tv Closing Bell CNBC May 31, 2019 3:00pm-5:00pm EDT
the first bad month -- >> see you later >> yeah, see you later, may. we begin june tomorrow, everyone >> but of course a lot more session to trade with the hour left to go thank you for watching "power lunch. >> and "the closing bell" will start in just a few seconds. we'll stay with you until it does president trump has a new trade war target >> stocks set to plunge. president trump threatening tariffs on mexico. >> these tariffs will escalate throughout the summer if mexico does not provide what the administration feels is a sufficient response. >> these tariffs would hammer the auto industry. >> mexico's president says his country will not respond to provocations >> this is actually a brilliant move by the president to get mexico's attention, to get them to help us >> we'll break down the real money impact on everything from cars to cans of beer plus live reaction from mexico's head of trade. it's the most important hour of
the trading day. "closing bell" starts right now. good afternoon welcome to "the closing bell," everyone i'm wilfred frost at the new york stock exchange. at the general motors post in particular that stock down 4% all of the autos, though, getting hit hard and we'll break down which other sectors are also being affected by president trump's threat of new tariffs on mexico. >> i'm sara eisen. 59 minutes left of trade we'll tell you everything you need to know before the market closes let's start with what is driving the action at this hour. of course there's concerns about what happens with mexico also weak economic data out of china overnight actually show contraction for its manufacturing sector and it is the final trading day of the month boy, has it been a tough one for the bulls. joining us for the hour to break down the market action, steve grasso from stuart frankel let's start with the autos we're going to go through every sector but that one's getting hit the hardest. what do you do if you own these stocks >> you have to hold on this is the first day thing. usually i have that three-day rule, when you wind up seeing a
market that sells off or rips higher it's a three-day rule let it settle in, see what kind of cooler heads prevail. just see what the market action is next week just hold on tight i would not be a seller of those stocks pb. >> let's get straight to that market action. seema mody watching the movers at the big board phil lebeau has a look at the fallout specifically in the auto sector kayla tausche has what comes next on the trade front. seema, though, let's start with you. >> hey, sara the market reaction really tells you how investors have been trying to position themselves. pulling back on mexico-related stocks, sectors, the etfs. even the peso as i know you've been following has been trading consistently lower across the board. and down 2.6% against the dollar outside of autos it's the rail stocks that have come under pressure the concern is that these tariffs will constrict or limit the flow of goods in and out of mexico and kansas city southern the big name to watch p. with direct revenue exposure to mexico shares are down nearly 5%.
this flight to quality is also evident in today's market action as yields move own lower utilities, real estate, the only two sectors that are trading higher and even the japanese yen gold often seen as a safe haven getting back above $1300 highest level in seven weeks >> we'll check back with you on the floor throughout the final hour of trade. auto stocks getting hammered as we mentioned phil lebeau has more from chicago for us hi, phil >> this sector is really the biggest trading sector between the u.s. and mexico. look at the number of imports and how much it's grown over the last five or six years in terms of vehicles coming into the u.s. from plants in mexico. almost 2.7 million last year and in terms of automakers this year and how many they've imported from mexico, gm leads by far more than a quarter million. but you see also a sizable presence from fiat chrysler nissan and volkswagen and that's why when you take a look at shares of the auto sector today, three in particular stand out. we're talking about gm, fiat
chrysler and nissan. they have the most production in mexico in terms of vehicles built there and then shipped back to the u.s. >> how does the mexico announcement impact america's global trading relationships overall? kayla tausche has that breakdown in washington. kayla. >> reporter: well, sara, the relationship with mexico appears to remain intact its president today with a measured response saying it intends to move forward with the ratification of the usmca. and mexico's foreign minister is expected to touch down in d.c. momentarily for some meetings here and earlier today he called those new tariffs, those proposed tariffs unjust. and said they make no economic sense for anyone and perhaps we'll get a few more comments this afternoon. it's welcome news for china, where companies may have been considering leaving china and moving to mexico to avert those tariffs. maybe they're reconsidering those moves. but the relationship that's really going to be fractured here is that between the white house and the business community if it goes forward with these tariffs. the chamber of commerce hit back against the white house earlier today and said that it is
exploring legal recourse against this we've also learned that other business groups are weighing potential legislative or legal action to try to challenge this white house action, although they say in a perfect world they would just get the white house to back off of this policy >> kayla, thank you very much. outstanding work today now, many on wall street are expressing concern about how potential tariffs on mexico will impact the economy deutsche bank chief economist out with a note saying these tariffs pose "serious risk to the outlook. he joins us now. thanks so much for joining us. what type of companies overall are going to get hit by this >> if you look at trade between the u.s. and mexico, really about 2/3 of that is intracompany trade so that means this is not just about avocados and fruits an vegetables this really is u.s. companies that are using mexico as a production facility and therefore basically putting goods back and forth over the border -- >> can you give us an example of what that means and why it's so
important? >> because that means at the end of the day a lot of this really has to do with that it's really not that much sensitive to the exchange rate and what the peso is doing, it really is u.s. companies that have used mexico as a production facility to basically do things cheaper because labor is cheaper, putting things together has been cheaper and that's basically we saw this in this very int grited supply chain we have today the answer to your question is this is not about two countries producing widely different things that are battling with each other it really is a very integrated network that's going to get hit as a result of this. >> does that make it more painful than if this were just straight up like china imports and exports? >> it really is like separating your spaghetti bowl and your pasta afterwards when you have cooked it because you really have a situation where things have really gotten so intertwined that it really is hard to disentangle what the consequence will be. that's also why from the market perspective and from a gdp perspective we really don't have any good estimates -- first of all of course of how long it will last and where we'll go on the tariffs. but most importantly we really
don't have a very good estimate of what is the ultimate impact on gdp other than it will most likely be negative >> some people pointing to the fact the mexican peso has weakened had that weakening been exactly 5% and the tariffs went and stayed at exactly 5%, would the effect be zero or because of this complicated relationship is that still a big negative effect? >> one thing that'san issue that's a bit unclear from the tweet yesterday is that this is on the value of goods that come across the border and some automakers they go across the border like seven, eight times so if you have to multiply 5%, 10% seven eight times you get a really magnified effect. there are unanswered questions in terms of what are the implications, how much extra should you add on to prices in the u.s. as a result of this new tariff >> steve-u said at the top of the hour let's wait, let's wait to see what happens on monday, don't panic if you're an investor why do you have that attitude? what do you think happens next >> because first of all, this is all a hypothetical situation here we don't know if it's actually going to happen and we don't know how long it's going to
happen this is a push president trump, his base wanted them to build the wall right? he was going to have mexico pay for the wall this is his way around it. they're going to pay for this pseudo wall at this -- one way or another so what i say -- >> but the u.s. consumer's going to pay for it. >> well, the u.s. consumer -- first of all, rates are low. right? we have zero inflation there's a lot of things -- we have a tax cut that was given to the american corporations and american people. there's a lot of things that counteract whatever higher prices they're going to pay. >> torres-ton, do you adjust your likelihood of a china trade deal now because presumably anybody will look at this action on an ally that has done a trade deal with the u.s. already and question what is the point of ever doing a deal with this administration? >> i know all day this has been the discussion with clients. is this an attempt to try to have more trade wars is there something going on in one area where you want to lever up and then lever down in the other area it really remains at this point
relatively unclear what the strategy is in terms of are we putting in one string and not in the other? are we basically pulling all strings at the same time so this is a really important ultimately political question that's just really difficult for investors -- >> why is this so difficult, though, when you think about it? president trump has an -- this country has an immigration problem. right? so whether or not -- some people say we don't have one. we have an immigration problem we have an illegal immigration problem. this is his way to try to handle it so we're all getting -- >> it was a total surprise to markets and it's a tariff, which has been used according to this administration to deal with unfair trading practices maybe as a more -- >> so should he worry about -- news flow comes as news flow comes. it's always a total surprise to the overall markets whenever you have a new dynamic to news flow. this market has been worried about the fed. it's been worried about brexit it's been worried about china trade. now it's worried about mexico. i will say that the only thing this market should be worried about is the fed if the fed is still dovish, all this stuff falls into place. >> steve, are you saying with
the s&p 500 down 1.2% that the market is not expecting these tariffs to fully materialize and if they did fully materialize you think there's more down side >> so i think that the market is trying to assess what the market can today. so to sara's point, it came as a total surprise so the market overreaches with total surprise because it shoots first, asks questions later. so now on the month end, where we had an msci rebalance in the beginning of the week, now we have month end people are squaring up their books. that's what professional traders do and institutions. square them up let's see where the chips lie on monday >> you think this pushes the fed to a cut >> so i think the fed has been talking about the incoming data. we also got consumption and the pce data and that still shows the ib coming data is good enough there's a huge debate about it's okay and therefore the fed is saying why should we lower rates if the data is still good. in that sense we haven't seen on the macro front. lowest unemployment rate in 50 years. from that backdrop it doesn't look like it's necessary
but we will have to wait and see. clearly rates markets are saying we're about to go into a serious deterioration. it is a down side risk but so part incoming data has not deteriorated sufficiently to authorize cuts. >> you wanted to touch on the chinese pmi this morning 49.4 contraction territory. worse than expected. how much worse is that and is that why japan and germany traded down today? >> absolutely, wilf. because here we're looking at a situation where china of course has some firepower to lift things up. so the good news if you let the chinese have more room to maneuver in terms of the chinese economy but it was quite a surprise that it continued to below 50 this is of course telling you that there is still something that needs to be done in china to get some support here for the chinese economy. >> torston, thanks for stopping by great to see you >> thanks for having me. >> up next one public policy expert says mexico tariffs could have major implications on a potential deal with china. he'll tell us why after the break. >> and later, mexico's head of trade joins us with his reaction to the surprise tariff move. whether mexico plans to
it's all on your schedule. awesome. now all you have to do is move...that thing. [ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. welcome back to "the closing bell." 45 minutes left to trade we are down 300 points on the dow. let's send it over to mike santoli's for today's market dashboard. mike >> thank you very much i'm going to be taking a look at what i'm calling re-emerging markets. the emerging markets trade this week a couple of groups performing relative to one another. and the market tale of the tape just a snapshot of after this tough week where we sit in terms of the market's position and then transitory story. buried a little bit today as we got some inflation data this morning. we're going to take a look inside of that first emerging markets, this is a one-week chart of the s&p 500 against the eem, the big emerging markets etf
interesting dynamic. you have the s&p on track for 2 1/2% loss. emerging markets up 2% and today widening out that performance gap. it's very interesting. there's a lot of explanations for it one of which is is emerging markets really took their punishment earlier so if you look at a one-month chart you see it's really more of a catch-up trade or a convergence trade between the u.s. market and emerging markets. that's one explanation another one is when the u.s. market was correcting back in the fourth quarter right around november, well below the end of that krerks emerging markets started to outperform. so it seems as if when the u.s. market is weak it's usually kind of following the rest of the world down and then you have a little bit of rebalance trade. this is despite the fact of course the dollar has been strong as we discussed yesterday, guys. >> mike, thank you see you in a bit president trump threatening to slap a 5% tariff on goods from mexico, which would go into effect on june 10th. white house trade adviser peter navarro joining us earlier on "squawk on the street. here's what he said about the president's move >> i would say to you that the president is going to get this
done by invoking the international emergency economic powers act and taking the appropriate measures this will get everybody's attention in mexico. >> great interview earlier, by the way, sara, on that front are these measures getting attention from canada, china, and europe as well ed mills, washington policy analyst at raymond james ed, thanks for joining us. first question is does this all damage the administration's credibility at making any deal on any topic given that a trade deal was already done with mexico >> absolutely. what you look at here is when i talk to the experts that really understand china trade they tell me that china is getting very concerned on whether or not president trump and the trump administration are reliable negotiators. and they're looking at this and saying look, this is the week that canada, mexico, the united states all started the formal process of getting the usmca,
the new nafta, officially passed in each of their countries and out of the blue we get a tweet that imposes tariffs so from a chinese perspective if you don't think a deal is going to stick why even negotiate? >> some headlines just crossing about mexico's response to the tariffs. according to reuters, mexico's national farm council says potential retaliatory tariffs on u.s. exports to mexico could include grains, pork, and apples ed, what happens to the new nafta? >> well, i think the new nafta ultimately still passes. i think that the alternative is still the worst case scenario for most members of congress when i talk to folks on capitol hill they keep on telling me they are doing everything they can to get this across the finish line. it is going to involve a lot of back and forth this absolutely kind of sidelines some of the progress we saw and you're not going to bully,
say, nancy pelosi into passing it but ultimately trump will threaten to blow up all of nafta unless the usmca passes. and with that as the calculation you have to think it actually gets through >> ed, do you think the likes of the eu and japan will be quaking in their boots because i guess we learned in the last 24 hours it's not just china that's currently in the crosshairs >> yeah. i would say japan's still probably in a pretty good position bim very concerned about what's happening with the eu i think what president trump has said from the beginning is he wants you to pick a side are you with the united states or are you with china? and what he has seen over the last year is he thinks a lot of eu nations are siding with china in taking advantage of this fight. you have a new airbus deal between france and china italy is doubling down on the belt and road initiative and no one's really listening to them as it relates to huawei and so if he wants to get the eu to pay attention and choose the united states over china, he's absolutely going to ratchet up
the pressure on the european union and these car tariffs, which he decided not to do earlier this month, he absolutely can go back to that at any time he wants and i think you have to assume he does it >> so it's quite a picture, steve, that ed is painting tariffs here, there, anywhere, anytime, any country, any friend i mean, you have to admit, even though you haven't been that worried about what happened today, that it hurts growth. so is there a specific trade energy, for instance, got killed this week. is there a specific slower growth trade you want to be in right now? >> so here's the problem, though when you look at energy, you couldn't have painted a more bullish scenario for energy. right? you have geopolitical concerns you've had issues all around the globe where you think that this should be the time of m&a. you've got real tailwinds for energy and it's done nothing but back itself up and trade lower. but i do like ed's comments about the eu
i think this is the way trump is talking to the eu, by talking to mexico in his way. i think he's able to check a lot of boxes at mexico's expense >> one final political question. i feel like hard line on trade on china was get's momentum behind it. what about immigration and mexico >> yeah, so with the fight with china trump has stumbled onto the most popular political position or policy position he has had of his entire presidency it polls about two times as good as build the wall. and so in many ways he's trying to export some of the goodwill he's seeing in these trade fights into the fight with the kind of immigration. i don't think we're going to see much kind of support from the democratic base at all on these trade tariffs with mexico. but with the divided congress that also means congress does nothing here >> he's not even getting support
from his own party senator grassley coming out and saying this is not how he should be using the trade authority of the administration >> he said that for the last year on china. and what you've seen here is that the president will always go back to his national security authority because there's ultimately almost no check to that and he used iepa, that international emergency economic power act, against huawei a couple weeks ago now he's using it against mexico who does he use it against next? >> usually they go to the state department but not this time ed mills, thank you. >> thank you >> we've got under 40 minutes to go before the closing bell take a look at the dow it's down 317 points lows of the day were down a little more at 329 points. you've got every major dow component lower except for mcdonald's still ahead, from food to financials, the mexican tariffs could have a massive impact across american industry the companies that stand to get hit the hardest when we come back and after the break, uber's
positive for the month as a whole, which is rare the dow is down about 6.5% for the month as a whole verizon down 4 1/2%. dow du pont down 3.3%. dow is down some 16% for the month of may suffering considerably more than the broader market but as you can see there, broad range of sectors lower today back to a good range of stocks >> only six dow stocks positive for the month of may shows you what kind of month it was. time now to get word on the street lots of talk on uber today after the company's first public earnings report last night upgraded the stock to overweight from neutral saying uber has an attractive stock valuation, expects improving ride-handling competition landscape to drive revenue growth but d.a. davidson lowered its price target to $46 a share from 53 though it did affirm a neutral rating the firm says uber delivered a solid quarter, cited early signs of price stabilization >> goldman sachs upgrading the
retailer to buy from neutral the annual believes the company's fundamentals are strong and says its risk reward is compelling at current levels. steven, back to uber, what's your take on this? it had a nice jump originally but -- >> so the way you look at uber is uber, lyft and everyone was so gung ho about buying uber and i thought it was actually going to succeed a lot more. have a lot better performance than we saw it have. but i think people are starting to rationalize it a little bit now, saying they have so many levers or levers, as you would say, wilf, that they can pull. so i think people are starting to weigh in just a little bit here canada goose, three-day rule, still making new lows. i would wait on that >> i would also just say as we pointed out two notes. one was a neutral. even the buy from atlantic actually lowered their price target it wasn't like it was a super bullish call they went from 55 to 52. mike santoli as well pointing out that was based on an enterprise value to bookings multiple which is a new thing. it's not like they can --
>> we have to figure out the right multiple we worry about m.a.u.s with social stuff d.a.u.s with social. uber we're just trying to figure out the metrics. >> but don't payattention to the billion-dollar loss. >> no. where did that go? >> both of them downgrading their price target not particularly bullish in that sense. up next, it's been a brutal month for retail stocks. the mexican tariffs could take things worse a top retail analyst will break down the news for us that's coming up next on "the closing bell." don't go anywhere. [ alarm beeping ]
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half hour till the close time to get a cnbc news update with sue herera. >> hello, sue. hello, everyone. here's what's happening at this hour a u.n. human rights investigator says wikileaks founder julian assange has suffered "psychological torture" from a defamation campaign and should not be extradited to the u.s., where he would face a politicized show trial >> our finding was that mr. assange shows all the symptoms of a person who has been exposed to psychological torture for a prolonged period of time what we're speaking about is severe stress and constant stress, chronic anxiety. severe psychological trauma. cardi b. appearing in a new york city courtroom today. the grammy award-winning rapper
is facing charges stemming from a fight with bartenders at a queens, new york strip club last fall she is due back in court august 9th. and an 11-foot alligator, there he is, barged right into a florida home overnight, breaking through a low window the homeowner says the gator broke four pretty good bottles of wine. police and a local trapper were able to capture it before anybody got hurt but can you imagine if you got up in the middle of the night to go get something out of the refrigerator and that greeted you in the living room >> a very cultured alligator it went for the vintage wine >> it went right for the good stuff, yeah. absolutely he has good taste. >> i also like that second picture with it taped up and someone still boldly standing in flip-flops >> that would not be me. >> nor i sue, as always, thank you. >> you got, it guys. see you next hour. we've got 28 minutes left of trade. here are the three key things that's driving the action. concerns about new tariffs on
mexico, weak economic data out of china overnight, and it is the last trading day of what of course has been a torrid month we're down 312 points on the dow. let's send it over to mike santoli for his second market dashboard. mike >> calling this the canary race. the old cliche about canaries in the coalmine looking at a couple of cyclically geared bellwether groups semiconductors and transports over the past week there's been an attempt at some separation here. you see in white is the transports another leg down this has been one of the weakest groups in the market, as a matter of fact and of course today with the mexican tariffnews the rails i particular are getting hit based on all that traffic flow they had. the semis trying to make a stand here they've had a worse month than transports but they're definitely still outperforming on a year-to-date basis. kind of the new economy cyclical bellwether trying to hold a little bit better than the old 19th century dow transports, which used to be considered the economic bellwether back when dow 30 was created, guys >> all right, mike, thank you.
levi strauss is down more than 7% today concerns about denim coming out of mexico. joining us to discuss this angle, dana tulsy, ceo and research officer at tulsy advisory group how much denim is made in mexico >> every company is certainly a little bit different it's split up between china and mexico where the denim is made. you can say it's a little bit half of each but overall what retailers can do and what brands can do to offset these tariffs, they diversify sourcing they share the tariff cost with the manufacturers. and what no one wants to do is pass on price increases to the consumer so that's what the here and now is and that's why retailers and manufacturers' stock prices are getting hurt today >> how bad of an impact is it still going to be with earnings coming down? lots of the retailers on recent earnings calls have been talking about the impact from china. is it incrementally worse across the board spectrum or just stock specific for mexico? >> it will be incrementally worse for apparel retailers.
i mean, we've heard of companies over the years whether it's t-shirts or whether it's denim everyone wants fast speed to market mexico has been able to deliver that in certain parts. and as a result there's only so far you can keep diversifying. and diversifying sourcing, it takes time to be able to do that there's a reason why companies source where they do the expertise and the speed. so it's just another thing where may has been weak. we need to get -- and the consumer certainly feels healthy. but retailers are pushing out earnings it's a back half year. and how much of a back half year will have the question >> so dana, when you talk about sourcing, i would assume that soft lines are easier than hard lines to source, but take me one step further where do i look at retail? do i look at the winners, which has been ross stores, tj max, olly's that benefit from the overinventory, that benefit actually from the trade skirmish, the trade war that we're having right now, or do i wait for the rebound effect from the ones that have not worked?
>> so i think overall when you think about value what works, value and convenience, i think those off prices that you just mentioned, they've had some of the strongest same-store sales and they've had both women and is men's apparel, particularly at tjx, doing well for them. so i think you're still going to see those off prices outperform and the reason why is because the extra inventory as you mentioned, their prices always come down a bit. access to better goods, access to more goods. they buy right, it's a win for the off pricers. >> dana, do you think it's already in some of these retail names that we could go to the next tranche of imports from china, another 25% tariffs on the $300 billion imports left which do affect a lot of them, like with apparel and footwear >> i think if the next 25% come i think there's still probably a little bit of another round down and the reason why, earnings estimates will be reduced again. a lot of these companies, they don't have the next round or
that fourth tranche put in their numbers yet. >> dana, did i hear correctly from one of your earlier answers that you're pretty relaxed about the outlook for the u.s. consumer for the rest of the year based on the earnings we've had in the last few weeks? >> yeah, i think the consumer is fine i think the consumer definitely what we've seen is they had more money than they did but you don't have the uptick you did last year. you don't have the extra wage increases and tax reform what we're comparing against is big numbers. and with those comparisons you're getting headwinds left and right. we still have -- whether it's ralph lauren, macy's or pvh. everyone has called out the weakness in the tourist trade. >> dana telescopy, as always great to see you thanks for joining us. >> thank you >> up next we've got your last chance trade just 22 minutes left we'll help you make that last play before the close. and later, president trump threatening tariffs on mexico over border security we will talk to mexico's head of trade about the move and whether
welcome back to "the closing bell." just under 20 minutes left of trade and we're right at the session lows that naenz down 350 for the dow, 1.4% s&p down a similar amount in percentage terms nasdaq and the russell down a little more, 1.5%. very much a defensive tone of course classically defensive tone you might say. real estate and utilities the only sectors positive. but everything else in the red steve, last chance trade >> so if you look at the market right now, you've called it out a couple times during the show mcdonald's it's green on days where we're red and we are aggressively red today. we're at the lows of the day and it's also green when the market's green they have efficiencies they're cutting down on the number of skus nonetheless green. for me i would not run out and buy mcdonald's i need it on a technical basis to be above $200 you might even give yourself a little flexibility there and use 200 as your out. i'd rather buy it breaking through resistance versus going up against it.
>> so interestingly, steve, your last chance trade you wouldn't even buy at the moment yet you're kind of not concerned about these tariffs today and the market's decline -- >> i don't want to put somebody into something because if you look at a chart on it and the resistance that it's been banging up against is right around a $200 level. so either resistance becomes stronger or the actual stock becomes stronger the more that it hits that level so once it breaks through, substantively, for a couple of days, then the stock is going to be up 5% very quickly. >> so the other defensive plays that are doing well today, real estate utilities, two sectors that are actually green. you keep buying those for protection >> it's a counterintuitive trade. when you look at utilities, there's nothing that gets people excited about utilities. there's nothing sexy about utilities. yet when you look at them -- they've outperformed longer than people would have ever thought even when the market rallies back, people don't believe the rallies. stay in the safety trades as well >> okay, steve, thanks very
much the oil sell-off intensifying. mexico tariffs could weigh on the energy stocks as well. rahel solomon has more on that for us hey, rahel >> hey, wilf oil prices had their biggest monthly drop in six months the news today on tariffs on mexican imports doesn't help after canada and zrabt u.s. imports the most oil from, you guessed it, mexico some of the top names include shell, valero and chevron. in total about 9% of daily imports, which works out to 680,000 barrels a day. i spoke to john kilgoff of again capital earlier today, who said the biggest concern is softening demand because of the impact to the global economy and taking a look at prices right now, chevron at one point was down this morning. it looked like the energy sector in general was down. we'll get an update on those prices and get back to you guys. sara, i'll send over to you. and all right, rahel, thank you very much. we've got 27 minutes to go excuse me, 17 minutes to go
before the closing bell. here's where we stand in the markets. good probably for the best >> yeah, really. wrapping up the month here on a sour note. appropriate for a month in which the market is down more than 5%. down 334 right now on the dow. not too far off from session lows s&p down 1.3%. losses picking up here we'll see what happens in the final moments of trade >> you know what else is falling sharply as well this week have been bond yields we've got a great person to talk about that coming up we will discuss if we've hit a bottom in yields you don't want to miss that. we're back in a couple minutes miss p e*trade core portfolios is an easy, automated way to get invested. we'll save you time by building, monitoring and managing a portfolio for you and provide all hands-on deck support when you need it- helping you become top dog. ♪
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pickles don't be so dramatic. but yes probably. there they are. aww! whaa , whaa, ahh! he. 13 minutes left in today's session. stocks are headed lower. we're near session lows. dow down 320 session lows down 355. market falling all day as president trump announces plans to put new tariffs on mexican imports. frank holland has more on what that could mean for trucking and rail companies wilf has been looking into the bank reaction. frank, though, first to you on transportation >> good afternoon, sara. the s&p roads and rail segment in line with industrials but with 85% of the goods imported from mexico brought by train or truck this industry has a lot of exposure to this tariff threat kansas city southern and union
pacific shares both down 16% of kansas city southern revenue could be impacted according to citi research in trucking. universal logistics and warner enterprises both do a lot of that cross-border business and probably because of china tariffs trucking rates have fallen by 18% over last year analysts say mexico tariffs would accelerate those declines and possibly put some smaller companies out of business. sara, back over to you >> frank holland, thank you. wilf, you've been looking at the impact on the banks, not having a great day. but not the worst performing sector >> not the worst performing but selling off once again let's dive into citigroup as an example because that has the highest foreign exposure they've got 21% of revenue in asia we'll come back to that. 14% in latin america about 8% of that is mexico or 6% in terms of their net income bann bannermex in mexico. exposure to the northern geographic region of mexico.
one analyst i spoke to said citi's mexican revenue had been growing at 7% in their model per year if these tariffs come through they say that will only grow -- won't grow anymore, will be flat, but not actually falling even for citi the most internationally exposed of the big u.s. banks, the impact not directly that high furthermore, there could be a long-term benefit of these trade wars goldman sachs analyst richard ramson, who upgrade the stock yesterday, says the following. "the global footprint and onshore presence in asia positions them relatively well to benefit from a potential shift in trade flows should trade tengsz escalate further, causing companies to diversify their supply chains. but of course in the short term, sara, the banks all trading lower because of the fears for global growth which come with tariffs and therefore the moves in the yield curve as well which their share prices are closely linked the only thing i'd say on the yield curve move, where we're all rolling our eyes or amazed at the u.s. yields, spare a thought for banks in europe. minus -- >> more negative
>> 0.2% in germany deutsche bank a record all-time low again. i'd just highlight that point. yes, these lower yield curves are back bad for the u.s. banks but they're still making positive net interest income and there is room to cut if the economy gets worse and you don't have that in europe at all. >> they can look forward to negative interest rates -- >> even further. >> ten minutes to go until the close with the dow trading lower now by about 319 points. let's bring in bill campbell from double line global bond fund for more on today's market move just when we thought bond yields couldn't go any further, bill, here we go again today what sort of levels are you guys paying attention to? >> well, we've certainly seen a rally across global yield curves as was pointed out the german bund hitting 20 negative basis points is an eye-popping number for us what we have said since the beginning of the year is that we wanted to focus on since the beginning of the year the tight range that the 10-year treasury was trading in and instead of making a call at
the beginning of may as to the exact direction we wanted to take a view that volatility and rates would go up. as jeffrey expressed on your program with scott wapner, we expressed our view through the volatility in interest rates and since jeffrey presented that trade volatility has gone up markedly going forward, i think we've seen a big rally so far. there's a lot of expectation for fed cuts i think we're pricing in 70% chance of a fed cut by september and greater than a 60% chance of two cuts by the end of the year. so the fed, you know, is really caught in a tough position this needs to be -- what we also wanted to look at is internationally. due to the low yields that we just pointed out there's been a lot of buying of foreign investors into u.s. assets and a lot of that has been unhedged so rather than expression an outright view in rates one thing
that i would like to point out is the surprising move in the u.s. dollar. ever since the trade war picked up and the trade rhetoric picked up in the past month, the dollar has actually remained fairly contained compared to what the rhetoric actually has been even today we saw a sell-off in the dollar and i think going forward in the second half of this year we would be a little bit more biased to advising investors at this point when we look at risk-reward to potentially start looking at non-dollar investments and instead of looking at any one particular currency or country use a basket because there are a lost idiosyncratic risks out there. >> we'll leave it there. thank you very much for joining us bill campbell. to his point, even the pound managed to rise today. which is rare at the moment. dollar weaker across the board up next we'll be back with the closing countdown. just 7 1/2 minutes left of trade. we've got all the angles covered for you with our closing bell.
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you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse. but you're not mad, because you have e*trade, who's tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis. five minutes left of trade time for the closing countdown shawn cruz from td ameritrade is here to trade the close. mike santoli bertha coombs at the nasdaq. seema mody on the floor of the stock exchange but let's start with shawn cruz to trade the close shawn, let's talk about the energy sector. big, big declines in oil prices
today. this week has hit a buying opportunity. >> i don't know if it's a buying opportunity just yet what i'm really focused in on here is the oil services companies. and if you look at some of the companies like schlumberger or halliburton, they get a lot of their growth right now from revenue. it's coming from latin america if you look at halliburton, that's about 28% growth they're getting out of that segment. if you look at schlumberger, that's about 14% and those two names are down pretty significantly today and i think the issue is a lot of the machinery that we get from mexico, there's about 63 billion of machinery that we import if you get we'll just say a 25% tariff that goes all the way, you're going to increase costs about 15 billion a $15 billion tax. let's take a look at what happened with staples last year when they had a pretty big pickup in input costs. they were not able to pass that along to their customers and that really put a squeeze on margins for them and i think right now you need to wait and see what the effect's going to be before you can really go in there and start buying these names >> we're wrapping up the month
of may if it was all about new tariff scares and growth fears because of a prolonged trade fight with china, what we just got with mexico on the last day of the month, is there any reason to think june would be different? >> i really think i'm looking at what's going on with the stroilt or the fear index. that was something strange to me, that some of these names in these sectors are pulling back to lows we saw in december when we had that pretty big sell-off at the end of the year but we're not seeing the volatility index spike as high as it did then so i think right now markets are going to be in a little bit more of a wait and see mode and if you think about it, even yesterday and a little bit so on wednesday we were trying catch a little bit of a bid in this market and at least stabilize things and maybe try to retest that 2800 level. i think we may have drifted somewhat higher having not gotten this addition to the tariff front >> thaun cruz, thank you very much sitting near the lows of the session. let's go back to mike santoli for his third dashboard. mike >> let's take a dial back a
little bit, look at where the s&p 500 stands to shawn's point, it did seem as if the news today pushed the market at a time when it was a little bit off balance, a little bit on a precipice let me point a couple of things out. one, we're going to have a weekly and monthly close below the 200-day moving average for the s&p. that's about 20 points above where we are right now some people are going to think that's significant it says something about the longer-term trend. this is not a very encouraging pattern where you have these kind of two toppy-looking hills on the chart other areas we're looking at right below. 1% down from here is 2722. it's the march low so that's right here and then beyond that i would like to point out you're basically at a 16-month low or just about on the s&p 500. so lots of sideways action 2650's the other one shawn was also talking about the vix. let's take a look at the one-year vix it has been stubborn it's been suppressed below the recent highs we got to 23 in the middle of this month you see that bump right there. it's built but it's not really spiked it shows you there's been
already a lot of hedging going on and people are not yet saying that there's some kind of a panic happening. down 7% in the month, though you're starting to think it's more than just a routine pullback we'll see if that plays out next week let's talk to bertha up at the nasdaq >> i've been watching the chip sector all week, mike. look at the smh, that's the etf, this week it put in its smallest decline in four months down over 15% for the month. and it's also seeing close to bear market territory. nonetheless, a little bit better this week than the previous weeks. that said, a lot of these chipmakers are down 20% for the month. down again today and they certainly do not see better outlook if you start seeing automakers suffering as a result of mexican tariffs. over to seema. >> volatile day and a volatile week for stocks where the market discussion was largely driven by trade and tariffs, not just with
china but mexico as well we're at the lows of the session of the dow, coming down 352 points take a look at the stocks hitting 52-week lows in the last hour s&p 500 down 46 at 2752. now time for the second hour of "the closing bell." and that is a wrap on may. a lot of bulls will be happy to say good-bye to the month. welcome back to "closing bell. i'm sara eisen >> i'm wilfred fraught along with mike santoli, cnbc senior markets commentator let's check in on how markets finished the day, not far from session lows the dow is down 355 points, around 1 1/2%. we also have the s&p down 1.3% the nasdaq down 1.5% and sara, in terms of sector
performance, really playing into the yield moves as well. we saw yields fall the only two sectors higher, real estate and utilities. communications services and energy toward the bottom >> bad day, bad week, bad month for stocks and if you look at the breakdown of s&p industries for the month of may it really tells the story. hardest hit. harder than the rest of the market you've got groups in there like auto components, energy equipment, and semiconductors. what does that tell you? growth concerns, trade concerns. the seamis got caught up with the huawei moves and higher tariffs on china so did the autos and energy of course got slammed. >> and i totally agree with even the focus on mexico today perhaps when you talk bay little overdone and i think we can't take our eyes off china. when you consider the move in oil, you consider the move in the japanese and german indices, i think that weak chinese manufacturing data earlier today, it was a big factor and maybe that's a siphon things to come from mexico if those tariffs do get put in place.
>> we've got a key player to talk to this hour. mexico's head of trade will be here to tell us whether his nation is planning to retaliate against the u.s. after president trump announced those plans to put new tariffs on mexican imports. mike, what's your take on today's sell-off and really where this leaves us as we look ahead to monday and the month of june >> it stretched the market further in the direction it was already moving but with a little more urgency i think the downgrading of growth expectations, the compression of treasury yields, and essentially the market almost insisting that the fed respond with rate cuts by the end of the year that became more intense right now. i feel as if the market was almost coming to terms with this u.s.-china stalemate after several days and we discounted the market but look, down 7% in one month is significant i do think it's also important to keep in mind that the big rallies happen when something we feared a lot doesn't occur so if you come out next week and they say we're going to defer the mexico tariffs because they vowed they're going to do something at the border, i think
we have the makings now of an oversold bounce. >> he threatened the chinese tariff rates would go up and he went through with that but then he also -- he threatened to close the border with mexico, and that never happened so it's hard to game it out. >> at a certain price not so much the worst case but a bad case is already priced in. that's where we are right now. already oversold are people too negative? it's hard to make that conclusion just yet. because credit markets did not have a good day. >> also there's a trip to europe next week for the president. i'm sure europeans will be wondering whether they might now be in the eye of the storm on the trade front. lots to discuss. let's start deeper into what has been of course a very bad month for equity market bulls. seema mody at the stock exchange bertha coombs at the nasdaq to review the miserable month of may. >> we are capping oft worst moffett year for stocks. the s&p 500 at a 12-week low the sell-off did accelerate this week a number of factors at play. trade of course being top of mind with the larger u.s.-china trade dispute with mexico as part of the discussion as well
lower yields and weak earnings from a number of retailers take a look at the worst-performing sectors on the s&p 500. we were really driven by energy. a big sell-off there down by 11%. followed by tech even some of the defensive sectors and nature, utilities ending down by 1%. although real estate eking out a gain of 1% digging into energy, a culmination of rising stockpiles, a stronger dollar pushing oil prices to the down side its worst month for oil since november, down 16% with that take a look at the performance of some of the biggest energy producers, halliburton, valero, marathon oil all down doubling digits in the month of may broad ten out and take a look at the worst-performing stocks on the s&p 500 this month, and it's largely dominated by those retailers. weak earnings, guidance, and also talk about tariffs. negative impact that will have on the company's bottom line and that will push a number of these retailers to raise prices. overall, the s&p 500, here's where we stand for the month of may. down over 6%
we're actually faring worse than china and europe wilf and sara, back to you >> worst month since december. and we all remember,000 that was. seema, thank you the nasdaq has been the weakest performer of the major averages in may bertha coombs tracking the damage there bertha >> chips were the worst performing sector but apple was the biggest drag in terms of its decline. down for the third month out of the last four. now the stock is back in bear market territory fang names, those other big momentum names, really didn't fare that much better. a little bit better. little bit down. less than apple but still were also a drag here as technology got beaten up. interestingly, some of the names that managed to avoid that plunge, mercado libre. this is a technology e-commerce. but they're in latin america so they're not impacted by either the mexico or china tariffs. take two interactive had pretty good earnings. a couple of those health care names starting to see a little
bit of action. back to you. >> bertha, thank you joining us to talk about the market day, larry adam from barry james and barry lannister from steeple you think the s&p fair value is 2750 we're kind of right at that level. >> we are. we've been using that level all year since late last year that's been our target price we felt like the first quarter run-up was excessive and as the market has pulled back it's pretty much at a fair value. i would put one multiple point around that. plus or minus 150. we're in a 2600, 2900 trading range waiting on the fed i think the trade thing is a little overblown but what i do think is very important is that the fed is simply too tight and needs to cut by 50 basis points until that happens it's tough. >> barry, what do you mean the trade thing's a little overblown? you said a deal is done with china or the mexico issue goes away >> i feel like i'm caught up in
an "art of the deal" tornado here but i do think that with china that there's a workable deal coming with amlo and mexico, the amlo administration, more left-wing populist, has not really done enough to secure the border. if you look at the prior administration and ones before that, during the obama years and the george w. bush years, they did a lot more but right now this is really a border dispute with mexico i don't think that will go too far. i think there will be some response there with china there's a deal coming probably by the end of the year. but the more important thing is the fed. they're simply too tight for financial markets. they're happy wa that they're going put stress on the credit side 37 and if the credit side feels even more stress than the high yields we've seen then they'll probably react more aggressively, the fed, and cut by 50 basis points, which has been our view in the second half >> and mike, actually interesting, a lot of wall street firms came out today and said we're caving. the fed's going to cut rates
this year. barclay went to 75 basis points. they see 50 basis points that's kind of a double cut coming in september. jpmorgan is there. >> bit of a capitulation the reason is we're getting in that three or four-month range of when the market right now is priced for the highlily hit of a cut. also it's very difficult to see what gets you a reacceleration of growth just in the very near term maybe it's sort of steady stay at around 2% that would be fine but i do think the narrative's going to change and we're in for a couple of months probably of kind of the market arguing with the fed or at least chasing those shadows and looking for hints that the fed might be coming in its direction. whether it's warranted or not. >> as well as the equity market sell-off, and of course we saw bonds rally, yields falling. is it time to make the switch between those two? >> again, we do think that bonds probably have had an incredible rally here but i think the fall in the yields has actually made
equities look even more attractive and that's why i'm more opt mystic for the equity market going forward. in fact if you look at the two-year at 1.9%, that's basically the dividend yield of the equity market. and you haven't seen that for two years. i actually think going forward i'm more optimistic. i think you might see a bounce in rates and i think the equity market's going to move higher in the not too distant future >> i see in your notes, larry, your base case is that u.s. and china and u.s. and mexico will both be coming to trade deals by the end of the summer. >> i do. >> that sounds optimistic. >> i'm optimistic that will happen i think there's three reasons. number one, i think the market could force them to come up with a deal i think the economic repercussions that you could see both in china and the u.s. could force a deal and then i think the political aspirations of particularly president trump will make him come to a deal especially when you look at this mexico particular situation and some of the states that by the way could be the deciding factor
in the next election cycle i think in the end cooler heads will prevail we'll get a deal, as barry mentioned. and i think that ultimately serves as a catalyst to send the equity markets higher. >> mike, on the topic of yields, fund strat pointing out that 21% of global bonds now in negative yield territory. the highest percentage since 2016 on the surface that sounds very bearish. but 2016 it's not like we ended up seeing a global recession so how are we meant to read this >> we did not. although much of the year we were afraid of exactly that and you did see really an emerging market an industrial recession. but that's exactly right it's not necessarily some kind of clear reliable prediction of how the macro's going to play out. it does show, though, that i do think we're not fearing inflation anymore collectively and disinflation risk seems like it's prevailing in everybody's mind the kind of assets that work in that environment have done better big growth stocks, dividend-paying stocks, and that's where we are until
there's some reason to -- >> we're also in this world, barry, where we're trying to figure out the import and export exposure to mexico we've been doing that with china for months with companies. it's not always the clearest in terms of impact on profitability and sales. but are there specific industry groups would you stay away from or get into? given the increased escalation we've seen in recent days. >> we've been very positive on the defensive trade because we had a low ten-year yield forecast in fact, we're saying it's going to break 2%. the full curve inversion even the 10 to 2s. before the fed acts. the fed's job is not to rescue equities, and the deflationary impact ultimately with the fed backing off would push down both your break even inflation and your real tips yield we had a 1.95 target just yesterday on a recent note so when you look at, that the obvious beneficiaries are things like consumer staples, reits, and utilities. very defensive bond proxies. and that's what you would stay
with until we get a bottom on the ten-year, which i do not believe we've seen yet and what you'd stay away from would be the obvious global s k cyclicals and growth stocks that ran up too much. but particularly global cyclicals. the materials, the industrials, these are the more sick ligcycll stocks under pressure. >> larry and barry thank you, very much for joining us >> thank you >> it wasn't a baa month for all equity market nirinvestors aroud world in may three countries ended positive brazil, australia, and malaysia. don't know if you had exposure there. but if you did you're up for the month. >> that would suggest maybe the china picture was looking up at one point it was. then we got a weak month >> recent policy -- >> that was in party mode. >> brazil's in party mode. anyway, just pointing out some positives out there. still ahead, auto stocks crashed
by president trump's threat to put tariffs on mexican imports coming up. how that will impact the auto industry and the price of your next car >> but first mexico's head of trade tells us whether these new tariffs could put the trade deal, the new nafta between his country and canada and the u.s. at risk.
big sell-off on wall street today. the major averages posting their first monthly loss of the year this after president trump threatened new tariffs on mexican goods. white house trade adviser peter navarro joined us earlier on "squawk on the street" this morning. here's what he had to say about the progress of the u.s.-mexico-canada trade agreement. >> let's talk about the united states-mexico-canada agreement this is -- let's agree that nafta was one of the worst deals in american history. let's also agree that the usmca was one of the most sophisticatsophisticat sophisticated trade deals that have ever been done. the president with ambassador robert lighthizer have done a beautiful job getting that to congress it's congress's move and congress's responsibility to pass that bill under fachtd track. we are waiting for them to do their job. >> so is the future of the usmca trade deal now in jeopardy let's bring in guillermo
malpiqua, head of mexico's trade and nafta office good afternoon to you. thanks so much for joining us. >> good afternoon. thank you for the invitation >> first question, was there any warning of this? did you see these extra tariffs coming >> no. it was a surprise. we were coming from a pattern of positive news, conducting on the trilateral relation, and suddenly we got this news yesterday. >> what's your country's reaction going to be >> well, mexico is taking the announcement made by the white house very seriously but this is so far only an announcement it's a statement that is on the white house website. it has been an announcement by the president. we have to wait and see what are the concrete notification procedures from the u.s. to mexico is then assess how that decision would impact our commitments, our international commitments with the u.s. and based on that to decide what is
the most appropriate reaction from mexico. we of course believe in free trade. we have been working on the usmca agreement and we are confident this intention of building a more competitive region in north america is a common purpose for mexico, canada and the u.s we want to have the discussion on trade kept at that separate track and trying to work things out on the rest of the topics of the trilateral agenda. >> is the usmca now dead >> i think the usmca has a lot of potential in the three countries' congresses or parliament to have a success in the ratification process we believe the negotiation was sufficiently complex but at the end of the day we have a result that gives the three parties the elements in terms of content of the agreement, in terms of ambition, and in terms of
long-term view to claim a success story in each one of the countries, in the canadian parliament, in the mexican senate that is where the agreement is voted in mexico. and in the u.s. congress >> what about the tone change that this injects into some of those agreements and negotiations i mean, do you feel that the u.s. is negotiating still in good will with this surprise 5% tariff move, threatened to be 25% october 1st? >> i think it's a very disappointing announcement i think we have to consider also that this is part also of an internal agenda in the u.s we have in common these messages app apparently contradictory during the entire negotiation of the usmca. it was something we got used to. we were negotiating at the negotiating table. and that's where we believe we can build on a long-term relation we tried to separate the public
discourse from the content and from the technical discussions and from the serious engagement among our parties. >> have you spoken to your canadian counterparts? where do they stand on the last 24 hours developments? >> well, we have had some initial discussions on what is going on of course for them it's also very important to have a ratification soon of the usmca and the other two countries. for them it was announced two days ago that the canadian parliament started the process of ratification and they want to see mexico and the u.s. also following suit so they are keeping an eye on this discussion. hopefully, we will be able to solve it soon on the appropriate track for this discussion and we will continue working on our side, on the trade side, on the process of ratification of the agreement. we believe we have to continue explaining to all the stakeholders in the u.s., to the congress, the benefits of the
agreement in many of these chapters >> but did you get the impression from your canadian counterparts that if necessary they'd be willing to stand alongside you and stand up to the u.s. >> no, would've to -- of course they had the same surprise as we had, but they are also in this waiting mode to see discussions. we haven't started discussions with the u.s we just had this announcement. we haven't had as i told you any formal announcement through the formal channels of communication among countries. so we need to start discussions in order to find out which is the best way to solve the matters and how we can continue pushing for a usmca in force >> if these tariffs do go through from mexico into this country i think there were $350 billion worth last year, what's going to be the impact on the mexican economy?
>> if that is the decision of the u.s., it's going to be very big of course pofor mexico becae we depend in a great manner from our trade with the u.s. but also for the u.s. and for canada. i think it's not good for anyone to have this type of decisions what we are moving is toward an area of serial tariffs and gradually more liberalized trade and better rules for trade so i think it's going to be impacting not only mexico. definitely mexico. 80% of our trade is with the u.s. but also to the u.s. i think many companies in the u.s. that are established in mexico will also feel the effects of these measures. and of course depending on the nature of the measures and the ability of the u.s. to justify those measures, mexico may take a decision with respect to countermeasures if that is the case >> guillermo malpica, thank you for joining us >> thank you very much >> let's get to a news alert now with sue herera.
sue. >> thank you, sara here's what's going on right now. president trump will give the medal of freedom to art laffer, the noted economist. the white house saying that arthur b.laffer, the author of supply side economics is "one of the most influential economists in american history," renowned for his economic theory. this is the nation's highest civilian award so president trump will award the medal of freedom to art laffer guys, back to you. >> also the co-author of "tru "trumponomics" with stephen moore. coming up, chipotle telling cnbc that president trump's new tariff threats against mexican imports will hurt its business big buyer of avocados. we eat most of them and they come from mexico we'll share the comments with you next >> also coming up ahead of the world's largest cancer research conference we will look at what's being described as the holy grail of cancer treatment
the month of may over 6% for all of the indices nearly 8% for the nasdaq >> we'll check in with mike for the final dashboard of the day >> we all recall if we can this month i guess when jay powell, the fed chair, talked about how some of the low inflation readings might have been due to transitory effects today we did get the fed's favorite inflation measure, the pce, personal consumption expenditures index this is a different version of that the dow's trimmed version of the pce, what it does, it excludes the extremes on a month-to-month basis and tries to look at the central tendency of inflation. and what you see is it came in right at 2%. so 2% long-term is what the fed is shooting for. and you see this very subtle little up trend going on right here so it's very common now as the bond market prices in a fed aegz cycle to say that inflation is nowhere to be found. well, inflation is slightly higher now than it was when the fed funds rate was a good deal
lower. so i think you can have an argument that this is still going to have the attention of the fed. not that they're looking for a chance to tighten. but this is one part of the story. and just in terms of those transitory factors, jay powell did mention one in particular, which is investment services fees he said it was depressed in december simply because the markets were down and that's how the fees are calculated look what happened here. shot right up. just as he said. he was right this was a transitory factor we knew that was going to be the case because the markets came back this is one of those wild numbers that would have been excluded from the prior version but it still i think merits a little bit of attention that inflation is not banished. >> but of course as well next time round we would have had a longer month of more intense trade-related tensions, which is going to be something they're -- >> this is obviously backward-looking if the fed acts it's going because of what happens from now into the fall for sure >> mike, thanks very much for that time for another cnbc news update with sue herera hi, sue. >> hello again, wilf here's what's hamg at this hour,
everyone missouri's only abortion clinic will remain open for now the license at the st. louis planned parenthood was set to expire at midnight the company sued and in his ruling the judge stated that it has demonstrated that immediate and irreparable injury will result if its license is allowed to expire. in prison pharmaceutical entrepreneur martin skreli has sued three executives at a company he started saying they illegally ousted him and defrauded the company of millions of dollars. the lawsuit was filed today in new york federal court hungarian rescue services released a photo showing the second sightseeing vessel that carried south korean tourists. seven people are confirmed dead from the collision with a viking cruise ship on the danube. 21 others are still missing. and pope francis presiding over a mass in bucharest on his first day in romania, urging residents to help the homeless it is his first visit by a pope to that country in 20 years. you're up to date. that's the news update this
hour guys, back to you. have a great weekend >> you too, sue. thanks very much still to come here on "the closing bell" we've got all the angles covered of how president trump's move to slap tariffs on mexican imports will impact the food you eat and the companies that make it >> plus we look at how these tariffs could be brewing up trouble for the beer industry. if you have a garden you know, weeds are lowdown little scoundrels. don't stoop to their level. draw the line with the roundup sure shot wand. it extends with a protective shield and targets weeds more precisely. it lets you kill what's bad right down to the root while guarding the good. roundup sure shot wand. got bugs too? roundup for lawns bug destroyer kills and prevents them, even grubs. roundup brand. trusted for over 40 years.
this is one of the most misunderstood aspects of the trump tariffs. china, for example, bears the burden of the tariffs in the form of lower exports, lower prices for their products, lower profits for their companies. the government of china has borne the burden of those tariffs in the form of lower tax revenues and a lower rate of growth >> but so is the american consumer >> no. >> import pay for it >> no. the government of china and mexico will pay for it and the producers in mexico and china pay for this
>> that was "closing bell's" sara eisen and white house trade adviser peter navarro on trump's latest tariff threat against mexico those threats having a ripple effect across the markets and throughout the food industry sara will break down the impact on food and beverage companies kate rodgers has the restaurant effect and aditi roy is covering the fallout for agriculture. sara let's start with you >> you know where your toothpaste comes from? >> no. >> well, maybe mexico. a tube sma smartalec. consumer companies, we're talking food, beverage, household products, make and source products from mexico. they also sell a lot to mexican consumers. that's where the biggest tape comes from according to analysts companies that have a bunch of sales exposure in mexico between the currencies plunge which we saw big-time today and the weakness it could cause for the mexican economy. those sales are at risk. here's how jpmorgan breaks it down, who it feel it the hardest. colgate palm olive coke and pepsi each with about
6% apiece. procter & gamble, monster. they've all got sales exposure the trickier question is who's importhd the most from mexico and selling here according to sanford bernstein colgate actually manufactures base anti-cavity toothpaste in mexico and also some of its health care products and estimates it's 2% to 3% of total revenues coke and pepsi we know source oranges for some of their juice businesses in mexico for coke coleate super fast growing craft beverages like mexican coke, topochico do come from mexico. but bernstein says it's in the low single digits in percentage of sales also notable pepsi just announced a few weeks ago it's going to be investing $4 billion in mexico starting this year to open the company's first plant in the country in 20 years bad timing obviously won't take a hit but the whole theory was that plants are being opened there. you don't want to produce in china. it's close proximity to the american consumer. it's much cheaper in terms of
labor. and we're moving toward a trade deal between the u.s., mexico, and canada, which may still be happening. but these tariffs sort of throw a wrench in all of those plans and make for higher costs. >> some of those stocks, pepsi, for example, off the lows of the day and not down anywhere near as much as the market. sort of staples nature coming through by the end of the day. >> staples, they're bond proxies, they're defensive they don't have a ton of sales exposure they don't have a ton of import exposure, say, like the beermakers, which is a much more significant percentage >> we're going on talking about the beermakers in more detail in a moment first let's check in on how the mexico tariffs are impacting restaurant stocks. kate rogers has that for us. hi, kate >> hey, wilf it's all about the avocado morningstar says names like chipotle which closed down over 2% and panera which is of course now private may be pressured by this new round of tariffs. chipotle told cnbc overt last year our supply chain team has been working to diversify. our produce supply consistent with our food with integrity principles, if the announced tariffs are enacted they would
negatively impact our costs and we are monitoring the situation and working with our suppliers to minimize the impact morningstar also called out smaller chains chuy's holdings and fiesta restaurant group, which may be less agile and able to diversify their supply chains if and when these tariffs of course come to fruition, guys back over to you >> kate, thank you mexico's a huge exporter of agricultural products to the u.s. aditi roy is here. lucky us with that angle. and it's not just avocados >> avocados are a big part of it as kate mentioned. but there's also a lot more. the u.s. brings in more agriculture products from mexico than from any other country. total u.s. agricultural imports are $26 billion. top items at this time of year besides advocate oerksz tomatoes, peppers, and cucumbers. one new development, mexico's national farm council says u.s. farm exports to mexico could be part of retaliatory tariffs. those items could include grains, pork, and apples and another factor which could affect things a rabbo bank
analyst tells me if the peso continues to depreciate it could help imports coming into the u.s. but of course the numbers would hurt exports as well >> aditi, we'll keep an eye on the currency thank you very much for that aditi roy. oil stocks were hit hard last year the u.s. imported $93 billion worth of vehicles more than any other good. joining us now to discuss john bazella president and ceo of global automakers. finished goods coming in over the border or is it more complicated than that? >> oh, it's way more complicated and therefore much more troubling for the u.s. auto industry this is not only about finished goods coming in, in other words, cars and trucks built in mexico for the u.s. consumer, which by the way is great, it creates more affordability and more choice but it's also about car parts. we imported $60 billion worth of car parts that supply american factories that employ americans building american cars >> who's going to pay for the
tariff increase? >> oh, there's no question who's going to pay the american consumer and american businesses pay. i'm not sure what economic models other people are -- >> i was trying to say that to peter navarro. they insist that the governments pay. >> i saw -- i saw that exchange. and i just don't understand it it's paid for at the border by the importer one of two things happens. it either gets passed on to the american consumer in the form of higher car prices or it gets passed on to the shareholder in terms of squeezed margins. and by the way, we know this for a fact because steel and aluminum tariffs are increasing the cost of producing cars in the united states by billions of dollars and companies are reacting through price increases and margin reductions. we know how this works >> long-term, john, do you think we'd see fully made vehicles in the u.s. is that an easy thing to see without all the cross-border transactions for different parts? >> well, let's understand how we got here you know, we've had duty-free
trade in north america for a quarter of a centery so the running rules have for a quarter of a century been let's have duty-free trade, let's have a seamless nafta industry in the united states. and you know, that's been great for the american auto industry we produced more cars and trucks here in the united states than we did before nafta 25 years ago. so it's been great for consumers and great for american auto workers. so to unwind that with established supply chains and factories and a long lead time, high asset industry, hard to imagine how you can get out of the way of these tariffs quickly enough >> i know we don't know many details here, this isn't really a plan just yet as far as we know, john, but could you envision a case in which the intracompany back and forth across the border somehow is exempted in other words, that was not necessarily what would seem to be the target of this kind of punitive measure by the white house. >> yeah, but i don't know how you do that. you either have a tariff or you
don't. but you raise a good point that was the whole point of nafta. you know, the administration -- the president and the u.s. trade representative have negotiated a new usmca to replace nafta it's a more challenging agreement. but really, either we're for duty-free trade because it supports american competitiveness and american jobs or we're not. >> john bozzella, thank you for joining us >> thank you >> up next, checking in on some stock therapy. and today we're talking about what's being called the holy grail of cancer treatment. details straight ahead >> and later, beer or bust hopefully the former the u.s.-mexico trade talks could imct h myopaowuch u pay for a six-pack we'll discuss when "closing bell" comes back 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, hey would say "oh we can't beat usaa"
the world's largest cancer research conference kick off in chicago. it's one of the biggest events of the year for biotech investors and gives us the most up-to-date look at progress against cancer meg tirrell joins us now with a closer look for today's stock therapy. meg. >> hey, wilf there's one story in particular garnering a lot of attention this weekend what some have dubbed a holy grail in kabser drug development. it's an approach being worked on at amgen and smaller biotech maradi therapeutics. kres this has been known for decades to be an important target for many kinds of cancers. particularly deadly cancers like lung, colorectal and pancreatic. but it's been seen as impossible to treat way drug until now. we'll see an update from amgen
on monday morning that could have implications for both stocks and while it's early days in the drug development process, success in this area could bring a much-needed new treatment to the thousands of people a year diagnosed with these cancers, wilf >> meg, any of the big stocks other than amgen that are in focus with any potential market-moving data over the weekend? >> amgen's probably the biggest that could have a potential market-moving update on monday morning. 4% to 5% swing in either direction based thon update. we always look at the big companies like merck, bristol-myers, roche, astrazeneca. these companies are working in that area, immuno-oncology nothing expected to move their stocks over the weekend but we'll bring them to you if we see them >> okay, meg, thanks very much for that there were six stocks positive in the dow for the month of may. three of them were health care stocks in terms of united, pfizer, and merck. still ahead a big buzz kill. your bar tag and your wallet could be feeling some major pain on the back of trump's mexico
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beer makers certainly feeling pressure today following threats of new tariffs on mexican goods. constellation brands having the worst finish of the group. closing down almost 6% it was down even lower joining us now is jim mcgreevey, ceo of the beer institute. jim, how do you think about the overall impact this could have on the industry? >> you know, sara, as yogi berra once famously said, today feels like deja vu all over again. the beer industry in the united states is already dealing with the $350 million added tax
related to the aluminum tariffs. some in beer are dealing even with the steel tariffs in terms of plant and facilities. and now we have this potential of a new tariff on mexican imported beer. you know, sort of feels like we've given at the office and we really hope that the mexican and u.s. governments get together as the mexican president said this morning and try to find a dialogue that averts these taxes. seven, eight, ten days from now. >> jim, i would imagine that this is an industry which it won't end up hurting the consumer so much because there are so many different brands out there they can shift pretty easily to one of very many similar-tasting beers. in fact, they'll just fall much more on lower demand for the particular mexican types of beers. is that fair or do you expect people to remain totally loyal to the one mexican beer that was the only one they ever drank >> well, i think people like what they like
they'll probably stick with that although today really i'm thinking more about not so much brewery jobs or beer importer jobs but the barley and hops growers. in 2018 u.s. barley makers exported $210 million worth of barley to go into the beers that we all enjoy same thing with hops growers and you have trained companies and employees and truck drivers bridging the beer back from mexico into the u.s. so the larger impact on american jobs and finding a way to avoid these taxes and these tariffs on june 10th would be a great idea and it sounds like that discussion is already starting and that's a good thing. >> jim, thanks for joining us. jim mcgreevey. president trump announcing moments ago that he will be awarding the presidential medal of freedom award to art lafer.
congratulations on receiving the highest civilian honor how did you find out >> thank you very, very much i can't tell you i'm gob smacked as my grandmother would say. i am so happy, i can't tell you. >> you've had a relationship with the president, right? you wrote a trumponomices and the economics of that campaign and it was loads of fun doing it and larry kudlow was along with us, as well and it was terrific doing that and i am very pleased with the economics of this president. i think he's doing a great job >> of course, you're most well known for the laffer curve and the work that you've done on tax rates. where do you stand at the moment for the level that we see that the president's imposed versus the higher levels that perhaps some democratic candidates are pining for ahead of the 2020 race >> think the signature of this
administration and fiscal policy has been the tax bill of 2017, december 22nd and that was just a phenomenal tax bill that brought the corporate tax rate back into line with the rest of the world and the fruits are being seen everywhere and the economic growth is clearly a consequence of that tax bill some of them want to rescind it and repeal it and some of them want to raise the marginal rates on the rich and that would be devastating to the economy and devastating to employment output production and the stock market. if they were to elect it and actually did that. i honestly don't think they're going do it, but it would be devastating if they were to. aren't tariffs devastating as well aren't they attacks on the consumer >> they aren't good and they do hurt the economy and you see the market's responses here. the question is this a strategy
to get lower tariffs and the president said that is his goal and his mission and i hope it is and i hope it will be and i hope he'll be successful in getting good trade deals with china, japan as well as canada and mexico i am very hopeful that will be in the case, but in the short run these tariffs are no fun at all. >> if your mission was to reduce inequality and you were trying to assess what tax you were trying to increase whether it would be the margin, which one would it number. >> i would have a low-rate, broad-based flat tax just like i did with jerry brown when he ran for president in 1992. get rid of the federal tax, get rid of the payroll taxes and employer and employee and have two flat-rate taxes and one on business net sales and one on personal unadjusted gross income and if you did that you could match it all with no laffer curb and that would be the best
decree of economic curve which is the only way of reducing income inequality. >> art, just to follow up on the tariff point, what do you think about using tariffs like the president is threatening to do with mexico here not to improve a trade relationship, but for immigration policy >> well, you see, there are all sorts of mixes in the policy and i don't have a strong view on either way on whether you should use a tariff policy for immigration policy it's outside of my range, but people have used tariffs for all sorts of things over the years and i remember when reagan put tariffs on japanese steel and autos and we had that and the nixon administration that were tariffs across the board and the 10% surcharge and usually tariffs when tahey're done for anti-competition and when they're done to bring in better trade deals i think they can work i think the kennedy round is one of the finest trade deals we've
ever done in this country and i think trump is trying to get some sort of good trade policy that would match that. >>. >> so what if a material doesn't actually materialize before the election campaign picks up speed next year? would your assessment be that this has all been a mistake? >> let me just say this is a hypothetical and let me answer it tariffs are bad in the long run and they're killers and the great depression are done by the smooth holly tariff and it led to the great depression and led to the stock market collapse of less than 90% when nixon put up the 10% import surcharge and the foreign-made products and they did currency manipulation and our stock market fell by more than 50% that led to a slowdown in the economy and we're only worse than the great depression.
tariffs are not a good, economic solution to anything are they a good negotiation policy that's what we'll find out i believe the president is a great negotiator and i'm hopeful that it would be successful in bringing down tariffs across the world. >> i'm glad you added that at the end. i don't need you to lose your medal. >> goodness gracious, but economics is the economics and the president is doing a great job on economics >> the white house called you one of the most influential economists in american history so what's your economic prediction for this year do you think trumponomics can take us through another strong year of growth. >> i've been on the record for a quite a while that 2018 and 2019 would be very good because of the deregulation and because of the tax bill and because of a lot of other things that the president has done on that area and they continue to have their impact i mean, if you looked at it, we have surprise billing in there which is amazing you've got all of the other
regulatory policies going through. i think this economy's on a roll, and i see no reason why it won't do very well this year and next year. >> art laffer, congratulations >> thank you for joining us. >> elvis presley, babe ruth, tiger woods and art laffer you're in good company. >> thank you very much i'll try to have a renewal on day two from that. thank you. >> art laffer. time for our wall street look ahead and apple's worldwide developer conference on individual and walmart's annual meeting kicks off next wednesday. let's get a preview on all of those starting with john ford on apple. >> apple investors are worried about china now, but when the smoke eventually clears they'll focus on the services business and that's what's going to grow it wwdc, and it's what it's all about. wwdc and we will get our first official look on ios 13 and the next version of tvos and watch
os and big features expected to have closer integration and new reality tools and the home screen interface and changes to mail, maps and health and the event kicks off at 10:00 a.m. pacific and 1:00 p.m. pacific and what our viewers know as the exchange. >> beyond meat set to have the quarterly results and the bar is pretty high. >> it is it's been one of the most successful ipos this year and its shares up more than 300% since its public debut investors will be looking for top-line growth and they're also looking for improving margins and on the call insiders want to hear about supply and how the company is building out capacity to meet increased demand and finally, we'll be looking for new relationships announced and whether that might include mcdonald's and people have been talking about that and one of the company's early investors and a board member is don thompson he's the former ceo of mcdonald's. >> aditi, thank you very much for that
walmart's annual meeting next week and courtney reagan has that for us. >> shareholders, it's an annual event walmart holds for investors and media from around the world and thousands of people come. on wednesday morning the shareholders meeting the take place including the election of the walmart board. bernie sanders has been invited by walmart employees to present a proposal requesting hourly workers get a seat on the company's board. it's not expected to pass, and friday is the big arena event. that's a pep rally of sorts to reward walmart workers from around the world with surprise celebrity guests and performances and executives usually give a review of the year back over to you guys. court, thank you very much for that we look forward to see who is on the agenda >> mike, final thoughts of the market looking ahead to next week >> down 7% just about for an all-time high. we have a new month seasonally if that matter june tends to be about it and i think you should have a bounce attempt here
the average year has two 5% plus pullbacks and they always feel nasty when they're happening and i think we're on the verge of deciding whether this is routine or if it will be a deeper correction >> it was -- december wasn't that long ago. >> thank you now it's not so much that does it for "closing bell" today. >> "fast money" begins right now. >> "fast money" starts right now live from the market overlooking times square i'm melissa lee. carter worth, tim seymour, jeff niles from pmc and dan nathan. crude getting crushed sinking another 5% now down 16% this month. is the commodity in for a crude summer we have the details. plus apple rotting >> oh! >> the stock having its worst month since november sinking deeper into a bear market and there seem to be signs of life the dow dropping 300 points having the worst month year as