tv Squawk on the Street CNBC August 22, 2019 9:00am-11:00am EDT
good thursday morning. welcome to "squawk on the street." futures bounce again after four days up out of five as we start prepping for jackson hole, powell's speech tomorrow another day of pretty good results. our road map begins with the fed's annual meeting in jackson hole getting under way philly's patrick harker will join us in the next hour
>> plus, nordstrom and dick's sporting goods both surging in the premarket as the consumer sector coming off what was its best day in nearly two weeks >> and tesla's second largest shareholder suggesting elon musk should step down as ceo. we have details. central bankers and economists from around the world are gathering at the kansas city fed's annual symposium in jackson hole investors bracing for tomorrow's speech by fed chair powell among the president's repeated calls for additional rate cuts some big live interviews coming up today and tomorrow from the summit our steve liesman will have harker in about an hour. he's got bullard tomorrow. but we know what the minutes did to odds of a 50-basis point cut yesterday. >> yeah, everyone is a little talking at different moments here you have the president saying things, the economy is fantastic, which is why we need to cut rates but now he's focused on germany.
you have the fed focused on the data and a little more torn. the fed is clearly thinking about the fact retail sales are incredibly strong. they needed that claims number to be much worse so i think they're in -- in a bit of a box i think they're going to say, look, the economy, you would even raise rates if it wasn't for germany. >>judging by the minutes, ther are those who believe they should certainly not lower rates. there's still a contingent on the fed that wants to see another 50 basis points, or did at the last meeting. powell is obviously the chair, and he can move people the way he wants to, in some respects. then every day, every day you're dealing with trump and the tweets, which you have to be ignoring >> ignore the president? the chosen one how do you ignore the chosen
one? >> he's tweeted now 19 times in august it's only the 22nd so it's more or less every single day when you were doing it just now on "squawk box," i thought you were doing yesterday's it was a new one i missed it. >> i think he's got to focus on greenland again. louisiana purchase was a huge win. people forget. not that many people around. >> well, the other thing about tweeting about german negative yields, he does not mention that it was basically a failed auction. they failed to sell half the debt the bank had to step in and soak up the rest. >> well, yes it is important when you look at our curve, the short-term rates are the highest. i know he probably feels like he's not really focused on the failed auction he is, i think, focused on the fact, listen, why are we letting germany take our sale? it's interesting he never picks on the koreans. except he just noticed samsung can get a heads up on apple.
>> results of tariffs on iphones coming from china. but even "the wall street journal's" editorial page takes him to task on tariffs, saying enough already warning, by the way, when it comes to germany, the 25% tariffs on auto which is he occasionally brings up is enough at least to potentially stall decision making over there, contributing to this very scenario he's discussing of negative interest rates. >> a lot of this is hard brexit, i think. people are just saying, get me into the safest thing imaginable no one knows what this is going to look like interesting that a lot of the retailers on their conference calls said, listen, we're building in 10% for the fourth quarter. don't even worry our numbers are going to be fine we're looking at the numbers dick's this morning will say, hey, listen, we're not concerned. our numbers we're giving you builds in the tariffs. >> right but if this goes into effect
december 15th, then get ready for fiscal first quarter impacts. >> lowe's in particular, not a problem. dick's, not a problem. i think it's going to be a problem for macy's macy's is challenged the chosen one points out that powell, 20 times, why can't i do macy's three times i think that steve liesman's reporting is going to indicate i've been worried about this andrew said, how do i feel about the market i think there's a possibility that one of these people -- i remember mester caused a gigantic selloff in october. she may be a candidate for hedge funds who really need to get their short positions covered. not kidding. >> nat alliance says they stand to make a bundle if the ten-year gets to 1.45 tomorrow.
seems like an awfully long way to go. but can you rule it out? >> no, you can't that and the fact i think zeke is going to sign in the next 72 hours. >> we know where you're headed >> a mutual wager on that guy, or is there no wagering allowed? the whole thing just seems wrong. can't we just do the analysis on whether nordstrom's quarter was good do we have to get this -- do we really want these bets then derivative bets i want to put money on that guy. there's a hedge fund right now taking advantage of the spread literally trying to figure where the spread is wrong. >> the 2.10 spread >> no, geez, david the spread of the eagles playing the skins. i'm not kidding. >> do you have your fantasy team yet? are you done >> i have it i killed it. >> so we're done with that >> i killed it >> because that's taking up a lot of head space for you. we need you focused.
>> beethoven had that whole thing up front that was about fantasy >> any thoughts, by the way? >> yeah, the second round of retail results what does it tell us >> nordstrom was expense control. target was without a doubt all about traffic. i love traffic dick's is traffic. and that's good. l brands traded up last night. i went through that conference call i mean, i went through the statement. i couldn't find a single reason why you would buy that stock not one. >> not one really >> no, not one >> nothing not one means zero, zippo. >> well, epstein wasn't on the call >> no, he was not, and he won't be wexner was not on the call either ceo of l brands. it's a challenged company. >> a lot of people thought
victoria's secret was going to have a turn. it's had an obliteration b.j.'s wholesale, the club membership i said let's focus on costco, but b.j.'s is one of the few that's come public that was lbo that's not a disaster, at least for now. >> right >> l brands is all mall. >> that's an issue >> the mall is a frightening place. when you talk to dick's, dick's has a couple stores in the mall, but they're mostly stand alone if you're in the mall, you have to be in a mall where you can drive up and get stuff put in your car that does not happen david, there's big department stores in malls that can't do that notice how i didn't say it this time >> you didn't. you didn't say macy's. >> i don't like being chastised. >> overall in the last 24 hours, we have gotten a lot of positive data points.
>> the brief inversion we saw yet again yesterday in the 210 means nothing. it's all technical but we have seen a lot of strong numbers. nordstrom was better than anticipated. >> well, nordstrom -- >> the stock is not down dramatically >> i have to tell you, kohl's was the worst. let's be honest. >> of the ones that have reported >> worst of all retail >> really? so surpassing under armour surpassing macy's? >> so dick's told me under armour did really well in stores a resurgence of under armour the miss of kohl's was at the beginning of the quarter they think they came back. they have decent back to school numbers, but decent does not
mean blowout it's target's era. marvin ellison, in one year, marvin ellison has turned around you know how he's done it? by bringing in systems, customs relation management. he said that so many stores were out of stock, and now they're not. that's just execution. cornell, on his conference call, is talking about the risks he took, small format david, who would have ever thought that small format targets, the soho target >> any listener or viewer who's watching knows how frustrating it is to not have stuff in stock. managing that is huge. by the way, sales force does report tonight >> a lot of first-round drafting of that. remember, this is keith block tonight. this is keith block. >> co-ceo. >> it's not going to be mark
benioff. he's in geneva i think keith block is going to deliver. >> i tried to pry him out of your grip. >> he doesn't like you >> yes, he does. we had a nice lunch. >> you did when was that? >> i'm not telling you >> i told him not to have that lunch with you all right. well, anything goes. the other day that fella who runs viacom, he showed up on another show >> that was only because i was 100 miles away >> i've been working to get that >> that's never happening. just, never. >> where was i i just think that keith block is a guy who closes he closes. now, splunk last night, i like that conference call, but doug is switching the way he accounts for things they had gigantic orders, but he's switching to a subscription business that's not unlike what happened when adobe switched and
went down. last chance to buy adobe buy splunk right here, right now on this downgrade. >> interesting sales force more of the same though >> i think sales force's quarter actually lagged. vm ware has been hit badly because it's been pivotal. a pivotal buy. so sales force has been the big laggard. a lot of people don't like the data deal. i bet that keith block explains it just like they explained mule soft, which was a brilliant acquisition. i think it was the right acquisition. we'll hear tonight a lot of people think it could be a shortfall >> but yesterday the money >> actually, i'll be on the closing bell monitoring those earnings >> again >> yeah two, days in a row >> i don't like how much david has to work. >> i'll be on it let me know if there's anything i need to know
>> i won't even let you near that >> defend your property. >> he's using that 3:00 to take a lot of my guests >> no doubt. >> oh, yeah. i'm taking your guests almost every relationship i have, suddenly gone. >> that was my plan. >> we'll get cramer's mad dash, if these two can stop fighting, after this break we'll get the opening bell take another look at the premarket. we're coming off four out of five gains we'll get to a lot more when "squawk on the street" continues. through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from finding out what's selling best... to managing your fleet... to collaborating remotely with your teams. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.
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♪ welcome back to "squawk on the street." about 14 minutes before we get started with trading here at the new york stock exchange. time to squeeze in a mad dash. sticking with retail >> this is the retail moment david, there's an analyst by the name of oliver chen. he works his butt off. it's really incredible he's got a survey out on tiffany, which reports august 28th, saying -- he's got an outperform on it but he says cautious, cautious, not doing that well. david, they had a management change i happen to like the stuff they're doing, but weak chinese inboun tourism in the u.s. what does that sound like? macy's so he's saying be careful when
they report. if they have a shortfall, the stock is going to get hammered it is going to get hammered. it still could go lower. >> and they are still reliant to a certain extent on those tourists coming. >> they sure are by the way, premium jewelry, have you looked at cigna lately? >> no. >> don't it's literally one of those -- >> a turnaround did not occur. >> no, because what happened -- and they tried, but cigna looks like the money they made was really from that kind of loan, high interest -- you know what i mean so it's very hard for them this is jared, not the president's son-in-law >> no, that's important. >> when they say going to jared, they're not talking about him. >> no, i don't think he goes to cigna. ivanka's got good high-end taste. >> there's a lot of problems from retail when it comes to
jewelry. jewelry is not really doing well that's important a local category not doing well. you know what category is the worst? >> tell me >> this, the watch that is hurting a lot of different companies. the watch's penetration is so big. do you know that steve jobs had nothing to do with the watch david, the watch talks to me during the show. when it pops up and says lisa, i stop the cameras >> it's all about your fantasy football team. >> no, when it says schefter, i stop the cameras too >> a lot more for you, including the opening bell back from post nine after this what about him? let's do it. ♪ come on. this summer, add a new member to the family.
you're watching cnbc "squawk on the street" live from the financial capital of the world the opening bell in just about six minutes. obviously a busy thursday as we prep for jackson hole, watch the curve, briefly inverting again, digesting those fed minutes. then there's tesla on the move this morning on this report from a german publication that volkswagen's chief is interested in acquiring a stake. volkswagen is apparently denying that report. we've reached out to the company and will update you when we hear back in that same publication, a firm which owns a 7.5% stake in tesla continues to suggest that musk step down as ceo, expressing criticism of musk's micromanagement and communication with shareholders, adding that he should withdraw from more of daily operations. >> james anderson is that gentleman we're referring to 7.5% is the largest single outside shareholder in tesla >> can't be ignored.
>> continues some things he's been saying. >> what's interesting is, okay, we sat here and tried to figure out whether this volkswagen ceo is involved. not one of us said that's ridiculous instead what we said is that makes sense. can we confirm it? what does that say it says that there are people -- and i credit phil lebeau with teaching us there are people in the industry who remark all the time that it is a marvel that they produce so many cars. the fact we didn't think it was a joke, that it was not something that was planted i think is important. >> not sure that was uniform you think everybody thought that way? stock was only up 1%, 2% in the premarket. >> i dismiss it initially as being highly unlikely. >> right >> as i would anything of that nature that said, you may be saying, well, do they have enough of a strategy when it comes to electric vehicles? >> look, i just think -- i wrote
an article this morning where i basically said, okay, look, why are the fossil fuel companies not going up they repeatedly recommended exxon this week. i say over and over again -- because everyone is talking about tesla-like vehicles coming and also because of what ford did, which is go against the chosen one >> fuel efficiency measures. >> it's extraordinary and worth a moment because as viewers may know, california, of course, has fairly stringent mileage standards that it will put in place that are very similar to what were the overturned standards that the obama administration had for the automakers, as part of their effort to combat climate change. trump, the administration overturned that, brought them way back to 37 miles per gallon. but the automakers are actually saying, no, we want to go
higher we want to go to the 55, the california laws, because it's the largest single state car market by far. >> why does the president say it's more dangerous? >> i don't know. >> i've never heard that before. >> maybe because you have to use different materials. >> maybe >> lighter weights that's been the movement for years. lighter weight, stronger materials in some ways >> the point is, it's unprecedented for an industry to get deregulation and say, no, no, no, we got it. >> they used to fight the standard changes tooth and nail. >> nobody has ever seen anything like that. the german automakers were also on board maybe that's also angering the president. >> right, right. >> we're going to go with california, which by the way means they'll be fine from new york >> i agree with him that henry
ford would be unhappy with this. henry ford had a lot of ideological stances that were somewhat, let's say, against the grain. >> what does that have to do with this? >> he said henry ford would be rolling over >> oh, i didn't see that >> he alluded to henry ford. he's got a lot of different things going i have to hand it to the president, he keeps you off balance. can you manage xi? what's it like when xi huddled with his people? what is it like? what is navarro saying what do you got there? navarro? >> just looking at natural gas did you know that's collapsed recently >> well, welcome home. the pipelines -- we exported 6.5 billion last night, which is the new record the marcellus pipelines are now done we do not -- it's the largest natural gas repository now in the world. we can't get rid of the natural gas. >> another reason why the majors haven't done particularly well global lng prices at a record
low on monday. >> and they've got 100 car trains going to mexico because mexico doesn't have pipelines that we need it is just -- one of the things happening right now, the biggest building boom is the plants that make it so natural gas liquids are separated. the mexicans use propane as their natural heating. so they're bringing down propane. but yeah, we have way too much because we have way too much, you can't drill for more oil that comes up with natural gas, and they don't want to flare the president is probably pro-flaring. but the oil companies don't want to flare because they fear a democrat coming in elizabeth warren would not be pro-flare, just for the record >> no, and by the way, the growing importance of esg investing, it's not there yet in terms of its size. [ cheers and applause ]
>> you have to think, wow, do i want to own a fossil fuel company? >> let's get the s&p 500 and the opening bell at the big board, representative from the new york stock exchange, celebrating the migration of its trading technology to what they're calling nyse pillar. at the nasdaq, the u.s. open the 2016 u.s. open singles champion we get ready for that great event here in new york. >> love that by the way, target is the star again today. we didn't talk enough about how a chain that's been around forever had a 20% move without a takeover that was extraordinary brian cornell is not praised nearly enough. he is behind that movement >> and citi says it's not enough they go to upgrade, from neutral to buy
>> that's well timed thanks, guys >> suboptimal now. suboptimal in my fantasy league did not do a good job last night. picked a guy, somebody in the second round, wasted a pick. >> suboptimal is the name of one of the teams you compete against. also what you're pointing out is the citi upgrade >> it's like picking kohl's over target you just don't want to do that but yeah, target is just going to keep going. it's a whole -- we call it a rerating it had the best of all these it really did. brian cornell, no victory lap. not fazed. just quietly going about his job. i have to hand it to him he's really amazing. >> jim, why did futures bounce on these esther george headlines that she's happy to leave rating right where they are >> you know what, i defer to
steve. i think there were some people who felt she could say, why are we cutting when we could be raising? the fire storm she caused in october when she gave some ill-advised comments that joined jay powell and that we need to be tighter so she's been the one who i think has been most, let's just say, believing -- most hawkish i think obviously she got -- has the president made fun of her yet? does he have a name for her? >> just a matter of time, i guess. depending on how hawkish she wants to be. she did say still sees 2% possible for the year. says we're in a good place relative to the mandate. the july rate cut wasn't needed. >> what? wasn't needed? >> wasn't needed >> she is in some sort of parallel universe. >> you just talked about how great retail and 70% of the
economy is doing >> she's not looking at the german ten year. >> is that the fed's new metric? their favorite metric is the german ten year? >> we have an opportunity to make the rest of the economy, not just -- okay, here, let's tell truth here. toll brothers downgraded today not a good quarter emerson, not a good quarter. >> the itb is about to break out of a bearish wedge you saw what home builders did yesterday. >> toll brothers average home is more than $100,000 the guys who have bought the smaller ones are doing well. i think there's enough weakness. >> enough weakness for what? >> will you listen to me you listen let me finish my thought, okay you can draft after me don't jump the queue >> have you actually finished your thought >> the president said the other day, we basically -- the chosen one -- that we have to get hurt
because of the trade war so i think you want to anticipate what's going to happen >> so you think that rates can respond to a trade war in just the way they respond to liquidity crises, hyper inflation, you name it >> the president is not backing down what he said, someone has to take them on there's no talks >> what he said was he's willing to go through ostensibly a recession for the greater good you agree with that? >> that's where i think esther george needs to temper her comments if you have a sitting president a year ahead of election who's saying he's basically willing to have a recession and it's powell's job to keep us out of recession, i buy that. i actually buy that analysis i am concerned that powell better watch what the president is doing the president is saying, we'll take it, we can handle it. >> it's being done for that
exact reason, to get powell to listen to him so he does that. it's been the one consistent thing the president said by the way, we're talking about on monday -- on tuesday he said we're going to focus on payroll tax and potentially index capital gains. on wednesday he said, no, it's off. >> he's a tad inconsistent >> why would you listen to it? >> well, because he's still the president of the united states >> understood, but the inconsistency and the back and forth. you and i both know that in ten minutes, we could get a tweet that says we got a deal with china or we're going to have a de deal i mean, unlikely, i know >> very unlikely >> i'm just concerned. i thought the rhetoric yesterday was the hardest line rhetoric i've seen when it comes to china. i bet even peter navarro recoiled >> here's what the journal said. journal op-ed page today
it's been tough on the president in recent days but today they write, trump is, quote, confused about whether the economy is strong or weak, whether more economic stimulus is needed and even whether his trade brawls are weakening the economy. no wonder business investment has fallen you think that's fair? >> i think that the president confuses you enough that you're not sure if you're a big business person. if you're small to medium size, doing very, very well. i think there's a lot of technology companies just doing well because of secular trends i think that if you're 3m, whose stock is just terrible, by the way, i think if you're3m, you're not sure what to do. if you're nordstrom, i think you say we can start going at it again. retail was good, consumers good. if you're industrial, one-third of the economy doesn't have a clue about what to do. i think they're trying to figure out what he says
waste management, which is really a play on construction, is having a great quarter. that matters tremendously. that's a good lead >> by the way, speaking of manufacturers, page one of the journal is about vietnam corporate managers trying to migrate supply changes, running into labor supply shortages already. >> but home depot is going to do it home depot has cloud home depot could call you up and say, listen, i need you to shift. >> you know what, it's hard. we all have anecdotal things i was with the ceo of a $50 million sales business -- >> 50 million? >> scurtain rods, okay all manufactured in china. >> that's problematic. >> i was like, can you move it no, we can't we can't get it to vietnam it's not going to happen we've been there for 30 years. we have deep relationships we're stuck.
we're stuck, by the way, passing this along they're already suffering some tariffs, and there will be more. you keep saying vietnam, vietnam, vietnam it's this much >> thailand, korea they're all at play. >> how about the u.s.? we getting any of this >> yes home dee bow said even the u.s i know that david is just a -- he's a curmudgeon about this, but if you're home depot -- look at restoration look at rh >> david's point is the big guys can do it. this is going to be a story about small businesses taking a backseat >> small business is going to be crushed. a guy who sells curtains, all from china, he's in a suboptimal situation. >> or other things for the home. it's hard. it's very hard >> that's what gets squeezed >> they're trying to figure it out. by the way, if you go about figuring out a way to change
your supply chain and get a deal with china, you're like, oh, my god. you killed me. >> yeah, you have. that's right but look at rh rh, they were so committed to china. then their stock went down to 110. suddenly they're making some stuff elsewhere. david, it's going to take a little time to build these supply chains. brazil took all our soybean. that was easy. boom look at that, that's reverse head and shoulders your favorite pattern. i think the big guys are going to win once again, the small and medium size businesses cannot keep up with the big guys. they can't they can't you notice ulta beauty going up? >> no, i hadn't. >> the unbelievable ceo at estee lauder called them out as doing really well. just pointing that out >> jim, boeing high for the
month, really. you see some of the banks perking up as we get yields higher >> boeing, every time it trades up, you have to understand that's someone who says they're not going to have to stop production if stop production goes to 300, continues production goes to 400. if you want to roll the dice like that, be my guest i know the changes they're making, apparently, are very good i believe that the key to that is other countries' faas, not just ours, but if they get that thing flying again, that's really going to help gdp it's going to help >> some say -- well, wilbur ross says 0.4 >> i've done a lot of work and think it could be 0.5.
>> really? >> yeah. >> huge contributor to gdp no doubt >> boeing is our best. >> jim, really quick, there's a story on the tape about leverage loans. five deals falling flat in the past few weeks things -- something that people have been putting in the worry column >> i think that when i look at who did particularly poorly in retail, it's the ones that came out of leverage buyout they're all just hanging by a thread if you read them, you start thinking, wow, the nordstrom brothers weren't so stupid >> they wanted to. it was the inability to get the finance. the banks in this case -- >> right, but isn't it interesting at 25 no one is talking about the banks, apropos of what you said no one is saying let's pay 35 for nordstrom. >> no, i think the family might still have interest in trying to do it if they could figure out a way. in this case, they're rolling in a great deal of equity, but it would still be a leverage
buyout less leverage, perhaps, than most a very difficult scenario to try and get yourself out of as a retailer, adding debt in an environment like this. >> how is niemann marcus doing i like to shop at michael's stores, but no one wants to buy the stock. wow, wow >> what do you buy at michael's stores >> thread, crafts. >> craft stuff weekend projects >> i like to do crafts i'm putting together a frame for something i bought last week >> really? >> yeah, look, i'm not michelangelo someone in my draft, drafted him in the third round >> just think, between reading conference calls, fantasy football, and growing tomatoes, you wouldn't have time to put together a frame >> like wilf would say, renaissance man. you're a laggard >> we like watching you on the tele too dow is up 171. let's get to bob >> good morning, guys.
a nice rally going we have banks up we have home builders on the upside let's take a look at what's moving here. again, you have that bank rally and home builders rallying on some comments from esther george that's moving yields semiconductors, that ez are classic cyclicals. industrials leading the way. utilities are lagging. this is a typical pattern when we see cyclicals up and defensive stocks moving to the downside the s&p futures here esther george interview this morning saying i'm not ready to provide more policy accommodation. that's right here. you see markets moving up here slightly down as we go into it we're a little higher overall. so the point about the direction of the market is stocks are tending to move in the direction of the yields, particularly ten-year yields. yields up, market up, yields down, market down. you can argue about whether it's going to be two rate cuts this year, three or four. there's all sorts of camps but for the market, the stock market, in the intermediate term, we're moving in the
intersection of bond yields. there's the s&p 500. 2940 has been a real problem for the markets. we keep trying to get over that. if we could get over that towards 2950, the bulls are going to come out all over the place and say we're at 3,000 but this has been a real resistance point we haven't been able to get over that right now europe is sort of flattish on either side of positive or negative all this week the bulls have been saying, oh, the manufacturing numbers are going to be really lousy ecb is going to get very aggressive cutting rates well, the numbers came out they were weak but not as weak as people feared overall, eurozone, 47 from 46.5 the prior month. these indexes above 50, expansion below 50 is contraction. that's still weak, but it wasn't as bad as people were afraid of. france is 51 that was better than people expected see how weak germany is? this is manufacturing, not services 43, but it was 43.2 in july. so yes, crummy numbers
not encouraging but not as bad as people feared that's a little good news. people were afraid the ecb was going to go crazy and keep cutting interest rates here in the u.s., everybody is very happy about nordstrom it's good news the margins were better. that's one of the reasons it's up can i point out, not to be a spoil sport, we're down 20% on nordstrom for this month going into this number we're down 36% for the year on nordstrom. that's with the improvement that we're seeing today this is a horrible year for the company overall. it's been a horrible year for the department stores. and there's a number of obvious reasons for that there's a little bit of good news short term on the recent numbers. guidance, which is the most important thing overall, affirmed at lowe's, tjx, home depot, kohl's. nordstrom lowered the high end of its guidance. very particular about that it's not a complete cut, but they lowered the high end of the guidance they're one of the few to move it to the downside what we can see here is the trends keep your eye on the broad trends and what's going on
the department store trends here we've got discounting up we've got soft traffic and we have little or negative sales growth they can't open more stores because the costs are growing. so that's the key point here there is no path to growth for the department stores. that's why things have been so crummy this year and fortunately, there's an etf for that so we tend to take a look at the xrt. this is the etf that's basically a basket of all the big retailers out there. that's this one here for the year you can see it's down for the year this is mostly brick and mortars. there are etfs that are for online retailers this is ibuy they have people like interactive on it, expedia, shutterfly that one is up 23% on the year so the market is clearly distinguishing between people who are growing and people who are not, and you can see that in the retail etfs. carl, back to you. >> bob, thank you very much. let's get to rick santelli already a busy day at bond pits in chicago another busy day tomorrow. hey, rick.
>> absolutely. you know, i just want to throw this out there i personally don't follow the market pmis as well as the more well-known pmis, but it did dip below 50, 49.9 is the read i thought i would point that out for manufacturing. now, let's get to the charts two day of two-year notes then a two-day of ten-year notes. what you should notice is beth of them are elevated whether it was the minutes that triggered part of it yesterday or esther george today, although much of that was already under way, and i think she just put a better footing under the notion that there is a whole world of people out there, some of them on the fed, who think that the july rate cut was a mistake. i think that maybe that audience is growing a bit look at the ten year bund today. this chart starts on august 13th the reason i picked august 13th is because there's actually some divergence going on today. we're close to unchanged ten year bund yields are a bit
elevated from intraday trading at the highest yields since august 13th, which problematic is that high yield is only like minus 61 all this nervousness about the 30-year bund and the auction i get it crummy auction i get it all but here's what i don't get. it's been negative since august 5th, as you see on the july chart. it shouldn't be so shocking that when we actually have an auction, it's going to reflect what the market has pushed those yields to. finally, what happens to a currency when crazy negative yields permeate every corner well, here's the euro versus the dollar the main reason the dollar index is steady eddie. it's hovering at the lowest levels since may of 2017 carl, jim, david, back to you. >> rick, thank you apple is preparing to launch new products in the coming weeks the lineup includes pro iphones, refreshed versions of the ipad pro, and the first revamp to the macbook pro in three years that's according to sources who talked to bloomberg. we know how much some of these
other categories, jim, now matter >> yeah, look, i think one of the things you really want to look for here is when does it cross over when do you start thinking about 60%? then the people who have just made their bet against tim cook because he hasn't come up with anything new since steve jobs died we'll have to look at where they're making their money and reach a different conclusion apple's best days are not behind it i think the watch is 50% growth, going to accelerate. i've seen a lot of new health things they're working on that are extraordinary. we haven't talked enough about can the apple news channel destroy news >> what? >> the apple news channel would be fantastic >> apple news channel? >> yeah, their own news channel. >> i always learn things here. very helpful >> apple could give it to you. i think people would take it
remember, you've got the msn and the fox. how about someone right down the middle cnn is over here watch yourself, everybody else apple. >> all right we've been warned. when we come back, philly fed president harker live from president harker live from jackson hole dow's up 130 since my dvt blood clot i was thinking... could there be another around the corner? or could it turn out differently? i wanted to help protect myself. my doctor recommended eliquis. eliquis is proven to treat and help prevent another dvt or pe blood clot... almost 98 percent of patients on eliquis didn't experience another. ...and eliquis has significantly less major bleeding than the standard treatment. eliquis is fda approved and has both. don't stop eliquis unless your doctor tells you to. eliquis can cause serious and in rare cases fatal bleeding.
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all right. jim, what's on "mad money" tonight? >> an interview with sales force. he will be the key to friday's market other than, of course, jackson hole. >> you will have gaap to talk about. getting bought front of the print tonight, gap stores. >> really? >> retail is doing well. >> yes, amazing. exciting show. >> there is a lot going on we will see you tonight. when we come back, philly fed president patrick harker live
good thursday morning. welcome back to "squawk on the street." a bunch of different things. dow's up 140 jackson hole tomorrow. brief curve inversion. now leading economic iner indicators rick santelli. >> our read on the july leading economic indicators hitting the tapes as we speak. tick-tock, tick-tock, tick-tock. let's see if it's on any of the other services no, it's a smidge late there it is. is a whopper up 0.5 that's a biggie. that's going to take the way back machine for a while you'd have to go back to july of 2018, exactly a year, to find a higher number, which was 0.6 in the rearview mirror we take minus 0.3 and move to minus 0.1. that's pretty good news.
i heard carl mention the inverted curve it still has yet to close inverted. >> our roadmap for the hour starts with stocks extending yesterday's gains, now recouping losses from last week's massive selloff as investors turn their attention to the fed. the retail rally continues today. b.j.'s, nordstrom, dick's sporting goods surging on their results. and in a few minutes we will take you live to jackson hole. we are going to hear from philadelphia fed president patrick harker let's start with stocks. moving higher. recouping losses ahead of chair powell's speech tomorrow, the president calling for more rate cuts taking to twitter this morning saying, quote, germany sells 30 year bonds offering negative yields our federal reserve does not allow us to do what they must do it puts us at a disadvantage against our competition. strong dollar, no inflation.
they move like quicksand fight or go home he never runs out of ways to criticize the federal reserve. i think that the german sort of jealousy over negombo yielativei interesting. it failed auction. they couldn't get enough demand on those german 30-year bonds. the eurozone economy is so weak, close to recession the minutes from the ecb show they are considering a range of options, whether lower interest rates. nobody wants to be in that position where you have got almost maxed out on monetary policy and a weakening economy with trade war it's unclear if anybody can fix it so the president continues to look at as an us versus them our dollar is very strong. our trade-weighted dollar is near the highs he is right about that i think it makes jay powell's job harder he has a split fed and constant attacks from the president.
>> 19 times in august. 22 days, 19 times he tweeted the same theme. >> and to jim's point, they get it it's hard to imagine that anybody in jackson hole at this point doesn't know where the president is coming from journal today says the challenge for powell will be to articulate why the central bank is likely to cut rates absent signs of economic deterioration that's a difficult thing to do. >> especially when you get the commentary, steve talked to esther george, a dissenter rosengren was a dissenter. we don't need a rate cut our economy is good. the employment situation is good the consumer spending situation is good. you have other members of the fed, 50 basis point cut. get ahead of any economic weakness the trade war is out there there are some early signs in manufacturing and the bond market that would indicate otherwise. so you have this push/pull it's why we debate recession
every single day investors and ceos are debating as well. the fed is debating it, too, and i don't think there is a clear consensus. >> two tens meets. >> right. >> whether it's really technical because of the extraordinary circumstances you just described in terms of the inability to find yield anywhere on the planet except here, or whether it really is a sign that has in the past seven out of seven times of a recession at some point. >> i think if we see it sustained as an inverted yield curve for a time, the three-month has been sustained inverted since may, that would keep the debate going. you could say, well, it's briefly inverted >> all of this is going to get kicked around in jackson hole where our steve liesman has a very special guest good morning, steve. >> reporter: good morning, carl. thanks very much here in jackson hole with philadelphia federal reserve president patrick harker thanks for joining us, president
harker. >> thanks for having me. >> reporter: you must understand risk management. there is a risk that you may come on shortly after the president tweets about federal reserve policy. >> yes. >> reporter: as david just said, 22 days in august, 19 tweets by the president. tell me how you look at this differential between german yields and u.s. yields is it a competition? >> no. it's a different economy the u.s. exports/imports are important to us, but germany much more so i don't think they are apples to apples comparisons. >> reporter: do we need to set our interest rates relative to european or japanese or anybody else's rates >> no. we need to do what's appropriate for the u.s. economy taking into account that there are effects, global effects on the u.s. economy. ultimately, the decision is what is best for the u.s. economy. >> reporter: is there a case to be made that by reducing their interest rates they reduce their currency and they get an
advantage in trade >> that in theory is true, but if you look at the last cut, the 25 basis point cut, the dollar moved in a different direction, right? so right now the u.s. treasurys and the dollar are safe assets the world is looking a world of volatility. they are looking for safe assets. >> reporter: so when you take and you start to set where to put interest rates, don't say to yourself, well, i can't go higher and i probably should go lower because of the differential between the u.s. and europe >> you can't ignore what's happening in the rest of the world. you don't want to be so far out of sync with other economies that can would cause problems. i don't think we are out of sync in a major way right now. >> reporter: it's 200 basis points out of sync. >> yeah. you look at where we are with respect to our inflation plus our neutral rate, i think we are pretty much where we need to be. >> reporter: let's talk about where we are in terms. economy. what is your outlook for the economy?
what is why you are view of growth right now is it too slow >> no, it's what we anticipated a year ago, two years ago. we are going back to roughly 2% growth. >> reporter: where would you say policy is relative to that trend growth >> so in december i was not supportive of the increase i was supportive of the decrease somewhat reluctantly this time around to get us back to where policy should be we are roughly where neutral is. i think we are roughly where neutral is right now i think we should stay sheer for a while and see how it plays out. >> reporter: you don't see a case for further stimulus to the economy? >> no, not right now the labor markets are strong inflation is moving up slowly. the last cpi print, it was a good print there are negative headwinds to the economy. right now i don't think they call for any drastic action. i think we can take some time and see how it plays out. >> reporter: tell me about the headwinds. which ones do you think are the
major ones >> i think trade what we hear repeatedly from companies is the trade uncertainty. it is not the cost to capital. when you talk to business leaders they are not saying i am not investing in plant and equipment because the cost of capital is too high. that has never factored into any conversation i have had. it's about the policy uncertainty. >> reporter: could you give me an example of a conversation you had where an executive said i am holding back on investment because of the trade uncertainty? >> one of our contacts was looking at the china situation saying i may need to move my supply chain to other countries. one of those countries was mexico mexico is a nafta country. what could go wrong? we are talking about putting tariffs in mexico. so you think about that individual and their board how can they make a decision in this environment >> reporter: talk about the yield curve itself, which has been flat, negative for a bit. what kind of signal do you get from the yield curve >> i think it is an important
signal, but one of many. you have to look at the labor markets. very strong. you have to look at growth although we think that 2 plus percent growth is weak, it's not. it's exactly what we expected. >> reporter: when you look at the risks, global economies are weak and some are in recession, nom negative growth. how much of a risk is that to the u.s. >> it is a risk. a lot of that depends on the country. very specific to each country. this policy uncertainty is not only a u.s. phenomenon, it's a global phenomenon now. >> reporter: you can't do anything about the trade uncertainty. you have to deal with the hand dealt to you in terms of the effects on the economy given that it has been persistent, given that the trend of it has been to worsen over time, isn't there an argument taking an insurance cutout for the potential negative effects >> i have heard that argument, but i am not very sympathetic to the argument right now, given the volatility
even of the poll ispolicy itsel, i don't think we need to make that move right now. nothing is moving dramatically in a negative direction. there is potential for it to do so i think we need to keep our powder dry so when that happens we have the policy space to move. >> reporter: so you are not seeing it show up in the economic data, the effects of trade? >> oh, yeah, on business investment for sure. but the consumer is the hero of the american economy they keep spending you have to look at where that effect is happening. if the tariffs kick in and really hit the consumer, then i am more worried. >> reporter: you guys, philadelphia fed is known for great research but the philly fed index. a key manufacturing index followed by the market it strengthened recently tell us about the business activity in your district. >> it never has the highs or lows in the economy. we are in the middle of the that's why it's a good predictor. the manufacturing business outlook survey has been volatile, but all the while it's
been positive. so while there are these uncertainties, manufacturers in the district still say that business is pretty good. >> reporter: if we have these headwinds and the economy is still running at 2%, do you think there is a potential upside to economic growth if the trade uncertainty were to go away >> i think so. policy uncertainty more generally, not just around trade, were able to be resolved, we could see a significant increase in growth for a period of time. we have started to see hints with the productivity number and so i think that is hinting towards higher growth because unless we move one of two needles, that is productivity and the labor force, we are not going to get that higher trend. >> reporter: how much upside do you think there is to the economy? >> not a lot i think we could get slightly higher productivity. we could run for a while a little under three that's not our forecast now given the current situation. >> reporter: one of the things you have been doing at the philly fed is this workforce
development. >> yes. >> reporter: this major macro issue, people can't find workers. >> right. >> reporter: how much does the shortage of labor limit the potential growth of the economy? >> oh, i think in two ways one, on the plus side firms are now being much more creative about investing in capital capital deepening because they can't find the workers that will have a positive effect on productivity. on the flip side, i talked to a major home builder, he said i can't even find not people to carry bricks and sticks. forget plumbers and electricians i can't find people, laborers on the site to build a home that is limiting growth for sure. >> reporter: has there been any progress we have brought down some of the employment rates in certain sectors. >> yes. >> reporter: of the labor force? >> yeah, i think we have been surprised how many people are coming into the work force and that is a very good thing for meme a them and the country how much more there is of that, i'm not sure. >> reporter: one thing people talk about is the possibility
that the u.s. rates could go to zero do you see that on the horizon is there a possibility of negative interest rates in the united states? >> i never, ever say never it comes back to bite you. so i don't think that right now, it's a high hurdle for me to think about negative ralts there are a lot of implications in the u.s. economy if we did that but i'd never say never. >> reporter: what about the banking channel and the idea that a reason for the fed to act, and that could be in a variety of ways, is to actually target the yield curve have you thought about this idea of restoring positive slope to the yield curve either by working on the long end or short end to increase the profitability to banks to lend >> so that is one of the conversations we are having among many with the fed listens effort that vice-chair claire is leading. no decision has been made about this it's a complicated issue because given that the u.s. treasurys
are the safe harbor around the world, just because we would take action doesn't mean the world will go along. >> reporter: you can't build a hill because the world is going to keep knocking it down >> potentially, yeah. >> reporter: any efforts you make to restore positive slopes to the curve are flattened by the run to safe assets in the united states? >> absolutely. >> reporter: how much concern do you if rates remain too low for too long for the financial stability side of things >> that is the other factor that i have to weigh. i didn't think the cut was appropriate necessarily, but i went along to get back to neutral. i'm on hold right now. my forecast is just to hold where we are for -- one of the reasons is that. i think we run the risk of creating too much leverage in the economy. >> reporter: do you worry though, i look at the fed's fund futures. priced for two more cuts this year at least and a 40% probability of a third cut it's come down a little bit, but
do you worry about where the market is priced >> a little bit. again, that doesn't -- it doesn't really factor into my decision-making. i have to look at the real economy and look at what's really going on in the economy to come up with my policy stance. >> reporter: is there a communications problem if the market gets so out of sync with where the fed is >> absolutely. macro 101. the market does the work we don't the market needs to move i think there is a communications challenge we face in explaining where our stance of policy is. >> reporter: patrick, we began the discussion talking about the tweet from the president how do you feel about these constant tweets? the federal reserve being called clueless >> yeah. so my wife thinks i am clueless in almost everything except monetary policy. no, we're not clueless i think the fed has been the stalwart of the u.s. economy for a long time, particularly through this period of the great recession and its aftermath. >> reporter: so i'm told the
yield curve, the 210 just inverted in my ear here. is that a signal that worries you? >> again, it's one signal of several that i take into account. but it's just one. >> reporter: patrick harker, thanks for joining us. >> thanks, steve. >> reporter: sara, back to you, philadelphia fed president patrick harker here from jackson hole, wyoming. >> steve liesman, thank you very much a lot to digest there. guys, first of all, harker a voting member next year, not right now. and i think the biggest headline was he said he reluctantly supported the rate cut, but was sounding much more in the camp of the economy is doing well and said very plainly to the trump tweets, we make policy for the u.s. our economy is doing a lot better than germany. they make policy over there. so this is not a competition of who can have the lowest rates. and when it comes to the question of negative interest rates, which steve asked him about, could that happen here? it seems like the fed president's line over and over again is never say never, but it
doesn't look like that's a strong possibility he said there is a high hurdle for seeing negative rates in the country. >> we will hear from others later. bullard tomorrow with steve. after george and now harker, does not peel like powell is poised to deliver big tomorrow the sentiment is not going that way. >> harker said he doesn't see the need for more stimulus now. >> he kept saying neutral. we are back to neutral that's where we should be. also doesn't believe you should be reacting to every move in terms of whether the trade situation is getting better or worse. >> wouldn't really bite on the yield curve. says it's one of many sort of signals we have been seeing. overall, a pretty rosy picture of what is happening in the u.s. economy. that's what we have been hearing. >> surprises to the upside. >> september is on that's where the market is in terms of a cut the question is, what then october? i don't know looking less likely. let's bring in rick santelli for
more reaction. what stood out to you, rick? >> i find the conversation fascinating. first of all, steve's question about trying to manage the yield curve, more man iplation, and listen, he is asking a question we want to garner as much information from fed officials as we can. what i don't understand this conventional wisdom that a flat curve or inverted curve is going to kill the banking industry last i looked, i read the fdic had a report recently, we are looking at record banking profits. so i don't understand any of that and with regard to, sara, you keep talking about how horrible the u.s. economy is. honestly, it's slowing, but it is far from horrible as you can get. it really is and everything that seems to be horrible is related to trade but here is a surprise, okay the president is the president because the rules of the constitution laid out popular vote, electoral college, and he gets the trophy, okay? the fed's job isn't the question, the duly elected
president's strategy on trade. they have to deal with the aftermath of it. and trying to -- he used the word "potential issues." should the consumer be ill effected they need to deal with some of those effects. but, in essence, it is not their job to neutralize the slowing that the president's caused because he has a platform. one that he enunciated before he was placed in office finally, and this is the biggie, okay, that effects manipulation is something that the president talks about often. to me, if they are manipulating and the outcome is what i see, i look at our economy as a competing economy with them. we should tell them to keep manipulating because it isn't doing their economy any good back to you. >> just to be clear, rick, i have been talking about mixed signals. >> you no. you kind of have. >> that's what the fed is
talking about. >> you know, we have never had a yield curve signal a recession ever in a world with negative rates. ever, period, period, period, period. >> sure. but i'm just saying there are members on the fed as we learned in the minutes yesterday arguing for a 50 basis point cut right now. i mean, there is an argument - >> sure. and there is lots of ecb numbers that argued for lots of rate cuts, too. maybe we all need to be more observant of the reality of the conditions we are currently living in. the u.s. is doing pretty well and the federal reserve seems to be panicked by overseas mistakes i wish harker was a voting member because he seems to have a lot more common sense than many. >> we definitely now how you would be voting for now, rick. rick santelli in chicago when we come back, dick's, nordstrom, l brands on the move. we will talk about what the retail is doing today. another good days of results
how you watch it does too. tv just keeps getting better. this is xfinity x1. featuring the emmy award-winning voice remote. streaming services without changing passwords and input. live sports - with real-time stats and scores. access to the most 4k content. and your movies and shows to go. the best tv experience is the best tv value. xfinity x1. simple. easy. awesome. xfinity. the future of awesome. . retail stocks on the move. big week of earnings continues courtney reagan with a look at some of those names. good morning. >> reporter: good morning. you're right there are some big moves in retail today dick's sporting goods putting up a strong quarter raising the full-year forecast that's with the impact of these upcoming tariffs comparable sales growth of 3.2%. positive comps at stores and 21%
e-commerce growth contributing to that. hard lines, apparel, footwear sales improved the ceo says our major headwinds are behind us. now, l brands beat on earnings but missed on revenues, total comps fell 1%. victoria's secret comps down 6%. l brands reaffirms its guidance. on the guidance the cfo said significant changes made thin fl merchandise along with the current trade and tariff uncertainty leads to levels of uncertainties in forecasting but we believe customers will react positively when he said that august it date trends having been sufficient to overcome the weakness in the lingerie assortment, shares plunged. nordstrom shares are up. it wasn't a good quarter the department store beat on earnings but with expense management, missed on revenue expectations, lowered sales and
earnings guidance for the year it said tariffs aren't in guidance but it will be relatively immaterial for the years. net sales down more than 5%, the worst since the financial crisis as the quarter started low and the anniversary sale was softer than expected, nordstrom is still counting on a positive turn in the back half of the keir, but analysts today are pretty skeptical sara. >> courtney, thank you joining us to break down retail's winners and losers this morning, projecting zero to negative growth for the industry in the next three months oliver chen says broad line stocks are the way to go i thi-- you write nordstrom is no-growth retailer and should trade at a low edp. >> nordstrom has been going through challenges the reason the stock is up, they have done a great job of controlling expenses and inventory of the the market has been skeptical we are seeing a rebound here
it might take a little bit longer for the sales trend to turn around. we don't think there is a lot of upside today. >> what will l brands? >> another situation where they need to turn around the victoria secret brand even into august the trends haven't shown the type of improvement that wall street wants to see i think that's why you are seeing the reaction this morning. >> both mall-based or to a large extent are can they work against the big trend that seems to be so powerful >> yeah. i think they can if you look at dick's sporting goods, obviously dick's sporting goods is talking more positively there are some company-specific issues there is opportunity for both to recover. it's not clear when that will happen >> oliver, hope for victoria secret still comping negatively. they got rid of their fashion show they hired a transgender model they have a lot of work to turn this around? >> yeah, there is a lot of work that does need to be done at victoria's secret. a lot of what is happening with the future of the consumer as
body positivity, inclusivity, reinventing the business model it's an incredible time in retail the winners are taking more share and are more cautious on the mall the mall is lb as well as macy's and others who are the winners in this environment? walmart, target, costco. as you think about that, food is your friend. you need to eat groceries, and food is insulated from tariffs scale is important, too, as we continue to see this digital revolution take place. consumers are really rethinking retail they just don't need as much stuff anymore either. >> this is true. oliver, i have seen on nordstrom they are putting very, very small footprint stores in manhattan. how much success can they have re-creating what others have done in urban areas? >> we really actually think that's a very powerful creative way. it's called nordstrom local. nordstrom has a local market
strategy so they'll have a flagship with little nordstrom local stores in neighborhoods such as the west village, the upper east side, and these are great points in terms of going on to try on items, buying online, pick up in store as well as getting alterations done the future of retail is a lot about service. nordstrom local helps you return items quickly and really leverages inventory close to your home. that is something to be watched. that's a brighter spot at nordstrom. courtney was spot on with nordstrom having unique challenges in key items. the promotional environment as well so there is a mixed picture there. but nordstrom local means a lot for the future of retail also with speed. product and retail in fashion expires quickly. they have to get the product returned quickly nordstrom local helps there as well. >> jay, who is winning back to school i know it's early. >> kohl's talked about a nice
start to august. they would be one that started off in a really nice way. >> really? they had a lousy quarter though. >> what's interesting, if you break up the quarter into two parts, the first half is very weak the back half they comped up positive one and without having to promote that they said in august they have seen that trend continue. obviously a lot of retailers have struggled relatively speaking, kohl's has been a little bit better. >> oliver, jim cramer called you out about work on tiffany, i think specific to chinese consumers. tell us what you found. >> we are more cautious on tiffany. we love the long-term store. however, a lot of factors are up against a tough comparison our survey results indicate caution with traffic trends. hong kong is another negative point. incoming chinese tourism these are factors in terms of traffic. tiffany is also somewhat vulnerable to foreign exchange with a flagship being an
important part of the business we are looking more forward to the back half and cautious next week we are more positive on ulta for back to school we think there is a good jeans trend. american eagle has a good denim offering those are two retailers we are excited about. leisure versus dressing trend continues to be true as customers love that athletic trend. that's something we are watching for back to school as well. >> yeah, i mean, stifle had a good note. they did a sneaker survey today. it showed that nike and advance continue vans continue to be the top pick >> suits and sneakers and rethinking what it means to be form, desk to dusk, the whole apparel landscape is clearly changing don't forget about recommerce in the cirque ldu soleil lar economy. people are buying used goods and loving it. >> what is your pick >> skechers is the third largest
footwear with can-in the world it has one of the strongest back-to-school asortments. it's a global business over half their business is outside of the u.s so in the -- the stock has come in a little bit. the valuation looks attractive skechers is a nice play for back to school. >> thank you both for joining us. >> thanks. have a great summer. >> what's left of it. let's send it to sue herera for a cnbc update. >> there was a little bit more left, david. here's what's happening at this hour french president macron telling british prime minister johnson that the brexit away drawl agreement are indispensable. johnson says the u.k. will leave the e.u. at the end of october >> it is vital for trust in politics that if you have a
referendum, then should act on the instructions of the voters and that is why we must come out of the e.u. on october the 31st, deal or no deal. >> iranian state tv reporting that president rouhani unveiled a long-range missile defense system since 1992, iran has developed homegrown defense industry that has produced light and heavy weapons. here at home house speaker nancy pelosi given a lifetime achievement award in san francisco. protesters got into the hall, holding up impeach now signs and started shouting the ceremony was stopped as police escorted the protesters out of the building. you are up to date that's the news update this hour back downtown to you guys. >> sue, thank you very much. obviously, we are losing our gains here quickly dow has lost almost all of its gains. s&p down 7 as harker and george throw some cold water on fed cut
time for our "etf spotlight. a look at the home builders ticker xhb, nearing highs for the year this group handily outperforming the s&p 500, up 29% for the year, falling mortgage rates and better than expected housing data fueling the rally the biggest gainers, kb home up 50%. lenar up 30% better results, lower rates. >> meanwhile, the s&p about a 1% reversal from its highs this morning. >> didn't like the harker comments, you know, piling on the idea that we might not need more stimulus. interest rates are good where they are this market feels like it's craving more always more stimulus. more rate cuts more, more, more, whether it's justified or not. >> when we come back, stock buy-backs are at the lowest pace in 18 months could be a signal of more wl tility ahead
indicate pain ahead for the market adding that one in four s&p 500 companies have propped up their earnings via buy-backs. the author of that report joins us, howard silver glad, senior index analyst and legend good to have you back at post 9. the journal out this week said slowest pace in 18 months. how serious is it? >> not as much 2018 appeared that the companies really bulked up on the buy-backs. they got the sugar high from the first time the tax numbers came in, so they increased it they wanted to show shouldareho return if you increase dividends, you can't pull them back buy-backs, as we see now, they can pick up the phone and stop
the trading in two seconds it's a dbig decrease from last year 2017 and before, then it's still ann an increase. where do we reset the level of buy-backs now, which q3 will tell us, and where do we put the support? buy-backs support the stocks and help the eps. >> this argument they isn't step in in may, were you surprised? >> at love people are surprised. i was one of them, yeah. they didn't go back in and make the bold statements they did like they did in q12016, how great their stock is it's just the market we are going in to buy they have buying they have to do for options. they could have done it. they chose not to. so the question is, did they intentionally know that they wanted to do less buying because they bulked up so much last year >> how much of this is being changed by apple just the size of apple do we need an ex-apple for the year >> it still is bad
apple, microsoft, basically it's up and down. they all have cut down financials down by 23% sorry. financials down 12%. they were less than the others because they have to get their stuff approved you know where they are going to be but decline across there so again is new level 160 as compared to the 200 billion, if they decrease, then there is a big concern on it. >> i think there was a $4 trillion number since 2013 in overall buy-backs. >> 20 years at 7.7 trillion, with a t. >> that's an astounding number. >> enormous. >> i don't know what our market cap is. >> s&p is 24. >> thank you that gives you a sense more than -- it's a third, roughly. >> 13 trillion over that time. >> what did that add to eps or even over a shorter timeframe? what are we talking about? >> on an individual issue, one in four companies have hiked
earnings with you look at the net income up so much and the eps up that much more. you spoke of apple, which is down they were down 2% on the erps, but down 8% on net income. different series of numbers. so one in four companies have actually boosted up their earnings you really need to know the difference because you don't want to pay the same p.e. for buy-backs as you do for actual growth on the index level, it's negligible we back into millions of dollars. you can buy back every share and have one and have $1 billion eps. doesn't make a difference. we multiply it out because we have 500 companies so on the index level, not too much on the eps. it gives support, obviously. issue level, one in four. >> how do you explain to people the why of slowing buy-backs is it just, you know, not as much cash because the tax cuts are -- >> no, the cash is up there. a little bit -- second quarter is a little bit high of $1.4 trillion for the
industrials alone. they have enough to do buy-backs, dividends it's what they choose to do. and apparently they have chosen to cut back on discretionary buy-backs. they are buying enough to negate all the options. it's the discretionary ones, the expensive ones, the ones from the top, the board of directors. >> do we think the buy-backs will go below capex or cash flow for the year >> not below cash flow because cash flow is pretty good, especially when you odd in the option into there. they have plenty of cash we are looking for the 160, 170 as a support level if it goes back to the 130, you have let volume. the big question is why did you cut back so much what are you doing with your money? we are not seeing it go somewhere else. >> sitting on it potentially because of the uncertainty you say you just indicated some important points it's a board of directors decision in terms of capital allocation that they are going to get involved with
they may well be saying let's sit back for a little bit. >> right that's keeping the gunpowder there. they are not making money in the banks on it. that's for sure. >> good stuff. >> thank you. >> as we head to break, hormel foods moving higher after beating earnings expectations, reaffirming the full-year outlook. stocks have lost the early gains. morning "squawk on the street" when we come back. come back. or "squawk on the strn we come back e "squawk on the ste we come back be the leader i am today. - [woman] i graduated high school 19 years ago. i still finished. - [man] in the military, you feel that sense of accomplishment. that's what snhu is. - you will march from this arena and say to the world.. i did it. - [woman] you did it. i love you. - [graduate] i love you too.
bank of america merrill lynch. what is the primary mover of the price of oil right now >> well, look, i think there is three puts in the market that have been supporting prices around $60 a barrel, lower for wti. you have fed put, which has been triggered with the rate cuts sallys have been cutting back supply and then of course there is a trump put. we do think that the president is going to try to smooth out the fluc rags of the trade war and prevent a recession. so that sets some support to 60. you have extreme outcomes in oil of maybe potentially a chinese retaliating against the u.s. by buying iranian barrels or, on the other hand, a resolution of the trade war which could send prices higher. around $60 a barrel, around that level with those two tales in sight. >> is that why you remain
bullish on the commodity because you think trump, powell, saudi will be there to keep prices from falling too low >> i think if you look at the fundamentals, we have very little supply. we have lost venezuela's oil, iranian oil in the course of the last 18 months so demand is terrible. don't get me wrong that's if line with a macro basis. the supply side has been exceptionally poor we have the highest disruptions in the oil market in 30 years. that's keeping prices where we are. >> is there anything geopolitically that can unravel the production we're contributing here in the u.s.? >> well, i mean, i think the u.s. obviously is slowing down in terms of growth because companies are under a lot of pressure i am sure you are following what's going on with the major equities in the sector so those companies are bringing back capital which will slow
down production growth the risk is that china turns around, the trade war is too tense and we end up with a chinese government opting to ignore u.s. sanctions from iran. i think that's a major risk, which will be would be probablyg the trade war to a whole new level, but certainly, we've seen no intention of de-escalating for the time being i think there's pressure on both sides to get to a deal, but that's why we're so focused with what's going on in trade but the production just keeps increasing and it's not going to stop anytime soon, is it >> well, that's a u.s. story >> that's a global story, too, particularly as exports increase >> so the u.s. production growth has been slowing down a little bit on the margin. i remember the rig count is down by more than 10% since the beginning of the year. and a lot of this is reflecting a lot of pressure on the sector to deliver dividends and share
buybacks energy has to come in and start buying shares back and that's what investors are asking companies to do, which will eventually slow down the rate of production growth. but the biggest issue is that we've lost iran. iran is the fourth largest in the world, back three years ago. now they are basically unable to export >> anything to be made of different commodity, but lng, which i think hit an all-time global low of 390 and mmbtu on monday something that used to trade as high as 12 to 15 bucks >> we have seen lng trading as low as $12 a barrel. first, we are at a low point from a seasonal level when it comes to demand. 90% of the world lives in the northern hemisphere, so everybody wants gas in the winter lng is a very bought-out commodity in that regard we've expanded exports out of the u.s. pretty dramatically in recent years also out of australia.
and again, china has basically tariffed u.s. lng imports. so they're slowing down their imports of lng this trade war is affecting all commodity markets, copper, aluminum lng, oil, you name it >> what about gold have you had to raise your target >> fufirst of all, rates global are collapsing we have $14 trillion worth of sovereign debt delivering negative yields. so that's naturally pulling people into gold the second thing that's going on central banks are very distrustful of each other and they continue to buy gold for their own reserves and the third thing going on in gold, which is quite interesting, as well, is that geopolitical tensions and just the uncertainty of the outcome of this negotiations, not just in trade, but everything else,
is also drawing investors to be more conservative and increase their gold allocations so those are sort of three main factors driving gold prices higher some people call it quantitative failure. i think that's kind of another way to refer to it >> before you walked in, reuters had a headline that china was partially easing restrictions on gold imports is china as important to gold as it is to oil >> it is very important. i mean, there is 1.4 billion people in china that have a lot of money in the bank china's monetary basis is bigger than the u.s. monetary base. if chinese people take money out of their percents and start buying gold, that's certainly a bullish case we think gold can be under a -- you know, a level of tensions we could see gold spiking to $2,000 an ounce over the course of the next 18 months >> where are we now? 1509 francisco, thank you >> thank you very much >> let's send it over now to morgan brennan and get a look at what's coming up on "squawk alley" >> hey, david, that's right. markets have moved lower in the
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