tv Squawk on the Street CNBC August 16, 2019 9:00am-11:00am EDT
we'll see you again soon. >> thanks, becky. >> world not ending tomorrow >> no, world is okay a little more risk, a little bit of volatility, good for markets, really good. >> it is that does it for us today. we're going to watch very closely. right now you are looking at gains across the board for the equities markets make sure you watch on "squawk on the street" to see what happens with the opening bell. we'll see you back here on monday bye. ♪ >> good friday morning welcome to "squawk on the street." i'm carl quintanilla with scott wapner at the new york stock exchange jim and david have the morning off. nice bounce in futures, up 200, well on track for the third consecutive weekly loss. nvidia the good earnings news today. deere not so much. europe is green. the ten year bund now yields a record minus 72 basis points back home our 30 year yield hits a record low of 198. road map begins with whiplash, wild week for stocks, we are on
pace for the third straight weekly loss, could a friday rally turn it around >> and great debate, recession or slowdown. two wall street titans weighing in this morning. >> and ge's ceo wants investors to know he believes in his company as the stock suffers its worst day in over a decade so we do not need to tell you we're heading into the final trading day of this volatile market week. the three major indices, each down 2.4% week to date the s&p and the nasdaq still posting double digit gains for the year with the dow not far behind interestingly we're almost exactly at levels we were on this date a year ago >> in both the dow and the s&p today we're left with the conversation of the moment, is this a walmart, an nvidia market or a deere and a cisco market. and that focuses you on the two big arguments. is the consumer strong enough to carry you through, or is business sentiment and business cycle deteriorating to a point where you have a problem
>> all right, and we continue to look at yields around the world. we mentioned the german bund, mexico cutting rates, i think it is the 24th maybe central bank to cut rates this year and talk of global recession continues to be a topic all around the world ray dalio talking to one of our affiliates on cnbc listen to that >> recessions are always inevitable in the next two years, prior to the next election, probably a 40% chance of a recession and i think that you're seeing this around the world. you willsee greater interest rate cuts as you start to see the world economy starting to slow down. and i think you're seeing that being led now by the bonds so we have a situation in which there is a lot of pressure to cut rates. >> the question is, can you cut your way out of it, you know do you have bullard on the tape this morning saying you have to get worried if you have a longer
period of an inversion, tom lee, this morning, arguing for a 75 basis point cut in september that's kind of where we are. and whether it is effective or not is anyone's guess. >> and then the corollary to dalio, of course, david rubenstein, co-founder of carlisle, talking about the fact that negative interest rates do not necessarily preclude a recession in various economies around the world here is what he told joe and becky earlier this morning on "squawk". >> i don't know when the recession is going to occur. we have one on average every seven years. we're ten years without a recession, that's very long. u.s. economies is in pretty good shape. we're not an island, though. no doubt as economies in europe and asia slow down and go into recession, we can't completely avoid that at the moment, i don't see a recession in the imminent future. >> joining us this morning, post nine, jim la camp and managing
director jonathan galup. you had an interesting journey this year. you were constructive in the first half started to adjust your model midyear. where are you right now given what rates have been telling us? >> we put out a 30-25 target for the year, which when we did, everybody thought we were insanely bullish we hit that, i don't know, maybe about eight or ten weeks ago and everyone is waiting for me to raise it and i said, i'm not comfortable with conditions, i think we're looking at flat money. it is really important i'm not saying i think the market is going to fall apart. we're not going into recession do we eventually get a recession? sure it is not in the near term horizon. but the underlying data is really concerning and falling interest rates like this are not a good thing for equities. >> we had the biggest jump in retail sales in four months, right? jobless claims, employment continue to be robust. what is wrong? >> i think scott mentioned this, two markets, you have a consumer
that is in surprisingly healthy shape. unemployment is low. super confident, he's getting a raise. and then the cyclical data is real -- probably whether we're in a global industrial recession or on the cusp of one. in europe, german data contracting, china data contracting, and this is exactly what we had in 2015 where you had an okay economy. and a recessionary industrial economy at the same time. >> the trade war, though, is the biggest risk card. and nobody knows how that's going to play out, jim. >> we don't. we have a lot of negative potential catalysts in front of us not that many potential positive catalysts over the next few months remember where we are season seasonally, august and september, our most volatile months now we have a market that has given everybody what it wanted this year. if you look at where bank of america, the goldman sachs, credit suisse, everybody already hit their targets this year and nobody knew what to do from there because the economy is
starting to slow down and the trade wars were heating up now we have pmis leading economic indicators softening here the consumer is good, but the trade wars will bring uncertainty among small businesses and they have been splitting the difference with their chinese counterparts, but if it gets any worse, they'll quit splitting the difference and inflation will creep in, uncertainty will creep in for businesses. i think we have some violent consolidation in front of us the next couple of months, a lot of volatility, maybe we don't go that many points in a direction standpoint, but violent consolidation, setting the stage for a december rally. >> i want to take the opposite side of this this is not about trump tweeting on trade related issues. we made the point that stocks are flat for a full year and when did they -- what really happens this year, you had interest rates peak around arou5 data in the u.s. started to weaken in august of last year,
why? because that's when the benefits from all of the stimulus and the tax stuff started to go away and you started to see that come in. so if you took away the trump tweets on tariffs, my view would be 100% the same. >> the market has not been the same since the day after the fed rate cut at 3:00 in the afternoon when the tweet hit about the september 1st tariffs. market just purely hasn't been the same since, it left us with all of these new questions it was the fed was cutting rates, the market initially went down, it started to go back up and you got the trade tweet with -- which left the uncertainty we live with now. >> you have the language from china they weren't going to back down one of the things about china is they're perfectly willing to let their people suffer, much more so than the american administration will do so a lot of people see the chinese digging in they don't see any relief on technology transfers or intellectual property theft and they think this is going to drag on for a long time in the meantime, the treasury
yields are coming down what is deceiving about that is we still have higher yields than almost everybody else in the world. it could be part of the reason that bonds are rallying is because they're a bargain on a relative scale to $15 trillion in negative yielding debt around the world. >> so we need to join that party, is that the plan? >> no, it is not a good -- it is not working. >> it is just another number. >> it hasn't worked anywhere none of the economies have taken off, japan hasn't taken off, negative interest rates would be completely deleterious to the banks. no reason at all to do it here. >> listen, i agree, i think this belief that lower and lower rates through zero is a good thing. i think it is crazy. the fed has a reason to cut for very different reason. the long end of the curve is steep lly sloped, which means te market doesn't think we have a long term recessionary problem the short end of the curve is severely inverted between fed funds and out to two or three years. that means the fed is basically miscalculated where the short end of the curve should be
if they go -- maybe tom is not going to get a 75, but if you got 25 or 50, even if you have a statement from the fed, we get it an inverted short end of the curve is not what we wanted it to be and we'll make sure that the conditions are supportive. thatthem needing to take big action. >> when you have an inverted yield curve, the financials will suffer what does the russell 2,000 made up of? mostly financials and energy names. they won't do well with an inverted curve you're not going to get any expansion in this market they're going to stick with large, listed, blue chip names and it is going to be tougher this market to really shoot for another leg higher >> so what is the short-term playbook for you >> short-term playbook is the market is basically three buckets. you have a growth bucket, you know, and it is 35 names on the s&p that are growth names. you have defensive bond-like stuff which as long as -- until -- one of two things
happen, the fed either engages the market or the economic data turns around, that stuff will continue to do well, regardless of whether there is any growth there. and then you have stuff which is cyclical in nature, stuff scott was talking about before and until one of those two things happen, you want to stay clear away from those kind of industrials and materials. >> this is a hershey, procter yield, staples >> the second you get announcement from the fed, you see better data, they get hurt as long as this thing stays sloppy and the fed stays disengaged from this, those names will continue to do really well. >> short-term playbook, be very careful over the next few months, we look back at the presidential election cycles, the market should do better, starting around december don't be surprised if we don't see something very unusual out of the federal reserve board like quantitative easing or something unusual out of the treasury like issuing long bonds. we could see 50 year bonds issued or 100 year bonds, they did in austria, they did it in
argentina, it could happen here with rates at all time lows. >> maybe get something coordinated next week too out of jackson hole that's a wild card as well you don't want to get too negative in advance of what could be a market moving event there. guys, good to see you. have a good weekend. after ge shares get slammed on accusations of accounting fraud, the ceo buys more. we'll fill you in. also continued unrest in hong kong, we'll take you there for a live report. bounceback friday, the dow with an implied open of 185 s&p would open higher by 21. nasdaq looks to be big winner out of gates, up by 72 we're back after this. "squawk on the street" live from post nine at the new york stock exchange see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that.
hong kong protesters out in force right now. brian sullivan is there live on the ground brian, good evening to you >> reporter: good evening. thank you very much. they are out in enforce. i don't know how many there are, probably couple, 10,000 is my estimate the park is behind that. i guess like the bryant park of manhattan, surrounded by banks, sky scrapers here. the park is full this is the overflow crowd you can see there is a lot of people here, a couple of different people talking the main stage is inside that park we were in there earlier there is so many people, you sort of can't move very peaceful so far a lot of speeches given so far nothing yet has happened still early, though. if you're wondering about all
these laser pointers that you see, the police issued a ruling that laser pointers are considered a weapon because they can burn at close range. so people are pointing these pointers to kind of rouse the police, if you will, to say, hey, we have our pointers out, giving it them a little bit. despite the protests here, very peaceful and calm, there has been a lot of unrest so the story that we got on cnbc is how much does this impact the financial markets. if you're a ceo of a company here, if you're thinking about going public here, maybe like alibaba in their secondary offering, does this dissuade you from listing your stock or moving people here we spoke with an investment banker earlier today who said, yeah, there is unrest and there has been in the past but when hong kong has going forward and always has is that it is a relatively stable financial market >> the one thing that hong kong has going for it is that it has very few failures of major listed chinese companies here. which means that the due
diligence in hong kong is done with understanding of how china operates where as uk, the u.s. in particular, singapore, even frankfurt is littered with failed chinese ipos. >> reporter: now, i know the chinese stock bears, they'll tell you maybe because of accounting rules are different for chinese companies in the united states versus here, either way, listen, the hong kong markets are hoping that what jeff hill said is what happens, that this does not stop companies from being here, from coming here, and remaining, arguably, the financial center of asia and the keyhole between the eastern and western financial markets. >> brian, a lot of conjecture about whether or in the the protesters could arrange a so-called run on the banks have we seen any evidence of that today >> reporter: no. that's been going around for a while, carl. i can tell you this much, personally, i took out some coin today, because a lot of people want to be paid in cash for various services around here
so far the banks do have money but what you're referring to is some of the protesters have put out these message boards, hey, go out and take out all the money, let's drain the atms if will so far that has not happened if my atm card doesn't work at maybe a separate issue, but i'll stay on the story. >> the intelligence you're bringing us from the ground matters a lot, especially on a week like this brian sullivan in hong kong. ge shares rebounding after the first one day performance in 11 years larry culp bought nearly $2 million in stock after it made off whistle-blower accused ge of committing a bigger fraud than enron. he joined us yesterday >> the numbers are missing top line revenues, bottom line profits, and nothing in between, like expenses, research and development, selling, general administration costs, research and development. it is all missing. including cash flows they don't provide working capital. it is the only company in that
industry that doesn't provide working capital. in fact, ge's working capital is minus 20.3 billion the current ratio, .67 name a company that does that is accounting 101. >> companies loss accelerated. we spoke to one of the board members and offered a rebuttal yesterday on closing bell. >> this report today set a very dangerous precedent, where somebody can just say things and then potentially benefit monetarily, significantly from the decline in the stock of the company. that is wrong. and i really think that we need to investigate the motives for this and -- because here we have mr. marcopolis and this hedge fund probably benefiting significantly substantially today and the holders of ge stock have suffered a loss >> of course, culp just didn't buy stock. he put out a statement calling
this market manipulation, pure and simple, saying interested solely in generating downward volatility so he can personally profit. >> you had a gentleman go on television, go public, and say that one of the most story businesses in the history of this country is a criminal enterprise, essentially. likening it to enron, three people went to prison, right ken lay, jeff skilling, andy fastow, the cfo, a company that had, you know, phony subsidiaries where they were hiding losses. equating that to general electric and this morning on "squawk box," you had bill cohen, writing a book about ge, saying this doesn't ring true to him. sounds hyperbollic likened it to throwing a molotov cocktail, like yelling fire in a crowded theater, a company already under investigation for accou accounting issues. let's just say that, right there, being investigated for
various accounting issues. their fundamentals are in question, in some corners of the market, right? and you have this happen. >> it does -- the broader stories that in -- this was the largest company in the world market cap of almost $600 billion, down 80 plus percent since then amazing story in terms of capital loss. >> no idea who the firm is that marcopolis is working with who knows if they covered their short. yesterday was down so big, did they cover did he get paid? because he gets a percentage of whatever the trade nets, if anything a lot of questions still remain unanswered. as we count down to the opening bell, let's take another look at the futures on this friday show you how we're going to open dow would open higher by 160 s&p 500 and nasdaq strong as well out of the gates.
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your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity. welcome back a few minutes before the opening bell let's bring in ken yny pulcari he's a principle with butcher joseph asseting management and cnbc contributor you were going to say about the market >> i don't think we're going to hold on to the gains as we move into the end of the day. we're showing up 15 points at the moment, off what it was earlier. i think all those concerns that we have been talking about for the last month and a half, the slowing economy, china, trade, retaliatory threats, back and forth, none of those have gone away >> the economy is good
went down the list yesterday. >> i think the economy is good, but i think the market technically has suffered a bunch of damage over the last week we -- the dow broke its 200 day, didn't hold it, has not rallied back i think for this cycle to be over, those two need to test the long-term support. that's what i think. look, almost looked like it would happen yesterday morning china says i'm hoping we can play nice in the sand box and, boom, right? the minute something goes out with a negative tweet, bang, it is going to go. >> test, 2790. >> yeah, but we didn't -- we got close. we didn't really test it in fact, the dow pierced its 200 day, broke it -- traded lower and rallied. the s&p and nasdaq hasn't done that that has to happen now, i feel good about the market i like the market. the economy is great i think based on the damage that has been done to the market, that the market needs to know that the buyers are really there i think that's the level.
>> how does the fed navigate a boom and bang market. >> i think that jay powell is under tremendous pressure with the president and navarro and everyone else jumping on but i think the fed needs to just stay its course it has to shut the noise out, as difficult as it may be i didn't think we needed the rate cut the market was going to throw a temper tantrum if they didn't get it so i think he's almost forced into having to do it besides the fact that the central banks around the world are doing it, you got to kind of stay in line but i'm not one of these guys that said we need a hundred basis point cut at all >> you think that should be enough. >> i think that should be more than enough. look, the economy is great the consumer is great. the macro data is fine so what are we cutting to are? we're pushing on the string. >> you think he can bring the market around to that point of view >> is it -- who? jay powell
>> yeah. >> is it jay powell's responsibility to do that? since when was the fed responsible for the market action investors and traders and asset managers need to price the market what is the risk they will price -- not the fed's responsibility to price the market nor is it the ecb or the bank of japan or the people's bank of china. >> even though you have this stuff going on, trade, geopolitical stuff what if you make it as simple as mark mobius is saying, you have a race to the bottom, central banks around the world. >> which is -- >> stocks go up in that environment. >> they have to. again, it is the same great financial crisis event when rates went to zero or negative, stocks went from 666 on the s&p to 3,000. >> would you agree that that premise -- >> where else -- when rates are zero, where else do you go there is not anywhere else to go when rates start to rise a little bit, we get to 2.5, 2.75,
they were throwing a hissy fit 3%, in my mind, i think it is completely misaligned. i think the rates need to be more i don't think zero is normal >> there is the opening bell stay with us let's get s&p 500, cnbc real time exchange and big board commercial mortgage lending company ladder capital at the nasdaq, bank holding company cross first bank shares. speaking of banks -- there is a great chart around this week, the spread between 2s and fed funds overlayed with small bank lending. if that spread doesn't close, banks will get tougher on lending to small business. >> i think banks will get tougher on lending in small business and banks will get tougher on lending in the mortgage space as well i just think they'll get tougher on lending no meat in there you had the dynamic where these -- the hunt for yield has been the story, right? rates so low utilities and staples, carl was
saying to our prior guest, what are you going to buy hershey and procter & gamble and things like that are those the things that are the way to go? >> now what you have to look at, you have to look at value, dividend yield what are some of the companies paying 3, 4, 5, 6% yield, that's a great place to put money when rates are zero you look at the names that are strong dividend players, consistent, that have a nice yield, that maybe some of the names have created on top of the yield, they're creating great value. >> yeah. interesting to see deere in the green at the open. they did miss at 271 looking for 285. ag equipment down 6. ev overall equipment down 3 they do cite tariff concerns in the obvious pressure on the farm economy. >> right. >> a little -- definitely holding in here at 144. >> holding in. you have to look -- i would have to see the chart up close a little bit but hasn't gotten so beaten up
over the last week and a half, now it is at a point where buyers are seeing longer term value in it and looking beyond today, tomorrow and next week. right? the big asset managers are finding value. that's what i'm talking about. some of the names that have gotten unnecessarily beaten up because they're easy to sell, because they're so liquid, are now in a position to really benefit. so if you're someone who has the long-term view or an asset manager, even an individual, that has five, 10, 15 years out, days like this you love because it provides an opportunity >> yeah. i wonder somewhat if, you know, we're kind of blowing the opportunity to have a positive market as the summer comes to a close before you get seasonally tough. >> yeah, but august typically tends to be kind of a volatile month in general september, october do too as we move into the fall you're right i actually think as we move into the end of the year, november and december again, i think that's when you see kind of the market -- i think you'll have a rough couple of months, volatile thrashing around in the market for the next couple of months
and then into the end of the year, you'll start to see some light. that's my guess. >> really? >> earnings estimates for the full year have come in, we're now looking minus 1.5, in january we thought it would be 6. so we think 2020 earnings will rebound? >> 2020 earnings i think -- you say rebound, rebound to where? >> i don't know. back to flat >> look, we had a negative forecast for this quarter that we're in i think net net in the end, actually came in positive. weren't they up 1.5% versus down -- down what they thought it was going to be as we move into 2020, you see, if we get a trade deal, i still don't think we'll get a trade deal in the next couple of months, if we get one, any movement at all, more toward the end of the year. look, he needs that narrative. we're going into the election cycle now. already in it. 2020, he needs that narrative. >> no trade deal in the next few months, you're skeptical on earnings, but you think the market will go up.
>> not that i'm skeptical, i think that earnings are going it stabilize. i'm not skeptical on them. i think, look, i think like anything, initial estimates are always worth -- you start to adjust as you get closer i think we'll see that adjustment happen as you start to move into the fourth quarter and the first quarter of next year. >> i actually think the market is okay. >> semis looking good today. they're going to ride nvidia, the number one s&p, western dig, micron, amd behind, nvidia did beat 124, revenue ahead. these high end video game chips, big secular tech story. >> and now pulled back on the tariffs for christmas, because he's worried about the consumer, those tech names which got beaten up are going to benefit, right? as we get close to christmas on the 15th and the threat of reimposing those tariffs will cause turmoil again. i don't think that -- i don't -- i think by then we'll have solved that part of the problem. >> apple back to 20 5, facebook getting a boost you like the big
high growth, faangs, or too dangerous here >> listen, i like some of them i don't use facebook, i never have been a facebook fan so knock that one out. names like apple are names that i think in any portfolio deserve a position in your portfolio if you look -- if you are a long-term investor, you ride it out. but you can't listen to the noise, because on days like we had in the last couple -- those are the first names that get beaten up partly because they're big names, everybody is in it. it is the overweighted trade so when everyone gets nervous, everyone runs for the door as the long-term investor, that's the long thing to do is run out the door on names like that as an individual. >> let's point out that ge is getting about half of its losses back this morning. that stock looks to be 6%. yesterday suffered the biggest losses in 11 years what do you make of that story >> listen -- >> we could talk all day long about what i think about that story. i think the whole thing stinks
it smells. partly because harry writes -- partners up with this undisclosed hedge fund, does this work, gives them the report the day before or two days before they make it public, and then is going to share in any of the profits. doesn't that stink to anybody? doesn't that scream something's wrong with this picture? to anybody at all? >> reputable guy, don't soil him, i mean -- >> he might be a reputable guy but he does his work, he partners up with you, he's going to benefit on a trade you do on information that the public doesn't know yet i'll give it to you first, and then we'll let the public know i don't know to me that screams, like -- >> does it say anything about his analysis >> it doesn't, but it talks to in my mind it talks to character. doesn't say anything about the analysis, you're right there is one thing between fraudulent accounting and aggressive accounting. we could talk about that all day long look, it is ge i have trouble thinking it is fraudulent i just have trouble -- i could
be way wrong. >> that about the industrials in general? more cyclical plays if you think that the u.s. economy is good, but you're worried about globally -- >> but, listen, be specific. you may not buy them in the swath across the board like anything, right do your homework and buy names that benefit, benefit from the u.s. economy or -- you have to look past the -- you have to look past the economic cycle here is the other thing that has been driving crazy the last couple of days, everyone is talking about pending recession. we're going get a recession. the dow will trade at 30,000 one day. it is going to happen. we know that it is part of the economic cycle. the recession is coming. you set yourself up. it is not coming tomorrow. not knocking on the door, not here right now it might be 15 or 16 months up but you set yourself up as you see t veit >> the journal has a piece, the president goes back to work on monday they're going to hold a call on tuesday with state and local officials with kudlow about the economy. and then we got jackson hole
what is the likelihood of cast lift that spur buyers next week? >> you get kudlow. they'll talk about how great the economy is trump did it yesterday, the day before it is all good i think we all agree that the u.s. microdata is not falling off the cliff. we think the u.s. economy is okay i think the trouble is going to be the narrative around the world has been so negative with whether it is the latest chinese numbers, the latest german numbers, the eurozone gdp going negative now it is not the end of the world at the moment. the ecb is set i think he'll throw -- he threw it straight to deal with i think like anything you have to do your homework and pick stocks that you think are going to benefit in our environment. >> can the market get to a point or a place where it can just tell that story to itself? u.s. economy is good the fed has its back or is it still going to be
consumed with every headline or tweet about trade? >> so, i think the human beings in this industry can see the much bigger picture. i think the problem comes with the smart logic algorithms that read headlines and read words and they read positive words and negative words and then create that cascade effect. whether on the downside or the upside i think what ends up happening with that is that the human traders takes it all and looks at the broader picture they have been unable to really interpret the meaning of a conversation and even though the word might be negative, there might be a positive story there it doesn't see. >> you're raising the worry that in the last crisis we didn't have the machines at this level. we don't know what -- how much it will change because of it >> that's correct. what we do have, we have the circuit breakers if the market starts to -- you have the circuit breakers, full stop, everybody take a breath, what's happening right. so that's what we do have. but you're right, we did not
have the advanced technology and algorithms in 2007 that we have today. >> we making too much of the inverted yield curve bullard is out there saying for a prolonged period of time, it is a problem but what we had -- >> for all of three minutes on monday or whatever day it inverted maybe it was five minutes. but, yes, i think you're making -- i think not you, i think we are making -- we the country, or the people that are talking, are making way too much of that very small inversion >> the market did go down 800 points. >> i hear you. but because everyone is going, oh, my god, it inverted, that is almost ridiculous. >> what about negative real rates, the 30 year, it is not just the curve. >> look what is happening. people are searching for yields so they're coming to the united states, they're buying our money, our bonds and our treasuries, so that's forcing the yield to go lower. do i think we're going to zero i don't think the united states is going negative.
will we get close to zero? i imagine probably if this keeps going. i also think that people have to start to recognize and put in place. i think it is happening. notice the day the market was down 800 points, it wasn't a sense of panic at all. people just sit there and go, okay, another one of these computer driven sell-offs. look what happened. >> you did have, you know, the nightly newscast, mainstream television leading their shows or the second story in with explaining a yield curve inversion to the mass -- >> which i think was honestly a waste of time to explain that yield curve inversion to the masses i don't think the masses care. i think the masses care about what is the state of the economy, how do we set ourselves up for whatever is coming? they don't care the yield curve inverted for 30 seconds. makes no difference to the average american does it? >> for the average investor that
is out there, they're doing their work, running their businesses. >> so is the bond market going to come back and say my bad, you got this wrong in. >> i don't think the bond market will say we got it wrong but they're buying all our treasuries forcing the bond market lower in anticipation of what they think will be tougher times ahead. we're going to get a recession when are we going to get it? i have no idea it is coming >> i want to show the dow's wild week we made this wall. as i ask you the next question, is this how it is going to be? volatility, the level of which we experienced this week down 8 38, up 373, down 8, up 1, who knows what today holds >> i think through the end of august just because go back to all the damage that the market had. you had this thrashing around. until the market stabilizes and finds that level, so, yeah, i think the volatility will continue i think you'll see days like that and specifically see days like that as he keeps tweeting and the next time china --
that's why i'm worried about today. you're coming into a weekend, right? a lot can happen on saturday and sunday coming out of china you could get like we did on monday two weeks ago they devalued the yuan, the market got slammed. same thing on sunday night into monday morning, china comes out with this retaliatory effort, they have threatened they're going to do. what is it going to be no one knows that's why i would be more cautious going into the end of the day today. >> watch out for the boom. >> i would tend to -- that's just my personality. >> been great hanging with you. >> the best 13 minutes of the week. >> good seeing you >> so we're up 169, dominic chu working the floor for us >> we have a situation, carl where we're still on pace, even with today's gains, to show you a market that is on track for its third straight week of losses as you look at the dow industrials, the s&p 500 and nasdaq, we are still higher on the day, but, remember, we started off higher, we'll see if that momentum can continue into the later part of this morning
if you take this in context over the course of the s&p 500 in the last year, one thing you'll notice is that we are still trying to get back to some levels that some traders are looking at as significant. if you look at the s&p 500, the dow, the s&p, the nasdaq, one week basis, moving lower to downside on that one week basis, however, with the s&p 500 overall, we're still within about five or so percent away from record highs, so let's look at this, because, remember, just here, just a few weeks back, right here, we'll show you, it was that record high and if you look at where we stand now, that move lower is about 5% from those levels here. we're still going to keep a close eye on what is happening up here, 2944 on the s&p 500 is going to be an area to watch the 50 day moving average. the more medium term trend line for the overall markets. as we talk about some of the sectors involved, places that we're going to watch with regard to what has happened in the market narrative of late, if you go all the way back in august, remember, the fed rate decision at the end of july, since then,
we have seen a decided move to interest rate sensitive sectors, real estate investment trusts up 3%, just so far this month to date you put in consumer staples and utilities in that mix as well. more defensive higher dividend paying type sectors are the ones leading the way higher financials, talk about the yield curve, that's playing out a lot in the bank stocks as the yield curve starts to flatten out and possibly invert, those bank stocks have taken a huge hit and energy stocks as well, global growth concerns, down 11% so far this month those sectors key focus as well. on the stock side of things, megacap, technology, communication services and media stocks have been some of the places investors have been buying on the dips, a little more aggressively so far this week if you look at this week overall, still, though, facebook down 2%. amazon down 1% apple, though, here, a china issue perhaps there, playing out more in the apple shares and netflix down 3%, alphabet down 1% the faang stocks continue to be a focus for traders as they see
whether or not sentiment returns there. then we'll end here on an overall check right now of what is happening in certain other parts of the market. the s&p 500 large caps, on one year basis, still outperforming the russell. what we're going to watch here is this underperformance by small caps will it start to exacerbate. that gap between small and large cap stocks has been getting wider as of late we'll see if that continues today. it may be a risk gauge or risk sentiment or risk barometer for the overall market so those small cap stocks still a huge focus for traders today >> dom, we appreciate it that's dom chu on the floor for us to chicago the bond pits, where rick santelli is at the cme group. >> historic week in treasuries but maybe a more historic week if you look at global rates or the dollar index one week of with year note yields unchanged on the day doesn't sound too scary. down 15 on the week.
one week of ten year, drifting not quite on the lowest yields, but not far. remember, 136 the yield from 2012 and 2016, that represents historic double bottom closes, lowest in history. one week there, down 20 basis points by the way, 30 year bonds they sit at 2%, down 26 basis points on the week. but let's really look at the epicenter. let's look at the shots, with year in europe, there is a 20 year chart hovering around minus 99 a glimpse of a currency whose central bank takes easing to a new dimension. its one week is drifting lower we know the dollar index is hovering just within a quarter cent of fresh highs going back to may of 2017 well, here is the mir ror image. lowest level since may of 2017
scott, back to you >> rick, i appreciate it very much, thank you. for more on today's movers, to bertha coombs at the nasdaq. nvidia day >> it really is. it is setting a positive tone in terms of chips this morning at the open, it looked like chips were going to be positive for the week nvidia with a beat and raise that is moving up. we have a little bit of a drag in that space in the chip equipment sector applied materials, had a more muted tone towards whether we are starting to see a bottom and we'll see a pickup in demand so the chip equipment makers are getting dragged a little bit there by applied materials as far as this week, most of the sectors as along with the nasdaq itself on pace for the third straight weekly loss we're going to watch chips to see whether or not they will end up even on the day software lower, communications, hardware, though, set to snap a three week losing streak part of the reason there is that
apple, among the only faang stocks and the only megacaps that is actually up for the week one thing to note, scott, we did see the russell 2000 this morning veering near the june lows most of the indices have managed to hold last week's lows russell was near the june low, but bounced from there still down for the week. a little bit of a positive silver lining on that. back to you. >> all right, bertha, thank you very much. bertha coombs. we're up 156 on the dow. month to date, dow down about 4.8% 4.5 at the s&p we'll see how this friday goes as we try to unwind some of the cuvees for the third conseti back in a minute with sofi, get your credit cards right- by consolidating your credit card debt into one monthly payment. and get your interest rate right. so you can save big. get a no-fee personal loan up to $100k.
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beyond insane on the way up. i don't know where it's going to settle on the way down i was thinking as you were telling the folks at headquarters you wanted to talk about this, i was thinking about wework this week and to see what this market environment means for them as they try to go public when they gave the s 1, revealed this massive loss you are talking about an uncertain environment. i wonder how that's going to be received it may be far different than beyond meat was initially received. >> we don't know the reviews of the s 1 have been like something we haven't seen in recent history. >> yeah. no doubt. >> mixed at best when we come back pulitzer prize-winning columnist jim stewart, his reaction of ge, being accused of accounting fraud. dow's up 148
bounce here to close out the week we will end the week likely with a weekly laos. we are going to get economic data in a moment we had housing starts earlier today. let's get it rick santelli at the cme in chicago good morning, rick. >> good morning, carl. you know, traders like this number university of michigan this is a preliminary read and it's a disappointment. 92.1 we were expecting 97, maybe a bit higher sequentially, our last final read for july was 98.4 92.1 is the second lightest number of the year the first being january, that was 91.2 so it isn't horrible but if you go back a couple of months, especially towards may, they were with the 100 anything triple digits is quite imf. a bit of a lslip there i like to look at the one year inflation outlook.
2.7. one-tenth hotter that's interesting if you look at the five to ten-year, also one-tenth hotter from 2.5 to 2.6. obviously, the people didn't listen to the last fed meeting back to you. >> but you did, rick santelli. thank you. our roadmap starts with the volatile week coming to an end what a week it's been. today as optimism here to stay or is a recession actually in sight? >> g.e. rebounding a bit we are going to talk about that with "new york times" pulitzer prize-winning jim stewart. later live to hong kong as protests continue to impact the chinese markets and the economy there. u.s. stocks are higher today, rounding out what has been a very volatile trading week the dow dropped by 800 points in a single day that's the biggest point drop of the year the selloff prompted by investor wore eefrs an impending recession. ray dalios spoke about recession
risks in an ex exclusive interview with cnbc. >> the only question is when. >> do you see one coming >> yeah, i think in the next two years, let's say prayior to the next election, there is probably a 40% chance of a recession. and i think that you are seeing this around the world. >> joining us now, stephen whiting, he is citi private chief bank investment strategist, and chief investment strategist stephen, dalios talking about the probability of recession how should we think about where we are right now. >> i think recession probability models are going to look like 40, 50%. they are going to look like a concern. the question is do we do anything about it. and when you have low inflation, good consumer balance sheets, you obviously are facing this risk of production declines, trade declines, investment declines, but if demand can be
cushioned, if it can be protected, i think much like the late 1990s, 1998 example, you can extend a recovery with fed easing right now. >> are we going to be obsessed with this recession fear story for the weeks ahead, or can we get past it by saying that the u.s. data has been good? >> i think the only way we get past the obsession is if the trade war calms down a bit it seems to be the back and forth that drives this recession fear, drives the yield curve, drives the push to assets which people continue to say is a potential of a recession that's the variable. that's the only reason we see it is the trade war intensify so much that it overrides the other good things. easing, things like that that stephen mentioned, are out there. >> i agree completely, by the way. >> to that point, we continue to have a strong consumer in the u.s. we got that sentiment number certainly softer than expected
but i wonder how much weight can we actually put moo tinto the modeling for recession and given the fact of the headlines and reporting about increased rising risks of recession, do we run the risk of putting ourselves into recession because consumers get scared >> the idea that there is a silver bullet, a roadmap that we can follow together to know exactly how to time markets and figure out exactly what to do with portfolios, i think that will be a mistake, that recession timing and dealing with this in financial markets is going to be confounding it won't be as simple as this little trigger if the 1..75 yield is above the ten-year, we react to that those overwrote concerns there when unemployment is at the lowest, that is when you get to the top of the economy, that is when you have recessions i think that the financial impact of the trade war again is marginally driving declines in
profits for important cyclical companies. it's driving monetary policy so at the margin, this uncertainty is the most significant risk. >> brent, the list of things that are down year on year, railcar loads, lumber production, coal production, corrugated paper i mean, does a resolution, does a full trade truce between the u.s. and china get those numbers back in the black? >> yes, because i think it's a bifurcated economy the services side has done well. it looks to good the side that doesn't is the manufacturing side that points the finger squarely at the trade war and the uncertainty that is emanating from it. i think if you do get a trade war truce, which i think is in the president's best interest and i think he knows that and he will only push as far as he can without tipping the u.s. economy in a recession, if you get that truce i would expect the economy to restrengthen. the only models that point to a recession right now are the ones d
dictated by the yield curve. that's it. i don't see any other models pointing to that the yield curve has artificial tendencies to it. >> stephen, that is a key point about a bifurcated economy right now. it makes me think about 2014-2015 when you saw what happened with chinese currency during that time period. is this similar to you >> you saw larger stock market declines this is what you think about in terms of asset allocation and risk but exactly that gap, that the demand side of the economy is pretty much everywhere are holding in and if that with can be maintained, which takes some effort, while you take down cyclical parts of the economy. we have to remember there are multipliers here if china's economy slows, their suppliers will slow, that there are effects. so the two hartsfield-jackslargn the world. whether they worsen or not again could change the regime from growth to contraction. i think that away from just the yield curve, that we have the ability again to keep that in an
expansion mode. >> that's the job of the fed and that's going to be the focus next week at jackson hole. is the fed up to the challenge, so to speak? are they going to be in a now prolonged rate cut cycle which will be stimtive to the market and the economy? >> i think the fed is up to the challenge. they have moved from the fed you used to know which was about fighting inflation to enhancing inflation. i hope they follow the research that suggests you go hard and fast when times like these occur because i do believe july was 25 basis points wasted. now, one could argue that was because the trade war amplified afterwards on the day they cut 2 a basis points, the yield curve did not steepen. they need to convince people like me they are serious about fighting deflation and cut 50 to 75 basis points even when inflation is not that low and the unemployment rate is not that high. >> that's the tom lee playbook this morning go big or go home.
he wants a surprise cut, 75 basis points. >> now it's harder to surprise you know, look, i have been more of the view that the federal reserve will follow markets, that powell's guidance at that press conference, which again has nuanced and it would have been simpler to not have a press conference, but was that we do not know what will happen on trade policy we are not going to preempt and say let's assume there is a recession. how would we treat that? let's hope there isn't one, right? that's not the federal reserve we have right now. i think they can be relatively effective. nine central banks, aside from the ecb and the fed, so people are worried about that, but it would be much, much worse if central banks were not reacting to the risks if you want to worry about yields being low, you could worry if they were higher. >> for sure. thank you very much, steven and brent. >> the fed expected to make another rate cut in september, but with fears of a looming recession will the fed look to act even more aggressively
this is the question we keep asking steve liesman has been digging through all of this. >> i wish i had a more definitive answer. the fed processing a series of cross currents in the u.s. and global economies that lead to different conclusions about where to set interest rates. look at some of these cross currents u.s. forecasts remain for 2% growth bond yields they suggest a recession in coming months u.s. economic data says otherwise. the consumer thriving while the manufacturing both globally and in the u.s. may already be in recession. >> the u.s. economy is in pretty good shape there is no doubt that as economies in europe and asia low down and go into recession, we can't completely avoid that. but at the moment i don't see a recession in the imminent future. >> all right here's how the market is pricing the outlook for the funds rate up clear if this is more aggressive than the fed itself thinks it's going to be. september 100% chance of a rate
cut. we will talk about that in a second 82% chance of another quarter point in october 56% chance of another quarter point in december according to the cme. so 75 basis points of rate cuts built in by the market before year end now let's look at september. this idea of being a little more aggressive a 72% chance of a 25 basis point rate cut and a 28% chance of a 50 that percentage is oscillated between 25 and even as high as 40 in terms of where it is there is some speculation the fed could be more aggressive as soon as september. we'll see about that now, we'll get a better look from blackrock this morning, saying that the fed needs to go 50 jay powell said he takes market pricing into account the recent inversion of the yield curve will work into his outlook. so will the strong economic data we will get a better feel for the fed's outlook in our coverage live from jackson hole,
wyoming. tune into cnbc we will have special guests. the annual gathering in the mountains taking on more importance now, i would say, morgan. >> it absolutely is, steve and just to give us a little, i guess a little preview here, what are you expecting to hear when you go out to wyoming >> i am interested in a couple of things. first of all, whether or not the fed would act in fact to steepen the yield curve. they talked about it asing something that would keep them from doing things, but not moving to, say, doing some stuff on the longer end. that's one idea. also how seriously they take the signal from the bond market is another. and finally, you will have a lot of international central bankers there. the question whether or not they think they ought to coordinate and akrovoid the potential rateo the bottom the u.s. are developing nations and the developed nations need to work together to figure this out. while, by the way, you know, morgan, the political side seems to be fighting and seeing this
as a zero-sum game the central bankers don't. >> steve liesman, thank you. i hope you get some fly-fishing in while you are out there as well. >> i will try. when be come back, shares of g.e. rebounding after suffering the worst loss in a decade yesterday after being a bigger fraud than enron 855. that's where it opened to the penny yesterday morning. we go to break, a look at the top performing stocks on the dow. walgreens leading the way. we arep 6. u13
shares of g.e. almost exactly where they opened yesterday after suffering its worst kay in more than a decade this whistleblower accuses the company of committing a bigger fraud than enron he joined us yesterday. >> numbers are missing they purport top line revenues, bottom line profits and nothing in between like expenses, research and development, selling, general, and administrative, research and development. it's all missing, including cash flows. they don't provide working capital. it's the only company in that industry that doesn't provide working capital. in fact, g.e.'s working capital is minus 23 billion. the current ratio 0.67 if you research it in their annual report, it doesn't appear name a company that doesn't do that that's accounting 101. >> the guard responded calling
the accusations inaccurate. >> when i saw the report this morning and had a chance to flip through it, my initial reaction was that i thought it was full of misleading, inaccurate, and inflammatory statements. that report does not reflect the g.e. that i know the basis on which the report was developed is questionable at best >> joining us this morning to talk about it, pulitzer prize-winning columnist and cnbc contributor jim stewart is here back with us at post 9 so we went after him on, tell us who you are working for, how you are positioned, how much money could you make from this call, and he wouldn't give us that how much credibility is lost because of that? >> well, i think a fair amount it's reminds me of what we do as reporters a lot of times like what is the motive of someone coming forward to give you information? that doesn't mean it's inaccurate, but i feel it means how closely do you scrutinize
it we know he has a financial motive for driving the stock down, by the way which short sellers historically have. you take it maybe with a grain of salt, give it a little more scrutiny the fact that he is going to profit from, i understand that that's what short sellers do i think short sellers have played a valuable role throughout history in bringing a lot of important information to light. >> what is your sense of whether or not it is accurate? >> here's what i don't like about his report i started reading it it's like one sensational claim after another. this is billions this is fraud. this is bigger than enron. this is bigger than worldcom i am reading along and thinking, stop telling me what it's like and let's get to the facts here. so i get to the facts. look, i'm not an accounting expert but it was a multipronged thing. it's not like -- first of all, it's not enron enron was a specific clever
deceptive practice that was hidden from the auditors it won't over a many-year period i didn't see anything like this here we can talk about the individual aspects of it, but i read through it and i wasn't convinced. >> the practice itself of this is a company that, you know, has had some hair on it over the last few years, right? >> right. >> do you liken it to yelling fire in a crowded theater? how do you just deal with the ability of somebody like this to go public against a company that appears to be on one knee? it's trying to rebuild itself. it's trying to get out of some of the problem areas that it was in an easy target, too. >> well, i mean, the general issues here are not new at all we know from g.e. that, yes, they do have problems with the long-term care insurance things. they had to write down the oil
and gas investments. they are under investigation over accounting issues i have never heard it raised to the level of out and out fraud who knows? there is an investigation going on the big-picture issues here we all know about and presumably people have had a chance to look at it. but frankly i was a little surprised at the sort of knee-jerk reaction i mean, the stock wentdown instantly. who could have had time to read the 175 pages before deciding to bail out i think a lot of people were just saying, oh okay, i'll sell now and worry about the report later because he is a big man and is getting a lot of attention. but yi think today it's the prudent thing to do with that is to wait and don't do anything precipitous as a result of it. >> i think the key question here, and citi came out with a note this is to me capturing the sentiment in terms of the reaction on wall street. allegations have holes but do highlight ongoing concerns it seems the question is, are
all of the risks and just how big the richksks could continue balloon to be already priced into the stock >> that's a good question. my own gut feeling, i don't know the specifics about g.e., but over the years i have seen reactions to this, there tends to be an overreaction. the enrons are the exception this could be seen as a value play personally, i don't invest in the spock. as an individual i would be cautious there are a lot of uncertainties. on the other hand, long-term care is not like he compares it to aig it's not like credit default swaps. we understand that business. there are actuarial rates about how fast people die. maybe they have gone up higher than expected, but it's not a black box the way aig was. that comparison to me is completely ridiculous. >> the other big news this week was viacom/cbs the predictions of whether or not they have the scale to fight with the big boys. do they? >> it's funny to me it wasn't that long ago they broke up. the idea was, oh, you know, you
separate, you get a higher valuation from the markets place. that wheel has turned more than 180 degrees. there is an open question, is this big enough to compete in today's media world? does it need to merge? does it need a vertical integration like at&t or verizon or something like that i do think it still has a lot of good brands. cbs streaming service, you know. a lot of the attention is on how many of these direct to consumer products can we have and i think they moved -- you know, they shouldn't have waited any longer my guess is they will be in the top five or six and probably do have the scale i still think it's an open question whether they need a bigger partner. >> do you think the spurs and a continued wave of consolidation the space -- and i ask that in part because increasingly folks are looking at big tech companies and whether or not they are involved in the content game as well as they launch streaming services but they are undergoing
anti-trust investigations and they are under scrutiny for some of their m&a practices as well i wonder what's left out there to potentially combine, specially vertically. >> my concern is the bloom is off that rose a little bit it was a rush to do it now people have seen, first of all, a huge amount of capital flowing into this business you have some big spend ergs, netflix, amazon, disney. this is super competitive. a lot of people want to see how does the at&t/time warner thing play out can this he capture that vertical integration to see whether they want to invest and it will help inform whether the anti-trust regulators are going to be taking a more hawkish view of this. the better for investors, the more profitable that deal becomes, the more likely there will be enter intervention from washington. >> the biggest victor out of this, sherry red stone, right?
>> it's something she was pushing for. i think it makes a lot of sense. i think the main obstacle to it was personalities and they have kind of -- moonves is gone she is backing backes. she has a stable leadership team we will see if this duopoly at the top holds up they often don't i think it was a smart move on her part. >> she got it done, right, after it was hanging out there for seemingly forever. >> yeah. >> we will see what it means about pricing. it's going to get awfully crowded in that space. >> it's not going to be $6 or $8 much longer. >> have a good weekend. >> thank you. >> we love it while it is. when we come back, is greenland for sale president trump reportedly looking into purchasing the country. we have the details on this next. and a check on the dow in what has been quite a wild week. currently up 218 points. still poised to close the week lower. more "squawk on the street" after this break
brian. >> reporter: hey, scott, thank you very much. i think we might have missed the moment here. shame on me. but the crowd dispersing very peaceful political rally everybody is kind of dispersing. but here you go. you talk about u.s. involvement. can you hear what's playing? they are playing "the star-spangled banner" and have been on a loop for the last few minutes over the loud speakers a lot of american flags here a lot of clapping when "the star-spangled banner" is over. there has been a lot of pro-u.s. viewpoints, if you will, in part because they would like president trump and the u.s. administration to use any political influence perhaps on beijing or the hong kong government to achieve their political ends of more independence i think it is a striking scene you have a rally of a couple, 10,000 people ending a lot of american flags. the way they end it is to play "the star-spangled banner. not sure what that says. we hear a lot of knocks on the
united states. but here a lot of pro-u.s. feelings look into washington to maybe help out their cause here, guys. >> brian, we appreciate that brian sullivan live on the ground for us in hong kong. let's switch gears to the "etf spotlight." a look at chip stocks with nvidia soaring. >> back here at the home of the brave, one of the closely watched et cetera in the semiconductor space, rallying on the back of upbeat earnings from nvidia which reported strong demand for the newer high end graphics chips made for video games. the sector's move has been relatively muted due to the weak outlook from applied materials that company warning recovery for the memory chip market would be unlikely to occur before next year the chip sector has been beaten down this month as growth fears resurface with trade tensions between the u.s. and china are ever present the smh on pace for the third straight negative week among the worst performers,
including skyworks, intel, xlinx, all down more than 6% nvidia still down more than 5% on the month, even with the earnings fueled surge today. worthy keeping in mind hopes of a tariff truce really boosted the stocks during the first few months of 2019 the group is still up 27% year to date, but the gains have started to erode. and with earnings season ending, investors lack to reports from hb, inc., vm ware and pure storage to get a better sense for whether demand will pick u back up /* -- up thank you. "the wall street journal" reporting president trump has expressed interest this trying to purchase greenland. officials from denmark and its territory swiftly balking at that notion. here is why the president raising the idea may not be as
crazy as it initially sounds it's home to the u.s.'s air base critical site for missile defense, hosting early detection systems for ballistic missile launches it's also home to the defense department's northern most deep water seaport and airfield as well greenland needs investment, and russia, and increasingly china have tried to bankroll projects there. china was looking to build airports last year on the island last year we intervened in that process. for china it was part of a strategy unveiled in 2019 for a silk road. it could involve access to resources like oil and natural gas. but given its strategic importance to the u.s. and u.s. military dominance, it speaks to the way that i think this country longer term above and beyond all the trade talks is thinking about the world map as it relates to these so-called
near peer threats and what the conflicts of the future could look like. dan mark may be swatting down and greenland any talk about a sale of greenland. this really does, i think, put a spotlight on why the territory so geographically important as greenland's foreign minister, guys, said to reuters we are open for business, but we're not for sale nonetheless, again i think it just really -- you put it in the grand scheme of global dynamics right now, especially where u.s. and china and u.s. and russia are concerned and that gives you a sense of whey it would be getting discussed and you have these kinds of reports floating out there. >> if it's not for sale, what are options short of a purchase? >> we will have to find out. i mean, as i mentioned, we have this military base there you know, there have been -- there has been infrastructure investment we have looked at those options as well. is that something that we increase
how does that play out from a geopolitical standpoint? i'll dig into that and see what i can unearth. >> fascinating headline yesterday. took a leg higher here on comments out of brian moynihan a news update from sue herera. >> good morning. here's what's happening at this hour democratic representative rashida tlaib says she will not visit her riltives in the west bank after israel issued her a permit on humanitarian grounds she cited oppressive conditions meant to humiliate her and it would break her grandmother's heart if she went under those terms. two abandoned objects that appeared to be pressure cookers evacuated the new york subway station during the commute. former nascar driver dale earnhardt jr., his wife, daughter and two pilots are okay after a fiery plane crash on late thursday. they were on a small private plane when it went down in
carter county, texas the earnhardt family was released from the hospital after being checked out. and more than 100 firefighters are battling a wildfire in colorado the deer creek canyon park fire is burning near a populated area of jefferson county. more than 300 people have been told to evacuate it has consumed nearly 20 acres and it is not yet contained. you are up to date guys, i will send it back to you. scott. >> all right thank you so much, sue. when we come back, how much should investors be worrying about a global recession a former imf chief enocomist will join us with his thoughts more "squawk on the street" after this
welcome back to "squawk on the street." the debate heating up after this week's inverted yield curve spooked markets. are we heading for a recession former imf chief economist and governor of the reserve bank of ind ind joins us now the author of the third pilar, how markets and the state leave the community behind thanks for joining us today. i mean, given all of the data that's out there both in the u.s. and the world, the moves we have seen in markets more broadly, what is your sense about these risks of a potential recession? >> well, i mean, it certainly has gone up over the last few days it's a complicated tussle. we have three games of chicken going on simultaneously. one, of course, between the u.s. administration and the chooerz administration over trade. we also have one between the u.s. administration and the federal reserve over federal reserve policy and, finally, we have one between the federal reserve and the markets about who is going to blink first
so a lot depends on how these play out because to some extent they are affecting the real economy around the wuerl they are affecting investor sentiment. they are affecting business sentiment. so far they haven't had a big affect on consumer sentiment, but that could happen. >> in terms of the yield curve that we have seen, that brief inversion between two and ten spread here in the u.s. and also, by the way, in the u.k. earlier this week, what does that signal to you >> well, it's more complicated now because there are forces which are operating on the yield curve which didn't operate in the past typically, what used to happen, inversion happened when inflation was really high, and there was a feeling to some extent that short-term policy rates needed to be really high to bring down long-term interest rates over time. and so you had a yield curve inverting when there was a feeling that policy rates would tighten. this time it's more about the fact that the long-term may look
pretty bad the interest rates will have to remain low and to some extent bonds are a hedge in this kind of environment. some of the flattening of the yield curve is because that's embedding a premium for bonds at this time. so we have to be a little careful. but it does suggest things are a little worse than they were in the past it doesn't, i think, it's not a sure fire signal of recession. >> how attuned are you to a change in high yield sprids, which is often, especially this week, a reason for people who doubt a recession to say one is not coming >> well, you know, i think high yield spreads again, some is influenced by which sectors are a part of that high yield. for example, the shale sector has issued a lot of high-yield bonds, and of course with the oil price falling some of that extraction is not remunerate
ive. i would say at this point the strength of the economy comes from a still strong consumer who is being held up by strong labor numbers. that could change, but it hasn't changed so far it is an economy which still seems to be progressing reasonably despite everything that's been thrown against it. >> sir, how quickly can we reverse some of the damage that has been done because of the trade war and the tariffs, assuming we do get a deal? i presume this can't be changed overnight. >> yeah. no, i think some of the sentiment will reverse if we get a quick deal, but a quick deal will not alleviate the longer-term concern that some of the same issues that are the basis of conflict, intellectual property, threat, the restrictions on companies investing across borders, those
will come back to the table because it's hard to see a comprehensive deal with the kind of monitoring structure which makes beau the united states and china feel comfortable my sense is anything short term is going to be a cosmetic deal in exchange for you buying more of our stuff, but that will not satisfy. the other problem is, the longer the conflict between the two countries go, goes on, the harder it is to do a cosmetic deal people will not be satisfied you fought so long just for this it's getting more complicated as this drags on. of course, both the united states and china have an incentive to deal because both economies are being hurt by hths impasse. >> to that last point, if we do start to see some of these -- and we have seen the softer data germany gdp this week, for example, some of the numbers out of china if you see certain markets of the world, europe, asia,
actually tip over into recession, can the u.s. avoid that and for how long? >> i mean, the u.s. is more resilient than many of these economies because it's much more self-contained but, no, we are not an island independent of the rest of the world, and it will affect, if nothing else, through the sentiment channel. the rest of the world is going down, how long can the u.s. continue chugging along? so i do believe that we are in the united states more resilient, but we are not totally immune to what happens outside. i do think the forces from outside will put pressure on both the administration and the federal reserve to think about policy sf policy going forward sichlt we have seen more than five dozen cuts by central banks this year, plus more, i guess, comments suggesting that we'll continue to see more, and that's really just since december 2018 when the u.s. stopped its own
tightening so i guess relative to the rest of the world, the fed does essentially have more bullets in the chamber right now. is that something that should be taken into account when you are looking at the u.s. economy versus everything else >> well, it certainly has more bullets than japan or the euro area, but also we must remember that many of the interest-sensitive segments in the u.s. economy are getting less and less sen sensitive to interest rate cuts the auto sector, the housing sector they have been relatively commute mangkhuted uted the las quarter. the auto sector has probably detracted a little bit i think going forward my sense is monetary policy has some bullets left, but they are getting weaker and weaker. the reality is, in the united states, far more needs to be done on enhancing growth in
specific areas which are relatively depressed many of the semi-rural areas, rather than a economy-wide stimulus we have had both the tax cuts as well azizing monetary policy, and they don't seem to result in strong sustained growth. we need to think more about regional policies at this time rather than a whole new set of stimuli. >> lastly, given the focus on currency right now, this rising risk of a potential currency war, where do you see the dollar going from here? >> well, it's complicated, right? if we do get a global recession, the dollar becomes the safe haven. that strengthens the dollar. of course, if, on the other hand, the u.s. sort of plummets for some reason, then while the rest of the world stays strong
that's unlikely. the dollar goes the other way much the problem with any sort of statements about the exchange rate is markets have thought through all of this. therefore, what is really going to change the dollar is the prices rather than something we all already know >> thanks for joining us today as we go to break, take a look at shares of deere. value despite the miss and guide lower. stock's up almost 4% farmers are delaying purchases of ag equipment because of the trade war. this is essentially erasing the losses for the year just barely. dow's up 262 here. more "squawk on the street" in a moment
welcome back now let's get to rick santelli and the cme group in chicago for the santelli exchange. >> well, thank you this week the story has been 30-year bonds. as they sit, they are down 20 basis points on the week they were down over 25 historical all-time forever even, low yields and this contract was introduced exactly 42 years ago today happy 42nd birthday, 30-year bond futures richard doc sanders wrote the spec for the contracts congratulations. >> thank you. >> that isn't even the story today. the story today is you wrote another contract that's being launched today tell us about it. >> it's a substitute for libor, rick, and it's a hat for you, a mirror boar futures are being launched today it's a libor replacement $200 trillion of assets have to be repriced with this new index.
>> now, the federal reserve also has a competing product, and of course it's called the secure overnight financing rate what's different about your contract being launched today? >> sofer is fantastic. it is a risk-free rate and, therefore, it's different than am i.r.a. boar. back to the days of the ted spread. >> secured versus unsecured. and there is going to be arbitrage there. then you will read market signals on credit quality? >> yes i think we will have a family of benchmarks just like with crude, just like stock indexes, just is like fixed income. the days of the single benchmark for the entire world is a civilization gone with the wind. >> libor is set to retire, forced retirement due to
questionable pricing in 2021 the issue was that the groups that priced that contract, which euro dollars converged to, maybe were fudging it a bit. what will prevent the underlying index of your contract to have a similar have a similar fate? >> ameribre is a market based solution it's not set it's based on actual trades on the american financial exchange between many, many different banks. >> and my final question is, the last time i looked, there was a boat load of things like financial structures tieing to libor. is this lead up to all this, is that going to be bumpy or have they done an adequate job to taper this into our new era? >> i think the regulators have done a good job. this is the same scariness that
people said about y2k. it came and went out a flutter the fed is doing a good job. the big banks are getting prepared and i think it's going to be y2k. we're going to get there the day will flip. >> richard, good luck in your new contract we all still use your first contract scott wapner, back to you. >> okay, rick, thank you so much that's rick santelli now over to john ford who has a look at what's coming up on squawk alley a few minutes away. >> partly just me. i'm going to slide into that seat you're sitting in right now. bob peck from barclay's is going to come and help us make sense of this crazy week for stocks. tech stocks in particular and what it means for the way forward, whether talking about the ipo market or which stocks have more or less value in this tesch ewe lent market. that's coming up on squawk alley.
over $400 million worth of cars expected to sell here over the next few days. and the strongest part of the market right now is cars under $250,000 being purchased by, yes, millennials i know we've heard millennials don't drive, they don't own cars, but they are becoming the growth engine for the classic car market this year, millennials and gen xers will collect more cars than baby boomers and the older generations combined >> soma lineals, the oldest of them, i think are 39 this year they're hitting that mark of just the beginning and we're seeing all the signs that they show plenty of interest in cars they're start to go make money and they're shaping what is hot and what's not in this market. so what millennials really love, as we know, is experiences so they like cars that they can take out and enjoy so four-wheelers, campers, this ford bronco from 1966 expected to sell for up to $80,000 at mecum. they like cars from the 80s and 90s like this ferrari testerosa
and they love taking cars out to the racetrack with their friends. so this pagani, this car can go over 230 miles per hour. we talked to a lot of millennials yesterday. they are out buying in force showing that consumer optimism, at least among millennial collectors, is strong. guys, back to you. >> incredible story, robert. always good to have you on the road our robert frank dominic chu joins us with a look at some of the dow gainers today. >> so we've got some session highs right now for the dow and the s&p 500. if you look at some of the biggest gainers right now from a point perspective, these particular stocks, apple is adding about 31 points overall 3m 19, jpmorgan and ibm 16 those are the biggest performs from a point perspective back over to you >> scott, good to have you
good morning it is 8:00 a.m oots 11:00 a.m. on wall street and squawk alley is live ♪ good friday morning. welcome to squawk alley. obviously, it's been a wild week for stocks the dow this morning looking for closes this week we were down 380, up 373, down 800, up 100, back in the green this morning we are trying to close for the