Skip to main content

tv   Squawk on the Street  CNBC  June 25, 2018 9:00am-11:00am EDT

9:00 am
that we have to build the relationship slowly. my heart is still down at -- >> i have my ipo on the new york stock exchange two weeks later everyone was looking at me like oh, you know, the uncle is staying a little late at the party. time to go home. >> thank you for being here. >> thank you it was great to be with you. >> we'll go down to the new york stock exchange tomorrow. "squawk on the street" begins now. ♪ >> good monday morning i'm carl quintanilla final week of q 2 stocks back to being under pressure trade rhetoric again in the headlines. dow on pace to lose nearly all the gains for the month. europe down about a percent. ten year back below 2.9. the road map begins with trade
9:01 am
rattling investors the president threatens trade reciprocity. stock futures fall sharply. >> we'll talk about the future of campbell's soup that stock is moving in the premarkets. >> so is intel shares sinking the chip maker downgraded due to, quote, "lack of leadership." wall street looking to start the week in red over concerns of a possibly global trade war continue the president issued a warn yesterday. the united states is insisting all countries that placed artificial trade barriers and tariffs going into their country remove the tariffs and be met with more than reciprocity trade must be fair and no longer a one-way street separately, the "wall street journal" and others reporting the white house is preparing to bar many chinese companies from investing in u.s. tech firms and blocking american tech exports to china the new measures could be announced by the end of the week apparently it's expected the treasury secretary will issue a
9:02 am
report that wouldn't be administrating these new rules in other cases commerce and the national security council. >> yeah. already has an important voice on the same issues and we should point out chinese investment into the u.s. has slowed dramatically over the last year. and you only need to look as far as call -- qualcomm, a story i followed everyone is trying to understand are are tensions moving higher and what are the ramifications >> it's an escalation and we're seeing the ramifications the harley davidson filing they put out was stunning in is a company that president trump looked at to complain about tariffs in places like india making it hard guess what harley davidson saying this
9:03 am
morning unwillingly it will have to ship some of the production internationally. specifically in europe because it cannot cope with the tariffs that the europeans are putting on harley davidson if it wants to sell to european customers, it has to move its production talk about bringing in american investment it's going the opposite way. >> harley said the tariffs in the eu going from 6 to 31 adding more than $2,000 a bike. and even as they were starting to really capture some share in the eu quarter, the first quarter year on year there's a look at the president from february 2 where harley executives came to the white house. they're not only going to ship the production, as sara says, they're going to take the bite on the additional cost they won't boost their msrp. they're going to swallow the loss to $100 million a year. >> yeah. the question is will other companies choose to do the opposite, of course, move production -- >> foreign companies
9:04 am
correct. >> and let's not forget friday's tweet, which we focussed on and did have a market impact on the threat of 20% tariffs on eu autos. which is about germany, of course, and is certainly something that would ratchet up the trade tensions were it to take place. >> whether it's other transportation companies or other sectors doing business abroad, q 2 earnings are about to start we're going to get a lot of commentary, i think, on the real world impact these tariffs are having on these companies. companies like brown foreman, which 30% of sales are at risk now that everyone is imposing taxes and tariffs on our bourbon and our whisky this hurts certain industry and certain companies. i think it's why you saw the dow last week shed 2%er have us is the smaller cap, russell 2,000 which has been on a roll did you see china? down another 1%.
9:05 am
>> the reserve requirements are easing. >> yeah. they're easing. >> the currency is down a lot. >> and the concern is perhaps they'll continue to pressure the currency as one response overall to some of the ratcheting up of tariffs. >> and the dollar strengthens. >> the dollar is up at 117 against the euro that's one of the responses to go into the buck which, actually hurts our exports. >> right carl, we had any number of strategists on friday, almost all are on the same tune which is it's a small portion of the overall u.s. economy. >> so far. it's only getting worse, right >> it is but, i mean, they continue to come back to the fact that earnings season will by far trump any real impact of the trade dispute that is now global in nature. >> and, by the way, i mean, other countries are feeling it, too. you see the german business expectations two-year low that's not reflecting the political turmoil that merkel is
9:06 am
engaged in we'll see how much this colors our earnings season starting on, what, the 13th, i think. >> yeah. nike is this week. i'll be looking for commentary there. china has been super hot for them they haven't been caught in the cross hairs. general mills and the food companies are coming later this week as far as european companies, did you see that chinese premier li was meeting with the french prime minister today talking about more deals for airbus. europe and china are having a trade fight with us. look who is benefitting. >> you're concerned. >> fresh from a break. >> you read a lot, too, when you're away. i did, as well it can kind of make your mind explode. >> there was a big report how china is not going to say no to foreign investment because that was backfired they're trying to draw investment, which is interesting. >> they are because part it's
9:07 am
forced technology transfers that can be apart of the investment itself. >> who is open for business? >> yeah. and the 2025 play the chinese have, of course, to try to take over so many of our technology industries where we have a significant lead. >> which is what the trump administration is worried about. >> yes. >> are they going about it the right way? >> good question we'll talk campbell's soup new york post saying kraft might have interest, guys. agr gee, really? that's a shocker kraft has interest in anything, all though they have said in the past that kraft certainly the, you know, they would not buy a business in significant decline so much so that even synergies would not offset the decline of said business. >> is that campbell? >> i don't know. when i've talked to bankers, they point out they crush a lot
9:08 am
of tomatoes. it sounds like a weird thing to say but the synergy and the cost savings from being the largest tomato crusher in the world are significant. it's not a surprise, that kraft has been focussed on acquisition. and unable to do a deal of size would be potentially interested. and it does have campbell up the real question is what is campbell going to do. >> right they have a family control. >> 37% of the family that is on the board. they own 37% of the stock. there are other family members, as well, who are not on the board who own equity, as well, in the company there also may be some sort of a split, at least, between certain family members in terms of their view of what the company should do but they are undergoing the strategic review they told us they would have a news for us by the end of august they have an interim ceo, of course, having fired the last ceo. i think it remains unclear what they're going to do. i've heard bankers names but
9:09 am
they have to yet to hire bankers. even though they have banks working for them there's a board meeting this week which certain things may be clarified. at least to the point the banks will pay them for their work and want them to move ahead. where it ends up is unclear in terms of, yes, if they were to say we are for sale, any number of potential suitors might show up. >> i went back to the conference call where the interim ceo was announced after denise morrisson and keith mclaughlin did say, quote "everything is on the table. it remains to be seen whether the family believes that but as far as the strategic rationale, soup is a lousy business certainly for campbell's they've tried to revive if for years and it's gone nowhere. there's an increased execution risk there. >> $5.7 billion.
9:10 am
>> the strategy in the past few years hasn't gotten good reviews. am i right >> true. for campbell's not necessarily for 3g that's the question. investors are looking at 3g and kraft. and they have a lot of cost cutting but the plan for what is next and clearly that growth is not coming organically i'm turning around the package food brands. >> no. it would be a big deal for the family to decide it's time to potentially sell and/or the rest of the board you can't also rule the possibility of an activist even though you're talking bennett durant, marge van buren on the board owning roughly combined 37% even with that, you can't rule out a possibility of an activist getting in there the board is not staggered all at one time. they haven't told us when their meeting is last year's meeting was november 15th
9:11 am
the story that kraft heinz might be interesting is not moving the ball. >> right by the way general mills and conagra reporting. they are active. that's a deal that conagra reports, adds you said who knows. i don't know where things stand. there may be consolidation. >> there's running consolidation in the industry. that's because the industry is weak i mean, the top line growth has been elusive for some of the food companies and the end game has been merging, squeezing costs out, trying to go through acquisitions so far very little growth. >> it's interesting how dining out now is that's what is swung in favor all these restaurant stocks that have been going crazy were heavily shorted, in some cases.
9:12 am
>> yeah. dining out and gets a further tail wind if you look at campbell's soup the tariffs raise the price of aluminium. >> it's only a penny or two. come on. the image of wilbur ross. >> it's more than a penny. >> it is, i think. >> if you ask campbell's [ laughter ] >> wow when we come back, setting new records. a look at the state of the economy from our new cnbc all america survey take a look at the future of intel this morning, as well. stocks getting downgraded over fears of a post company. also downgrades of kroger and es stay lauder. another look at the premarket. more "squawk on the street" in a minute at&t gives you more for your thing. your getting serious thing.
9:13 am
that moving out of the friend zone, moving in together and getting two of everything thing. those fur babies preparing you for real babies thing. that one for me, one for you, us together for the rest of everything. buy one iphone 8 and get one iphone 8 on us. more for your thing. that's our thing. visit att dot com. i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
9:14 am
is coming to theaters jurassic on june 22nd. kingdom and now xfinity customers can get movie tickets
9:15 am
by using their x1 voice remote. get tickets. don't miss it. because at the very end there's this scene... [ dinosaur roar drowns out bryce's words ] buy tickets with your xfinity x1 voice remote. just say "jurassic world" to watch the trailer, then say "get tickets" for local showtimes from fandango. and it's just like, "wild." only with xfinity x1. the public views on the economy hitting a record in the ten year history of cnbc's all america survey steve liesman joins us now with the results. good morning. >> yeah. making history here in the ten year history of the survey american optimism hitting a new
9:16 am
record 52% on average for the two quarters down 54% this quarter. rating the economy as excellent or good. a percentage saying it's fair for 45%. that's a new low combined together. another little fact on this is for the first time in the history of the survey, the percent saying the economy is excellent is higher than those who say it's poor. just 13 to 11. maybe an important flip in terms of why we get these numbers. on the outlook for the economy, down just a little bit but still pretty strong. 36% say the economy will get better in the next 12 months you would expect that when people have a current positive view on the economy. looking at the effect on the president's approval rating for the first time during the trump presidency 51% of the majority approve. that's a 6 point jump on the
9:17 am
approve. it's come down by 10 points. the approve up by two points on the stock market down a little bit still historic -- still relatively high compared to the averages you can see that the kind of sideways down market over the course of this year has reduced optimism just a bit. 42% saying it's a good time to invest 29% saying it's a bad time looking at the financial lead, those with the most in the stock market and the wealthiest, they remain relatively bullish. the 20-point gap between average americans. 64% saying its a good time to invest 16% saying it is a bad time to invest guys, we did not measure any particular difference affect on the immigration controversy out there. most americans don't think it
9:18 am
has much affect on the economy. >> what about trade, steve when was this conducted? how far along the tit for tat with other countries were we >> it's a good question. when would you like it to measure? we did the poll june 16th through the 19th that was last saturday, sunday, monday, and tuesday. trade has been in the headlines. overall, the public supports the president's efforts to renegotiate trade deals, but he gets much less support when it comes to tariffs on taxes on imported goods we have a consistent theme in our polling of the president conceptually they like his ideas. on the specifics they tend to not like them. >> in general, on the sample, steve, are the people surveyed holders of stock or in some cases do they not? >> so, our poll shows that 56% of the public own stock in some form individual equities or mutual
9:19 am
funds. that's historically high we've been down in the upper 40s before that number has cent up over time so, yeah, 56% own stock. there's some split i don't have the numbers in front of me, between those who own more than $50,000 and those who own less than $50,000. a lot of growth, carl, has been in the percentage that own less than $50,000 in stock. maybe middle income to lower income americans increasing their stock ownership by some amount. >> yeah. that reflects some other surveys we've seen, as well. thank you, steve steve liesman this morning when we come back, details on the next possible sale at ge. take a look at the premarket here, which is negative after a nice rebound on friday "squawk on the street" continues in a moment.
9:20 am
you're gonna do great! thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?! not that kind of hurt. yeah, aflac paid us cash in just one day to help with our car payments and mortgage. aflac! perfect timing! see how aflac helps cover everyday expenses at aflac.com. welcome to holiday inn! thank you! ♪ ♪ wait, i have something for you! every stay is a special stay at holiday inn. save up to 15% when you book early at hollidayinn.com
9:21 am
when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. fidelity. - anncr: as you grow older, -your brain naturally begins to change which may cause trouble with recall. - learning from him is great... when i can keep up! - anncr: thankfully, prevagen helps your brain and improves memory. - dad's got all the answers. - anncr: prevagen is now the number-one-selling brain health supplement in drug stores nationwide. - she outsmarts me every single time. - checkmate! you wanna play again? - anncr: prevagen. healthier brain. better life.
9:22 am
♪ we're keeping a close eye on general electric this morning. the journal said the company is close to a deal to sell the industrial gas engines business to private equity firm advent for about $3 billion the sale could help stream line ge's power division which did see profits fall 45% last year of course, raise some cash for the company, david, as they're going to be out of the dow and, obviously, people watch the balance sheet. >> yeah. power is a long-term turn around, as we know mr. flannery discussed that and said it's going to take time to get them to execute appropriately. it fell far short what had been internal and external goals for the company. it's been a brutal year for ge, as we know and as i talked about last week,
9:23 am
we're waiting for what is expected to be before the end of the quarter the more significant announcement from the company in terms of its future. we'll leave it at that, at this point. in terms of see what the details are, if we get any in terms of the future and the various divisions, but it has been brutal run every time. it seems to get a little bit of momentum, the something happened the most recent being dropped from the dow it's more of a psychological blow. >> it's the trade issue. they get affected. talk about a global supply chain. a company for ge according to the journal from the initial tariffs that have been listed around the world, 3/4 of the initial list of products are facing u.s. tariffs. they have to source parts. they profile an mri machine and how many different components from around the world go into something like that and how ge will have to navigate that in the middle of the structure turn
9:24 am
around. >> yeah. it's a great point and an important one jeffrey, the former ceo ran the company for 16 years made it a global giant that was one of his key initiatives. not that it wasn't already, but it became a lot more so over the last period. now it's a difficult time to be that. >> interestingly, he did a couple of years ago start talking about local production local assembly i don't know if he saw this coming, in particular, but that was a big thesis of his that supply chains overall were getting a little bit too much. >> that takes time and now that urgency is certainly there with some of the trade tensions that or they have to raise the prices on the items for consumers and the wholesalers. >> yeah. you're right it takes a long time to figure out your supply chain. you can't do it based on a tweet. >> yeah. >> that's why the harley news is significant today. the opening bell in a few moments on this monday don't go away. into retirement...
9:25 am
9:26 am
9:27 am
and a little nervous. but not so much about what market volatility may do to their retirement savings. that's because they have a shield annuity from brighthouse financial, which allows them to take advantage of growth opportunities in up markets, while maintaining a level of protection in down markets. so they can focus on new things like exotic snacks. talk with your advisor about shield annuities from brighthouse financial- established by metlife. the opening bell is brought to you by -- u're watching "squawk on the street." live from the financial capital of the world the opening bell in just over
9:28 am
two minutes on this monday, as we put a final week into q 2 hard to believe the year is halfway over trade tensions, obviously, coloring the premarket as futures have been negative for most of the day. the white house and the treasury, according to the journal, planning new restrictions on chinese investment in this country, which is well lower than even last year. watching harley. watching the ten-year below 2.9. morgan stanley has a note out saying 312 was it. >> peak in the ten year yield. >> that's going to be the question i did think it was notable that jay powell, the chairman of the federal reserve started talking about hearing uncertainty from business as a result of the trade tensions if you look at the overall market, you wonder, you know, is it priced in something worse happening on trade hurting global and u.s. economic rogue maybe not necessarily in the broad market
9:29 am
if you look at specific sectors, for instance, technical. the faangs are lifting the category the semiconductor stocks are not following suit they're exposed on the global supply chain you have the divergence between the dow and the russell 2,000 with the dow having the worst week last week you see shades starting to enter. certainly the industrial, as we're talking about ge have been underperforming on the trade worries. >> without a doubt we'll find out, i guess, on july 6th whether the market is prepared for that is when tariffs go into place against the chinese, for example, who have vowed to respond. of course, the president said he's willing to go to basically everything that china exports the u.s. $450 billion not leaving much room for anything else. if we get to that point, sara -- [ applause ] >> also, the autos.
9:30 am
>> we'll get to the opening bell s&p at the bottom of your screen on the big board it's spirit [ opening bell ] >> harley as much as any other name is one to watch they're going to shift production of some motorcycles that are eu bound to some other international plants it will take about nine to 18 months to complete they're going to take the hit on the tariffs that the eu has been increasing as we said earlier, from 6% to 31%. >> yeah. it's one of the president's favorite companies, as he hosted them at the white house earlier. i'm watching retail names today, guys on a pair of upgrades from goldman sachs. specifically on tapestry, which is the company that houses coach
9:31 am
and kate spade they say that is now a conviction buy 12-month target of 56. a bullish note out of goldman on coach saying they like the strategy to target millennial's. they like selena gomez is the brand ambassador they like the kate spade brand they say there's an inflection in thebrand. and the handbag categoryis back luxury handbags are growing again nicely thanks to gucci and louis vitton this is something that is going to be important. >> you've seen michael kors trends >> they said tiffany is a buy 12 month target of $165 tiffany, they say, is in an
9:32 am
early stage of acceleration and growth they missed a big gain from last quarter. they came lawsute to the fall it'll continue high end jewelry. >> generally speaking, the trend of the market, as we might have expected, given what we saw as a potential opening is lower technology, in particular, did notice, as you might expect, shares of alibaba still a strong performer this year. up almost 14%. it's been down lately own the increasing risk of a trade war with china and what it might mean for alibaba it's largely, though, hasn't done much in the u.s it sells, obviously, largely in the chinese market itself. but the access to brands from around the world particularly on their platform perhaps tariffs would make it more difficult they are, obviously, the consumer part of the economy in china, which chinese have been focussed on trying to grow but remains roughly at about a third of the overall economy
9:33 am
the flip from the economy from where we're more than two-thirds. >> and there's a view that the chinese economy gets hurt a lot worse from some of the trade tariffs and the back and forth retaliation. certainly you see that in the shanghai composite down almost 20% from a recent high and the chinese currency that continues to weaken. i was watching energy. big move in energy prices on friday it continues in wti crude. the feeling is that the opec decision there was a lot of speculation. oil prices continue to rise with wti flirting at 70 and brent to 75. >> yeah. mentioned downgrades of consumer names. estee lauder is the other one. morgan stanley had been overweight for six years. >> that's a good call. >> a beautiful call. they go to equal weight on evaluation stock is, obviously, on a huge tear, as cramer were here he would talk about his selfie
9:34 am
atmosphere always got to look good, no matter what. but the shares are down almost 4%. >> you know they also have a great business in china, too. >> yeah. >> very important for them in terms of growth market. >> and they source a lot the make up is not all made in this country it hits so many different industries. >> i know. we haven't started talking about nafta and where things stand in terms of those talks mexico and canada and tariffs there and what will happen if that falls apart i don't know, sara what will happen >> it's going to be bad. >> thank you. >> my question on this is where does -- what is the market thinking by all accounts the politics there doesn't appear to be much movement every time there's a set back or escalation with the u.s. and china on the trade front, the canadian dollar gets hit and the mexico peso gets hit because the prospects are lower. what does it mean for u.s. companies and why are u.s. stocks holding up in the face of that rising threat >> right
9:35 am
you may have seen it we have it there we've got the announcement from ge $3.25 billion is the number for the sale good distributed business advent international. a global private equity firm and this is in their power segment and it's power generation, gas compression, distributed power and different products in that area. a couple of key acquisitions over the last 13 years, i think, in the dresser deal and another sort of are now what is being divested but this is not a large deal at all. >> what will it take for the market to start acting positively on some of these? is it just they're too small the moves they're making >> yeah, you know, i think people are waiting investors are waiting for the larger sort of strategic vision that flannery will have and what they told us would be announced before the end of the quarter to
9:36 am
sort of see. there's continued concern about the dividend last week we had a goldman sachs analyst suggest they should suspe suspend it for some time the liabilities and long-term care plan was a moment there it shook a lot of people's faith. the number was so far above what anybody might have anticipated it was sometime ago already we're talking early this year. it was difficult for ge to recover from that, despite what may be better execution on the part of mr. flannery within the businesses themselves. >> we talked about m & a regarding campbell there's another story regarding at&t i don't know if you're going to go to this in some depth later it's history, really. >> yeah. reporting that there was a meeting between shar i ai redste and randall stephenson not much to make of it everything, you know, that i've heard has indicated at least
9:37 am
thus far it's no -- not the intention to sell either one of those companies separately but bring them together and perhaps at some point selling them together because the view has been to receive a higher price for those if you decided nobody has to potentially sell them has there been interest in at&t? of course. they were looking a lot of different things they got time warner verizon seems to be moving in a different direction now. it had expressed interest in trying to engage in a dialogue with cbs previously. really, the question on cbs and viacom and that fight that we were talking about every hour for some time is now put off to the courts in delaware until potentially october, which is a long time to wait when you have the desire to put the two companies together given how quickly things are changing in the world with
9:38 am
whether it's the fight over the fox assets between our parent company and disney whether it's the time warner closure by at&t. netflix continuing to increase dominance. it's hard to sit there and wait if you have a strategic view that apparently is what shari redstone is stuck with doing now until we hear from the court it comes back to the power of their holdings there to exert their will they want to. >> intel, of course, was a big story last week. the journal today has a bit of a tick to be on the timing of this episode which he did lose his job. saying the affair was before he was ceo and ended several years ago. the woman continues to work at the firm does not hold a senior role at the company. said uncertainty about the company's long-term perspectives said the departure is surprising
9:39 am
on multiple levels the shares are down almost 2% almost 15id and change. >> and brings back the focus, i'm sure you talked about when the news hit on what the future plan is and what the leadership of this company, which direction they'll take intel in with companies like apple and samsung increasingly going in house. just on food deals, campbell's is leading the s&p 500 on speculation of a deal. kellogg is not far behind it all the companies appear to be on sale. we talk about ans celestial. the company put out word they have begun to look for a success successor as part of a natural process and irwin will stay on and be the nonexecutive chairman and help advise whoever the new ceo is the market views this favorable. the stock is up. a lot of twists and turns for
9:40 am
simon and hain overall in the lackluster way that food has been growing hain celestial is a look at what is working now. organic. they've had execution missteps and the accounting probe over the last year or so, but the market is viewing this, david, as its time for hain to get in a better operation the protein business is for sale. >> is this an admission the entire company won't be sold >> i'm not sure. >> i've heard that while various divisions might not be. >> right there's a lot of stream lining that needs to take place it's a ton of different brands i don't know how many brands it's grown through acquisitions. if protein is for sale, maybe it becomes more of a snack, soup kind of play and there would be more suitors interested either way it shows what is happening. and i think the enormous
9:41 am
transformation is going to happen in the faster growing organic space and the slower growing package food business. >> dow down 176. the agains for june is now gone. we'll get to bob. >> happy monday. you think we have problems in the united states. it's even rougher overseas the trade wars are having greater implications in china and germany. take a look at the global markets. another 1% down day in china, in general. germany is down almost 2%. a lot is big industrials and automotive names we talked about friday how the small caps from china are doing compared to the small caps from the united states that don't have as much export exposure like the russell 2,000 this is for the quarter to date. that top line is the russell 2,000 which is up about 11% for the quarter. that bottom line is the shenzen the small cap. it you can see the notable move to the downside in the last four weeks. now it's down 11%.
9:42 am
it's quite a gap for small caps. elsewhere you can see the proxy in europe for trade wars here it might be boeing or some of the industrials or some of the semiconductors over in europe it's the automotive manufacturers for the last month we've seen volkswagen bmw all down another point and a half today they're the proxies for the trade war. here in the united states, looking at the sectors the same proxies. here they are industrials. here they are materials. also, to a certain extent, semiconductor stocks big names semiconductor names down most of the big ones down 2 to 3% you see more of a materials. all noticeably weaker. that's a big move down there for micron david was talking about the food companies, of course, kraft heinz potential interest in campbell i can make it simple they're on the upside. you don't combine two
9:43 am
slow-growth or no-growth company and suddenly get a high growth company. that's the problem here. you can talk about synergies and cut the entire back office out and maybe improve your margins a little bit you generally don't suddenly see higher multiples because you combine two low-growth companies. that's the problem they have low multiples. it's been going down for a number of years. and that's the problem with these slow-growth industries face elsewhere, i want toknow we're going to have a big week for ibo. look at the earnings big ipo week we're going to have 13 and 14 to include. this will be the busiest day of the year in fact, it might be -- we might get 27 or 28 at the end of june. that would be the busiest month since june of 2015 we'll get b.j. wholesale we know that and one of the big online used car marketplaces in china. of course, that's going to be a big one, as well right now we're sitting at the
9:44 am
lowest of the day, carl. down 200 points in the dow. >> thank you we'll head to the bond pits and check in with rick santei. good morning >> reporter: good morning, sara. one week of tens gives you all the information you need see the way we drifted today below the 290 level. we're sitting at 288 this is the 17th day of trading in june. this is the three lowest yield closes is 289 plus the reason i bring it is there's compression. and there's a lot of reasons i could give you why the long end should start to slip more. think of everything bob is talking about. might be a little iffy for a variety of reasons our economy cooking in grease. overseas starting to take on a little bit of water. one week chart of bund
9:45 am
see the way they're dipping to trade it just above 30 basis points 30 1/2 basis points. this is one of the areas that it going to affect us this could be what pushes the treasury note yields on the long end below their consolidation support levels and yield for the month of june. open the chart up to september and you'll see what i mean under 30 basis points. there's going to be a lot of trade. a lot of lower rates in europe especially on the high quality paper. finally, a lot of talk on china. here is an interesting chart today the dollar versus the yaun, the chinese currency is at the strongest level for the year going back to december 27. we'll see how it plays into the current conversation carl, back to you. >> all right thank you very much, rick santelli when we come back, quote, lack of leadership intel getting a downgrade as we discuss over fears of the future at the company "squawk on the see bk tethistrt"ac
9:46 am
the digital divide is splitting this country. we have parents who are trying to get their kids off of too much social media and computers, and then we have parents who would only hope their children have access. middle school is a really key transition point, right. the stakes start changing. students begin to really start thinking about their futures. what i like about verizon's approach is that it's not limited to just giving kids new tools, it's really about empowering educators to teach in different ways, and exposing kids to more active forms of learning. giving technology is not a total solution. teaching technology, now that is.
9:47 am
9:48 am
dow is down 242 on trade
9:49 am
fears. intel down 2% on this morning. downgrading the stock from a buy rating to knew really a on concerns over, quote, lack of leadership following the departure of ceo brian krazanich. is it about the lack of a bench at the company >> it's a couple of things i mean, i think the board was eager to see him go. and, you know, that brian hadn't set the company up for success long-term that started to manifest itself starting in april. they do have a good bench. i don't believe there's anybody internally that is going to give the market confidence they can get through the longer term issues. >> i don't understand. egger to see him go. prior to learning about this violation of company policy, you believe they were eager to see him go >> it's possible i mean, you know, they've fallen
9:50 am
behind tsmc on manufacturing leadership first time in the company's history. we had a private meeting with brian in june where he disclosed matter of factually they'll lose market share to a & d. he couldn't draw a line in the sand as to where their share these are serious issues intel faces. >> you believe the board was not unhappy to have acted on this violation of company policy because they were concerned about execution? >> it's hard for me to believe that they would let the ceo go for a relationship he had from over ten years ago >> really? >> yes, because the way it had been explained to me, he like every other employee is bound by those same policies that had been in place over five years. it was as straight forward as that that's the reason, as painful as it was, that they dismissed him. >> results have been good but i just think if you look at the stock since april when they disclosed they had these delays that were going to extend out,
9:51 am
the multiple started to compress and that continued through june. their data center business is really the crown jewel of the company, and, you know, that business -- the outlook for that business is definitely up in the air. some of the things that have happened around manufacturing and share loss, i think are significant. >> sounds like you're saying the episode here was used as an excuse by the board. >> we'll never really know for sure but it's just -- it's hard for me to believe that you'd get rid of your ceo over something like this >> finally wanted to ask you about tesla speaking of internal drama at companies we had that news of what he calls himself a whistle blower and what the company is calling someone trying to stab aabotage company. how is this all going to play out for investors? >> you know, i think companies sue employees for trade secrets all the time they are making progress on
9:52 am
their production of model 3. six months ago, the shorts were convinced they couldn't produce the car. they're producing somewhere between 3,000 to 4,000 cars per week elon is trying to get them to 5,000. and they're doing everything they can another thing that came out last week was this tent that came up. and that's additive to the 3,000 to 4,000 that's what probably gets them the 5,000 per week if they can get there, this company is going to start generating a profit. >> real quick on intel gop they go externally to find a new ceo or stay internal >> they should hire hock tan from broadband >> he's not coming over willingly. >> or sunjai from global founders but they've never hired someone externally for that seat number two, the chief engineering officer came from qualcomm two years ago he's probably the most likely
9:53 am
candidate. if they don't promote him, he probably leaves. so my feeling is that they will go internal. they will hire him and i don't think that's going to get the market over the hump on some of these challenges they're facing long term it's going to take some time gonge >> got to go $55 target ramit, thank you gains for june are gone. back in a moment hi, i'm joan lunden with a place for mom, the nation's largest senior-living referral service. for the past five years, i've spoken with hundreds of families and visited senior-care communities around the country. and i've got to tell you, today's senior-living communities are better than ever. these days, there are amazing amenities, like movie theaters, exercise rooms and swimming pools,
9:54 am
public cafes, bars, and bistros, even pet-care services. and nobody understands your options like the advisers at a place for mom. these are local, expert advisers that will partner with you to find the perfect place and determine the right level of care, whether that's just a helping hand or full-time memory care. best of all, it's a free service. there is never any cost to you. senior living has never been better, and there's never been an easier way to get great advice. call today. a place for mom -- you know your family, we know senior living. together we'll make the right choice.
9:55 am
9:56 am
pretty negative breadth as the dow is down 255. lost its gains for june which were -- which was at one point the best month of the year going back to january. and now we're in a stage where we're going to start looking at levels dow is about 1.5 percentage points away from a 10% correction some people don't like to call it a correction but it would be the second 10% drop from the highs of the year. that would be a 23,955 >> so-called fear index, the vix. highest it's been in june. all the usual suspects that get hit in a trade war are the biggest that get hit caterpillar, cisco, boeing
9:57 am
some of the chipmakers that source their supply chains globally like micron smh, worst day since april 19th. >> yeah, well, that's one reason why the comp is down almost 1.3% larger loss than -- >> consumer staples are , though food deals -- >> consolidation has that going. >> chips are not helping at all. a sell-off has picked up a little bit of steam here we'll watch it closely when "squawk on the street" continues.
9:58 am
9:59 am
10:00 am
♪ good monday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber. we're threatening once again to hit the 24,000 level >> our road map for the hour begins with the fears of a trade war. dow and nasdaq in the middle of a sell-off after coming off their worst week in over two months mark zandy with us in a few minutes. then harley-davidson moving
10:01 am
production oversea why the president's trade policy could impact some jobs >> and we remain on supreme court watch. key decisions are pending on the administration's travel ban and a few others, any of which could occur this hour. >> first up, some breaking data. let's get to rick santelli at the cme. >> y thank you, carl our read on may new home sales expecting the number around 670,000. we end up with a bigger number 689,000. and that is up almost 7% 6.7% here's the rub the reason it's up so much in part is because we had a negative revision last month from 662 down to 646 but nonetheless, 689,000 is the highest rate of the year actually the highest rate going back to november and for more color on exactly what it may mean, let's go east to diana olick. >> this is a nice day for new home sales this number is based on contracts signed in may, not
10:02 am
closings like the existing home sales number is. this is people out shopping in may when mortgage rates were a full half percentage point higher than they were in january of this year so mortgage rates clearly not having a huge effect on buyers newly built homes come at a price premium to existing homes and the shortage of existing homes is severe. so you'd expect new homes to get a bump from that but they are more expensive. we did see the supply of newly built homes bump down to a 5.2-month supply so you are seeing supplies continue to shrink of newly built homes. but there's demand out there buyers are out they're signing contracts and they do not seem all that disturbed by mortgage rates but we'll watch that going forward as affordability starts to weaken because of those higher mortgage interest rates. back to you guys >> for now, some good news on the housing front. back to the overall market this morning's sell-off picking up steam the dow down 300 points. usaa investments vice president
10:03 am
of equity investments john tooey and global market strategist gabriela santos. good morning to both of you. gabriela, a day like today we walk in after reading reports over the weekend that the treasury is looking at blocking chinese investment just thinking about how the market looks at all of these trade developments is that more worrisome than what we've had so far? >> it's all part of the same mosaic which are rising trade tensions there are actual measures being put in place but there's still a lot of noise. these measures aren't final. neither are the tariffs on china. we have investigations going to in auto and auto parts so there's some signal but still a lot of noise and that's what everyone is trying to digest what are the potential direct and indirect impacts on the economy and on earnings? >> john, as a big investor, do you tune out the noise or are you making some noise? >> i think you have to stick to
10:04 am
your strategy and sit pat for the moment i would agree with the sentiment that there's a lot of noise out there. the challenge, though, is that any of these trade and tariff discussion, if some of these things go through, whether the reason is to reduce the trade deficit, whether it's security concerns, it's going to hit sales. with global supply chains now, s&p 500 exposed about 40% to manufacturing, disrupt, hit the profit margins and the sentiment which hit multiple revenue hit, multiples hit, earnings hit what we'd recommend is until it settles down to what the actual policy is just sit pat with your strategy >> we have been through this a few times now in recent weeks and you could rely on the comp the russell. not happening today. is there danger in tech
10:05 am
leadership failing amid everything else? >> well, i think the underlying drivers for strong earnings growth in tech are still there i think everyone is still trying to digest how much this is actually impacting the potential for really strong u.s. revenue growth, right? remember we got last week some interesting data from the market pmi survey which showed some softening in the u.s so there's someanxiety about how much that is really being driven by some of these trade tensions, softening confidence so this is really what is driving the mood here today. >> the vix above 16 now. a few minutes ago, above 15. that takes you back to may, end of may, and ten-year below 287, right? so -- >> so are you in the camp that we topped at 312 >> no, we're not who knows for the next couple of weeks as we do have some bit of a risk off sentiment here but ultimately we still think the economy is still doing well. that still gets us to rising
10:06 am
ten-year yields over the next 12, 18 months or so. >> just to dig into your answer a little bit as to what you're doing as a portfolio manager, you say stay the course. don't do anything different. you talk about falling profit margins. eps growth and sales growth. are there particular industries you're trying to stay away from as the trade tensions escalate >> i would say those are the risks are what i outlined, the sales growth and profit margins. to your question about where we're -- what we find draec attractive one part is digital, whether it's the digital payments with a visa it's the digital experience for customers at salesforce.com or it's the digital advertising like facebook. those are all secular growth areas. other areas, u.s. certainly strong we'd agree with the sentiment u.s. economy continues its path of strong economic data.
10:07 am
look at companies that are tied to that with strong capital return we think regional banks, like a key corp and lastly, my comment on sort of stay the course, there's a movie "ferris buhler's day off." i was watching it with my teenage daughters. talks about tariffs and trades but one of the lessons there it's not just about tariffs and trade but take the day off clear your mind. that helps us stick to your strategy you don't want to get whipsawed based on some tweets or a policy that's not in place. >> ferris buhler was about trade? >> no, it's ben stein, anyone, anyone anyone well, gabriella, i'll come to you. you said earlier it's too early to know the impact, of course. and everyone is dealing with that is there a point at which you believe the contours of this dispute will be better defined
10:08 am
is it july 6th when the new tariff goes in place with china or is it somewhere down the road and we'll know it when we see it >> i don't think it's july 6th specifically it's when it starts impacting the data that's what chairman powell was talking about. we've been hearing about how it's been impacting business sentiment here and there but we haven't actually seen it in the data in production data, for example. it's when you start seeing it in the data that's when you can start quantifying these things of course it's also how much further this escalates we're still only talking about $32 billion worth of tariffs or on $32 billion worth of goods. so how much further does that escalate $200 billion more after that then we start talking about larger numbers >> do we start talking about the federal reserve holding off from raising interest rates >> it's a little bit tricky. i'm thinking how they would think through this they'd largely look through any sort of inflation impact because it would be somewhat temporary on the comparison numbers and if
10:09 am
it does change the booming economy, maybe it doesn't really alter their view >> john, what's your take on how -- on the interplay between rates and stocks with the fed raising interest rates as trade tensions flair >> so long as rates are going up and end up going up for the right reasons and that's because we're seeing strong growth, not just real activity, not just inflation, we continue to see the strong labor market. we continue to see the benefits of the tax cuts filtering through the economy. we at usaa believe the fed will keep raising rates, but to gabriela's point, got to be cognizant of blips in the inflation that are not due to underlying strength but impacts from higher tariffs that get enacted. >> how do you think in q2 commentary, and we start getting it in a couple weeks, how is 4x
10:10 am
going to compare to trade in terms of a thread? >> those are two things we're on the watch for. the dollar rallied quite a lot since mid-april. that's interesting to see from those more international companies rather they're actually starting to get worried about any sort of dollar impact. and the trade commentary will be huge we already saw how just one announcement last week had a huge effect on the market. perhaps more clarity once the second quarter earnings season starts >> the commentary will be interesting. thank you both for joining us. as we watch this 200-day moving average. 24,280 haven't closed below that, carl, since last year in june. >> indeed. 2016, actually >> 2016. a couple years >> on a close. stocks are selling off across the board a lot more on what's driving this move lower. rbc's mark mahaney is going to join us with bold new predictions on amazon. w wndodo 299 we're back in a minute
10:11 am
10:12 am
10:13 am
the dow a little lower groups in the s&p 500 lower. nasdaq composite is lower. the semis, particularly ugly, on fears of trade tensions escalating american express, walmart and coca-cola remain notable winners here want to go to diana olick now.
10:14 am
a decision that the supreme cout >> a big win for american express in this case the supreme court affirmed a lower court's decision that american express was not violating any antitrust rules. this case was about 17 states claiming that by american express making vendors not say anything to customers about possibly higher fees that american express charges to them, that that was violating antitrust rules. the supreme court said the plfrs offered no rules that the price of credit card transactions was high thaern one would expect to find in a competitive market the merchant fee increases between 2005 and 2010 were not entirely spent on cardholder rewards does not prove that amex's anti-steering provisions gave it the power to charge anti-competitive prices. also the plaintiffs failed to prove that amex is anti-steering provisions have stifled competition among credit card companies. the supreme court affirming the lower court's decision against
10:15 am
17 states and saying amex did not violate any antitrust rules. back to you. >> see a big spike on amex shares there diana olick outside the court today. starting on wednesday, amazon prime members will get discounts on a wide rachbnge of products at whole foods. the biggest boost could come from the ad business according to rbc's mark mahaney who says the ad platform could rival google and facebook within five years. mark, good to see you again. >> good morning, carl. we've spent the past year or two getting used to the power of aws but now it's time to pay attention to amw, the marketing services >> there's been new disclosure that essentially implies they are at around the $7 billion revenue run rate for advertising based on a bunch of checks we've done 125 advertisers survey report. we think this business is on track, probably not to get up to
10:16 am
facebook and google levels any time soon but to get about $25 billion in avenue revenue within five years and it's a highly profitable business. that's one of the most interesting takeaways from this which amazon is two great revenue makeshift stories. aws. but then ams not capital intensive. so as a bull, a long-term holder of amazon, this is the business model transition you want to see. good for fundamentals, revenue growth and earnings growth for the company over the next three to five years. >> next week, we talked about your survey on customer satisfaction and you did see some wrinkles. you used the term plateauing on prime in the u.s is this sort of -- is this offset those concerns by multiple or not. >> it offsets the concerns there's a lot of different pieces to amazon i almost feel like i could come on every week with a different in-depth story but this is a -- looking at the
10:17 am
business model long term and cash flows, one of the most impressive new parts of the business and it speaks to the platformability of the business. when you get that many customers, there are other things you can vent to them or offer to them and advertising is one of those and it's certainly a place where you're a point of sale marketing. similar to google. people are searching for particular commercial items and amazon is giving them a chance to get in there at point of sale a powerful new part of the business model >> want to make sure everybody follows. advertisers buying keyword searches on the amazon platform. that's where this takes place, correct? and you're going to there buy something so it is very valuable is it that large at this point i did note that google seemed tock moving into amazon's business with that purchase of a stake in jd.com last week. it is interesting to see them moving into each other's businesses in a way. is it because of this threat, do you think? >> i think you're right.
10:18 am
they are in cloud computing. two of the three superpowers here one is google. one is amazon. if you think about the amazon value opposition to advertisers, it's similar to google consumers on the site that are searching for baseball mitts, that are searching for something for the kitchen. and you can get your ad up right when somebody is expressing intent the advantage amazon has may be over google is they can close the loop somebody is searching, clicking and purchasing it right on site. for amazon so they can give a detailed roi to that advertiser these companies are coming closer against each other. butting heads. this is another area they're doing that advertising >> mark, i wanted to ask about the grocery move today now prime members get bigger discounts and can save a few bucks on sockeye salmon or organic peaches if shopping at whole foods. are they going to be able to grow market share of prime by offering these discounts at whole foods?
10:19 am
>> i think the play for amazon, this is one of the synergies it wasn't clear to us early on or to most people maybe. it's becoming clearer now. there are approximately if amazon has $60 million to $70 million prime customers, the problem will be 20 million to 30 million that live near a whole foods that don't regularly shop there. they're taking that prime customer base and incentivizing to go over to whole foods. they could double whole foods' overall customer base over a five to ten-year period just by giving financial incentives to prime customers. that's the synergy they're now pulling from this deal too early to know how well it will do. it seems to make a lot of sense. you bring these two programs together whole foods and prime. two complementary offerings. >> mark, good stuff. good to pay attention to wish we had time to talk netflix down 6%. that will be another day perhaps. mark mahaney, rbc. when we come back, competition for the trump rally following another dow drop this
10:20 am
morning. why the index has gained since the election are only the success best under any president in the last 50 years moody's chief economist is with us next on why trump's trade policies are contributing to that decline the dow is down more than 300 points 305. we're coming off the worst week in months anthd e losses are continuing tech hit hard. "squawk on the street" will be right back
10:21 am
10:22 am
10:23 am
dow down 306 mike santoli looking at how trade war fears between the u.s. and china continue to push both markets lower. >> pushing both markets lower but the chinese market going a lot lower than the u.s. market for right now. some could interpret the u.s. market weakness as a little catch down move towards what's been happening in the emerging markets, specifically china. a lot of different ways to cut the equity market. look at the etfs the mchi is basically the msci china index is going to be
10:24 am
your -- which line is that that's the orange line it's right in the middle the two largest holdings are ten cent and alibaba. it's really much more a tracker of the mainland chinese economy. yes, ten cent is in there but a chinese construction bank. it's the banks, insurance companies, oil companies that's been where you've really seen the pain. and kweb which is the crane shares chinese internet stock index just as a comparison because that's what's holding up the broader chinese market that green line is the chinese version of faang it's performing okay up 24% over 12 months. so everything outside -- kind of like our market. everything outside the big growth stocks in tech are suffering. but over there suffering a whole lot more >> the view there is there more vulnerable in this trade war >> much more dependent on -- much more export geared economy
10:25 am
than ours is so at least right now at a relative basis, the market seems to be localize the pain where it's going to be felt the most >> meanwhile, looking for leaders today, right since netflix is not with us today. >> and that's why you see the overall market backing off more than 1%. so it's -- through this period of range-bound trading you haven't seen the real defensive stocks outperform. people taking heart in that. if it's going to be a bear market, those stocks would be working. >> what's your sense of when the market -- i don't know if yo call this a panic, a 1% move in the dow with the amazing run-up it's had sometimes reacting quite differently to them. >> there hadn't been a little diminishing effect that's mostly because small caps and tech gave you a place to hide on a given day. i think the market really wants to resist the idea this is a broad-based game changer s&p 500 earnings estimates are
10:26 am
not going down very much >> going up in some cases. >> and now if that's kind of the head fake, that's your problem the folks at b of a merrill are saying a lot of this looks topee right now. the corporate fundamentals are hanging in the u.s. credit markets are fine it's not as if we're seeing ancillary panic out there. >> a ton of issuance on corporate debt big week for ipos. >> we're swallowing it so far. is the market just growing tired at the wrong time when a lot of thyse these headlines are a bit unfriendly the s&p has not proven itself. didn't get back to the march highs. it's lost june's up side already. it's this nervous, choppy environment. >> is there a line in the sand is there a point, a date or maybe a marked escalation in the form of auto import tariffs where this does become an economic growth story? >> you would think there's a threshold there. and the emerging market is
10:27 am
driven by the currency moves telling you there's risk of that i wonder if the bigger potential risk for investors point view of is this is it. we're just going to have this exchange of measures and threats and it's not going to lead toward a process it's not going to necessarily lead toward some kind of negotiating angle where we can handicap how it's going to play out. if it's really just we're going to do this and you're going to do that. autos. stocks are already getting hit hard so something out there would make it seem like it's broader in the market's ability to quarantine it is going to fail >> new lows for the year on jpmorgan and on caterpillar. which do you think is more important? >> i think jpmorgan is more important. i don't think you need the banks to lead the way. i think that's an old rule that's going to become obsolete. but it's been conspicuous that you have a lot going for them. and it's obviously a proxy for
10:28 am
the yield curve and all the rest of the things that are leading people's worry list whether they should or not. >> don't go too far. we'll attach a line between you and the desk as we go to break, a check on where markets stand in the sell-off not quite session lows but dow is down 286. watching that 200-day. hasn't closed below that level sie nef 16 stay with us
10:29 am
at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & if your customer also forgets socks! with pg&e in the sierras.coupon for and i'm an arborist since the onset of the drought, more than 129 million trees have died in california. pg&e prunes and removes over a million trees every year to ensure that hazardous trees can't impact power lines. and since the onset of the drought
10:30 am
we've doubled our efforts. i grew up in the forests out in this area and honestly it's heartbreaking to see all these trees dying. what guides me is ensuring that the public is going to be safer and that these forests can be sustained and enjoyed by the community in the future. good morning i'm sue herera president trump criticizing a virginia restaurant that asked his press secretary sarah sanders to leave because she worked for the trump administration in a tweet this morning, the president said the red hen restaurant should focus more on cleaning its, quote, filthy
10:31 am
establishment than refusing to serve a fine person like sanders, end quote in france, ten people were arrested by anti-terror police they reportly had links to the radical far right and are suspected of planning to attack muslims. the operations took place across the country. turkey's main opposition candidate has conceded defeat in the presidential and parliamentary elections calling on the winner, president erdogan, to end his divisive policies he accepted erdogan's victory. porn actress stormy daniels had been scheduled to meet with federal prosecutors in new york today but that meeting was canceled late sunday after it was reported by news organizations that her lawyer michael avenatti said that two prosecutors called him saying they were concerned about media attention in the case. that meeting has not yet been rescheduled. we'll keep you posted on that one. you're up to date. i'm going to send it back downtown to you, sara.
10:32 am
>> sue herera, thank you welcome back to "squawk on the street." i'm sara eisen with carl quintanilla and david faber live at post 9. watching this market sell off. the worst day for the nasdaq and s&p since back in april. more than 1% losses. the nasdaq getting particularly hit today down 1.7%. technology is the worst performing group on the s&p. a lot of the negative action centered around the semi stocks like micron, amd, nvidia. let's get to bertha coombs with more >> looking through and it really is the large cap names leading the way to the down side and it's really across the board, not just in technology. not just as far as chip stocks but also when you look at biotech. the larger caps are falling further. a lot of them have moved a lot higher chip stocks in particular are in focus because a number of them get a number of their revenues their source in china.
10:33 am
so as these tariff tensions escalate, we see a big sell-off in those names when you look at the biggest decliners on the nasdaq at this hour, save for netflix, they all have that china exposure micron which has about half of its revenues coming from china of course, jd.com is the chinese online e-commerce playoff. netease a platform in china as well microsoft of note, that's been one of the big gainers among the sort of faang names. if you add the m in there, microsoft has been one of the big move irs it's now negative for the month. the rest seem to be holding up right now. and the nasdaq is still positive for the month and for the year apple is one i'm watching because it's come off the lows
10:34 am
of the open and is holding up relatively well. some reports say apple has been given assurances they will not be impacted by these chinese tariffs, notwithstanding the fact they do manufacture their iphones in china but that's one to watch. what's bucking the trend toorksd a lot of companies more focused here reports they may be looking to make a move for campbell's soup, the embattled soupmaker for their food assets but also take a look at ruth's that's a restaurant operator here in the u.s., as well as dollar tree. costco a little higher as well so, sara, we're starting to see folks once again look at that safety play here in the u.s. local retailers, local
10:35 am
restauranteurs that aren't as affected necessarily by tariffs. >> got it. bertha, thank you. we have to ask jim cramer whether we're allowed to put microsoft in the faang he's the father of faang >> i think he would say no speaking of, course, the key story we've been following markets are selling off. chinese investments in the u.s technology exports to china also now under imminent threat. the administration may announce some additional barriers targeting china's technology growth by the end of this week while breaking down the conti e continued escalation, we're joined by mark zandy from moody's analytics. mark, we've had a parade of strategists and other economists who follow the market and say right now given at least where we are in tariffs, even where we may be in the not too distance future, it's still quite small
10:36 am
when is it no longer small and when does it start to make a feel difference? do you know? >> it's already making a difference if all of the tariffs get implemented, and that's about $100 billion worth of imports to the u.s., that will save about 0.1% off gdp in the coming year. but if all of the tariffs that had been threatened by trump are actually implemented, and that's $800 billion worth of imports, that would save about a half point off. that's real growth that's real profits. that, i think, the stock market would have a hard time with. so, yeah, it's already starting to add up. >> you think we get there on that half a percent? july 6th a new round certainly the possibility of escalation seems to be significant at this point. not just with china but europe as well and maybe even mexico and canada do you think we actually get to
10:37 am
that point where a half a percent is shaved off gdp? >> i think the most likely scenario is this is just chest thumping and at the end of the day, once the stock market goes down a few percentage points, the president focuses on something else and life goes on. no big deal. but having said that, clearly this war is escalating today's announcement by the administration is a good example of that. so i don't say that with any confidence i'm growing more worried that we're going to go down the rabbit hole here and the pain -- economic pain and suffering will be much greater than i had thought. >> mark just laid out an interesting point i've heard a couple of times here on the floor of the stock exchange which is the president wants to see the stock market go up he bragged about it every day since the election now that we're in for a little bit of pain, how high is his threshold, do you think, when it comes to some of these trade actions? >> i think if you look at his
10:38 am
great love of a higher stock market and if you look at whether it's the trade deal with south korea or recent deal with north korea, it doesn't seem like this is a president who is willing to go through this sort of sustained pain to reach his objectives and i think the smart money so far has been all this is going to be about negotiating and eventually the chinese will agree to buy more u.s. products. somewhat smaller on trade deaf sit with china and then we move on but not everybody in the administration believes that and if we're now following the navarro path, the president has heard this needs to be a sustained -- especially against china, a cold war against china and this isn't going away. i think investors may want to begin to value these technology companies for a world in which you have two separate technological ecosystems, a chinese one and american one than both fighting for the american market.
10:39 am
it's a very different scenario than this is an art of the deal negotiation and we'll be talking about something else by september. >> well, you seem to be pointing to something critics bring up, which is there is not a unifying theme in terms of all these battles we're waging it's going to get us to some end result we've established as what would be success do you agree is it seemingly random in terms of where we're headed? >> if we're going to define success by a metric, the president's favorite mess ritric being the trade deficit, that's one thing. is the trade china there's been a debate whether china is a combo of the 1980s japan and 1980s soviet union and military and economic threat combined if we'll treat china like it's the old soviet union in which we board technological transfer, we're talking about a long-term
10:40 am
suppressant on the market. there isn't an obvious end game. it's just going to go on and on and on >> can i -- >> go ahead. >> i think there is no clear end game here. that's part of the problem the one thing he does talk about is the trade deficit he wants to make that smaller. that's not going to happen because of the fiscal stimulus, the trade deficit is going to be larger a year or two from now. with regard to that specific goal regard to getting china to play by the rules, that's a laudable goal but punching them in the face doesn't seem like a strategy that's going to work. the best strategy there was tpp. >> all right i was just wonder -- >> i just wanted to push back a little bit if the strategy from an economic
10:41 am
standpoint can work, what the market is telling us is that china is in for a lot more pain as a result of all of this than the u.s. is. and that already we're starting to see countries maybe going to make some concessions on trade is there an outcome where the tough negotiating strategy and the tariffs that the president is implementing will lead to fairer trade which will overall boost the pie? >> no. the chinese had tremendous -- we are tethered at the hip with china in many, many different ways and many tools they can use to fight back. now the president thinks, oh, you know, we import a lot more from china than we export to the chinese. therefore, we have some leverage here but the chinese have tremendous leverage they can make life very difficult for american companies that do business in china. i can attest to that firsthand or they can decide, you know,
10:42 am
maybe the yuan should be worth less the chinese have control over the yuan and that's just two examples of what i'm talking about no, the president, i think, is misjudging what levers and tools the chinese have and they can exact tremendous pain here's the other thing we -- the stock market is a very sensitive arbiter of all of this and the u.s. economy is particularly sensitive to the equity market. the chinese equity market doesn't really matter. if the u.s. stock market keeps going down, it's going to exact tremendous pain on the american economy long before any pain on the chinese economy. this calculus is just plain wrong. >> speaking of chinese leverage, there's been a lot of discussion about the degree to which they can turn to argentina or russia for soybeans the vice premier talking to the french about how they'll buy some french planes how much of that is a real swipe at the prospect of lower, say, boeing sales
10:43 am
>> well, we're sort of the pressure point boeing, that's a pressure point. another obvious pressure point is apple which even though they have assured apple that you'll not be a part of the u.s. the u.s. has assured you'll not be a part of that. that can very well change. if the end game here is to force china -- try to force china to abandon its technological ambition, made in china 2025 which china views as an existential thing it needs to do, then everything is in play and there's going to be no safe harbor for any american international that does business with china >> thank you, mark and jim on a related note, harley-davidson announcing it's shifting some of its production overseas to avoid the retaliatory tariffs just implemented. phil lebeau is in chicago with
10:44 am
the latest this to story which this company has become such a touchstone for the whole trade issue. >> in part because the trump administration has embraced harley-davidson and has for a couple of years as an example of an american company that, according to the president in the past, is doing quite well. not doing well enough in europe to avoid taking a big hit if these tariffs go through as a result, the company said we're going to shift some production for vehicles or i should say motorcycles headed over to europe from the u.s. that's because the eu tariffs are scheduled to rise from 6% up to 31% what does that mean to a harley-davidson buyer over in europe an additional cost of $2200. so as a result, harley executives have said we'll see if we can supply europe from other plants away from the united states. this is a company that has been embraced by the trump administration the president has twice hosted harley-davidson executives at the white house since he was elected. he has also lauded the company
10:45 am
as an example of american companies that will do better under his policies well, this trade dispute is now going to cost harley-davidson between $90 million and $100 million this year. that's the estimate coming from the company in its s.e.c. filing this morning and as a result, it is going to move some of that production from the u.s. for motorcycles built in the u.s., sold in europe they'll now supply those motorcycles from other plants outside the united states. guys, back to you. >> phil, thank you very much big story today. phil lebeau. a lot more on the sell-off dow off the lows down 238. session low was down 324 take a look at campbell bucking the sell-off as well up about 10% today on these reports that kraft heinz may be interested in buying the company. more "squawk on the street" continues in a moment.
10:46 am
[thoughtful sigh] still nervous about buying a house? a little. thought i could de-stress with some zen gardening. at least we don't have to worry about homeowners insurance. just call geico. geico helps with homeowners insurance? good to know. been doing it for years. that's really good to know. i should clean this up. i'll get the dustpan. behind the golf clubs. get to know geico. and see how easy homeowners and renters insurance can be.
10:47 am
market selling off as trade war tensions escalate. the best defense plays today on
10:48 am
tradingnation.cnbc.com more "squawk on the street" right after this
10:49 am
dow session low was down about 324. off of that now. the treasury secretary tweets on behalf of @real donald trump the stories on investment restrictions in bloomberg and "the wall street journal" are false. fake news. the leaker either doesn't exist or know the subject very well. statement will be out not specific to china but to all countries trying to steal our technology according to the journal it would limit restrictions on investment the journal did frame it as chinese investment he's saying it's much broader than that. >> this is becoming a familiar pattern when the treasury secretary sort of walks back the worst of the trade fears in the middle of a big market sell-off. the trade war is on hold but he is -- this is coming from his department from the treasury secretary. clearly investors are paying attention. >> and i guess you have to pay
10:50 am
attention to the very first words on behalf of the president. >> he got permission >> yes >> so we'll keep an eye on that. dow down 249 let's get to rick santelli with the santelli exchange. hey, rick. >> good morning, carl. rick. >> good morning, carl. thank you. i would like to welcome my guest from newberger berman. what we just heard was breaking news, maybe reports of exactly how much the u.s. will contest sharing or allowing companies to invest in certain strategic areas, maybe a fake news story you know, it's very difficult, even the news we know to be true coming from the president and administration, it must be very difficult to service investors at this time. >> the trade issue is a challenge. july 6th deadline for the 50 billion. our volatility will keep rising over the next week we have the mexico election coming up over that period of time, too. the introduction of the threats,
10:51 am
$250 billion tariffs, car maker tariffs, it's a risk that's been there but it's percolating more into the market. we're reaching a deadline where we can punt on it but we think something is going to end up happening one way or another. >> so hard to get bearings i see them quoting chinese news stories, which i don't know if there are any worth quoting. and really a big story in itself. >> it's a couple of important things on fixed income we had the sell-off rates in january. since then we've been treading water. the second time we've seen weakness in credit markets with the exception of lower rate of high yield, lot of fixed income has been under modest pressure third thing is on a day like this, where stocks are down one odd percent and rates are down one to two bases points, government bonds and treasuries just aren't -- >> no.
10:52 am
we used to call it the crash syndrome weak equities, buy a few treasuries it seems as though -- maybe it's a coincidence. after we had the big portfolio fallout where blended portfolios to maximize positions, that strategy blew up it's really never been the same. >> no. that is one of the things we're talking to clients about i think it will be more and more realized in the markets. treasuries are -- and government bonds in general there's more headwinds on them we're seeing it this year when equity volatility rises. it's going to be with us for a while. to us, that's the biggest story in the fixed income markets right now. >> we were talking off camera. you think the short end is probably done and it still represents a nice spot for investors to hang out? >> definitely. the front end has been under pressure for several years gradual hiking of the fed. plus or minus at a 3%, we think
10:53 am
that will find value short duration portfolios, mid single digit yields. that will attract capital. it's an intermediate term story for the bond market. >> thank you for your thoughts back to you. >> thank you very much, rick santelli dow down 248 s&p bounced off that 50 day. a lot more on that sell-off after this ♪ introducing e*trade personalized investments professionally managed portfolios customized to help meet your financial goals. you'll know what you're invested in and how it's performing. so you can spend more time floating about
10:54 am
on your inflatable swan. [ding]
10:55 am
10:56 am
welcome back to "squawk on the street." consumer energy stocks falling more than 8% after companies beat expectations but issued disappointing guidance for the rest of 2018. >> thank you very much, eric dow down 324 this tweet from the treasury secretary about investment restrictions or would-be restrictions that we would expect to hear more about on friday hard to know if that tweet is net positive or negative, if it's not directed to the chinese but broader, what does that
10:57 am
mean >> directed at everybody but also with a purpose to protect intellectual property and technology of the u.s. in the meantime we'll see how the market takes all of the trade concerns i think what mike santoli said was that it's not pricing in anything super negative as far as the hit to economic growth. it really feels like the story even when we have down diedays like this one in the overall context, the market is holding up. >> indeed. dow down 276 don't go away. you always pay
10:58 am
your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance.
10:59 am
11:00 am
good morning it's 11:00 a.m. in washington and 11:00 a.m. on wall street as well and "squawk alley" is live. ♪

83 Views

info Stream Only

Uploaded by TV Archive on