable lessons. the most important piece of this for the people here in rio, he says there has been much said and too many valuable resources dedicated to what happened last weekend so i hope we can spend our time celebrating the great stories and performances of the games and look ahead to celebrating future successes. my understanding is that this statement has been read by his sponsors. he does have a number of sponsors and we've been looking into this trying to get statements from them and hopefully get them today. ralph lauren, speedo and air weaver among them. there were earlier sponsors we named on his website that has been taken down and some of those were sponsors no longer with him, gillette and gatorade among them. but that is in his own words his view on what's taken place now we've heard from him and it has
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overshaded what have been removable -- overshadowed what have been remarkable games here. >> as of yesterday i read ravel ralph lauren and speedo were among touring the situation. bob costas says lochte has probably cost himself millions of dollars in his words and the mayor of rio says he has accepted the apology from the usoc and has, quote, pity and contempt for the four u.s. swimmers. wonder how lochte's statement will go over among rio residents. >> we will see. there were people today, there were people on twitter locals here thanking the ioc and the u.s. team for their apology. we will see whether his apology goes over any better. he does want to swim. he wants to swim in tokyo and in 2020 and also planning to move to los angeles where we imagine he may want to have a career in
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some form of entertainment and see whether his sponsors end up sticking by him thus far not commenting but we'll try to bring you more as we get it, guys. >> andrew, thank you very much for the update as always from rio this morning. >> thank you. we're watching shares of gap, gap reporting earnings this morning beating the street. the stock a relative bright spot in a down market. courtney reagan has been digging through the numbers and she joins us with more. courtney. >> hi there again. gap shares are up slightly this morning after the retailer reported adjusted eps, comps down 2% revenues down as well. the biggest disappointment with the slightly lower revenue guidance for the full year. the company looking between 1.87 and 1.92 for adjusted earnings per share. that, of course, does exclude one-time restructuring costs. gap is a disciplined operator. analysts positive on the margin improvement they've seen. roxanne meyer calls it impressive and the lean inventory. but with inconsistent traffic and continually falling comps
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ceo art peck says he's unsatisfied with the pace of improvement. on the conference call peck started off characterizing the consumer saying there's oobly some strength out there in different parts of retail. apparel specifically the environment remains challenging and quite frankly, it remains most challenging in the higher end of the market. and just to remind everybody he continued, we have a very robust value portfolio with our outlet channels and the old navy business. old navy's comps did improve in the quarter, as the quarter progressed, and gap thinks the brand could post a solid second half. gap is closing stores in the portfolio but peck says there's still opportunities for more old navy locations and even some small store formats. banana republic still a sore spot, not are resonating with shoppers. 40% off is pretty common there. the namesake store turnaround is a wait and see for most analysts reading through the notes this morning. jefferies randall conic is among the positive analysts
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reiterating a buy today. acknowledging yes, sales trends are volatile but thinks the earnings estimates are realistic if not conservative. he likes the clean inventory thinks kite minimize the margin risk and shares are also trading well below historical average, he thinks it's an attractive stock at this point. if you want to take a risk we've been talking a about the raelts market when it's a smart entry point and that's what jefferies thinks is happening. >> i was trying to figure ute what sort of fashion moves gap was making to try to turn it around in a retail environment. i was speaking with an analyst who covers the stock and said bottom line, selling fashion to the masses is difficult where everybody wants to be unique. and that's why some of the fast fashion retailers are working, this idea that selling, you know, normal everybody wears jeans and a t-shirt does not work anymore. mkm says banana republic as a result is in an identity crisis.
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>> 100%. banana republic has gone through several creative directors over a couple to several years and just hasn't really worked there. like you said, people are looking for something very unique and/or something that perhaps is more disposable, meaning they don't want to pay a lot of money for it. that's why they're attracted to h and m or zara, high fashion at a low price. if they want to invest they want to invest at the higher end and a problem for the folks in the middle. denim trends strong for some reta retailers, maybe we will he see gap pick up. stretch their, adding stretch into some of their designs, not just in the athletic wear. i do think they're in a tough spot for sure. >> yeah. absolutely. courtney reagan, thank you on the retail story. it has been a busy week. >> coming up, why chinese telecom giant ten cent is overtaking alibaba. apple ceo tim cook in china hoping to shore up relations with the world's second biggest economy this week.
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ggb's capital hans tung joins us to discuss the tech theme in china when we come back. mobile trading desk, so i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices. the market's hot. sync your platform on any device with thinkorswim. only at td ameritrade.
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take a look at shares of apple. looking to shore up relations with the second biggest economy amid rising regulations an falling iphone sales and chinese telecom giant ten cent threatening to take over alibaba as the company's most valuable tech company. a lot of topics to cover and joining us is hans tung. nice to have you here tore once. >> good to see you, carl. >> for all the attention that alibaba gets, especially around here, seems like we need to give ten cent a little more. >> what ten can cent has been known is a a gaming company. revenue for gaming, 70, 80%. over the last few years as we continue to grow they're starting to monetize with advertising in other things. even on the pc, the website, also growing rev as well. multiple growth and p/e and retail shop investors in hong
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kong very, very well giving them credit for that. >> how do you explain the dominance of he wee chat to some be who has not a good notion of how it is. >> it's essentially facebook, it's netflix, it's amazon all combined in one. and you can do everything on we chat. one single app that unifies all apps in china over 800 million users and continuing to grow. >> what did you make of the multiples these two stocks trade on? is alibaba at a bit of a difficult position that it's listed in the u.s. and u.s. investors have a little bit of skepticism about a chinese company just generally speaking? >> that's definitely how we feel. alibaba because it's in the u.s. there are three concerns that u.s. investor have for alibaba. one economic slowing down in china, how does it impact alibaba retail sales continuing to slow down, and so forth, second thing people worry about alibaba, is that they're into a lot of different things. expanding quickly in multiple
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geographies can they remain focused and they have 80% market share in e-commerce in china. people worry can they maintain the market share. people don't know alibaba has multiple growth engine in cloud business, targeting, and also has a very strong financial service portfolio, so people will be surprised the story in china is going from alpha economy into on-line and both alibaba and tencent are well positioned for the growth. >> what do we think tim cook is up to with his visit, with the r&d investment, what's the plan? >> i think tim knows structurally apple has the issue, high-end phones and high-end markets haven't been penetrated in china. their investment into the portfolio is an example of exploring how to go after the transportation industry with map data and self-driving cars and so forth. i think they're experimenting new things beyond just phones. >> what about the uber dd
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partnership and sale? it feels like the playbook for american companies doing business in there in china just continues to change? >> i don't think you knuber get enough credit for what they have done. spending over $2 billion last three years in china. and now their economic interest in dd is not worth over 7 dln -- is now worth over $7 billion. not bad for three years worth of work. >> samsung hit a new record market cap high but this comes off the back of three years of pretty slow share price growth for them. what lessons are there from samsung's tree veils for apple? a lot of it has come down to maintaining margin on smartphones. is that about to happen for apple as well. >> for china the growth story is a high end to mass market as you expand to inland. the average selling price for a smartphone in the region of china is roughly around 50, 60, $70 u.s. that's a huge difference on what
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apple is good at. samsung faced that. samsung wants to take apple on head on on a premium brand and has hurt them in china. apple may have a similar situation if it doesn't do more beyond phones. >> one thing on uber the plan to roll out self-driving cars would still have an engineer, is this the beginning of something real that we're all going to see in cities across the country? >> five years ago people were talking about self-driving cars. i think five years later it's becoming more of a possibility or reality. i think in the next five years you will see more mainstream activity around self-driving cars. and dd has seechds -- uber has reached over close to have a population in the world. it will be very exciting five years ahead. >> amazing to watch in real-time. good to see you. thanks for coming in. >> good to see you. >> still to come here on "squawk on the street" the secrecy of settlements we'll go inside the fox newsroom and what may be the end of the viacom saga. pulitzer prize winning new york
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times columnist jim stewart will join us to discuss those next. you're watching cnbc first in business worldwide.
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good morning, everyone. i'm sue herera. your cnbc news update at this hour. olympic gold medal winner jimmy feigen agreed to donate close to $11,000 to charity in return for his pass portfolio. feigen is one of four swimmers including ryan lochte who brazilian authorities say made up a story of being robbed at gunpoint in rio and appears they were trying to cover up their role and vandalizing a gas station bathroom after a night of partying. lochte issued an apology for that incident. firefighters have reportedly made some major gains against that giant wildfire fwhurng southern california. officials say it is at least 22%
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contained and a small number of evacuees on the east side of that blaze have been allowed back home. the fire has covered 59 square miles of land. there are fears the zika virus has spread to miami beach. there are reports that health officials are investigating two cases of the virus not linked to travel but none have been confirmed. cases have been confirmed, though, in miami's wynnewood neighborhood. actress amber herd says she is going to donate her $7 million divorce settlement from johnny depp to charities that work with abused women and sick children. she says she is looking to help those less able to defend themselves. during the divorce herd claimed she was the victim of domestic abuse and the couple settled privately this week. you are up to date. the news update this hour. i will send it downtown to you, sara. >> sue herera, thank you very much. with stocks off the lows down 36 points, the battle between viacom and sumner redstone seems to be coming to an end. part of the settlement viacom
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ceo philippe dauman will be stepping down. this according to a source. settlements are being reechlacht fox news and our guest says the secrecy at settlements of fox news hid inappropriate behavior. joining us at post nine on a friday, jim stewart, pulitzer prize whipping new york times columnist cnbc contributor not enough time with all of these media sagas and settlements. let's start with viacom. what is your headline here? shari redstone gets her way? >> blood is thicker than water, blood is thicker than money. but again, i've said this before, this mess and it has been a terrible mess, has hurt the company, the reputations of everyone involved, all of sumner's making. 93-year-old person should not still be in the position to control 80% of a major company. he should have arranged a system where there was a graceful handoff before now. but that's water under the bridge. the fact is now, we'll never know if he's mentally competent
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and if she was exercising undue influence but the fact is when you get in a situation like that, the person close to him, the person who is in the house every day, is the one who ultimately will have the most -- >> and from an investor standpoint we are seeing a pop potentially resolution to the uncertainty hanging over this company. >> yeah. >> but fundamental problems exesist still. >> all the problems still there. probably gotten worse during this turmoil. nothing but a distraction for management. i would expect to see some relief rally here. on the other hand you kind have to wonder these are big numbers coming out of this, the cost of the company. was this a shakedown to get payments for these people leaving after a disastrous performance over the last few years. i think this is troubling for shareholders' perspective. >> $72 million. >> yeah. that's a really big number for that kind of performance record. again, i'm sure corporate governance people will be up in arms about it. >> any implications for les moonves at cbs. >> he still seems to have the
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support of shari redstone, the performance there has been a lot better but again i think we now know effectively the power has moved from sumner redstone to shari redstone. you have to keep her confidence, keep -- she's got [ inaudible ] and that's the fate of les moonves. >> does it make you want to shy away from family either run or largely owned businesses? because the fox -- it's easy to draw parallels here. right? >> absolutely. not necessarily, but family businesses with aging moguls who show no sign or inclination for handing over power i would want to stay away. which does bring us back to the murdoch empire and what's been going on there. >> yeah. that's the subject of your column this week, secrecy and settlements hid bad behavior. what sort of digging did you do you? >> it got to me that they put out statements we have zero tolerance for sexual harassment
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and turns out we know at least two secret settlements with people where lawyers negotiated this millions of dollars were paid, sworn to secrecy, how many more were there? we have no idea because they're confidenceal. so i have scratched my head saying how can they have zero tolerance and didn't know anything when their executives and lawyers had to do this and pay out this money. it doesn't make sense. experts i talked to said look, there's the stated rule and then there's the real rule. the real rule is, powerful executives get away with pretty much whatever they want to. not just fox. it's rampant in business. and they -- when a victim comes forward their career is at an end, get paid off, promise to remain silent and the perpetrators go on about their business. >> with roger ailes departure from fox i wonder if that changes anything with the election. we're in a rare position where fox hasn't outright supported the republican candidate, a few high profile clashes. does his departure alter that dow think? >> i don't think it's going to
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have effect on the substance of how the network goes about its business. they have an audience they want to protect and i guess whatever they've been doing seems to have been working. it is an aging audience. i've heard rumors, you know, mild rumors that they might consider selling it. and, you know, which i wouldn't sell now given this scandal, but i think from an editorial position, they feel they're doing the right thing. i don't see major changes. >> isn't it interesting that you have ailes now advising trump, you have bannon now part of the trump campaign, i mean, if this happened on the liberal media can you imagine the uproar? >> total uproar. i mean, when ailes left i thought, wouldn't it be incredible if he side -- what would he like to do, advise the trump campaign. that's not going to happen. the optics would be so bad that you're like not even trump would entertain that. and lo and behold, i continue to
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be surprised. here he is doing it. the appearances are so terrible there, but i guess trump has written off the women's vote. i don't know. >> delicate question because it's where we live, aging audience is in cable. we know about the challenges nbc has had in the olympics versus london as this is the first games of the streaming era. do you worry about the media companies model as it exists today? >> i've been worrying about it for years. i've been working at the wall street journal now "the new york times" print, the established media that gets mocked every day for years. of course i worry about it. i don't think in this day and age any media company can take any model for granted including some of the digital startups. it's changing so quickly that habits of people are changing very fast. i still, though, always come back, maybe i'm an optimist at heart, news, information, story telling is vital to our civilization, started with
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paintings all the years ago. people will pay for it. we're going to all have to adapt. the fundamental demand is as keen as ever and maybe more than ever. >> jim, the future of media companies, the likes of the facebooks, the googles of this world, are they making a mistake by having similar sorts of shareholder structures where they might have listed might not hold the majority shares but hold a massive majority of voting rights, he heading towards the issues we had at viacom and news corp and fox. >> they're young, several decades to be thinking about this and worrying about it. i would hope they would be looking at this and see what happens when you have people who will not relinquish power when the time comes and i hope they're thinking ahead and getting a good advice on that. >> changing times in media. feels like tectonic shifts here. good to see you as always, have a great weekend. jim stewart from "the new york times." >> an epic battle royal kicking off at the ufc 2.02. jane wells joins us with more on
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that. jane? >> yes. wilfred, they're calling this rematch between conor mcgregor and nate diaz bad blood at the t mobile arena but it could be money. ♪ as both fighters did public workouts separated by an hour to keep them apart espn reports tickets to the fight itself are not selling out, but the money is in pay per view where trends look good, maybe better than when the two first squared off in march when forbes estimates $ $1.5 million pay per views were ordered. macgregor and diaz this week got into a bottle throwing brawl at a press conference, a child may have been hit. this only weeks after talent agency bought the ufc for a whopping 4 billion, a record-setting price for a sports franchise which connor mcgregor takes credit for.
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>> $4 billion is a big, big sale. you know. 2015 bringing all these numbers, breaking all these records and early 2016 sells for 4 billion. you have to understand i had a big role in that price tag. my contract is very, very sweet. >> have they shown their appreciation? >> they most certainly will. [ bleep ]. the money channel. >> all right. >> in an epic meltdown, of an interview last march between the two fighters and me, diaz's stunning defeat, macgregor revealed he was going to breeze past $10 million in that fight. when i asked diaz, he said what is this the money channel. this week macgregor says he's going to make more money though he lost last time. for diaz -- >> how much are you going to make this fight?
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>> this ain't the money channel. you know what i'm saying. >> all right. he says he's not making as much as he deserves and later, another issue for the new owners to the ufc, a move to unionize the fighters. guys, one fighter told me, quote, i want insurance and a 401(k) and another said i would like dental. back to you. >> going to be $10 million or a little more, little less, still clearly these fighters making huge amounts of money. which is a big difference to some of the various different fighting disciplines we've seen in the olympics. some talk of some of those gold medal winners from boxing to judo tae kwon do to moving to ufc. is that something that the sport would welcome or do they think that they are quite different from the olympic sports? >> well, ufc you have to understand is a combination of all those things. you have to be able to do more than just box or ju jitsu or wrelsling and while you talk
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about the big money at the top, there's not big money at the bottom as in many sports an this push to unionize. it's a very, very dangerous sport that has a lot of wear and tear on the bodies of the fighters and there is -- they've talked about unionizing for a long time and now that is gaining momentum. we'll see what dana white has to say about that. >> great stuff, jane. thank you very much for that. guys, i don't know whether andrew ross sorkin should consider it. do you see him doing tae kwon do this morning. >> got beat up a little bit. >> could get into ufc, don't you think? >> for about two minutes. >> would be lasting a long time. we would last about ten seconds. >> when we come back, we're going to talk markets. foot locker surging, better than 9% right now on better than expected second quarter sales. ross stores at a record high and gap is getting a little pop. we'll have a look at the major averages in negative territory. the dow off the lows at one point down 100 points, now down
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30. s&p 500 down 0.2% and the nasdaq goes positive. a little bit of strength here as we head through the session. much more ahead on "squawk on the street." [click]
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[ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. let's get to the cme group. rick santelli with the santelli exchange. >> thank you, sir. i would like to welcome my guest daniel. i will tell you what, daniel, student loans the issue here, folks. this is just remarkable. you talk about a giant student loan debt problem. giant being the operative word. all i can think of is fee, fi, faux free, faux free, nothing free about it.
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the candidates, bernie, hillary, make college free, debt free for all. but dan, where i come from two sides so everything in accounting. okay. debt free for one group means more debt for another. what do you think? >> that is totally true. you're looking basically about ten years ago, in the first year of the obama administration, you took a private federal lending program and moved it into what's called the direct lending program and put the debt on the federal balance sheet. >> they national aized it like health care sort of right? >> you call it nationalization, or whatever you want to. the bottom line we have roughly -- we have 50% of bore errors who because of another series of payments they did where they let people pay a percentage of their income, basically they're seeing their loan balances increase. if you're the minimum wage guy and you have $25,000 of debt you basically are seeing your loan
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balance grow each year which means it's probably never going to get paid back and if that's the case you're probably looking at something like a $500 billion write down for the federal government. >> you know, the word finance, whenever government intersects, intercedes, takeover, whether financing, like mortgages, whether it's financing like student loans, whether it's financing the country's health care, the government doesn't do finance well. what are your thoughts on the comment you made in 2010, when they started to change things and took over the old program, they said they were going to save 60 to $70 billion between 2010 and 2020. what do the numbers look like? give me specific numbers as to how that was so faux? >> so, the federal government has basically -- and i think a lot of this is the law of unintended consequences, right. education is the pathway for most people from into the middle
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class. and unfortunately, if we knew we were spending, you know, originating about $100 billion of federal loans each year, and if you thought that roughly 50% of those were going to go bad that means we're means we're sp roughly $50 billion a year on this program, and that's more than nasa, more than virtually any major program. and so if you were looking at this, you'd say wow, are we spending our money the best way possibly? and there are a lot of solutions out there. i think there's bipartisan support for fixing this, but if you think about the federal balance sheet, you want some specific numbers, 45.7% of the federal balance sheet is actually federal student loans. so, you know, write-off of this size actually mattered and it's better honestly if we can be forth right about how much we're spending, why we're spending and maybe a better outcome from it.
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i agree, there's got to be a better way with right now we're looking at real serious issues, not just for the federal government, but also for the borrowers faced with this deficit. >> listen danny, we're out of time, but we want all students to get a good education. i want the public schools, but it seems when the federal government took over education, nobody wants to send their kids to public school anymore. i wonder how many of the 537 people in government both chambers and the executive branch actually send their kids to public school as they legitimate these programs. we're out of time, daniel, great, thank you. and of course, let's kick it back to sarah. >> all right rick, thank you. as we head to break, take a look at shares of applied materials here. up nearly 7% after reportings an earningings beat and record orders. the company's ceo gary dickerson will join "squawk alley" to talk about all of that and more. the dow is down 30 points right now. more ahead, stay with us here on "squawk on the streets." people.
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hedge funds going long amazon, short ge. list. hedge fund positioning and just come out and kate kelly joins us with more on that, good morning.
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>> good morning, sarah. the headline here is the performance might be coming out of the woods since the beginning of july, widely held hedge fund stocks are outperforming. breaking what was the goldman hedge fund longest cold streak on record starting last august. that index, which is tradeable has been a favorite short strategy among some i know, and it's interesting as a gauge because performance for hedge funds according to goldman, at least the ones they study here they define as fundamentally driven and having at least ten stocks in their portfolio, really depends on the performance of a few key names. look at what's in it as of the second quarter. amazon, charter communications, facebook, alphabet are the most frequent appearances on the holdings of the surveys here. that's an interesting shift when apple was number five and charter was lower within that top ten. apple now is number nine this past quarter. and on goldman's short list
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compiled for records on short and large, cap stocks. excludeing the long list members on the other side, that's another story too. top of that list is ge, followed by exxon mobil, boeing, wallet disney, and lockheed martin. you can see a trend, favoritism towards big tech and media names and shorting on some of those big industrial names. and one other interesting thing i'd point out is that the crowding activity we were seeing earlier this year, such a problem for valiant. that activity broadly appears to have peaked and declined quite sharply goldman says since then. >> very interesting, kate kelly, thank you. we are looking at a turn around here in markets driven by tech and consumer discretionary, and that is why the nasdaq is in positive territory. the nasdaq down 33 points. thanks for being here this hour. >> it has been my pleasure. >> have a good vacation. and now over to john with a look at "squawk alley," you're
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really leading the begins, john. >> it is. and we're going to have the ceo of applied materials on the topic the future of many things. including virtual reality. also we're going to continue to talk viacomm, that battle is drawing to a close. what's meant for that company and carol swisher is talking about the worship and why she doesn't do it. all that and more coming up on "squawk alley."
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good morning, it is 11:00 a.m. at viacom headquarters in new york city. "squawk alley" is live. ♪ ♪ ♪ ♪ good friday


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