tv Closing Bell CNBC July 25, 2019 3:00pm-5:00pm EDT
>> frank holland, thank you. big night for tech earnings, of course. >> alphabet and amazon the two companies -- >> and interet -- >> i say should be broken up by investment bankers in our lifetime. >> that's your conviction. you'll stand by it. >> i state with aplomb. >> thank you for watching "power lunch." >> "closing bell" will pick up where we leave off, right now. ♪ welcome to "the closing bell." i'm littwilfred frost. i'm at the boeing post, they're sliding and it's been a bad week rerl renewed fears for the 737 max stemming from the airlines shlg but broader markets are selling off as well. lots to discuss from central banks to earnings with 59 minutes of active trade. >> i'm sara eisen. welcome, everyone. let's look at what's driving the action lower this hour, the final hour of trade. european central bank today leaving interest rates unchanged, signaling a future rate cut, more monetary easing didn't do the trick, though, in terms of exciting the stock market earnings fallout from tesla and facebook weighing on big tech. and we are awaiting results from
google, amazon, intel, and many others after the bell. coming up in just a few moments, we'll talk about today's pullback much more with hayman capital management founder kyle bass will be good to get his thoughts especially on china. joining us for the hour, cnbc contributor stephanie link is back from nubene are you taking a chance from this pullback to do anything today? >> it's an earnings bonanza. i'm still way behind in the conference calls that started last night but yeah, during earnings season, you always get exaggerated moves. so i actually am looking at the fundamentals and trying to identify where there is opportunity. zille yix this morning was indicated down 6% last night and only opened up down three, but i still think that is an opportunity because they derisked the numbers bristol-myers opened flat, but actually that quarter was really good, bought a little bit of that so i'm lacking for opportunities slowly, because the macro, obviously, we've got a lot of
questions still. >> so, does today mean that the market is interpreting earnings season overall as a big negative because we were at record highs just recently. >> no, yeah. i mean, i think that there's winners and losers all the time, but the moves are so exaggerated. the machines see the details, the numbers, and they're not doing the fundamental analysis, but i think today is also a bit about the ecb and them maybe not being as dovish as what people wanted but if you really listen, they're pretty darn dovish, so something's coming down the pike. >> listen in the first hour. listen to that. >> that's right. let's dive in on the big stories we're watching phil lebeau with tesla and the airlines, julia boorstin with facebook, seema mody with details on 3m, and bob pisani has all of the other key movers at the exchange, but phil, let's kick it off with tesla. >> you're looking at a stock right now seeing its worst day this year. if it slides much further, it will be its worst day since september of last year all of this coming despite the fact that the company had better-than-expected deliveries in the second quarter, but it's
the automotive gross margins that's what's weighing on shares of tesla in fact, yesterday thecompany said its auto gross margins in q-2, 18.9% most were expecting them to top at least 20% they were squeezed as they ramped up deliveries of the model 3. on the conference call yesterday, elon musk once again said he sees profitability in the future for tesla >> we believe tesla has -- is now at the point of being self-funding, and we expect the cash flow, the free cash flow positive in future quarters with a possible temporary exceptions around the launch or ramp of a new product. >> guys, tesla shares down more than 13% so far today. >> phil, we also wanted to ask you about the airlines big news out of southwest, american, both out with earnings what were the big takeaways? >> yeah. well, that's why we're down here in the dallas-ft. worth area both airlines reporting earnings today and both of them beat on the bottom line, although they did take a hit in terms of
revenue because they don't have the full complement of 737 maxes. just a reminder -- american and united both have already said that they don't plan on flying the max. it's not in their schedule until after the beginning of november. well, today southwest said, look, we're not expecting it to come back until january. here's doug parker, ceo of american airlines, talking about how they're really trying to get the best guess here, but they're really not sure when the max will fly again >> we remain in limbo, as everybody else does, as we wait to hear from the faa as to when they've come to the conclusion that the aircraft is ready to go back in service again. >> and again, they will adjust that schedule if they do not get an indication that it will fly before november 3rd or if it won't be flying november 3rd, they'll push it back, like other airlines have. shares of boeing once again under pressure remember, they said yesterday they may halt production of the 737 max if it cannot meet their projections in terms of being back in service by the fourth
quarter. >> phil, thanks very much. busy day for you stephanie, boeing down 4% today, 8.5% for the week as a whole you're a shareholder are you disappointed with sort of drip feed of bad news >> it's very frustrating but remember, last thursday it was up 4% on the news of the charge, remember so i mean, net-net, you're down 4% -- >> why didn't they have it all at once? >> i don't thaink they know. >> the sense from the airlines is they're expecting a worse outcome than boeing has guided to so there's a gap there surely you want to get the wobst case out there -- >> did you hear the ceo on "squawk" >> i knew boeing would be down when i heard that. $75 million of headwinds and they still beat the quarter, you know that's still impressive on southwest's side but on boeing, look, i have said this consist qulaevenlt, this is not an easy fix, this is not an easy story in the near term. it's probably going to tread water and on headlines, and that's what it's doing but once you get this thing in the air, it will resume higher, i think. and i do believe the cash flow
story is just a delayed mechanism, not that it's cut and you'll never see it again. turning now to facebook, also falling on the back of yesterday's earnings report. julia boorstin with the latest julia? >> well, we've counted at least ten analysts actually raising their price targets on facebook's better-than-expected revenues yesterday but the stock is lower on concerns of what's ahead. cfo david a winner warning that facebook's revenue will see more pronounced deceleration going into 2020 partially due to ad-targeting-related headwinds and uncertainty. while the fcc's fine is accounted for, there are many unresolved issues. the fcc's antitrust investigation, the doj's probe, plus, of course, scrutiny from capitol hill wilf and sara? >> julia, thank you. steph, is this one of the names where the results were good, the share price reaction to the down side overdone, and you want to be picking it up here? >> well, it's up 52% year to date, so it's hard it's only down 3%.
so it's not as compelling to me, but i mean, my goodness, those growth numbers, the ad revenue growth numbers free cash flow growth was 92% better than consensus expected, $2.4 billion in the quarter. really good stuff. >> caution around the second half. >> and expenses, for sure, but i think clearly numbers are going higher, in spite of that so this stock is actually very reasonable valued. i just think today is a little f.a.n.g. fatigue, or a little deregulation fatigue, so people just took some money off the sidelines. this is the only one i own of the f.a.n.g. >> all sectors are low, though, today. of course, f.a.n.g. is a lot, but it's not like it's an isolated setting switching to dow component 3m, which was a winner today before becoming a loss, seema mody explains why. >> they beat on profits driven by cost cuts, plus sales for the quarter improved in divisions like health care, where it continues to put more money to work, recently acquiring a bandage maker.
still, concerns could and in in china. it was referenced on the conference call and that as when shares which were up 5% in early trade reversed course and are now down 1% on the day the company also said it's going to slow down its rate of stock repurchases. sara, back to you. >> all right, seema, thanks. let's broaden out to the rest of the market bob pisani has more on what is behind today's pretty broad-based pullback. >> durable goods better than expected that may have been a factor. draghi may have disappointed people by not cutting rates. a lot of reasons why we could be down caterpillar recovering on disappointing guidance, yesterday's drop utx is high after good numbers on tuesday visa is at historic high and though down, had terrific numbers on tuesday if you look at some of the sectors, semis weak. there's an earnings story. xilinx, a little disappointment there, but many of these are at new highs. the semis etf just had another
high metals and mining, they've rallied the last two weeks and are selling off today as well. cyclical groups look like they're running out of steam here after a pretty nice rally in the last two weeks. smo of the more defensive names, your johnson & johnsons, your proctor and gambles, your merck, all are a bit higher today guys, back to you. >> bob, thanks very much for that stephanie, in terms of the broader market, you mentioned some of the individual names are there any sectors that stand out to you, given the rotation that's been going on >> it is interesting because bob makes an interesting point in terms of the rotation today. it's actually been a reverse of what we've seen over the last couple weeks, so it will be very interesting to see if the cyclicals can kind of resume and i think a lot of that is going to depend on what we get next week with the fed and the boj, by the way, as well so i think that the macro is going to take over a little bit in terms of which sectors lead, but i think we have to wait for the fed. >> i mean, the numbers today weren't as well received, bottom line, than they have been, and i'm wondering what the sort of thematic takeaways are from that is it weather? is it softer global growth,
maybe huawei issues? >> well, i think every sector -- it's kind of stock-specific. so, like paypal, the stock was up huge in the last year, a favorite of so many, myself included expectations were just too high. and yes, they did lower guidance, product transition issues, that sort of thing, but of course you're going to see a sell-off on that xilinx, it was huawei, 3m -- my goodness, you don't want to be anywhere near china auto and that's a big part of their business, so they have problems, but on the flip side, others are doing pretty well. bristol-myers, we looked at coke, right? how good was that? and visa so i think you have to pick your spots. >> we've got markets down what, 0.6% on the dow with 50 minutes left of trade. we're not far from the session lows as we stand coming up, a massive afternoon of earnings ahead with reports from alphabet, amazon, intel, starbucks and many more we'll break down what to expect from those results, coming up. plus, we've got an exclusive interview with hayman capital founder kyle bass. we'll get his take on everything
from china trade to the fed's upcoming decision next week. and as we head to break, a check on our data tracker for today. june durable goods orders climbing 2%, easily topping estimates. it follows two months of declines initial jobless claims fell by 10,000 last week, their third klein in the past four weeks two sets of positive data. two sets of positive data. we'll be right back. but i feel like you have the potential to do so much more. can we build ai without bias? how do we bake security into everything we do? we need telps people understand each other. that understands my business. we've got some work to do. and we need your help. we need your support. let's expect more from technology. let's put smart to work. ♪ ♪
♪ we've got 47 minutes left of trade. here's where we stand in the markets. lower across the board dow pulling back here about 171 points nasdaq down 1% the russell 2000 index lifts small caps lower as well mixed bags of earnings report and less than enthusiastic reaction to mario draghi promising more stimulus this morning. mike santoli has today's market dashboards what have you got for us today, mike >> all right, here is what is on the sleet. first, should we fear the cheer? it's going to be our thursday sentiment check right here then, i think i'm going to need a ruling on this i'm sayi ining lol at vol could lol be pronounced like that, like an acronym? i'll say yes for these purposes. applaud, it's broad, that would be the market being relatively broad coming into today.
and from cheap to steep, that's one part of this tape that seems like it's going to get a little bit expensive. so, fear the cheer let's look at a couple different readings of investor sentiment first of all, professionals or investment advisory services this is the investors intelligence poll, it comes out every week and on top it's just the s&p 500. at bottom is the spread between bulls and bears. so, when this goes up, it means that a lot more bulls than bears, and it maybe is a little bit of a contrarian signal this is from jeff degraff. so, we're pretty much in the 90th percentile. it's getting a little bit elevated but keep in mind, a lot of false positives. we were here above 90% we were here so, there is actually not a high hit rate in terms of getting very negative on the market when you get to this level, but on average, a lot of big declines are preceded by this so, it's probably a little bit of a headwind but not something that stops a rally here's a different version, aaii really cautious, even though the
market's at a high bullishness is in a down trend there, that from early last year, but not really responding. bearishness is about the same as bullish, 30% above the typical level of bearishness, which says people are still a little defensive, a mixed picture, so you defer to what's been the story in the market, relatively positive. >> on the small chart, do we see a small pullback >> on average, you do get a little bit of a slowing down of a rally, a flattening out, a little bit of a pullback we actually have been more or less slowing down and taking a breather here with the s&p 500, but it's not really a sharp, very timely short-term signal. it's just kind of part of the general context of what's happening in the markets. >> all right, mike, see you in just a bit stephanie, really quickly, the sentiment numbers. it's not euphoric. >> no, it's not euphoric. >> what does it tell you >> and it you've record levels of outflows from individual investors, too so, look, i think there's definitely a defensive tone in the market, and that's what we've been talking about up until the last couple of weeks
so let's -- i think that can unwind if people get in a little more confidence in where we're going on the macro. up next, we will look at which retailers could benefit from an antitrust attack on big tech, specifically amazon. a leading analyst gives us his call in our "word on the street." >> plus, for the third straight month, analysts have a buy rating on amazon it reports after the bell, along with alphabet and many more. don't miss that coming up here on "the closing bell."
welcome back time for "word on the street." bank of america putting out a couple goals on gaming stocks, downgrading electronic arts to neutral and upgrading activision blizzard to buy. the group seeing growth concerns on the mobile and fifa games meanwhile, it says the competitive outlook for activision is improving and that it's on the verge of an inflection point. etig upgraiding etsy to buy, $79 price target there, citing increased intrinsic value based on the online retailer's free shipping initiative and acquisition of instrument company reverb and positive trends among other reasons bernstein out with a note -- does an antitrust attack on big tech help retailers? let's bring in the analyst behind that note in a "word on the street" cameo with brandon fletcher of bernstein. brandon, do you actually think that antitrust scrutiny of a company like amazon will improve share price performance for retailers?
>> yeah, i think it takes a while for you to get the changes we're looking for, but once a large company gets in the crosshairs of regulators, and frankly, just competitors deciding that there are no holds barred and they need to come after their competitor in any way, it gets very difficult. i spent the bulk of my career at walmart, and we used to have 10,000 lawsuits a year, and it makes it hard to operate when you face incredible scrutiny and i think that phase is coming for amazon soon. >> do you think there are serious grounds to hit amazon in the retail space do you expect it to go ahead and to really punish them, make them sell off certain parts of their business >> yeah. so, i think that what's normally difficult about antitrust is we tend to think of it in terms of mergers because in the clayton act violation, which was designed to handle mergers, that's where most of the action is, but the very first antitrust act, the sherman act, talked about behaviors. and i think that's where amazon may face more scrutiny there are some, i think, reasonable arguments for illegal
restraint on trade that you could make against amazon. there are some things that they're doing with the way they deal with their vendors that you could argue were difficult restraints on trade. their subtleties about how the one-day shipping program works, which will cause some vendors who used to be able to ship on their own to really have to go through fulfilled by amazon, which is extremely profitable for amazon and there were even practices which they very recently stopped, like forcing vendors to not have lower prices on other websites, which they only stopped because the senator was sniffing around for antitrust concerns so we think it's inevitable that there will be a shoe that will drop again, it's not a breakup call by any means, but pressure on amazon creates room for others to operate >> like who, brandon throw out some names of who benefits the most. >> absolutely, yeah. so, walmart's powerful enough to probably hang in there on their own, but you need some help in order for a kroger and a target and a best buy to get some extra room let me give you a tactical example how those pricing rules become difficult we think of amazon as the price
leader in every category, but they actually don't sell the most volume in every individual item in fact, there are plenty of items where best buy sells far more of those than amazon. so theoretically, you should end up with price points in a best buy marketplace that could be lower than amazon. but if amazon uses a rule like you can't price below my price on the website for a vendor, then you're essentially stifling competition. and if you can create something that puts a little bit of a break in the armor of amazon for the absolute lowest price on everything, which empirically, it's not, you create room for a best buy, for target, for kroger, to create some other progress on their own. >> quickly, what are the latest market share numbers on amazon and retail overall and online retail any real sign of a monopoly here >> yeah. so, monopoly definitions require a notion that looks at customer segmentation that's important. so we actually segment the market based on customer need. and when you segment the market, by the way, we think about it as price in assortment items, which is about $6 mnd billion in
sales, which is a massive number but most of amazon's sales in the u.s. are inside of that category so, their concentration at $100 billion of sales is as large in that space as any other retailer in any other category. so it's not that they're at monopolistic levels, but they're at enough control that some of these restraint on trade provisions may be possible and even if a suit isn't successful, discovery processes in antitrust can be useful to figure out details on how the company functions, and you might find bad behavior another way, even if the first challenge isn't successful >> brandon, thanks for joining us >> thank you guys. still to come, we've got your last chance trade and steph is looking towards the insurance sector we'll reveal her call, coming up. >> after the break, hayman capital founder kyle bass joins us exclusive to talk about today's pullback, the latest china trade negotiations and china trade negotiations and more sfx: record scratch
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amazon, intel, and more off the close. we are down 136 points on the dow. time for a cnbc news update. sue herera's got it for us hi, sue. >> i do, indeed. thank you, wilf. here's what's happening at this hour, everyone joe biden and senator cory booker each appeared at the national urban league conference after days of sniping between the two campaigns. and then they talked about other problems >> if, in fact, i find out anything at all that is going on in terms of trying to alter the election, whether it's helping me or not helping me, i will immediately go to the intelligence community, the fbi. this president said he'd accept that information it is outrageous it is un-american. and it's close to treasonist. >> you need to understand that we cannot beat donald trump unless we have a large, vibrant turnout in the black community the next nominee for the democratic party will not win if
they cannot inspire. and for only the second time since temperatures have been recorded, the mercury hit 100 degrees in britain today the high temps disrupted train service, prompted alerts, and caused people to flock to local pools and the beach. you are up to date that's the news update this hour guys, i'll send it back to you. >> sue, and we don't deal with the heat well. no one's got ac. >> i know. >> i think it's the first 100 for july it has done it in august before, but nonetheless, massive heat wave and i was just reading on the bbc website, paris, 42 celsius today. that's 108. >> yeah, i was going to say, between 108 and 110. i mean, it's ridiculously hot. >> insanely hot. well, we think it's hot here often, but there we go it will only last a couple of days the rain will be back next week. >> it's more unusual in europe to have those temperatures. >> northern europe, for sure. >> thanks. let's go to mike santoli >> all right, sara, we're going to lol at vol. i'm going to stay with that
here volatility, that is. take a look at the trend over two years in the volatility ind index. we are bouncing a little bit off recent lows over 12 in the volatility i was going to highlight this long stretch here last summer. as we similarly kind of had this stair-step pattern going higher, well, we're kind of sliding down into that range again, and this tells you it can kind of last for a while. this was more or less the way it went until we hit this top here in september of last year. so it's probably not going to match up perfectly not every feature of this market resembles that, but there has been a slow bleeding away of this slight anxiety build-up in the volatility index now, people have said that there was a really little uptick in speculation that there would be a pop higher in volatility going out toward august and september. that activity shows you that people perceive these levels of prices and options to be a little bit cheap and play for some kind of a late-summer storm. no real indication yet, but the setting is in place or becoming in place for something like that, guys >> mike, thanks very much.
good lol at vol. >> we approve of the lol >> we do. >> it works. >> it's definitely a word as well as an acronym. hopes of a trade deal between the u.s. and china were revived when treasury secretary mnuchin confirmed that he and trade representative lighthizer will head to china monday for trade talks. joining us now for an exclusive cnbc interview, longtime china bear kyle bass, chief investment officer at hayman capital management good afternoon to you. thanks for joining us. >> good afternoon, wilfred how are you? >> very well, thank you. very well. and let's talk about the trade talks restarting how optimistic are you that a deal is reached let's say this side of the new year >> well, at first, you referred to me as a longtime china bear i like to call myself a china realist. but i would like to -- you know, when you look at what the chinese did in the last negotiation, it was about 150-page agreement and the night before both sides were to sign the agreement, the
chinese took 50 pages, the core of the agreement, and threw it away and so, they won't sign anything that's either measurable or enforceable. and trade rep lighthizer is pushing something that is both measurable and enforceable because every deal the chinese have signed with us since their ascension into the wto in 2001, china never lives up to their promises so at some point in time, one of our administrative officials has got to hold their feet to the fire, and this is kind of the battle of cultures, because the communist party doesn't want to submit themselves to anything that's measurable or enforceable. i don't think an agreement can be had >> but kyle, how much is the trade issues a swing factor in your bear case or your realist case, as you like to put it, on china? would you be bearish either way? and would you be incrementally bearish if things broke down >> no. i think it's important to focus on a couple of things with trade.
so, first of all, trade is so -- it's so nominal, it's so minimal when you look at our relationship with china, it's really ip theft. it's the stealing, the lying, the cheating, the thievery of all of the u.s.'s, let's say what we produce best here in the u.s. is our innovation and our intellectual property, and they seem to take it at will. and so, i think it's important that trade -- look, if we're talking about $500 billion worth of trade and potentially putting 25% tariffs on it, we're talking about a little over $100 billion. the chinese economy's $13 trillion the u.s. economy's $20 trillion. and we dedicate so much time to it, it's really nothing. what's important here is restructuring our relationship with china you heard fbi director ray say a couple of days ago that there are 1,000 intellectual property theft cases actively being pursued by the fbi, and all of them find their way back to china. so, we have to stop allowing china from stealing from us, and
i think it's important that these trade negotiations are but an agreement that we are forcing them to reset their entire relationship with us >> do you think it's going to work >> i mean, clearly, i don't think it's going to work i know mnuchin and his cadre are pro china and may be pro china even after he comes out of the treasury, and i think that lighthizer's more of a realist and looking at the national security of our country. >> how are you expressing this view right now, kyle because i believe you sold out of the chinese currency short ahead of the sort of trade tensions last year so, what exactly are you doing to bet against china >> yeah, i think -- it's a good question, sara i've spent the better bart of a decade studying china, and the more and more and more i study all of the different aspects of our relationship and the manner in which the communist party operates, it's become more of a personal passion of mine and i don't want to be conflicted with, let's say
financial incentives at this point in time. so, we covered our chinese positions. we have positions in the rest of southeast asia, but nothing directly in china because i think it's the epicenter of u.s. national security, and i think the greatest risk to our security is china over the next 10, 20 years, and we better pay a lot of attention to it now so, there's no trade expression here it's just, sara, when you think about the fiduciary responsibility of institutional investors in the u.s., how can you invest in a market where there is no rule of law? how can you buy a company that doesn't adhere to the same auditing standards as u.s. companies? how can you as a fiduciary own a variable interest entity in alibaba when all you own is a small piece of a piece of paper that references something out of the cayman islands like, if you lose money there, you should be sued by whoever you're a fiduciary for, and you're going to lose that suit and so, i don't understand how fiduciaries can buy these
things. >> it's interesting to hear your answer there about how you're not in the trade because of the conflict, because as you know, there was this propublica story out this week, which did name you, and it details rnc co-chair tommy hicks jr.'s relationship with donald trump jr the report says hicks arranged a meeting between you and the treasury department to discuss your views on china. says it's not clear whether or not hicks held investments in any of your china-related funds at the time and that the relationship hadn't been probed by ethics exercise i know you talked to our kayla tausche about the piece, said it was a hit piece. i wanted to give you an opportunity to clarify what your role is with the administration, with the treasury, and whether there was any conflict there >> i think it's absurd the treasury reaches out to people in the professional community every single day i lecture on the chinese financial system at stanford and harvard and cal berkeley, and they reached out to me asking me about my china -- about the
chinese financial system this was a piece that a political reporter spent many months trying to do something with the rnc chairman, and they foia'd all the meetings in treasury and found one it's really -- it's a joke >> you are, nonetheless, bearish still on other trades related to china, i think i'm right in saying are you increasingly bearish on hong kong given the protests of late >> yeah, i mean, look, when you look at -- i look at leverage. so, if you look at my history at what i've done, i found the overlevered portions of the u.s. housing market, and that's how we began our firm's history, and then we found the excessive leverage in ireland and iceland and greece and europe. then we moved to japan, and then we looked into china and hong kong so, there isn't any particularly regional bias here there's a bias towards overlevered economies. and when you look at china or you look at hong kong, hong
kong's the most levered developed economy in the world they have 900% of gdp in banking assets that's exactly what happened to iceland, ireland, and greece when they fell and you also have 300% private-sector credit to gdp for example, in the u.s. and japan, we only have 150% so, hong kong is the most levered, developed country in the world, and now they're having this situation where there's an existential crisis. like, imagine if you were running a business in hong kong. would you be investing more money in capex would you be buying more homes would you like to move more of your family into or out of hong kong at this moment in time? you know, hong kong's going to have a real problem -- >> i love hong kong. >> -- over the next few years, and i think you're going to see hong kong be the epicenter of the relationship between the u.s. and china >> and yet, i remember, you know, a few months ago you said you were betting against that hong kong dollar and the peg breaking and them not being able
to sustain it, even though those crazy protests the peg seems relatively stable with regard to the u.s. >> sure, pegs remain stable until they break think back to the tequila crisis of '95 or with mexico, or think of '97 when the thai baht broke. it's an interesting corollary because the british handed hong kong back to the chinese on july 1st in 1997 and july 2nd is when the thai baht broke. it's fears of communistic rule over former open economies that have caused the asian currency crisis of '97, and that's again percolating its way into, let's say asia's financial center today, which is hong kong. i believe that asia's financial center will move i think it will move to singapore. but guys, this doesn't happen in a day or two it doesn't happen in the news cycle that you guys would like it to happen in. i think it's important to realize that these things take years. and this is just the beginning >> i guess the pushback, of
course, would be that for china's gdp and the metrics and the percentage of debt drops a l lot, but we need to move on and talk about the fed going back to zero rates as the u.s. economy slows. do you expect that to start next week and how effective will rate cuts be this time around? >> yeah, i mean, i always -- we believe that the rate cuts are less and less effective once you've been at a zero rate bound, rate cuts have less efficacy than they once did before you ever got down to that level. so, it's a great question and i think there will be less efficacy i think that as you heard in powell's last press conference, a member of the press asked him, you know, if he believes in this ideology of, to the extent that there is going to be a slowdown, they have to be more aggressive sooner to get the intended effect, and powell tended to agree with that statement. and i think you're going to see,
to the extent that we see softness in the u.s. economy, which you know, when you look back to yield curves inverting, it typically takes, call it 9 to 14 months before you see the result and effect on the business of, let's say the economy. and so, i think you're going to see an early 2020, you're just going to see softness in the u.s. economy and if you look at the pmis of europe and look at what's gone on in asia, and china just reported the slowest growth rate that it's ever disclosed in the last 35 years, the world's slowing down a little bit. it's not a financial crisis like 2008 we might have a shallow recession, but if we do, we will immediately go to zero rates >> so, what do you do, buying treasurys, selling the dollar, gold >> yeah, i mean, i honestly think what we all have to do is think about, you know, the best way to defend your investments in an environment like that is to buy long-duration assets.
i.e., you want to own apartments, office buildings, you want to own long bonds, right? you know, one of my friends joked with me recently and said, you know, you buy bonds for capital appreciation these days and you buy stocks for yield and i think that's what you're seeing that's why you're seeing stocks go straight up and i think they're going to go up more and more as treasury yields come close to zero. >> but that's interesting, kyle. so, you're bullish on u.s. equities, it sounds like, but you're fairly bearish on the u.s. economy how long, if both of those things play out, how long can it last, that equities outperform in a recessionary environment for the economy? >> yeah, i mean, if i knew the answer to that, wilfred, you know, i'd already be on the beach. but i think that you're going to see -- just look at japan. in japan, they've bought more than 100% of their gdp in their bonds. they own 75% of every listed etf. the bank of japan owns them. the bank of japan's become a top
ten holder of four of the largest companies in japan through their etf purchases. and guess what, they just keep going. and so, you even heard a question asked of powell, where they said, are you going to buy stocks and powell said, that's not in the cards right now. i.e., it's not off the table and you heard my friend, rick reiter, telling europe, if they want to stimulate, they need to buy stocks so, the playbook shows you that the fed and the ecb and the world central banks will go right back to zero the ecb's negative, right? we have record sorveg bonds -- the record number of sovereign bonds below zero yields right now, $13.5 trillion. and it's just going to keep going that way so, what we're going -- what you're going to have to do is buy as much duration as you can and buy assets that have higher yields so, i think yield-based instruments are going to do better and u.s. multinational corporations are high dividend yields are going to do great
so, do i think stocks could go down absolutely, i think they could go down. but over the long term, if that's the playbook from the central banks, then you'd better buy anything that's nailed down. >> sounds like you're sort of laying out a case for the no-yielders, too, like gold, bitcoin. are you a fan? >> you guys are good at this you know, look, gold, yeah i mean, is gold going to go up in that environment? probably so. bitcoin is such a fascinating concept for me i've looked at it over a long period of time we've looked -- tried to study -- i'm not a technical person, so i don't know the math behind it that well, but i've tried. and i think bitcoin is successful because the majority of the people that invest in bitcoin believe that scarcity equals value, and i'm not sure that's the case. but i do think that, you know, the blockchain is valuable and it's going to displace a lot of businesses in the world. and i think it's going to be useful over time
but as bitcoin becomes more successful, if you're a sovereign nation and you've seen treasury secretary mnuchin comment on this recently and you've seen, i think powell comment on it in the past -- i think bitcoin's success will be its undoing. i.e., today i don't know what its market cap is of all of the bitcoin, $200 or $300 billion, but it's just a play toy at the moment and there are speculator and people who have invested in it and made fortunes but i think as it becomes more successful, i think the sovereign nations of the world will have to tax it, outlaw it, do whatever they need to do to slow its growth or stop it because when you look at the u.s., we use ofac at the treasury to impose sanctions on other countries. we use the swift system in belgium to impose economic sanctions. and in this day in age, i think economic wars are much more effective than kinetic wars. so we're going to get into a place where bitcoin makes itself more problematic, but that
doesn't mean that it's hit a high i'm not calling a top by any means. but i think the better it does, the more trouble it's going to have, and i'll leave it at that. >> kyle, so, you're out of the china short at the moment. i wanted to ask as we wrap things up, what is your highest conviction position at the moment i hope it's not just like a dividend stock like bp or shell, and it's something little more exciting for a hedge fund manager like yourself. >> yeah. so, i think that if you look at fannie and freddie and u.s. housing reform, i think that you and i as taxpayers lent them $191 billion that's what they lost in the financial crisis and since then, they've repaid the government $292 billion. so, they've earned about a 12.2% return, the government has, on its 10% coupon i.e., they invested a senior preferred there. i think the junior preferreds of fannie and freddie are worth far and they're trading below 50% of
par. that's our highest conviction position. >> there we go, 100% return for you if you go into that one. kyle, thank you very much for joining us. >> thank you. >> nice to see you, kyle. >> kyle bass there great discussion tomorrow, another great discussion coming up first on cnbc interview with national economic council director larry kudlow on the trade talks with china and also the latest gdp report. "squawk on the street" tomorrow. >> 10:00 a.m don't miss it. still ahead, we'll get earnings reports from alphabet and amazon shares of alphabet down 10% over the past three months on that i think revenue miss last time what will they post this time? we'll talk about it next
welcome back just under ten minutes left to trade. last-chance trade. stephanie. >> so, i have chub i know you guys interviewed the ceo yesterday, which was a great interview, but this is -- he's one of the best ceos in the financial community, if not in the s&p 500, in my opinion they have a great underwriting standard skill set that is their advantage, for sure, and great market share but the reason why i like it now is because they reported on tuesday, and it was very evident, they are getting pricing. we haven't had a hard market in the insurance property casualty sector in over ten years so you're starting to see better pricing, 7% north america commercial pricing then you also have layering on the ace acquisition synergies. they made this acquisition in january of 2016. they still have synergies there. the stock trades at 14 times forward estimates. a free cash flow yield of 8.8% i like it. it's actually also lagged its peers year to date, so i like this one. >> part of this defensive pivot sectorwise or not? >> no, not really.
it's really truly a good story and if you get pricing -- if it's real and it's sustainable, earnings are very, slow. >> though travelers was a big knoimt earlier this week. >> i think that the underwriting standards at chubb are really superior. >> all right there you go we're gearing up for earnings after the bell josh lipton with a preview of alphabet deirdre bosa following amazon. josh, first to you what do we expect? >> so, we expect alphabet to report q-2 eps of 11.30 on revenue of $38.2 billion analysts paying attention to the top line growth, saying you need 17% for the stock to move higher stock is up about 8% so far this year and that means it is badly lagging both the market and the tech sector on worries about slowing growth specifically in its bread-and-butter search business, lack of disclosure, and regulatory risk. wilf >> josh, thank you very much let's get to deirdre bosa for what to watch out for in amazon's numbers d. >> wilf, what we do know is that
expenses went up this quarter as amazon rolled out that one-day shipping the question is, how much does they go off and will it accelerate revenue growth which has been slowing in recent quarters now, the street is also going to want to know whether that faster delivery initiative has been effective in getting consumers into the prime ecosystem and getting them to buy more also looking as usual at the higher-margin services businesses, amazon web services and advertising. are they still growing at a healthy click? and can they continue to power profits? lastly, of course, guys, we are interested in any talk on increased regulatory scrutiny. >> thank you very much for that. we have got just 6 1/2 minutes left of today's session. and coming up next, we'll be covering all of the angles in the "csilong countdown." we'll be back. the dow's down 115 points.
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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. four minutes left of trading. time now for "the closing countdown. stocks lower across the board. dow down 152 let's trade the close. kevin hanks from td ameritrade, is this an earnings story? and if so, what are you looking for, for some of the biggest movers after the bell? >> hi, saraa thanks for having me on. no, i think it's actually both the microeconomic effect is the earnings, but the macroeconomic effect will be tomorrow's gdp number remember, it's the last look,
the last data point that the fed's going to have before they go into a fed meeting, which should give us a fed rate cut on the 31st but between that, between the close of business today and the opening bell tomorrow, you've got all the earnings you can possibly handle, for sure. >> kevin, if we're talking about the big names after the bell, which of them, from what you're looking at, has the biggest implied move based on good or bad results? >> right i mean, we have a lot of big names, and the options implied volatility give us an expected move right now, the biggest is actually twitter, which is tomorrow morning tonight after the bell, we've got amazon at 3.6%, $71. we've got google, $45. that's 4%. the biggest is intel it's only 2.60, but that's a 5% expected move. the lowest, mcdonald's at $2.60 -- or i'm sorry, $5.70, a
2.6% expected move >> kevin hincks, thanks for joining us let's go to mike santelli for the dashboard. mike >> if you can applaud, it's broad. that would be the market, the rally, that is, not today, but recently take a look at today's advancing and declining volume even at the lows of the day for the indexes, advancing and declining stocks, that is, even at the lows of the day was not terrible just about a 1-3, a little bit better than that looking on a longer-term basis, s&p 500 cumulative breadth when you really focus on is this is a new high yesterday as the stock market hit a new high. that's supportive. go back to last year you actually had the breath figures kind of rolling over before the market did, so that's one thing to watch right now breadth it supportive even if the small caps are not always cooperating. let's go to the nasdaq and bertha. >> thanks. we have a broad pullback today across all sectors, but big disappointing earnings were really part of the catalyst here on the down side
align technology with its worst numbers in terms of one-day decline in 12 years. slow sales in china, big problem there. and then the other tech disappointments as well dragging things lower when you take a look at the other f.a.n.g.s, beyond facebook, you have alphabet and amazon on track today. a little bit of sderges there. alphabet almost positive just a few minutes ago, and netflix for the first time is bucking the trend to the positive. and we also had on a day when you had a down tape, really good response to two ipos, la vongo and health catalyst, health tech ipos doing very well bob, over to you. >> and durable goods better than expected drug may have disappointed the markets by not announcing an immediate rate cut, earnings disappointments, whatever the reason, we opened down and we have stayed down look at the board here key takeaway, trade, geopolitical tensions. we heard that from dow we heard it from rockwell automation they lowered guidance on trade uncertainties impacting customers' investment decisions.
the slowdown in global auto cycle, that's an issue for ford and borgwarner look at the sectors, cyclicals, semis and metals and industrials, all weaker on the day. defensive names, proctor and gamble, johnson & johnson stronger it looks like the cyclical rally is running out of steam. there's the dow jones industrial average closing the day down 132 points, s&p down 16. good afternoon welcome to "the closing bell." i'm wilfred frost. >> i'm sara eisen here with mike santoli, cnbc's senior markets commentate wror. the dow, s&p, nasdaq and russell 2000 all declining today keep in mind, the s&p and the nasdaq closing at record highs just yesterday 1% pullback, though, for the nasdaq s&p's down 0.5%. it was broad every sector, all 11 of them, closed lower -- energy and information technology were the worst hit. had some weaker earnings stories, at least facebook
ending lower, ford, that type of thing. also not so much enthusiasm for ecb mario draghi, though he seemed to promise more stimulus is in the offing. >> promised more stimulus, but i think people are focusing on the fact that later he admitted it wouldn't have that much effect this time around and of course, he's on his way out, so we've got to wait and hear from your good friend, ms. madam lagarde to see what she's thinking. >> this is her last meeting. >> in terms of u.s. markets today, broadly off by the close but all lower. the nasdaq the worst of the indices and tech wasn't a great performer, but it was energy and materials that led things lower as opposed to some of the cyclicals that we've been looking to lead the rally of late. >> appendis held up relatively well like staples. >> today is the busiest day of the earnings season. lots more still to come. our team is standing by to break it down. >> the octobox. >> wonderful we will bring you all of those results as soon as we get them let's keep that up for a little bit longer look at those smiles. >> brady bunch there
all right, joining us talk that about the market, paul hickey, co-founder of bespoke investment group, kevin o'leary with o'shares etfs and you're still with us. as we await the biggies, mike. >> yes. >> amazon and alphabet what stood out amid the selling today? >> honestly, it was a bit of a spillback of yesterday afternoon's rally, and actually, yesterday's afternoon rally was a little bit odd it was kind of a little bit of a levitation, people getting perhaps a little bit overexcited as we got through the mueller hearing, we got the decent earnings i would say it doesn't really change much. we're still toying around with the 3,000 level of the s&p 500 the rally is more or less intact you have a couple percent on the down side if you got a pullback before you would have to say, okay, now we're in a new phase. >> mike is the market now saying earnings season has been bad >> no, i think it's saying earnings season is what it always is. some days it looks like everybody's got it right and some days you're getting a sell on the news response but i do think that the earnings
season has not really changed the broader picture for global growth it's just that companies are perhaps a bit too conservative three months ago with guidance coming into the season. >> so paul, you've been looking at the sort of pros and cons of whether to buy stocks. i think you've reached the conclusion that there are more pros. >> yes so, you're never 100% bullish or 100% bearish, kbrout add up the different ingredients and there are moe pros than couldn't. >> what's at the top of your list >> breadth has been so strong. we had record breadth in q-1, very strong in q-2, and yesterday, breadth, the accumulative line hit a new hig for the market so investors are buying stocks, broad-based across sectors, so we're seeing strength there. and earnings season hasn't been bad and we haven't seen a lot of bonds of companies reporting so far. hopefully that's still the case this afternoon. >> don't speak so soon. >> let's see how have earnings been for amazon, deirdre? >> just getting them now and it looks like a miss on the bottom line but a small beat on the top line earnings per share coming in at
$5.22 versus $5.57, which was expected revenue coming in at $63.4 billion, representing growth of just under 20%, and that is higher than the $62.48 billion expected now, this shouldn't come as a huge surprise in the after hours you see amazon down about 1% the street was expecting profits to come down a little bit here as they go into spending mode. we'll continue to dig through these numbers and bring you more on amazon web services, advertising, online sales, all of that. dig through them and get back to you guys. >> all right deirdre, thank you very much mike, 20% revenue growth, a miss, though, on the bottom line, has shares down a little bit after hours. >> pretty modest move at this point i think you'd have to say, up like 4% this month, the stock is so doesn't change the overall picture without looking too far below the surface. 20% is better top line growth and i think that's going to be the anchor number here the earnings, we always talk about, it's almost a residual for amazon it's not like they target, you
know, making the number, but here we are a little short. >> yeah, i mean, amazon results always vary from estimates they've missed revenues three of the last four quarters this is their first earnings miss in seven quarters, but they're not playing, as mike said, to the quarterly analyst consensus. >> all about margins, right? margins are a really big part of this story how much are they investing? how much are they spending on one-day delivery kinds of things and all of the other initiatives that they have so, i think that's probably the big question mark. i haven't seen the margin number, but i would expect that's what came in below plan. >> all right, we'll hit it in just a minute, but alphabet earnings are also out. josh lipton with those results josh >> sara, alphabet is reporting eps of $14.21. the street was looking for $11.30 also a beat on revenue, up 19% to $38.94 billion. analysts had it closer to $32.8 billion. looking quickly, google properties revenue $27.3 billion, google ad revenues
$32.6 billion. google other revenues, ameri$6.2 billion. other bets and revenue at $65 million. looking at total tack in the quarter at $7.24 billion tack is a percentage of google ad revenue, 22%. and paid clicks up 28% in the quarter year over year cost per click down 11%. guys, back to you. >> josh, thanks very much for that big jump, 6% due to that eps line beat. steph, to your point, it's all about margin it's more important for google, the bottom line, compared to amazon. >> absolutely. the name has been awful. it's lagged substantially pretty much to any other company and at a reasonable valuation relative to its growth. i didn't hear the number for the websi website's growth, but i think we'reall looking for that number did you see that >> google properties is slightly better than expected, $27.3
billion. >> so that's a little better than expected and it's not a continued deceleration from last quarter, which is very important. >> kevin, talk us through your take now that we've got a couple more of the f.a.n.g. names in and weigh it out with facebook, of course, that came in yesterday. >> well, certainly, the nay sayers on alphabet are going to be quieted this is a pretty good print. i'm just reading it. there's been a lot of concern about growth issues and margin issues this is a really good beat here. and i think it's interesting on amazon, i only worry about the top line amazon spends so much money, and i will say this, i have a lot of positions in private companies that sell consumer goods and services in america, almost in every state now, and about 30% to 40% of our sales are now on amazon, and there's good pros and cons to that, but we really want that same-day delivery. so, if there's more capex going into that, i'm very happy with my position in amazon. that's going to be a game-changer for a lot of providers. same-day is a big deal, because
it lets you get an advertising spend and get a direct measure to how impactful it is in regional markets, when you can deliver the same day >> we have got another earnings report out, and it's starbucks kate rogers has the numbers. >> very strong q-3 for starbucks here, beat on every metric we'll take you through eps 78 cents adjusted compared to 72 cents the street was expecting. revenues $6.82 billion versus estimates of $6.6 billion. that's up 8% year on year. the company also says that's an all-time high for revenues global comps up 6% kpaferd to 4% estimates. u.s. delivering a 7% comp. that's driven by 3% traffic growth and that's across all day parts, including the afternoon china comp up 6% they also say they grew store count by 16% in china. starbucks rewards numbers, 17.2 million, up 14% year on year they've been streamlining barista tasks, working a lot of beverage innovation, those things do seem to be working
the stock up 40% year to date. it's up over 6% right now. that conference call is at 5:00. we'll take you through anything we hear after that back to you. >> kate, thank you don't miss a first on cnbc interview with starbucks ceo kevin johnson tomorrow, "squawk on the street. maybe we'll start with starbucks, mike, because those comps are pretty impressive, especially in china where there are worries about economic slowdown, competition with luckin i mean, for a company that's run up so far in the last 12 year-to-date, this is a big move. >> yes well, it's like the market was telling you that things had reaccelerated. and 7% for domestic comps is very, very impressive. so, obviously, it wasn't just that the market was saying, oh, this is a quality global brand, i'm just going to buy it for safety it was, it seems like they have a little bit of a revival of 2k3wr0e9d. so i guess it's going to support it right here. seems like 7% comp, most of it probably i.c.e >> kevin, i know you make your coffee at home in the morning because it's cheaper, but a lot
of americans ignoring your advice >> i own this name i just tell all my interns, if i catch them buying a starbucks, i'll whack them. it costs 18 cents to make this that's why i own the stock i said, when you can afford to buy the stock, then you can buy the coffee. >> well, maybe they did do that without you knowing, up a5.9% for that stock due to good comps in china and the u.s another alert, intel jon fortt's got it. >> i'm going to give you the earnings number, also going to tell you about this transaction where intel is selling the smartphone modem business to apple for $1 billion first, earnings numbers. intel beats on revenue, turning in $16.5 billion versus $15.67 billion expected also, earnings per share comes in at $1.06 versus 89 cents expected outperformance really in client computing, $8.8 billion versus a flat 8% expected data center group outperformed,
$5 billion internet of things also stronger now, this was an anticipated deal, apple buying intel's modem business we have some details in the release. it says they have signed an agreement for apple to acquire the majority of intel's smartphone modem business. we'll find out exactly what that means. that includes approximately 2,200 intel employees that are going to join apple as well as intellectual property equipment and leases this has the transaction valued at $1 billion, expected to close in the fourth quarter of 2019, subject to regulatory approval of course, this is important, because for a long time, more than a year, we saw apple and qualcomm really at lagerheads over patent issues and licensing issues when it comes to smartphone modems. they did resolve that, signed a six-year agreement but now apple with this business from intel has potential to grow its own smartphone modem business internally. this would follow a legacy of
apple incorporating technology, not just hardware and software as its legacy has been, but way back in 2008 it bought pa semi, which was a dhip design outfit, allowed it to design low-power chips for the ipod and eventually the iphone as well. they've integrated more with the a-series chips for the iphone, w-series for headphones. you can imagine they want to do something similar for smartphone modems in general as those are going not just into the iphone but also into ipad across all sorts of different mobile devices. that should help them on margins long term as well as intellectual property, guys. >> a really good context jon, thank you intel shares up almost 5%. the deal was rumored stephanie, you're an apple shareholder. do you like it is this a strategic move >> yeah, i'm not surprised they're not hostage to qualcomm, as we just heard but i think it's really -- this is a really good report from intel, too i mean, it truly is. and it's contrast so much from last quarter when they lowered guidance we knew pcs were going to be very strong for intel.
data center actually also was better than expected and the guidance is actually better than expected stock, i mean, this trades at 12 times earnings, only up a percentage year to date so we can see why. it's in line and it a modest positive. >> you've been looking at intel as well. >> analyst sentiment i think is the weakest in five years on buy ratings. but alphabet and intel, these are two important reports. they're both doing well, whereas in april, both stocks bombed in the end of april, and that sort of helped set the stage for overall weakness in the market in may so, the fact that they're reacting positively and that they're, you know, intel as stephanie said, beating data center sales, which was a big area of potential weakness are they losing a step, losing to competition this sets a really impressive -- >> in other words, these two had something to prove. >> and they came through on it. >> another earnings alert. t-smoebl out julia boorstin with the results for t-mobile. >> t-mobile missing on revenues, coming in just a hair light of
$11 billion versus estimates of $11.13 billion but earnings per share beating estimates. the company reporting earnings per share of $1.09 versus estimates of 97 cents. and the company also adding more subscribers than expected with 1.8 million total net additions in the quarter that's up 11% year over year, and that's also about 500,000 more than wall street was projecting looking at t-mobile's guidance, the company upping its guidance for its customer additions to between 3.5 and 4 million, up from the prior guidance, also raising the guidance for adjusted earnings for the 2019, increasing that guidance as well t-mobile shares down just about 0.2% back over to you. >> julia, thanks very much down 0.2%. bringing the conversation board back to some of the other bigger names. you said earlier you never want to see something that's 100% positive, 100% negative. amazon, 100% buy calls is that a warning sign to you?
>> what's interesting about the stock price reaction for amazon, their numbers are off the charts every quarter. we're just in awe of what they do but the thing is, in the last six quarters, the stock has been selling five of the last six years, it has sold off in the following day once it's opened so the stock's done pretty much nothing over the past 18 months. i mean, it's up from where it is in january, but a big sideways range. and so, i mean, i think there's a little bit of, you know, are there many more converts left to amazon at this point so, it's sort of got to grow into sentiment here -- >> people looking at this ceiling issue with big tech. >> obviously the stock had a great run but stopped right below last year's high, around $2,050, something like that a share. so i mean, this decline after the report is no big deal, but if it accelerated, i think you're going to start to look at that chart as being this kind of big, wide range with a ceiling on it, but we can't say that yet. >> as for the earnings report, deird deirdre's got more details on amazon's numbers. >> that's right. i've been digging through the
report and the big question was could they accelerate revenue growth with that higher spending i don't think we really got that answer, but everything does look pretty steady, which is why i think you'reonly see the stock down about 2%. aws, this is always a business unit that we're interested in because it powers amazon's profit, coming in slightly below expectations, revenue there, $8.38 billion versus $8.48 billion expected that represents growth of 37%, which is actually lower than the growth, year over year growth of 40% or above that we have seen for at least the last five quarters of course, this is a unit that is seeing more competition from microsoft and google's own cloud offerings. that jedi government contract still needs to be decided. that will be important here. looking at other product lines, online stores representing 16% growth that did come in a little bit higher than expected at $31.1 billion. physical stores, really no growth here, just 1% still a tiny part of the business third-party seller services and subscription services, this is
important, especially third-party seller services, because this is what amazon always talks about in response to antitrust questions that came in, in line with expectations, nearly $12 billion, up 25%. and the ad business, i'll just mention that as well, coming in within expectations, $3 billion, up 39% back to you. >> deirdre, thanks very much steph, is this a sign that microsoft is starting to take some of the share or some of the very positive growth, at least, that all of the companies are experiencing, but they're doing a little better in the short term and on cloud? >> well, microsoft also saw a deceleration from 75% growth to 68% growth in azure. so, they also -- i moon, they're growing faster, but they also saw a slight deceleration. i don't read anything negative at all in this amazon report, and this is one name that i would look to add to if it does fall, even though it's up quite a bit year to date, where are you getting 20% growth on top line where they have the ability to flex the margins in terms of whatever they want to do, right they have the capability to pull back on spending and they'll see
the operating leverage, and they do it from time to time. >> they also have the regulatory overhang, though. >> i think less so than the other f.a.n.g.s. >> you do? why? >> they're their market share is far less than walmart's when they were at the peak, and i think they're under the radar. i think maybe -- >> i don't know, the infrastructury secretary's saying that they're destroying retail. >> well, they are, certainly -- >> you have to come up with a novel theory of why they are a monopoly, but -- >> yes, but also, i mean, the retail companies underspent for years and years and years and didn't embrace technology and they didn't embrace change and they got caught. and amazon forced them so, yeah, there is a debate about regulation i just think that they are under the radar for the time being versus the other f.a.n.g. names. >> also not against the law to put other companies out of business. >> right. >> kevin, before we let you go, i want to go back to one of yesterday's earnings reports you bought tesla today i thought -- >> i did >> very un-kevin o'leary. >> talk us through. >> but let me be clear, i did not buy it on any of my mandates or etfs -- i bought it
personally for one specific reason i didn't know this, and a lot of people probably don't, but every single college university in the world in the technical engineering group puts together an electric car and the graduate students race these cars all over the world i've been hanging out in the pits with these engineers and i've learned something extraordinary. when you go to one of these races, like in lincoln, nebraska, six weeks ago. i was watching this. when the race is over, the winning team can come from anywhere on earth. who do they want to talk to? they want to talk to the tesla hiring team there, the hr people that are hanging around in the pits every one of these engineers, the smokin' hot kids that sit with their cars, the men and women that sleep with them for 24 hours a day -- it's an unusual culture i've never seen before -- they all want to work at tesla why? because the teams are six to eight people in size if they go to a legacy car
company, they get drowned out in the back somewhere these smart men and women make a big difference as interns. i can't believe the access to talent they have that's why i bought the stock. >> that is a random reason forget the profitability. >> yeah, right. >> and the p multiple difference to traditional autos, which we've heard your argument on >> i love that. >> kevin, thank you. >> we're out of time we'll have to leave it there kevin, paul, stephanie, great to have you with us, as always. we're just getting started don't go anywhere. up northwest next, an amazon shareholder reacts on the earnings miss, plus, reaction from alphabet, starbucks and other after-hours movers starbucks up 7%, starbucks up 5% and amazon trading lower by and amazon trading lower by 2.5% the united states postal service makes more e-commerce deliveries to homes than anyone else in the country.
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more earnings coming your way. we've got an alert now on expedia. seema mody tracking that name. seema? >> hi, sara. amid heightened competition, expedia reported a strong earnings report, earnings much higher than expected the estimate was $1.67 revenue topped expectations, $3.15 billion. and expedia's gross bookings climbing higher by 9% year over year, $28.3 billion. that was really driven by demand
here in the u.s. and overseas. and on that note, it did see room nights up 12% that was better than anticipated. the big story for expedia and these online travel operators, sara, has really been the growth in its home-sharing platforms. vrbo, formerly homeaway, saw home bookings grow at a slower pace to the first quarter when bookings grew by 5% year over year, although i would point out that revenue is stronger than last quarter shares overall are up 2% in extended trade and the conference call begins at 4:30 p.m. eastern >> seema, thank you. also, don't miss cnbc's exclusive interview with the expedia ceo. that's also tomorrow on "squawk on the street," 10:00 a.m. eastern. amazon shares lower an reporting disappointing earnings here to joining us is tripp, mark lehman, and cynthia littleton, business editor at "variety" magazine good afternoon to you all. tripper, i'll start with you
coming into this, you are very focused on aws, slight miss, out but only slight. is that why the stock's down >> i think so. i think it's one of the key points everyone was looking at coming into the earnings today and you know, for us, 37% growth roughly is not a huge disappointment obviously, the comparisons to microsoft are something that everyone's talking about they were a little bit down as well so, you know, for us going forward, we really pay attention to those higher margin businesses like aws and some of the other things that they continue to invest in, like their advertising business so, for us going forward, you know, top-line growth of 20%, certainly we think drives the stock higher over the long term, but as value investors, we'd welcome a dip tomorrow to get to buy more. >> mark, what do you think this gut-reaction selling is all about? >> i think we've talked about the fact that the top line wasn't that much of a blowout and we saw the aws slowdown. you do have the specter of legislation or oversight i think that people are worried about. but it was very much in line, and i think a continuation of
trend. and i think, like you said before, the stock hasn't broken out of the highs and i think the quarter was just fine and you'll see that continued growth through the rest of the year and amazon is still a stock that's going to go higher over time, and i just think this is a pause that refreshes >> cynthia, do you think the doj's a threat >> i think it is i think amazon is so big, it's such a big target for all kinds of political agendas and ideological agendas. you know, we saw that with the online effort to devise a strike around amazon's prime day. the company really does become such a punching bag for so many different constituencies it's really got to be something that they're weighing now. >> i mean, it's one thing to be a political punching bag, but the question is whether for investors there's any risk of an outright case that would cause them to change their behavior or spin off a business or do something more drastic than say paying a fine. >> well, i think we all know that something like that would take years and it would wind through the process quite a bit.
and certainly, amazon has been less under the hot lights than, say, facebook or the big social communications platform. but amazon's bigness, as we just saw in new york when they tried to establish new headquarters here, something that they thought would be welcomed with open arms, raised all kinds of issues from, again, a bunch of different political and civic constituencies, and i think that they are in their bigness, they are very vulnerable. >> did you see that report that they're looking at the lord & taylor building? >> yes, so they're coming anyway, right? >> they're coming anyway, but also like a business that they helped start in a big way. >> right that's a good point. i know that some of the digital media companies moved into the old "the new york times" building, too, so, that's what happens. but you know when it comes to amazon, what's interesting is a lot of antitrust-type efforts in the past have involved bundling. so, putting some products within, giving it to customers at an uneconomic price it's really hard to disaggregate prime, right a lot of stuff is thrown into
prime. a lot of profits are harvested from aws and are also used to subsidize other areas. it's great for customers, but somebody could try to make a case that it disadvantages other competitors. >> tripp, are you pleased to see them investing so much money in one-day delivery, or does that concern you in terms of the bottom line and when we're likely to see significant actual margin improvement in earnings growth >> we think it's a smart investment in the short run for them then over the long run, the payoff we think will be seen in the margins as we believe their prime business will grow it will attract more customers everybody's really focused on speed, quality and i think about you see them being cut by fedex as one of their delivery outlets, it puts more pressure on them in the short run to spend more capex to build out that delivery network for themselves and you know, with 20% top line growth, they need a pretty big delivery footprint, both for themselves and from third parties to keep the prime customer happy so, we think it's a smart investment, both short and long
term, and we think it will drive higher margins in the years to come. >> trip miller, mark lehman, cynthia littleton, thank you all for joining us want to hit shares of google parent alphabet, higher, sharply higher after reporting earnings just moments ago for more on the numbers, there's the stock up 7.75%, tom forte, john freeman and kevin landis from firsthand capital management gentlemen, good afternoon to all of you tom, your first take on what appeared to be better numbers, really psych lodge clael important for google, which has underperformed the rest of f.a.n.g. and the market. >> yep so, on first blush, i think the headline's better than the numbers themselves, to the extent that revenue is better than expected, earnings per share was better than expected, but i think if you dig a little deeper and you look at paid click growth, you saw a 6% sequential improvement from last quarter but still have pretty significant deceleration on a year-over-year basis so i think the headline's pretty good, but when you dig into the
numbers on the advertising front, maybe not so good. >> john, in terms of what you were looking out for, part of it was youtube. did you get what you were looking for there? >> yeah. you know, i think we did i think that, obviously, what i would like to see is more breakout and more detail about, you know, youtube, more stats, but they keep that bundled and another thing i'll be looking for in the details will be the cloud business that is just sort of emerged that, as know from amazon, that's a fantastic business that has tremendous operating leverage and everybody's going to be looking for an alternative to amazon, and there are not very many microsoft, azure, sales force to some degree, and then google is really what you've got, right? >> yeah, kevin, you were also looking for how they're changing y youtube and the ad growth. bhadz y what'd you see >> it's still an ad monster. and yes, you can find some metrics that don't look as good
as maybe you were hoping but the bottom line is, this is up and to the right. it's a really powerful engine. google is still really dominated by ad revenue, and it just sort of goes to show this greater debate about personal privacy. it's just impossible for them not to change this business model. i mean, it's impossible for them to change the business model and get away from ad revenue. >> stay with us, if you will we want to get back to our reporter josh lipton for some fresh comments from alphabet's cfo. josh. >>er i did have the chance to catch up with cfo ruth porat we talked about the quarter and other issues, about the bottom line beat, $14.21 versus the expectation of $11.30. talked about the operating performance, called out the strength in sites, that would include search and youtube, talked about the strong growth in the other segment, so that's cloud and play obviously we'll see on the call with more metrics on how the
cloud business is performing we did talk as well about, listen, google like many other tech giants is clearly under this increasing regulatory scrutiny and i asked ruth porat how she feels about that scrutiny some analysts believe her company is a primary fartarget, just given their market share in search on that topic, ruth porat telling us they are already subject to oversight in a number of areas she semi-sized this is not new for the company, shoe taeld me, and that they have been engaged with regulators around the globe for quite some time. switching gears, we did also talk about huawei. that's interesting because its phones use that android operating system, but apparently, it's now huawei has trademarked its own smartphone os, operating system and i asked ruth porat, how do you think about that if they make that move, how does that impact your company potentially to try to quantify that on that issue, ruth porat saying listen, we are focused right now on protecting the users. those who are using huawei devices right now. it is still, she said, an open
item and finally, we talked about m&a. and listen, i think that's an interesting question if you're under more scrutiny from regulators, does that change how you think about m&a does that mean you're less likely to do big, meaningful m&a in the future just because you're under what appears to be a tighter microscope on that subject, on m&a, ruth porat saying the acquisitions are additive and we are open to them where they make sense, there is a lot we are doing there organizely, though, as well finally, i did talk to her about peter thiel, of course, the billionaire investor and facebook board member. we know he recently ripped into google, reportedly said that google should be federally investigated for allegedly aiding the chinese military. did not get an answer from her on that issue. guys, back to you. >> josh, thanks very much for that some great insight let's get reaction tom forte, what's your take on in particular the comments there that ruth porat's not that threatened by regulatory oversight? do you think that's something that's going to take some value out of the stock
and what's your call overall, bullish or bearish >> yep, so, i'm bearish, and some great stuff there i do think that regulatory risk for amazon, apple, facebook, and google is the most significant risk for those companies if you look at the ten-year period where microsoft was dead money, essentially, the antitrust case and regulatory risk took a big bite out of microsoft. so, i think it's something investors have to pay a lot of attention to, regardless, really, of what the cfo says >> guys, thank you all very much tom, john, and kevin >> thank you we've got an earnings alert on mgm resorts contessa brewer has those numbers. contessa. >> mgm popping on its release right now, sara. mgm is meeting expectations with net revenues of $3.2 billion the street was expecting earnings of 25 cents a share and mgm came in with 8 cents a share. let me put some perspective on that number. there are some adjustments, some one-time charges
these are costs associated with restructuring, canceling contracts, debt-related expenses if you exclude those, the eps goes up to 23 cents. analysts might consider that a small miss, but as you can see, it's popping in extended trading, up now more than 8.5% las vegas saw a 12% decline in gaming revenue the house had some bad luck with table games and there weren't as many gamblers playing baca area. we've heard that before. the gaming industry really focuses on property ebitda, that is earnings before interest, taxes, depreciation, amortization mgm beat expectations on that front in both lank and in macau, where its new mgm is ramping up and they are on track for an ebitda lift of $100 million by the end of the year because of the restructuring. we'll jump on the call now and see what the ceo has to say about the numbers. >> contessa, thank you up 7%. >> mike, i was just wondering if amazon and alphabet have to
disclose whether they are officially being investigated by the doj or the ftc because at this time yesterday. >> yes. >> facebook put out that headline and whether that would come in a release or in a conference call or what. >> if there were a formal investigation, presumably they wouldn't disclose it, but most likely in a filing so, the requirement would be that they'd have to include it in the quarterly filing in the 8k as opposed to the public press release. >> which could be coming. >> could be filed, yes. >> all of the f.a.n.g. stocks in the red after hours following a couple earnings reports, google and -- well, google's higher, but whatever other ones we had there were all in the red. still to come, we'll get reaction to intel's earnings and its deal to sell its smartphone modem business to apple. we're back in a couple minutes prevagen. healthier brain. better life.
welcome back it's been a wild after hours earnings session alphabet, apple, intel, starbucks all posting better-than-expected revenue but amazon in the red. the other three nicely higher in after hours. we've got another one for you, mattel. courtney reagan with the results. courtney >> hi there, sara. for the second quarter, mattel did post a loss, but it was a smaller than expected loss, coming in at 25 cents. the street had been looking for a loss of 40 cents revenue also stronger than expected at $860 million the street had expected $813 million. gross margin also very strong, 39.7%. last year for the same quarter,
gross margin was 30.1% so, a really big jump there. they're not quite yet profitable, but the company talks about moving closer to profitability in its turnaround. and then if you look at the segments, barbie again strong. worldwide growth sales up 9% hot wheels up 5% fisher-price, though, continuing to be sluggish those worldwide growth sales down 6%. and american girl down 23% for worldwide gross sales, so that's still a struggle point the company is not giving updated guidance through its turnaround, so nothing there, but shares are higher after hours by almost 6% they had been higher by more than 7% at one point in reaction wilf, over to you. >> cool, thanks very much. time for a cnbc news update. sue herera's got it for us >> i do, indeed, wilf. thank you. here's what's happening this hour military officials have arrested 16 marines following an investigation into human smuggling. the arrests at camp pendleton, california, were carried out during a battalion formation
meeting this morning. bill cosby's insurance company settling another defamation suit, this time filed by model janice dickinson. it is a big win for dickinson, who says cosby drugged and raped her in 1982. >> he's where he belongs we need to work on the justice system about statutes of limitation against traffickers, against rapists, and against this five, tevseven-year, ten-yr statute. and dramatic video shows a toddler who escaped his mom's grasp, climbed on a conveyor belt and took a wild ride on a luggage conveyor at the las vegas airport. 2-year-old lorenzo vega disappeared feet first through a rubber curtain, then crawled over bags trying to avoid being pulled through a large screening machine, but it did pull him in, and then he popped out on the other side only to tumble down into another room where security
workers finally managed to pull him to safety. he's a little guy, so you can only barely see him right there. there they got him. >> i can't watch >> i know. >> i hate that turn it off. >> i know. but you know what, he did break his hand -- >> he was fine. >> but luckily, it could have been much, much worse. >> he broke his hand, though. >> he did break his hand, yeah. >> poor baby. >> i know. >> poor little guy. >> very accident-prone at this age. all right, sue, thanks >> you got it. >> sue herera. coming up, analyst reaction to intel's earnings, whether you should be buying or selling the stock right now. it's trading sharply higher here it's trading sharply higher here tehos.afr ur what do advisors look for in an etf? it's trading sharply higher here tehos.afr ur don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed
dow component intel just out with strong earnings, also announcing apple will acquire the majority of its smartphone modem business ed snider from charter equity research joins us now with some reaction, ed, with a pretty nice pop for intel up 6%. i guess it had been an underperformer what drove the better results? >> well, primarily, the declines in some of the core business weren't as bad as expected, but most importantly, their pc
business continues to do fairly well rereleased a bunch of new products on their 10-nanometer process and they're starting to show up and it's showing up in better revenue and margins, so that helped out quite a bit, too. >> what's your take on the apple/intel sale is it a good price for intel >> well, yeah, it's smart. yeah, it's a very good price, given they weren't going to be able to make much with that division if they weren't in smartphones. so, they had this huge group of engineers that was constituentsing them quite a bit and dragging margins and if you're not in smartphones, you don't have the volume to pay for that getting apple to buy into this and letting apple use it for smartphones while intel uses that modem product for stuff that's core to them like laptops and routers is a smart move because it takes a lot of cost off their books but still gives them access to a 5g modem. >> jon fortt also joins us, our recover who covers the stock, is going to talk to ceo bob swann tomorrow, jon, on "squawk alley. what's the key question around
the earnings and this deal >> i think the question around earnings is the lowered expectations and then the raise, in the text around this earnings announcement, bob swann saying it was the strength in the data economy, both on the side for pcs and on the data center side that drove this outperform they raised their full-year guide by $1 billion. they've been telling this data story for a long time, so what exactly did they see that caused the quarter to outperform that much and as far as the apple transaction goes, i think we're maybe prone to underplay this a bit because there are rumblings this was happening, we've been talking about it for a couple days, but this is the most important investment, the most important m&a deal of the tim cook era at apple. this is 2,200 employees along with intellectual property it is one of the most key components in apple's most key product, and there are all kinds of possibilities on the integrations that apple can do on this going forward now that
they've got this in house. apple's always been this grand experiment in technology, particularly consumer technology when it comes to vertical integration, and this raises the stakes on that to a level we haven't seen before with apple, guys >> yeah, so, i guess the question off intel, i mean, it's up 11% this year it is one of the worst performing chip stocks does it get rerated on this news how do you value >> yeah, i think people are going to look at that. it depends on the conference call comments and the color we get out from the cfo and ceo on more details of the trends but you're in a down cycle starting the beginning of last year you saw this with ti a couple days ago where things were coming off the bottom of the cycle and they were protecting -- not predicting, but suggesting that they're probably going to see a rebound. so a lot of folks trying to anticipate the bottom of the cycle, but it looks from these results and others we've seen, we're reaching that. and so, i think you will get some reratings >> ed snider, jon fortt, thank you both. >> you bet.
>> looking forward to your interview tomorrow, jon. let's get back to deirdre bosa for more headlines from amazon decrceo's media call. >> the ceo says the cost to implement that one-day shipping initiative are slightly above the $800 million that he estimated last quarter he says that it has to do with adding and moving inventory. he says that productivity was a bit off in warehouses and transportation networks. he added that amazon has been down this road before, has dealt with numerous shocks to the system in the fulfillment world, and he says that amazon knows how to tune for those costs. he thinks haw happen over time, but for now, amazon will see increasing and ramping up cost pattern. he also adds, though, that amazon has seen very good pickup from customers they're responding to this one-day shipping they're liking it and they're moving more volume back to you. >> deirdre, thank you. we'll look forward to any more headlines to come. that stock's down 4.25%.
markets pulled back from record highs today, at least the s&p and nasdaq do you closed lower 128 points back to mike santoli for the final dashboard of the day. >> calling this one steep to cheap. in the last 52 minutes we have heard earnings from about 22% of the nasdaq 100 that's three companies right there, amazon, alphabet and intel. those three stocks alone, more than 20% of the nasdaq 100, the basis for the qqq exchange traded fund. this is the forward price earnings multiple on top of the qqq. you can see it's reached kind of near its decade high, a little
over 22, 22.5 times earnings relative to the s&p 500 which is somewhere around 17 times earnings this is the qqq valuation relative to the broader market you see the steady up trend. what i find interesting is back in 2011,' 12,' 13, you had the huge growth stocks trading at a significant discount to the long-term valuations they were basically at parity with the s&p 500 that was the real buy. obviously you're not stretching to extremes. if i took this back to the year 2000, you would be up here somewhere, so it obviously has been more aggressive but i do think it is worth noting that with yields where they are, these big growth stocks are definitely stretching the upside down valuation limits. >> i guess the absolute pe is not what looks stretched. >> that's right. >> it is the relative to the s&p 500 which does that also talks to some under valued te valued sectors out there. >> that's right. this is the elite within the s&p 500 and that is dragging the
overall s&p 500 valuation to where it is because you are right. i think more than half of all stocks might trade below the average valuation. >> 20% plus growth, then you start 20 p is not too bad. >> never in history i don't think have companies of this scale with market caps of this size grown at 20% top line >> so for how big they are it is high. >> exactly still ahead, year on wall street look ahead. everything investors need to watch tomorrow when "closing watch tomorrow when "closing bell" comes right back 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. ♪ i want it that way... i can't believe it.
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what a wild after hours earning session it has been. just to bring you up to speed, alphabet, intel and starbucks beating estimates. the top line though was good, growing 20%. don't miss a first on cnbc interview with ceo of intel bob swan tomorrow at 11:00 a.m we have expedia ceo also on earnings and a lot more. >> also more fresh earnings coming out tomorrow, twitter and mcdonald's to name a few julia boorstin has twitter for us and kate rogers has mcdonald's julia, start with you. >> well, the question is whether twitter can maintain its momentum after better than
expected results in the first quarter reassured investors the company's tweaks to format can jump start growth with a focus on eliminating fake news and trolls and making it easier to follow conversations analysts projecting 16% revenue growth and 10% earning growth in earnings per share back to you. >> julia, thank you. stockst flat over the last three months mcdonald's reporting tomorrow. kate rogers with the preview kate. >> analysts will be looking for updates on the company's velocity growth plan which includes the experience of the future, the restaurant updates mcdonald's made a few tech updates for drive-through optimization in march, so details on how it is deployed will be key along with traffic and comp updates in u.s. as promotions provided a nice lift for the company in the last quarter. back to you. >> kate, thank you very much back to the earnings movers this evening, we talked about yesterday highs, bad day of trade today. do you think it will be reversed
with some of the positives >> it looks like the indication is it would be i think mostly it is because of alphabet it is up 95 bucks a share or something like that, a tremendous amount of market value, that kind of a move so i do think that it is going to give a little bit of a lift, maybe more than offset amazon if, in fact, amazon stays with the little slight down side. >> everyone we have talked to this hour from analysts to investors have said on amazon they don't see a big problem. >> it will be the line until it stops working. it hasn't stopped working in a long time. >> it is because it is 100% buy. >> it is it is a unanimous consensus thing. at this point it hasn't stopped. i think what is interesting talking about mcdonald's, the same setup starbucks did, clicking to all-time highs almost every day everyone loves the concept and comps are supposed to be good. >> those comps, both china and u.s., extraordinary. >> completely. and people thought they really were at almost the saturation point in terms of the u.s., and clearly not the case, pricing and volume. >> i was going to throw in, we
have sub quarter gdp number out tomorrow >> that's right. >> it is the last big reading before the fed meeting. >> right >> eric rosenberg in boston said he wants to see all of the data before deciding. >> and the data has been generally okay we will see if we get 2%. >> we are out of time. thanks for watching. that does it for "closing bell." >> "fast money" begins right now. "fast money" starts right now. live from the nasdaq market site overlooking new york city's times square live, i'm million your traders the desk are tim seymour, karen finerman, dan nathan, guy adami. a trifecta of tech titans wrapping up the busiest earnings day of the season. alphabet, amazon, intel, all on the move in the after hours session. those conference calls getting under way. josh lipton just got off the phone, deidre bosa standing by gene munster is ready to break down the headlines coming out of the calls. alphabet soaring after the company beat on both the t