tv Squawk Alley CNBC July 31, 2018 11:00am-12:00pm EDT
good morning, it is 8:00 a.m. at facebook headquarters in california, 11:00 a.m. in wall street. "squawk alley" is live ♪ ♪ good tuesday morning, welcome to "squawk alley." watching the markets closely got a nice pop of the open dow up 111 on headlines that perhaps there's resumption in trying to put together trade talks between the u.s. and china. we start with the pain in tech
stocks facebook is down more than 20% in less than a week. netflix down 20% since the high in june. despite that, nasdaq is up on pace for four straight months of gangs. faang plus fell into correction. now 10% below the june 20 high apple reports tonight after the bell here to discuss the moves, guys, good to see you both we checked in on some names last week 9% for faang in three days 300 billion in market cap gone is it forcing you to reevaluate some longer term thesis on thes names? >> i don't think so. two of the faang names that had questionable fundamental quarters were facebook and netflix. those are the 20% correction stocks amazon and google are with very
solid prints are 4 or 5% off all-time highs the market at least is acting rationally in terms of which ones it wants to punish more than others. the most interesting setup across this group is facebook. we are going out on a limb at 170 bucks, you look at this stock at 18 times earnings which is a multiple over many years. i don't think fundamentals changed to the extent of 20% i think they still have new mondayitization opportunities with facebook messenger and what's app the stories transition is way overblown. this is probably the best opportunity to go long facebook in at least a year it is our top pick. >> do you not believe the gravity of what they said on the call regarding expenses in the next year or so? >> yes and no. what i like is the fact this company will aggressively invest in things like they have to invest insecurity. if they don't get the security and safety of the platform
corrected going through the midterm elections, there's a real problem they're investing in the right why have, defensive investments. offensive investments are creating deeper moats around the business there's no competing social media platform to facebook and instagram together doesn't seem to be any good competing messaging platforms to facebook messenger and what's app. they're in investing aggressively, building deeper moats around the business. it is harder to catch up to facebook most investments, they probably overplayed hands a little bit, but that's all right better to do that now than have to do it later >> brian, one of the things i was hearing in terms of 20% drop of facebook the last couple trading sessions, maybe it is forced selling we had a number of folks on air said the slide in tech stocks, they don't think it is a harbinger of a bigger turnover to come, but how much to apple earnings, for example, shake the
narrative. >> to invest in tech, you have to be strong i think this is going to weed out some of the weak hands and we're going to move higher as you get through the years we have apple earnings tonight this stock is so unbelievably cheap at over 12 times x cash. i think the quarter is fine. i think they'll give a conservative outlook fx is an issue you have a new iphone ramping, they don't know all of the details on the trajectory of that and you have a muted smart phone market my feeling is a little volatility around the quarter, apple will continue to rise the second half of the year >> brian, it all makes sense to say if you look at faang and the largest tech stocks, nothing changed fundamentally. did anything change to get the last 10 or 20% of up side for stocks in other words to call the stocks is to call people's appetite for paying up for winners. i guess how do you handicap that based on price targets, apple
and faang, you see a half trillion added in market cap the next year. what gets you there? >> i point out three most undervalued of the faangs, if you put in apple, it would be apple. facebook with this correction. and also alphabet gets no respect. they had a cloud conference, obviously great earnings and cloud conference and what they're doing with ai, that's an exciting story, the driverless car later this year. google is cheap. facebook is cheap. and apple is the cheapest of them all those are the three i would focus on. >> mark, maybe you want to weigh in is it a matter of ebb and flow of investors appreciating that, starting to worry about that, and that develops into a longer term trend in stocks >> i think it is case by case basis. with google, i think stock will continue to outperform, mid teens year to date, modest correction here. the call is peak opex, with the
traffic acquisition cost moderating growth which is what happened in june quarter and will happen going forward, makes chances of negative margin surprise smaller then you've got this autonomous vehicle catalyst, commercial catalyst coming up end of the year google is fine as a stock. it is not a screaming buyer, but one of the better buys in the group. names like facebook. facebook here, there's more fear than greed in the stock now. the question is it is the over under on 25% revenue growth the street has for next year i think they'll do better. we think it will be more like 30%. if they print in line with street numbers, this is dead money. we think there's opportunity as they monetize more aggressively, messenger, as they monetize stories within instagram and facebook, revenue comes in better than expected, margins better than expected 20 to 25 times earnings.
>> of names we talked about so far, does netflix surprise you most in terms of reaction? 20% off the highs? >> you know, netflix, this stock was a barn burner. it was up 109% going into earnings there's up side to subscribers everyone thought then they missed by a mile and go down. >> in this case, their own guidance, right? >> i think it is their own hubris they raised prices late last year, put up two phenomenal quarters, got caught up with themselves, thought they were on fire, put out expectations that were too high and this is what happens. netflix i think is also interesting but had a phenomenal year anyway. >> before we let you go, brian, one other question we have seen weakness in faang and social media stocks in particular recently. one area of tech that held up well has been more enterprise software focused stocks, oracle, up 8%, microsoft up 7% are these areas where investors
should be putting more money now? well, i think they're looking for more value oriented tech is what may be happening. you know, those particular names, oracle we have a neutral on, we're not thrilled with what's happening there, especially with what we saw at aws summit and with google, cloud last week. i would say if you want to pivot back to value in tech, i would look at apple, facebook and alphabet here. i think these are great values >> talk more about that, and especially when we know more tonight after apple. thanks, guys see what happens appreciate it very much. let's get back to kay rogers at hq for a news alert on chipotle. >> they say they're reopening that single location in ohio you remember they voluntarily closed that location yesterday after reports of illness, the company telling us they expect business as usual, are reopening this morning, adding the local
health department has two complaints of illness at the location keep you updated on anything else we hear >> thank you kate rogers at hq. trump administration considering a tax cut for the wealthy through a change that wouldn't require approval for congress kayla tausche has the latest on this developing story. >> reporter: the administration is weighing changes to the way capital gains are treated when assets are sold as a conservative coda to tax reform passed last ear. the idea was floated again by the treasury secretary on the sidelines of the g 20 and re-entered the public conversation in "new york times" when they published the comments what this would do, it would index capital gains to inflation which would significantly lower the charge for investors when they sell an asset i reached out to the white house to ask about the president's position on this they said the white house has no official position on this, but defended the notion this would
disproportionately help the wealthy, saying that all investors with 401(k)s and penguin pensions would benefit treasury official says they're evaluating the process by which they would do this and the economic impact of doing something like this to the economy. the treasury secretary according to this official prefers to pursue this change through congressional action, not through a seeming executive fiat which is how it was reported yesterday. what's interesting is this item wasn't in the tax cut and jobs act or the package floated by the ways and means committee yesterday when i reached out to tax staffers on the hill, this is the first they were hearing about any potential tangible move in this direction it is safe to say it would meet much resistance in congress. just today we heard from a top senate democrat chuck schumer playing the role of deficit
hawk >> the economy is already running hot on the artificial sweetener of tax cuts and deficit spending another 100 billion in tax cuts for the rich isn't just more gasoline on the fire, it is an incendiary device. >> reporter: that's what "new york times" estimated that investors could see as a windfall if the change were made when i asked the treasury official about that estimate, they said they're considering what the impact would be guys, back to you. >> granting that the details around this as vague as you described it, would the idea be they would do this for capital investments, for investments made from this point on or let's say somebody has a 20-year-old investment that now has a huge gain, they would pay lower taxes on that existing one if the idea is to incentivize fresh new investment, it is forward going aspect that matters more. >> reporter: right, it is
unclear how retroactive this policy would be. it is nacent at bes t to describ it the deficit plays a huge role when you think about the ideological views on the economic team at the white house. many conservatives like larry kudlow support making the change but other deficit hawks like the budget director would have heart burn over this remains to be seen how it would be structured if it comes to pass >> disagreements within the executive branch have to get used to that appreciate that. when we come back, cbs chairman and ceo les moonves will remain on the job as the company investigates sexual harassment allegations through independent outside counsel. walter isaacson joins us after the break on what steps the ayitnes te w.no st wh us why did i want a crest 3d white smile?
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isaacson thanks for joining us. >> thanks for having me. appreciate it. >> so the investigation is going to be going on with this outside law firm in the meantime, moonves stays in his position temporary or otherwise. do you think this is the right move >> yes, i think it is. we now reached a stage when things like this come out. you should investigate, you should figure out what's going to happen, you should hire an outside law firm we're getting into this pattern now where you have things that happened awhile back where it is unclear exactly what happened, and i think it is important that a board of directors says okay, we have to take it seriously, we'll hire a firm, investigate and then see what happens. you know, it has been kind of a frenzy in the past but these charges, especially ones against les moonves, are the type of ones that bear some investigation as opposed to snap
judgments. >> certainly needs to be investigated and followed through on meantime, the stock is down 9% in the past couple trading sessions a number of experts on air the past couple days said meantime as that investigation is under way, it would make sense for moonves to be put on ice temporarily as that plays out, especially given the fact he is chairman of the board and investigation should go quickly. you say no, you don't think so >> i wouldn't second guess the board on this. i think they know what the initial allegations are, they know how serious they are or not, and they know that they should get to the bottom and investigate it i must say for a long time admire rememb admirer of the work of les moonves and the way he approached many issues, i think the fact that we're taking a
measured approach to this, the cbs board is, is something that's admirable i was reading a great book that came out a couple of months ago called frenemies, about the ad revolution disrupting places like cbs and traditional ad sales, but in that book you see how well les moonves has and a half ga-- has navigated this an having a feel for television and entertainment. that shouldn't count or be balanced against if he had serious sexual violence or things like that, but it does mean that you take measured steps to investigate the allegations and i think we'll find out what the facts are and the board will probably make a decision based on the facts. >> walter, you say measured steps. you have a board here that is not only dealing with allegations against les moonves
but also reporting is about a culture at cbs where there was maybe people looking the other way, other managers potentially misbehaving in this regard i wonder if there's a clock that's running with regard to the court case, with regard to the redstone control and the rest of it is there a possibility a law firm can be brought in and in a matter of weeks have a comprehensive result that the board can be satisfied with that tells them how to move forward >> carl, you're right, it is a bit of a storm gathering around cbs because of the viacom situation, because sherry redstone is on the board, controls a couple of the seats you also have the great media consolidation happening. if you don't put cbs back together with viacom again, they split, come back, split, come back, now as you know the redstone -- sherry redstone wants to put them together unless moonves resists it.
it opens up strategic possibilities for cbs. it comes as a particularly interesting time for members of the board of directors but i think pretty quickly a competent law firm can investigate the allegations and figure out what they're going to do. >> walter, i want to dig into that more with you i realize there's a lot of uncertainty and a lot of moving parts around this company now. given the fact that stock has sold off recently, down 12% for the year, do these assets, cbs specifically, begin to look attractive to other companies and if so who might be some of the other companies that would come in and be interested as all of this gets sorted out? >> i think cbs assets are truly valuable, a great company, let me declare small conflict of interest, my book by siem and and shoester owned by cbs. they have good studio, good
broadcast, that would do something like you saw with at&t, time warner, now that the way has been opened for people that own the pipeline of distribution to want to consolidate, that would open up some things. cbs does not have a cable company, it has a wonderful fledgling, not fledgling, news division that's internet delivered opposed to table delivered. that might be a wave of the future you have to look at the telephone companies, table companies, and amazon, netflix, all of the other companies trying to get into content i think cbs has a great play if they can weather the storm and the allegations against les moonves, unless they are resolved one way or another in the next few weeks >> walter, thank you. when we come back, is apple on one trillion dollar watch
why investors keep an eye on valuation. what you might expect from apple today on the other side of the break. dow up 113 back in a moment at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95. fidelity. open an account today. you'll only pay $4.95. with tough food, your dentures may slip and fall. new fixodent ultra-max hold gives you the strongest hold ever to lock your dentures. so now you can eat tough food without worry. fixodent and forget it.
it has not been all of tech suffering. apple stock up 10% year to date, holding steady this week as well as the company is set to report earnings after the close today market cap for the company sitting at $934 billion. josh lipton is here with what to expect from apple this afternoon. hey, josh. >> reporter: mike, apple is on a roll here, the stock up 15% in the last three months. here's what the street is looking for after the bell today. earnings per share $2.18 on revenue of 52.3 billion. that implies growth of 15% on the top line iphone units, up 2% from a year
ago. iphone average selling price, $694 is what the street is looking for. that would be up 15% from a year ago. iphone results matter when it is this late in the cycle service is in sharp focus, expected to jump 26% to $9.2 billion rbc sees strong service momentum in the quarter, led by subscription growth, strong gaming specifically. and looking ahead, the street looking for apple to forecast q4 revenue of 59.6 billion. that will imply a jump of 13%. morgan stanley sees down side risk to the forecast, saying their checks indicate 6.1 inch lcd phone, one of three new phones they're looking for this fall could be delayed until october. also, you'll see attention on the china business, main land china accounts for 15% of company sales. some expressed concern as trade
tensions escalate, apple could be kol clat ral damage. back to you. >> samsung results, slowest quarter growth in a year as galaxy mixed sales targets in light of apple results after the bell, is there anything you can glean or read through to be had from samsung results to apple's? >> reporter: i'm not sure, morgan i think when apple reports results i think investors, analysts will have quick questions about the mix in the quarter. we know tim cook says iphone x remained quarter after quarter a best seller. the question becomes did that hold true, was there a shift did apple's top device become a bigger part or smaller part of
the mix. if it remains strong, that tells you there's demand for apple's high end device. maybe that tells us what tim cook is thinking in terms of pricing the next generation. >> going to be a busy afternoon, josh see you in a bit let's get to michelle caruso-cabrera for the european close in a couple minutes. >> thank you very much, carl stocks closing higher to finish after a string of strong earnings reports, including upbeat results from credit suisse they're all finishing the month of july in positive territory, that breaks a two month losing streak you can see the performance of the euro stocks. not as good news on data front official figures show the eurozone economy grew 1.4%, slowest pace in three years, significant contrast to u.s. pace of 4.1% dollar stronger against the euro 1.17 is what it will cost you.
european union negotiator softening his opposition to british prime minister theresa may plans for the london financial services industry. deutsch said they would move activity from london to frankfurt, concerns that it could erode london status as key financial hub. weak bond yields hitting a high after they still face a struggle after bailouts the imf recommended greece consider boosting capital and other discretionary spending to ensure sustainable growth going forward. still, yields below 4%, long way from 7 and 11% yields we used to see. the turkish lire after a court rejected a report for pastor to be released from house arrest as
requested by president trump bumping up against the five level when it comes to that turkish lire now to sue herera for a cnbc update. >> good morning. here's what's happening. president trump tweeting he is consulting with the nra over whether it makes sense for a texas company to publish downloadable blue prints for 3d printed guns he says he doesn't think it makes much sense the nra did not immediately comment. white house counselor kellyanne conway says she hasn't discussed the possibility of a paul manafort pardon with the president. jury selection begins today in the bank fraud and tax evasion trial. >> we have not discussed that at all. the trial is just beginning. remember, it has nothing to do with the campaign, as you know, i did not collude with russians, i was meeting with voters in michigan and wisconsin and we won. flames from a factory fire in connecticut could be seen for miles as firefighters spent
hours trying to get it under control. the plume of smoke was so large that it was picked up by doppler radar. no injuries reported and the cause of that fire is under investigation. you're up to date. that's the news update this hour back downtown to "squawk alley." morgan, i'll send it to you. >> sue, thank you. when we come back, tech stocks rebounding, bucking the trend of three straight days of 1% losses for the nasdaq former yahoo ceo danosswg renei joins us we'll talk about all of that in tech stay tuned i just switched to geico and got more. more? got a company i can trust. that's a heck of a lot more. over 75 years of great savings and service. you can't argue with more.
tech stocks had a monster run and corrections the last few weeks, recently in facebook as you obviously know education tech company is up after doubling the last year a $3 name in 2016. 27.45. dan rosensweig is the ceo, joins us on the back of earnings good to talk to you. good morning >> good morning, carl, how are you? >> not as well as you, i guess 32% revenue growth, subs up 45 you raise guidance i wonder, talk about the quarter and the fact you were caught in the down draft the past couple days. >> the quarter was great we're in a big segment, education is a trillion dollar segment.
we converted the business model from analog to digital two years ago. now we have extraordinarily high growth rates and margins and big -- we feel comfortable we are building a mission to help students improve education, get materials for less, learn, master the subjects, get a job nothing else that matters more in their lives than that we're ecstatic about that it is part of being a public company. hard to figure out how the funds work, they rotate in and out clearly the advertising companies, facebook and twitter sort of had a different view on the quarter than subscription companies like ours or netflix or amazon with the cloud and prime. these companies are not the same after awhile, that should be good for tech. >> dan i was looking at your
numbers, carl pointed out, service to subscribers increased year over year clearly there's demand for more tech, more disruption in education. it has been a long time coming where do you see the greatest opportunities? >> it is a great question. our view is bet on the inevitable it is inevitable more people learn online, not less inevitable you should be able to use technology on dmanlemand, l expensive, more relevant, and teach people at the level they enter the system as opposed to the level you hope they enter with what you see with chegg, one out of four by the end of the year are paying us for something. clearly you're right demand is there. we're doing something straightforward and simple helping them save time and money and get smarter. think about it you're a young person. 70% go to state school
40% work 30 hours a week or more 25% of college kids have a kid while in college we are available to them at the time they're available to learn and classrooms are not they program a schedule, you can make it or not we look at it, we say as long as we can help students master the subject, pass their class, learn their career path, lower costs, get a job they want, that we're going to be one of the most valuable companies on the planet that drives our employees, and the business captured fire >> you mention the large addressable market you're in and how that's kind of music to tek tech investors' ears other companies are aware of that, too. how do things feel in terms of m and a environment, seems like small midcap internet companies have a lot of run. part of the story is at some
point there will be some consolidation. what do you view that? >> i think tech has always been an industry that consolidates and evolves or dies. so you've got the break away companies, ones that hit velocity, and they start as companies that define their categories netflix defined its category google, facebook, paypal and chegg is defining its category we see ourselves as consolidator as opposed to being consolidated there's more people that want to go direct to the customer. if you own the customer and the data and channel of distribution, and like us own proprietary content, you have ability to satisfy your customer at a lower price, higher value than anybody else. we do see a lot of what you mentioned, which is consolidation. we have become a consolidator. we acquired two small companies
in our space what's happening is companies build an audience or don't if they build an audience, they don't necessarily have a business model to monetize, but part of something bigger when facebook bought instagram or chegg acquired easy bin, we have the ability to use our reach, bran, data to grow them faster and be more profitable that's the same game plan we're following. but i think you're right if you look at the tech space, most companies don't end up going public or staying public and that's just the fact of our industry but we see ourselves as hopefully one of the consolidators opposed to the other way around. >> finally, dan, one question. ex-chegg, do you see it as a speed bump or are biases being formed, whether it is on supply chains or social because of what facebook said about engagement and cost >> look, i think in the short
term they're very real considerations there is an issue over trade war. there are issues over tariffs. on the facebook side, issues over the fact that mark stood before the government and said i'm going to fix this, we're going to invest whatever it takes, then it surprised everybody that he chose to invest in whatever it took i think what you're going to find is these are speed bumps at best no way people stop advertising on facebook now, no way people aren't going to want hardware they want. initially there will be bumps in the road, unevenness, volatility if you want to bet which companies get bigger in the next three, four years, it will still be facebook, amazon, netflix, still going to be google, and we believe hopefully still going to be chegg i think they're speed bumps, not walls. >> dan, good for your take on what's happening in the broader world and today, what's happening with chegg see you soon. >> thanks for having me on
all right. when we come back, a closer look at ford's new mustang. first, rick santelli, what's in your dashboard today >> you know, i'm watching the boards, i'm watching yields, first day of a two day fed meeting. jamie dimon's words are still echoing in my brain from yesterday's interview. we're going to ltetohaisn tt after the break. need a change of scenery? the kayak explore tool shows you the places you can fly on your budget. so you can be confident you're getting the most bang for your buck. alo-ha. kayak. search one and done. tap one little bumper and up go your rates. what good is your insurance if you get punished for using it? news flash: nobody's perfect.
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of the hour. she's the woman that calls the market, nancy davis warned us about the tech trade now she's back with another potential market mover plus our call of the day, throwing dirt all over an industrial stock and two doses of unusual activity, he will reveal names likely to move in the options market he will do it at noon. 15 minutes away, morgan. see you then >> sounds good thanks, scott. famously driven in the hit film "bullet" ford is debuting a new edition of a classic phil lebeau with a look at the brand new mustang. phil >> reporter: not just any mustang, morgan, it is the bullet mustang on a chilly morning here in san francisco, perfect time to show you this car just rolling into showrooms. when you look at this, we had a chance to drive it in the streets of san francisco the past couple of days.
admittedly, we didn't hit the speeds he hit in the chase scene of "bullet" but it has plenty of get up and go. just under $47,000 with 480 horsepower for ford, getting a little momentum now is important, especially when you look at the muscle car war the mustang has done well, compared to the challenger and camaro this is a company as we know from last week's earnings are in the midst of going through restructuring, saying they need more extensive restructuring guys, they're hoping a little halo effect behind a vehicle like the bullet will rub off on the company. it is limited edition. there aren't huge sales. they believe this is the kind of vehicle that will make people say i remember what ford is all about, and if you need a further reminder of what ford is about, all you have to do is climb inside the bullet mustang.
make sure you have your seat belt on, and certainly listen to the roar get the roar going see you guys >> you can make it louder or make it quieter. doesn't have to sound like a 1968 engine but it can if you want it to. >> always good when phil does a live shot from a moving vehicle. >> hope he is careful on the hills. >> he is going to open it up now. >> excellent hopefully he comes back for later. meanwhile, in an exclusive interview with cnbc, jpmorgan ceo jamie dimon warning of unprecedented risk in the market listen here. >> it's trade if the skirmish becomes more of a war. i would say the reverse qe, i don't want to square the public, never had qe, never had
reversal regulation is different, monetary transmission is different. governments borrowed too much debt people can panic when things change it is changing, we tell you it is changing, we know it is going to change. what happens, it might have some effects people don't expect and it is bad policies you know, bad policies lead to bad outcomes >> someone who's also focused on this unprecedented policy, rick santelli hopefully he isn't scaring the public rick, take it away for the santelli exchange. >> never about scaring the public, mike, it is about keeping the public in the know exactly how it turns out, good, bad, indifferent, remains to be seen and insiders, meaning people on trading floors, people running managed money, in brokerage, viewers on cnbc, this is not a new topic. the big unwind is something that we have talked about for years nobody knows how the game of musical chairs and central bank
music starts to stop will there be enough seats for everybody's economy to continue in the same path and in the same trend that it has been in the last several years, all unknowns. what's really interesting is who said it. jamie dimon. you have to remember the transmissions he talks about in monetary policy, he is one of those gears in the transmission. banks, primary dealers are the avenue of implementation of monetary policy to get it into the economy, and indeed, how it reverses we don't know one thing we do know when we talk to people like jim bianco today, all the cumulative positions of central banks should be moving a bit lower as the u.s. starts and mario draghi to some extent is joining. the problem is if you look at where we were in qe as we started to do our taper, those levels are about the same levels we are today between bank of japan and other
central banks, they've made up the difference the point of that is kind of hard to tell nothing really has happened yet. and the biggest issue of all may be europe and japan. with respect to europe, mario draghi understands that you have to take these things slowly but the problem with slowly is if there's a bad market signal, if we come to a point where there's an area like the taper tantrum and it isn't done or big percentage done, that's where it starts to get complicated, and bank of japan is a race. they're way in the distance. another thing that occurred today that is significant, we had the second quarter unemployment costs index a lot of things don't splash across on the headlines i cover. one in particular is private wage and salary growth was at a 2.9 year over year clip. that's a good clip because it is the best since the third quarter of '08 close to ten years
everybody remember five employment reports ago when we saw year over year wage gains of 2.9? i know that's apples to oranges, that was later revised, but it got the markets higher that was one of the few trading periods we developing in the system carl, back to you. >> we know you're on top of it r, rick. thank you for that as we go to break, take a look at shares of twitter upgrading the stock to neutral, saying expeck tases have been b reset after sell off sparked by the quarterly results in guidance shares. up almost 2% when we come back, why every marng woman and child would need to eat an extra three b pound of cheese this year to clear the stockpile sitting in u.s. warehouses when "squawk alley" comes back alerts -- wouldn't you like one from the market
it gives you super fast speeds for all your devices, provides the most wifi coverage for your home, and lets you control your network with the xfi app. it's the ultimate wifi experience. xfinity xfi, simple, easy, awesome. there's record amount of cheese sitting in u.s. warehouses almost 1.4 billion pounds contessa brewer is in upstate new york answering the question, why does america have a cheese glut hey, contessa. >> they're heeating more cheeser why? part after the reason is because the cows are producing more milk and yet american con sunlgts of milk has declining for decades
these big manufacturers have looked to open new markets the extra milk gets turned into cheese which has a more stable shelf life b and as much as 20% of u.s. dairy gets sent abroad according to industry trade groups >> as we look at the future, 95% of consumers are going to reside outside of the united states the productive capacity of american agriculture is unsurpassed any place in the world, so we need trade agreements to facilitate the movement of good frs the u.s. to all countries around the world >> mexico is the biggest impo importer of american cheese. it get about quarter of all exported u.s. dairy, but now has slapped 25% tariffs on cheese from the u.s to rather, the fourth largest importer has piled on import duties and all this could add to the surplus we're seeing cheese makers have a couple big concerns one, decline in sales.
two, that their customers could move permanently to canada or especially the european union. and three, that they won't with able to sell parmesean or feta as feta because the eu is making new trade deals. the reasons were traditionally they were made so how do you market it as anything but parmesean guys >> fascinating look at some of the inventory cycles being distorted by this trade discussion thanks very much when we come back, whiay alibab is is teaming up the starbucks dow's up 143 s&p up better than 17 points more on the other side of this break.
announced 75,000 people had signed up. this follows difficulties of rival movie pass which had innovate d this type of busines and which has been looking to squelch the major cash burn. amc -- >> some indication a piece of the market moving past >> starbucks reportedly teaming up with alibaba to deliver coffee in china in a deal set to be announced this week the deal says the service will take place within lma and begin in if fall of year they hope it will spark a turn around and reported a 2% drop compared to 7% dwrout growth in the year prior stock's gone from 47 and change to 52 and change we know how crucial china is to that company >> yeah. i don't know >> big business.
maybe not yet. >> china will be in focus today when we get results from apple after the bell as well also how that iphone 10 model has been selling in the quarter. a lot to look forward to >> let's get to headquarters and the half >> our top trade this hour, value trap does text trouble really mark a sea change for stocks or will the market's favorite sector soon rebound here to debate, joe, stephanie, jon and kevin. a cnbc contributor begin with the markets stocks higher including the nasdaq coming off its first three day losing streak in three years. kevin, you got the nasdaq trying to avoid the first four-day losing streak since april. 37% of t