tv Fast Money Halftime Report CNBC May 14, 2019 12:00pm-1:00pm EDT
you got the vicks back below 18, obviously the market responding to encouraging signals about at least in the general relationship between the president and xi after those comments >> much of what was down yesterday is up today. >> we're going to watch and see if this holds in the afternoon session. for that, we're going to start with the judge and the half. >> carl, thanks, i'm scott wapner, with a trade war takedown of apple is the key to your money if that stock can't stabilize, can the only overall market? it's 12:00 noon, this is "the halftime report." >> announcer: trade war casualties, tech, industrials, retail and beyond. we'll show you the stocks and sectors most likely to bear the brunt. plus, at what point does the market stop believing? >> we were getting very close to a deal and we're starting that paperwork today so we'll see. >> announcer: plus how energy stocks will react as the act of terror intensify as iran becomes more of a focal point for the
u.s. and the financial stock one analyst says could jump 30%. "the halftime report" with scott wapner begins right now. >> good to have you with us on this tuesday, here to debate and trade the big stories of the day thus far, joe terranova, josh brown, jim lebenthal and erin brown is back, portfolio manager. we begin the markets stocks are mostly higher this hour including apple which slipped into a bear market on monday the most valuable company on earth sliding a 20% from its most recent high many now say it holds the key to this market. the dow has regained its 200 day moving average you can't have apple roll over fully if you expect the market to rebound, can you? >> i don't think it's the only stock out there. of course it's important at close to $1 trillion in market cap and yes it's a bellwether for electronic manufacturing but it's not the only stock out there and there's good reasons
why it's down. to your point, yes, if it were to rally from here, that would help support the market. but i'm not buying into the idea that it's the only thing, th only key that moves this market. >> not the only but if it continues to roll over, our point is how's the market going to recover and continue to rebound if the apple roll continues. it's not going to happen >> if it stays right -- this is a good point if it stays right here, we're fine if we start testing back down toward that 150 level after the preannouncement late last year then you got real problems so i'll agree with you on the downside on the downside, it could be a problem. i don't think that's going to happen, by the way but i don't think you need it to rally for the rest of the market to recover >> steph, apple in many regards is the stock or at least one of the principal stocks that helped carry the market from december back to new highs. and it's been one of the stocks that's gotten hit the most and has helped the market roll over to, you know, this 4% decline from the most recent high. how critical is apple's performance to the overall market >> the reason it's down is because of trade and if that
still is the issue then that is going to be an overhang for the market i think if you look at apple and the implications of trade, it's like 15% of a hit to earnings. that's what it's kind of estimated, 15% to 20%, stock's already down 12% from its highs but still up 40% from the december lows so could it overshoot to the downside? sure could it bring technology down with it and other names and sectors. >> it already is >> that have exposure to trade absolutely >> isn't it already bringing some of these big tech names down with it this is just month to date as i think i told you guys yesterday, we're on track for the worst may in some 50 years >> okay. >> netflix down 7% this month, alphabet down 5%, facebook down 7% and i could go on and on, some of the software stocks are down big, the old tech names that a the hello you lilot of ye gotten hit too >> it's down and do you want to buy it, start looking and bottom fishing some of these names. down 12% but still up a lot
since december but trading at 15 times those reduced numbers. this company is still going to produce double digit earnings growth they have a huge cash hoard. they're buying back a ton of stock so this is one you want to pick at, actually, because i think the fundamentals are fine, just fine. services and wearables, those are really good growth drivers, so i don't think the story's broken it's down because of trade, not because of fundamentals. i'm buying that. >> unless what's happening with trade, josh, impacts the fundamentals of apple directly as jpmorgan talks about today, "apple needs as much as a 14% price increase on iphones to offset headwinds from the expansion of tariffs." that's a game changer to the business model you have to change your prices by a double-digit percentage point to offset what's happening with tariffs >> right so i read another estimate, $160 added on to the cost of an iphone which currently gets paid
for in monthly installments on the cell phone bill but still. or some situation where apple takes a monster earnings hit and needs to hold from themselves and probably the truth ends up being somewhere in between, a little bit of pain to the consumer, a little bit of pain for apple. either way it's not good apple technically is at a very interesting level, 180 to 185, was resistant in late '17 into early '18 so if it breaks cleanly below that level it's bearish and if you're an investor, you have to ignore those levels and if you're a trader, you have to respect them so this is a bigger issue than is apple going to tank the market or save the market. this is really about how do you invest and if you're a trader you're looking at that level and saying, that's going to be the decision maker whether or not it can hold that level tells me where the psychology is of the other buyers and sellers if you're an investor and you're underweight apple for some reason, that's an area where you would say this looks like a breakdown but that's not relevant to me i understand there could be bad
news on pricing for iphones but that doesn't change how i feel about the fundamentals of the company which i think are sound. so that is the really the way i think different people need to look at the issue. >> so, joe, these other tech names, again, biggest sector out of the s&p, was leading you up and then what started with semis has sort of had a carryon effect in other major areas >> it's indicative of what i said last week, which is prices in a bull market and you've got the four big stocks, the microsoft, the amazon, the google, and the apple that are taking the market higher i don't know necessarily if you look at fundamentally what's going on with apple and you make the decision to get out of the name, i think it's in the area which josh talks about between 180 to 190 that i think you can make a strong consideration that the company is going to come in and they are going to support this stock in the form of buybacks they have been a serial company in terms of buying back their stock, and this is a great level for them to do it, so i think the one criticism that you could
levy upon apple is have they diversified geographically their production enough and the answer to that probably is no, and i think in the coming years they'll address that but i don't know fundamentally if you're going to make the argument with apple sitting at $185 that it's going to continue to trend lower i just don't know that >> i think there's another criticism. i'm going to come out and say this i do have some concern about what management has been saying over the past several months tim cook came out on the last earnings call and said china is fine a week later, qualcomm came out -- >> china was getting better. >> he was positive on it unmitigatedly, he was positive on china >> he was more positive than he was prior. >> qualcomm -- >> didn't say everything was great. >> qualcomm was negative on it and china clearly is a problem is it clearly was a problem. and i don't like the removal of the guidance on units going forward or the reporting, rather, on units i understand it's apple, it's the greatest company out there, tim cook is leading it, but you know, i'm getting less information and i don't like the information i'm getting. i'm not selling the stock on this but when you said that
something to criticize -- you had something to criticize, this is the one thing that bothers me >> jim, you have to -- wait. >> sorry >> china actually did see green shoots in the first quarter and it wasn't just apple that said it caterpillar said it. nike said it >> qualcomm said the exact opposite and they are in the same business. >> qualcomm actually has their own issues and i think you would be quick to admit that absolutely >> absolutely disagree, fundamentally disagree >> i think that company has had some troubles over the years i'm there with you >> i don't remember you owning it as long as i do and i don't know -- >> i'm not going to get into that i'm just going to say there were some green shoots in the first quarter from the economy in china. >> not in the smartphone business >> the company -- you have a lot of companies saying that you started to see an improvement so i don't think it's really a knock on tim cook if that's what he was saying. >> okay. you all take a breath. jimmy. >> we're having a nice discussion >> take a breath erin brown, nice to see you again. >> nice to see you >> apple, no apple, tech, no tech, you're short equities. >> we're defensive equities right now and we do think that
notwithstanding some of the green shoots that we did see in the first quarter we think that the market was overextended going into the beginning of the second quarter that said, when you talk about companies like apple, we do think that you want to be owning sectors with -- sectors or companies with good balance sheets that are a little bit more defensive, that have good earnings growth and visibility and i would say that the tech sector, yes, it got hit hard but it is a sector, actually, that we think can do well, particularly in the software and services side because of the sort of regular annuity stream of these services so we like companies like apple with good balance sheets and we think that at these levels, you know, once some of this trade tension eases, this is a sector that you're probably going to want to be in. we would actually underweight sectors like the -- that are much more cyclical like semiconductors which we think are going to be a weaker position going into the end of the year >> let me ask you this what if these tensions, as you call them, little squabble as the president says, what if it lasts for longer than investors
thing? >> it likely is going to >> it already maybe has. >> it already has and it's likely going to extend at least into june when president trump and xi sit down. so you still have another three to four weeks of lack of visibility with respect to the trade tensions that's going to keep, i think, markets under pressure and going to keep equity volatility higher, so yes, we're getting a little bit of a bounce today and maybe an extend for another couple of days, but this is not a time, i think you should be piling back into the markets at this point, because i think there's still going to be a lot of uncertainty in the market over the next couple weeks >> i want to be clear, though. you're a portfolio manager are you short the s&p right now? >> yeah, we have a short in the s&p. >> okay. >> underweight in the s&p relative to -- >> that says broadly where you think the stock market is going in the near term at minimum. >> right >> how quickly would you turn that around? >> we can turn it around very quickly if we see either valuations and levels get to a level where we think it's
attractive to start buying or we start to see more, you know, positive developments either on the trade front or on economic data >> if you're underweight that, what are you overweight. >> we're overweight, right now, we're overweight treasuries, mortgages, overweight more defensive assets in the portfolio overall, and then we're also overweight quality in our equity books so companies with good balance sheets, with good earnings visibility that are able to deliver free cash flow generation. >> so, let's talk about earnings, visibility, as you say, in specific companies and it's not just apple and tech hardware makers, et cetera, the collateral damage. let's talk about deere, okay ag equipment, agriculture's in the cross hairs big time jpmorgan cuts deere to underweight, we're downgrading it to underweight as a result of the rapidly deteriorating fundamentals in u.s. agriculture. it's been a long time stock and i don't know if it's still in your book or not but it was. >> not for a while i did well with it
i think, like, ask yourself a question so they're going to do subsidies to farmers, farm income is a measure of whether or not people are going to buy equipment farm income has been depressed for ten years now, as have agricultural prices, demand in some cases, et cetera, so ask yourself a question. let's say it's $12 billion or the next number is $16 billion and republicans continue to do these types of free market subsidy policies is that money going to be turned over to deere? absolutely not that money is going to get saved for the idea that there's going to be a continuation of the pain that's being felt right now. people don't get a subsidy check from the government and buy brand-new shining john deere equipment. unfortunately. combine that with the fact that one of deere's biggest issues over the last few years, as jim will tell you, is a glut of their equipment all over the world so this idea that any of the subsidy money is going to go into tractors and combines and other equipment, that's a fantasy. it's not going to happen that's why you have to stay out
of this stock. >> not to mention that you have supplies are so high in ag product around the world let's go to farmer jim with some traffic talk jim knows it better than anybody. >> listen. you know i love this business but i never invest in here i'm glad you made good money on it but the reason i never invest in it is because i don't want to be susceptible and beholden to, hey, argentina and brazil had bumper crops this year so prices are going down or there was a tornado in china and that, you know, or rather, sorry, china, you know, there's the swine flu epidemic so the swine population is down so they'renot going to need as much feed. these are not things that i want to pay attention to on a day-to-day basis i want to give deere credit where it's due they bought that german highway construction company they get it. they're trying to diversify but they still are ag and it's just a tough business >> their core business is their core business. >> they are ag but explain, and you can do it best, in november of 2016, when the president came into office, this was an $88 stock.
last january of 2018 it was $171 that type of appreciation, i don't think this stock has ever witnessed so there was something fundamentally driving it, u wer. what was -- >> berkshire hathaway was in it. i think there was some -- i think there was some sense that the president's domestic policies were going to be terrific for the space and while he is a big fan of farmers and the farmers love him, that hasn't played out financially. >> all right another stock, i mean, it's right at the top of the marquee on trade and the trade war is boeing o'leary was here yesterday and o'leary said the stock was going down to 288 or 283, 280-something. you bought it today. >> yes >> at $341 >> right >> why today >> well, look -- >> and you have said that you don't think this trade war is going to end -- you've said cooler heads are going to prevail, i get it. >> take the worst case go ahead keep going with where you're going. >> you're not expecting a
resolution in the next five hours or five days, are you. >> no. >> so why boeing today >> because enough is enough. i mean, the stock is off $45 billion in market cap since the ethiopian airlines accident so there's two things going on here there's a 737 max and there's trade. i don't know and nobody knows what the ultimate liabilities coming out of the 737 max grounding are going to be. they're going to be in the billions even after insurance is accounted for. but $45 billion, i doubt it. and on the trade war, which is obviously the second topic, and steph, you and i have agreed on this quite a bit, there's just -- if you were an airline and you want to run new modern fuel efficient planes on the routes that the 737 max services, you have two choices the 737 max or the airbus a-320 and the a-320 is sold out for seven years. you don't have a choice. the max problem will be solved they will have probably a cooling off period while passengers get back into comfort level with it but that will happen that happened with the dc 10 after the o'hare accident in
1977 it will happen again here. there's been plenty of instances so i'm not worried about it. as for the 288, okay, you know what it certainly can go lower, that's why i didn't load the boat i think $288 is an end of days sort of price level. you got to remember there's more than the 737 max >> i know you keep talking about the max. i keep talking about trade >> there's -- yeah, okay, i already mentioned trade. >> i know, but the bulk of your argument centers around the max. >> you don't have a choice no, no along look, there's defense. defense and other services like defense, space initiatives, are 40% of the business. there's also the 777, the 787, which is a cash cow right now. the two things that have knocked this thing so far down to $340 in share price, one is the 737 max, the other is trade. they're both in the price right now. can it go lower? sure but this is a great price to buy at it. >> i don't really think social security trade i know it gets the headline, but the three chinese airlines that actually will make these planes in the coming years, in 2021,
they're state-owned enterprises so if they have tariffs they're going to be tariffing themselves so it doesn't make any bit of sense. you have a six, seven-year backlog, even if you have a global recession, you probably have a five to six-year backlog and you really have a duopoly at this point i understand the headlines but if you dig into the details it's really not that material it is all about the 737 max. because that is a big percentage of their operating profit. you got to get that thing in the air. when they get that thing in the air, the stock is going to work but in the meantime, the stock is very attractive i'm loaded i'm full in. >> so, the collateral damage conversation goes to retail as well today 83% of the xrt, the etf that tracks that space, is in correction we've been talking a lot about the consumer big deal about whether consumption's going to hold up, steph. yesterday, you said you were a little concerned about where the consumer may be going. you own amazon, there's a lot of amazon ownership here. but one week performance, xrt as
we said down 4.5%, macy's down 6%, nordstrom, target, l brands, gap, tiffany, best buy, locker, all getting smoked in a week of where trade is dominating. so that remains to be the headline we need to follow trade directs where retail goes. >> well, look, there is -- there is a trade impact, right, because if you've got apparel prices coming out of china going up in price because of tariffs then that hurts the margins at the stores which presumably will have to -- i think with the list of names that you just listed off, we still have this issue of brick and mortar versus online and it's not just amazon but walmart obviously has been killing it in online, and it's just harder and harder for the macy's, the nordstroms of the world to get the traffic into the stores it's just getting harder and harder >> erin, what do you see in this space? >> notwithstanding the secular issues which i think is pretty well known and in the price at this point, in a very shorter term basis i think that retail here is actually a good buy particularly going into retail
sales at the end of the week which i think are going to be a pretty solid print we saw some weakness, which was well understood at the beginning of this year i think now when you look at income growth, it continues to be quite strong. yes you may see consumer sentiment in the next couple of months start to weaken on the back of some of these trade tensions but right here and now in terms of the prints that are coming up in the next couple weeks i think there's a lot of negativity already priced into these shares and for a short-term sort of investment i actually think that retail could start to do pretty well. >> i think it's the digital transformation lululemon doing well, shopify, chipotle, the consumer's still out there spending money they're not changing the behavior the behavior is just going into a different, new, modern type of venue. amazon, clearly, walmart, clearly. >> you're assuming that the consumer, i mean, i don't know what the most recent data is >> i'm not assuming. i'm telling you confidently that the consumer not only -- >> you've canvassed all -- >> not only is the consumer doing great but the consumer
will endure through this little squabble and continue to do -- >> optimism. >> no. >> okay. so i'm telling you, with full confidence, the consumer will remain -- >> full stop >> full stop >> small business optimism ticked up in april >> buck stops here >> the second thing is there are always consumer brands and by extension consumer stocks that are doing well it's never an all or nothing game the consumer always finds a way to spend money look at a stock like livenation. what does chinese tariffs have anything to do with people wanting to be at concert festivals, be at venues, be at halls watching musicians they care about and all the ad-related businesses around that the stock doesn't care the client doesn't care. so, you can always find consumer discretionary names and obviously staple names where they're going to weather any storm. it doesn't mean the stock goes up every day but lululemon is a great point joe brings up, taking share from almost everyone else and they're very good at it these days and that
is not going to change based on whether or not gdp is 2.9% or 3.1% it's just not. >> i think it depends on -- i do think that the market has an influence, though. i mean, i really do. >> for sure. >> we saw that data in january that was really miserable. i think the consumer is very strong and i'm overweight the consumer in my portfolio so i believe that very much and it's wages and it's jobs and look at the jolts numbers and confidence numbers are still quite strong even though they're off from their highs i guess my point is, if this trade goes on, it just erodes confidence a little by little and business confidence little by little. it's not a positive. i'm telling you that so, i'm just watching for it that's my point. >> but stephanie, don't you think it's more it erodes the business confidence just strictly in relation to capex. so i mean, the consumer, okay, during the -- >> the point is if the market continues to be upset, it's going to have an impact. >> it absolutely will. >> you think the stock market can continue to go down, the consumer's just not going to pay
any attention. >> no one's saying that. the wealth effect is real. >> the wealth effect is real, okay, but what was the consumer behavior when we had the worst christmas eve, the s&p was at 2350, it looked like the end of the world was coming into january. consumer spending was fine so the behavior has not changed. >> actually, joe, it was not >> no, it was not. >> consumer actually, it was weak in january, it was a little bit better in february and it was -- >> it's weather-related. >> that's not weather. >> no, it was genuine -- >> holiday season. >> i didn't see -- jimmy, i'm not talking about the holiday season >> you just said the holiday season >> i'm talking about the behaviors rolled into january. no, no, no, i never said the holiday season don't put words in my mouth. >> you said december i forgot >> the s&p was 2350. that did not impact in january and february consumer spending it did not >> we had a negative retail sales number >> you did >> in january. >> that was weather-related. >> no it was not weather-related. >> you had a government shutdown as well. >> well, you had the government shutdown but you also had a
market meltdown. >> it's pouring in here right now, speaking of weather-related, so we're going to move because i keep hearing a conversation out there that, you know what, don't worry about what's happening in the market, last week was the worst week of the year, everything's going to be fine when there's more positive commentary about trade. because it's worked in the past. market goes down, you get a tweet or a comment from either the president or one of the president's advisors who suggests that talks are going well, i'm going to show you what we're talking about. this is what investors have had to deal with and the question is, at some point, does the market stop listening to this? >> we had very productive meetings we mad a lot of progress we're making great headway >> our hope is that we are in the final weeks of having an agreement. >> i think we're pleased with the progress >> it's got a very, very good chance of happening. >> very productive >> it was very productive. >> i think it will be a very strong day, frankly, but we'll see. >> they were constructive discussions between both parties. >> all right, so let's bring in
eamon javers at the white house. you got more of this today the president himself in a scrum in which you were one of the reporters in says very good dial with china, the relationship with president xi is extraordinary, and then in the next breath, says, well, china broke the deal >> reporter: and he also minimized the seriousness of the trade war right now. in his view, just a squabble with china, something we'll get over soon enough and sort of lines up with the rhetoric you just played from administration officials going back months that this is just a temporary problem that ultimately can be fixed but the president out there in that scrum also sort of laid out his vision for why it is that he wants to have this trade war right now. take a listen. >> we are the piggy bank that everybody likes to take advantage of or take from and we can't let that happen anymore. we've been losing, for many years, anywhere from $300 million to $500 million a
year with china and trade with china. we can't let that happen the relationship i have with president xi is extraordinary. it's really very good, but he's for china and i'm for the usa. >> reporter: so, ultimately, the president making the case as he's done before that there's just a fundamental rift in the relationship between the united states and china, economically, it goes back decades and he is the leader, he says, to finally solve that problem i asked him if he's now ready to move ahead with the additional $300 billion in tariffs that's just over the horizon, and he did not commit to doing that he said, we're looking at that very strongly, but didn't say, ultimately, that he's definitely going to do that by the end of june, which is the way the timetable lays out now, right around the time that he's going to be meeting with xi jinping in osaka for the g20 so the question now is, the white house has said they want this trade war, they say that they're winning the trade war, the president said it again today, and they say this is a temporary situation so the question is,
what's the off ramp here how do they end the trade war at this point doesn't seem to be an answer forthcoming today anyway the president simply projecting confidence that all this is going to work out. >> yeah. eamon, thank you eamon javers, north lawn of the white house. this tweet from china state media and maybe this boils down to the most important conversation that we need to have around the table as investors and analysts they say, "the trump administration has been constantly deceiving investors they need to mentally readjust themselves far more than chinese investors do, which is likely to result in even more volatility in the u.s. market." what do we take from that? >> we take that china does not have elections, maybe not ever again, and they understand what the vulnerabilities are of people who are up for election here and they also understand that the wealth effect is critical for things like business confidence and consumer spending and if they can rattle the stock market, they look at that as possibly a win or maybe
that's just what they want to project. who knows. but they get the game. they are following me on twitter and consuming our media and they understand everything that's happening here they're very, very wise. they also can define a tariff if asked by a reporter, which i'm not sure you could say about all politicians right now. >> do investors need to mentally prepare themselves for more volatility because of the trade war that you, you know, you can get the commentary that we just played for you in the stream there of all of the trump officials saying things are great, constructive, good, this, that, and the other thing but the reality is, is that the investors here are going to deal with a lot more pain and volatility than, you know, we'd like you to believe. >> i think the path of volatility does, in fact, remain elevated as i said to you yesterday, i'm concerned about what is going to occur on may 18th. erin and i spoke about that before i know she disagrees she, i think you said you think the european issue is not one that's going to impact the market but i do think if the president
imposes tariffs on autos, i think the europeans are ready to come charging and take that battle >> they're already pivoting. tom cotton came out and said that this is going to be -- involve sacrifice, not unlike what our soldiers had to sacrifice -- so they're already pivoting from, we're winning and we're going to win to, hey, this is going to suck for a little while. that is a new message that clearly is coming from somewhere and you're going to hear more people saying that in the coming weeks so i absolutely think that's the correct premise, scott, they're talking about, now, dig in, batten down the hatches, that is a new rhetoric coming from the white house. >> let's do this then. if that's going to be the case and then we have to examine what the fallout is going to be for the broader markets and the economy, we need an answer to that question. we'll take a quick break, come back, leishman and richards are waiting in the wings we'll have a debate on what happens if the trade war persists we're back after this. >> announcer: next, the
financial stock one analyst says is set to surge. plus, energy upside. a pipeline is hit in saudi arabia after four tankers are sabotaged in the persian gulf. is it time to put some money into this sector before the break, our data partners at kensho after the tech sector falls more than 3.5% in a week, the data shows, buy in the sector is up 66% of the time by an average of 2.42% a month later. for more, go to cnbc.com/kensho. "the halftime report" is back in two minutes.
♪ welcome back, everyone, i'm sue herera here's what's happening at this hour house minority whip steven scalise applauding president trump's tough stance against china in the escalating trade war between the two countries. he spoke outside the white house. >> ultimately, we've seen the american economy suffer because china doesn't play by the rules. they don't comply with trade agreements, they steal our intellectual property, and we've been in a trade war with chiep f china for a long time. i'm glad that president trump is standing up to them. >> three people are dead and two others are in serious condition after a shooting in st. louis monday night
police found the bodies of the three men killed inside a home in the city's penrose neighborhood for the first time in 125 years, hershey's is changing the look of its iconic milk chocolate bars each section of the bar will now feature an emoji they are set to be released nationwide this summer for a limited time only. i think that indicates a market top in emojis. >> maybe so, sue thanks sue herera all right, that's the news update for us. key question, how bad will the economy really be hurt if the trade war persists senior economics reporter steve leishman, and paul, welcome back steve, what's the answer to that question how bad is the economy going to be hurt if this persists which already i think fair to say longer than some thought >> i think it's going to be hurt and depending upon what else happens in the economy it will be the thing that determines outcomes here. there's a lot going on the u.s. is not the most open
economy. i think we've come to rely upon chinese imports for key parts of our supply chain you slap a 25% tariff on $200 billion of it, you might be okay you go the full $300 billion, add in the auto tariffs and it's going to hurt and if other things in the economy are going okay, you get by if other things are not going okay, you don't go out in the world looking for trouble because trouble is going to find you and we've had problems with overseas growth and the other thing we don't know, scott, is there's at least two sort of indirect channels. ceo confidence is this an environment that you want to go out there and make major brown field investments -- green field investments, not sure and the other one is, we don't quite understand the relationship between these tariffs and slower global growth they may have been at least partly responsible for the slower global growth that we're dealing with >> the question, then, paul, is what is the solution if there is the potential of more pain, let's cue the president's latest tweet
he says, "china's going to be pumping money into their system, probably reducing interest rates as always in order to make up for the business they are and will be losing if the federal reserve did a match, it would be game over, a win. what do you think? is the answer cutting rates? >> no, it's not. if the fed needs to cut rates it will be because there's been a major mishap in this war the last thing this market wants, the last thing this economy wants, the last thing, i think, president trump wants to be reelected, is if the fed needs to cut rates because they'll have to go 1% because it will be that bad think about q4 with the stock market think about a 10% to 15% do downdraft. hea he's not getting reelected >> the pressure is sfwoigoing t ratcheted up on the fed if the economy does deteriorate and the megaphone from 1600 pennsylvania avenue continues powell's going to feel some pressure >> but i think richard has it
right. the fed is going to address the fallout from this, not preemptively address it. it's not going to be made a party to what the fiscal authority is doing look, scott, i have real concerns that trade is being weaponized the way that wmd was weaponized in the war with iraq and instead of bad intel this time, there's bad economics. when the president talks about a $500 billion trade deficit as if they are stealing from us, that's just wrong. and the idea is that we are being led down this path effectively to war over an issue that is, at best, poorly understood and at worst, purposely misstated. >> they are stealing from us, maybe the metric that he's pointing out is incorrect. >> there are two separate issues here there's the theft of ip property, which is a real serious issue, and there's a $500 billion trade deficit that is the result of free people engaging in free exchange, goods for money.
okay now, maybe it would be a little different if their markets were more open or not, but whatever the idea is that is not theft. that is trade and there's reasons for that there are small business people across this country who have decided that the best input for them is a chinese good that they import for $3 and put it into a system and sell that thing for $30 and they make money on that. and that's a trade that's what we do. that's different from ip theft >> is there an economist in the world who would say trade deficit is the way to measure the well being of a society? >> yeah, there is. there is peter novarro. only one read the "wall street journal" editorial today. >> besides him >> there is not. if it gets crazy, there's the idea that there are things that are out of balance that may be worth thinking about and addressing in terms of currency regimes and things like that but no, that is not supposed to be the metric. it is not generally the metric by which anybody judges whether or not -- you give me $100,000, i'll give you a porsche.
did i steal from you i didn't steal from you. >> i want to say yes >> depends on how good the porsche was. >> how much of this can the market withstand seemed like we were on a path over that threshold and beyond to who knows where and now we've been surprised by what we thought was the potential of a deal this past friday, didn't happen, additional tariffs are now on, maybe more are coming, president seems to be noncommittal, at least publicly, on that. >> i think ten days ago we had goldilocks, a great payroll number, two days later we had a wet sunday, i don't know what he was doing in the white house but he started tweeting. he really got angered by lighthizer and he reacted and probably for very good reason so the market came off 5% i said to someone then, that's a 5% tweet i think we retrace half of that so we get back to about 2870, we don't go back above 2,900, we do work now we've got six weeks until osaka
but we need someone like lighthizer on an airplane to china within two to three weeks or this market's got a problem i think we've got another two weeks, we're going to look at this market and try to work it out. you don't put new money to work and if you want to get out, that's your view on whether this thing resolves itself or not >> on that theme, thank you very much for being here. good to see you again. steve, thank you there's a good note, you guys should check out and you'll hear from mary ann bartals tonight. she writes tonight, headline, data supports summer rally absent the trade war it's what we're talking about. if you can get this solved, you can get, in her eyes, a summer rally. >> it's goiscott, i need to folp because that's the issue it's the opportunity cost. we may end up growing 2% but we might have otherwise grown 2.5% or 3% if not for the trade war >> just ahead, we'll trade the rest of earnings throughout this week big names, alibaba, cisco, walmart, nvidia and more
we'll give you a check of the s&p sectors today. it's a abundanbounceback day, tn around tuesday, we're back after this the ai i want? well, insurance it's all about trust and speed. i need it to guide this analyst to customize flood coverage for this house. so that this team, can inform this couple, that their payment will arrive faster than this guy. hey. ♪ ♪ so whether i'm processing claims due to this fine gentleman... (car engine starting) or suggesting premiums for this young lady... ai can help change everything at this company. expect more from ai. ibm watson. look limu. a civilian buying a new car.ug
we're back let's trade some earnings, how about we do that we set you up for the things coming down the pike because there are some good ones the calendar's right there we got macy's, cisco, baba, walmart, nvidia, we already hid deere for you. josh brown, take one on the board. >> well, i'm long nvidia and i'm most interested to hear what the management at walmart has to say. i think what walmart has to say has big ramifications for, i guess, what my view is on whether or not consumers are holding up i know we had that whole debate. i won't rehash it. semiconductors have been absolutely smacked both on an absolute basis and even relative to the xlk software stocks have held up much better than chip stocks although both are considered tech so let's see if they have something to say that resets the conversation i don't know that's going to be a tough one in my opinion. >> stephanie link, the board is yours. >> cisco, i own a really large position but trimmed it back most recently. i think the quarter is going to be great my concern is trade.
if you listen to the last call, the cfo talked about trade, 10% tariffs, they were able to manage through it. but she said that if it goes to 25%, that's a lot more difficult for this company, so there's a lot more that they're going to have to put in place i think they'll be able to do it i love the story in terms of the products, the management's great, balance sheet, valuation, i just think you might just get a hiccup and i would buy that hiccup >> erin, you got semi names on the board and you're short that group. >> i think that right now we're really looking to see whether the semis can really bounce as many have predicted they will into the back half of the year and i think earnings visibility into the back half is going to be really key for these names because there's a lot of positive sentiment already built in >> jimmy, you want to give me something on cisco >> i'm going to give you more than cisco because there's two things to note here. one we're in the perfect balance now, i think, between hardware and software so they've got the stability of the hardware but they've got the higher growth and the higher margins of software but also, as a long-time holder of this stock, you know, they never beat or miss by more than a penny.
they never raise or lower their guidance by more than a penny and the reason that's so beautiful is take a look at the stock chart the last five years. it's just higher and higher and any time it misses by a penny, that has been a great opportunity to get into the stock. if it beats, as steph thinks it will, then that's okay it goes -- it's still 10% off its recent high and you've got plenty of room to go from there. >> keep your questions coming because the desk is answering them next. you still have time to reach us. go to cnbc.com/halftime. you can tweet us we're back in just two minutes my experience with usaa has been excellent. they really appreciate the military family and it really shows. with all that usaa offers why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and i should have changed a long time ago. it was funny because when we would call another insurance company,
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♪ hi, everybody, i'm kelly evans, here's what's coming up on the exchange. president trump giving markets a nice boost after saying trade talks have not collapsed former nec director larry lindsey will join us to discuss. and whatsapp user's biggest fears coming true, the messaging service was the victim of a spyware hack, how hackers listened to users' conversations. and amazon wants employees to quit their jobs and it will pay them big bucks to do so.
that's coming up now to futures now >> thank you, kelly. crude oil jumping today amid rising tensions with iran and after reported drone attacks at pumping stations in saudi arabia, let's bring in our traders, jim and jeff join me from the floor of the cme. let's start with you what do these increasing geopolitical concerns mean for oil? >> well, first and foremost, rahel, welcome to futures now, it's wonderful to have you here and i'm going to apologize in advance for yorio's behavior as we see back in the crude oil, we have seen this geopolitical tension really ramp up we saw four vessels carrying oil get attacked, now two drone ascents on the saudi arabian oil site so i think the fact that the u.s. military is reviewing the plan to potentially send over 120,000 troops in some type of conflict with iran i think the price of crude oil is going substantially higher >> we've seen that positive movement jim, to you. you're looking at the next key
level to tat the upside for oil. >> yesterday was a big day in that we made a new high and a lower low. that didn't -- it didn't confirm that today and to me, that means it sets up the potential for reversing it reversing it right now i think we were near yesterday's highs, lets call it around 63ish if we settle above 63.33, yesterday's high, that's where the magic happens and we resume our track back up to 70. >> so for more on oil and all things futures now, check out our live show. we will be joined by invesco's kristina hooper and she'll give us her take on the market rebound. tom lee is weighing in on the bitcoin boom that's coming up at 1:00 p.m. eastern on "futures now" on cnbc.com scott, back to you. thank you very much. your questions and final trades are next on "the halftime report." the w unely00doisp ar 3 this is my headquarters.
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welcome back i'm leslie picker breaking news as it relates to uber uber and its underwriters were so concerned about the ipo they took an unusual step to support the stocks according to four sources, the banks deployed a rare technique known as a naked short which goes above and beyond the additional help a new offering can get. the naked short was relatively small, however naked shorting is a legal technique that allows underwriters to sell additional shares short in excess of the 15% that they typically overalot in each deal that allows them the ability to buy even more stock back in the open market to support the trading. banks were likely to make excess
fees on this short position if they covered the naked short because the stock plummeted 18% in the first two days of trading. morgan stanley and uber declined to comment but for more details on how this work, check out my article on cnbc.com back over to you, scott. >> really interesting news, leslie picker, thanks so much. in fact, let's get some instant reaction to that >> it's not a surprise, it's not a growth company it's not -- you know, it's a brand. it's an 8-year-old company, 9-year-old company they just waited too long. there's nothing exciting about it you know, maybe they'll introduce something new, maybe uber eats will explode and the numbers will show something incredible but i don't think you could have expected anything different. >> you know they would take issue with you saying they are not a growth company they may have an issue with
revenue growth slowing down and the fact that they lose a lot of money and there's really no idea when they're going to be profitable, but they are a growth company, though, no you really think they're such a mature company that the story has changed completely because they waited so long to go public >> look, i don't know what the new business lines are going to introduce, but the reality is you're nine years in and you're still having to buy your revenue. that's not a good sign nine years in, and in this economy the fact that the home gig economy is challenged when the overall economy and unemployment rates are low and the economy is growing, because it's not a primary job for most people it's a job of last resort for most people. so that increases the cost o finding new drivers. again, i'm not saying that they can't accelerate and can't fix it, but right now it's a challenge. >> have you bought or would you buy any of the most recent ipos, whether it's zoom or pinterest
or lyft? >> i was an early investor in lyft so i'm up a little bit on my stock so it was big, but not huge for me no, i haven't bought any more. when i bought in lyft, it was four years ago and i've been pushing for them to go public from that moment on. obviously they waited and didn't listen i just think we're seeing a reflection of the silicon valley ethos in the public market the whole attitude was wait, wait, wait, wait, wait you don't want to deal with an ipo, but at some point they need a liquidity event. it also suggests they're not very good at valuing companies and it's not a very efficient market when it comes to late-stage companies in evaluating ipos. zoom is a nice alternative, but pinterest waited, lyft, uber, all of them. i think it's a real challenge. >> do you think by virtue of what we've seen with uber and lyft specifically that
valuations in the valley are now going to be completely reset for the companies that do attempt to go public? >> well, i think they'll attempt to go earlier, having learned from what they have seen with the current crop of ipos but it's just going to change a whole different mindset. i mean, you know, a lot of these are not in the business of investing early anymore. they prefer to invest later and later and later with a higher success rate when you have a bunch of unicorns, it looks good in your portfolio. i think ceos and employees are going to be smarter. i think the biggest impact will be on the choices employees make so you went from, hey, i'm early, i'm going to get a ton of stock or maybe i've come in four or five years in, i'll have stock, it will appreciate, i'll make a lot of money. i mean how can you continue to do that as aen